India: Much optimism on gas demand; consumption to zoom in the near term
One more terminal for import of liquefied natural gas (LNG) was inaugurated last week. At first glance, one wonders why. For, the country’s demand is currently far behind the capacity to supply. Pipeline utilisation of state-run GAIL India is a mere 40-45 per cent; it is having a problem finding further markets for imported LNG. “A majority of gas-based power plants have got stranded. Between 50 to 60 per cent of the LNG we have contracted from the United States will be sold outside or swapped due to demand shortage,” said a GAIL official, asking for anonymity. Of the 25,329 Mw total of gas-based power plants’ capacity in the country, at least 14,000 Mw is reportedly stranded. Despite this, at least 10 more LNG projects are to come up, with four already operational. Taking the total capacity of terminals to around 72.5 million tons per annum (mtpa). According to a report by the Petroleum Planning and Analysis Cell of the government, against a projected consumption of natural gas of 494 million standard cubic metres a day (mscmd) for 2017-18, the consumption was 144.75 mscmd. Even so, import of LNG rose 6.6 per cent over the previous year. India is now the world’s fourth largest LNG importer. Demand optimism A four-mt Floating Storage Re-gasification Unit-based LNG terminal by H-Energy Gateway (energy venture of the Hiranandani Group) was launched last week at the JSW Jaigarh Port in Ratnagiri district of Maharashtra. The terminal is likely to be operational by the fourth quarter of 2018. “We have 100 districts in India where city gas licenses have been awarded. This June, of the 670 districts in India, another 100 will be awarded. So, demand will double. Total (annual) consumption of gas is now 40 mt and we think it will move to at least 80 mt in the next five to six years. Half of it comes from domestic sources. So, 22 mt we import and 20 mt we produce domestically,” said Darshan Hiranandani, managing director of H-Energy. He adds that all mega terminals might not but all small-scale terminals would do good business. A rise in demand is expected from power, city gas, fertiliser and industrial consumers. According to Petronet LNG, the country’s demand is set to increase by 82 per cent to 654 mscmd by 2026-27. Demand from city gas is set to zoom from 22 mscmd in 2016-17 to 68 mscmd by 2026-27. And, power sector from 157 mscmd to 309 mscmd during the period. “We expect a rise in demand post 2020 and are already in talks with refineries, power plants and petrochemical units near our planned and existing pipelines,” the GAIL official added. India is set to bring its first LNG cargo from Gazprom in May, after the Russian company and GAIL agreed to bring down prices, based on a new formula agreed this January. The company also plans to bring at least 80 cargoes of LNG from America in this financial year. GAIL has already signed a $32-billion supply deal for 20 years with the Dominion Energy Cove Point project in Maryland and Cheniere Energy’s Sabine Pass project in Louisiana. Dion Dawkins Authentic Jersey
Contracts offer glimpse of progress on Jafrabad FSRU project
Multiple contracts announced this week provide a progress report of sorts on the first floating storage regasification unit (FSRU) being built explicitly for use in Indian territorial waters. News of supplier and classification contracts for Swan LNG’s Jafrabad FSRU project coincided with the arrival of another FSRU in India – GDF Suez Cape Ann – which will shortly commence operations as India’s first floating LNG receiving facility. Hyundai Heavy Industries (HHI) is currently building the as-yet-unnamed Jafrabad FSRU at its shipyard in South Korea. The 180,000m3 FSRU is set for delivery in December 2019 and expected to begin operating early in 2020 in India’s Gujarat province. The 5 mtpa project’s cost is estimated at more than US$600M. The Indian gas market is expected to be one of the fastest growing in the world over the next two decades with natural gas projected to make up 20% of India’s total energy consumption by 2030. Lloyd’s Register to class Jafrabad FSRU Lloyd’s Register recently signed a contract to class the Jafrabad FSRU, which will be built to LR’s Rules for the Classification of Offshore Units. TMC to equip Swan Energy FSRU TMC Compressors of the Seas has signed two contracts to supply five marine compressors to the Swan LNG FSRU. TMC agreed the contract directly with HHI to provide three service and control air compressors to the South Korean shipyard. The compressors will be delivered in Q3 2018. In addition, TMC has signed a subcontractor deal with another supplier to provide two feed air compressors to a nitrogen system delivery on the FSRU. That compressor delivery will be made in July 2018. TMC’s contract values are undisclosed. Once completed, the FSRU will be moored to a fixed jetty and will regasify imported LNG to enable distribution by pipeline grid and road tanker. Greg Holland Jersey
GAIL sells 90 pct of 2018/19 U.S. LNG volumes through swaps
India’s Gail Ltd’s executive says the company has sold 90 percent of U.S. liquefied natural gas (LNG) volumes through time and destination swap deals for 2018/19. Executive says 65 percent of U.S. LNG volumes for 2019/20 have been sold through destination swap and FOB sales deals. Executive says company has sold 45 percent of U.S. LNG volumes through destination swap and FOB sales deals for 2020/21. GAIL has a contract to buy 90-92 U.S. LNG cargoes annually. GAIL has contracted 5.8 million tons a year of LNG under two long-term contracts. Brandon Crawford Jersey
Government scraps plan to privatise oilfields
The government has shelved the plan to privatize several key aging fields of ONGC and Oil India following strong opposition from the state-run companies and consultations between the oil ministry and the Prime Minister’s Office. The two companies will now draw up their own proposals to boost output from the fields. The oil ministry drew up a detailed plan last year to sell up to 60% participating interest in 11 ageing fields of ONGC and four of Oil India to private companies under the so-called Production Enhancement Contract (PEC) aimed at raising output. The plan also included another 44 older fields of ONGC and Oil India that could take on private technological partners under a process managed by the government. ET was the first to report on May 31 last year that the government planned to privatize some of the ONGC and Oil India fields. Soon after the Directorate General of Hydrocarbons (DGH), the technical arm of the oil ministry, began circulating its draft policy paper on oilfield privatization, ONGC launched a strong protest, triggering a pause among policymakers and exchanges between the oil ministry and the PMO. The government hadn’t finalised a policy on this. It was just a discussion and that discussion has now ended. The government is not going ahead with this,” an official aware of the development said. “The ministry has now asked ONGC and Oil India to prepare their own plan to enhance production from ageing fields.” ONGC had already launched a similar plan independently for two of its ageing fields in Gujarat and Assam. It’s seeking partnerships with oilfield service providers under a long-term contract in which private partners will get a predetermined fee for every unit of oil and gas produced. The government now wants ONGC to use these learnings to attract more private capital and capabilities to ageing fields. Another official with knowledge of the matter said the oil ministry changed its mind on the proposed policy after consultations with the PMO, which had heard all sides and didn’t want to invite controversy over a privatization move in the fifth year of its term. In its strongly-worded letter to the government, state-run ONGC had attacked the proposed policy as unfair to the company and favorable to private players that would have received fiscal concessions while operating these fields. A grouping of its executives sought the Prime Minister’s intervention in this policymaking process that, it said, lacked transparency and objectivity. Dennis Smith Authentic Jersey
India opens biggest city gas licensing round
ndia today opened for bidding the biggest city gas distribution licensing round, offering 86 permits for selling CNG and piped cooking gas in 174 districts in 22 states and union territories. As many as 86 geographical areas (GAs), made by clubbing adjacent districts, are on offer in the 9th city gas distribution (CGD) bidding round, according to oil regulator Petroleum and Natural Gas Regulatory Board (PNGRB). The GAs cover 24 percent of the country’s area and 29 percent of its population, Oil Minister Dharmendra Pradhan said at a roadshow organised here to promote the round. The round is likely to attract an investment of Rs 700 billion, a PNGRB presentation made at the roadshow said. The last day for bidding is July 10. Pradhan said the government is targeting to raise share of natural gas in the primary energy basket to 15 percent from current 6 percent, in next few years. The bid round is also aimed at meeting Prime Minister Narendra Modi’s target of giving piped cooking gas connection to 10 million households, roughly triple the current size, by 2020. CGD licences for Bhopal in Madhya Pradesh, Ahmednagar in Maharashtra, Ludhiana and Jalandhar in Punjab, Barmer, Alwar and Kota in Rajasthan, Coimbatore and Salem in Tamil Nadu, Allahabad, Faizabad, Amethi and Rai Bareli in Uttar Pradesh, Dehradun in Uttarakhand and Burdwan in West Bengal are on offer. Prior to the 9th round, 91 GAs were awarded to firms like Indraprastha Gas Ltd and GAIL Gas Ltd, which are serving 240 million population, 4.2 million domestic consumers and 3.1 million CNG vehicles. Of these, 56 GAs were awarded through bidding rounds and the rest on government nomination. The bid round is being held on changed parameters after ‘one paisa’ bids spoilt the initial auction rounds. Bidders have been asked to quote the number of CNG stations to be set up and number of domestic cooking gas connections to be given in the first eight years of operation. In the previous eight bid rounds, bidders were asked to quote only the tariff for the pipeline that carries gas within the city limits. These bidding criteria did not include the rate at which an entity would sell CNG to automobiles or piped natural gas to households using the same pipeline network, leading to companies offering one paisa as the tariff to win licences. In the new guidelines, maximum weightage of 50 percent has been given to the number of piped gas connections proposed in eight years from the date of authorisation, as compared to 30 percent earlier. The number of CNG dispensing stations proposed to be set up has been assigned 20 percent weightage. Length of the pipeline to be laid in the GA and the tariff proposed for city gas and Compressed Natural Gas (CNG) have been assigned 10 percent weightage each. Also, a floor tariff of Rs 30 for city gas and Rs 2 per kg for CNG has been put in order to deter bidders from quoting unviable tariff of 1 paisa per unit. Companies having a net worth of not less than Rs 1.50 billion can bid for cities with a population of 5 million and more while the same for cities with population of 2 to 5 million has been proposed at Rs 1 billion. The net worth eligibility goes down with population, with a Rs 50 million net worth firm being eligible to bid for cities that have less than 1 million population. PNGRB said any entity security CGD licence would have to enter into a firm natural gas supply agreement with a natural gas producer or marketer in a transparent manner on the principle of ‘at an arm’s length’ within 180 days of winning a licence. The authorised entity has to achieve financial closure within 270 days from date of grant of licence. The winning company would have 8 years of marketing exclusivity in the given city. Current licences provide for 5 years of exclusivity. Last few rounds of CGD have evoked a lukewarm response. The fourth round was altogether cancelled, while the fifth saw a sparse response. The sixth round of bidding for 34 cities in 2015 got bids for only 20. The seventh round of bidding done to set up CGD infrastructure in 11 smart cities under smart city mission received only 1 bid. Seven cities were offered in the 8th round last year but not all cities have been awarded so far. Kevan Miller Womens Jersey
Cyprus, Israel seek gas-sharing formula to unlock East Med energy hub
An ownership squabble over Cyprus’ main natural gas field is threatening to delay multi-billion dollar plans to turn the eastern Mediterranean into a major energy hub. Israeli Prime Minister Benjamin Netanyahu and Energy Minister Yuval Steinitz are flying to Cyprus on Tuesday to spur plans to join the two countries’ electricity grids and construct a pipeline to link newly found gas fields to mainland Europe. Standing in the way, however, is a dispute over Aphrodite, a gas field discovered in 2011 at the edge of Cyprus’ economic waters. One tip of it stretches across the border into Israel’s maritime zone. At stake is 7-10 billion cubic metres of gas worth close to $1.5 billion, according to one recent estimate in Israel. That is less than 10 percent of Aphrodite’s total reserves and a fraction of the gas already discovered in Israel. Israel says it will not give up on the gas and the companies operating on the Israeli side are ready for legal action in case Aphrodite is developed without them. “I assume we will find a solution in good spirit so we can keep cooperating on bigger, more important, things,” Steinitz told Reuters. Several large gas fields have been discovered in the region over the past decade and Israel and Cyprus have grown close while collaborating in their development. Steinitz says he and his Cypriot counterpart, Yiorgos Lakkotrypis, have become good friends. But that does not guarantee a quick solution. “The government of Israel cannot give up, not even as a gesture of friendship, on its territories or its natural resources,” Steinitz said. He said the governments have asked the companies to reach an understanding among themselves on how much gas is on each side. “If they don’t reach an understanding, then we will ask a professional arbiter or a professional group … to examine the findings from both sides and decide on the proper division,” he said. The Cypriot Energy Ministry declined to comment, but officials in Nicosia said Lakkotrypis has suggested a similar course of action. Steinitz said during his visit that the countries may agree on a general format to solve the issue, but a final agreement could take weeks or months. Charles Ellinas, CEO of energy consultancy e-CNHC, said this should not be a deal breaker. “If the two governments between them agree to abide by the findings of the arbitration then it takes the heat out of it. And that’s what they need to do at this meeting this week,” he said. IT’S ALL CONNECTED Aphrodite is smaller than two huge gas fields, Tamar and Leviathan, discovered in Israel around the same time, but it was a milestone for Cyprus. Developing it are Royal Dutch Shell, Texas-based Noble Energy and Israel’s Delek Drilling. They are looking to sell the gas domestically and abroad, with a focus on Egypt, where Shell has a liquefaction plant. The field is also meant to be a link in the 2,000 km pipeline being planned by IGI Poseidon, a joint venture between Greece’s natural gas firm DEPA and Italian energy group Edison, to carry Israeli and Cypriot gas to western Greece. A final investment decision on the pipeline, with an expected price tag of up to 6 billion euros ($7.2 billion), could come next year. Deep-sea exploration in both countries continues and many current and future discoveries will likely be connected to each other to cut costs on infrastructure. The Aphrodite partners would not comment on the dispute, though a footnote in Delek’s 2017 financial report stated that “the vast majority” of gas was in Cyprus and a “minority” was in the adjacent Yishai prospect on the Israeli side. The Yishai consortium, which includes energy firm Israel Opportunity and Nammax Oil and Gas, a company linked to billionaire Beny Steinmetz, has already spent $120 million on exploratory drilling. The group commissioned a third-party assessment that concluded Yishai’s estimated 7-10 bcm of gas could be worth close to $1.5 billion. Production will have to happen in Cyprus since that is where most of the gas lies, said Rony Halman, chairman of Israel Opportunity, but he envisions the Yishai group being like “smaller partners for Aphrodite, but we will be part of the system”. They are prepared to bring a legal challenge in Europe in case of any opposition. “We as a company will bring a commercial claim that will stop the development. We have already sat with lawyers in London. We retained lawyers for this issue,” Halman said. “We are not willing to give up on this.” Jesse James Jersey
Shell trading arm protests proposed program for Marketlink oil pipeline
Shell’s U.S. trading arm on Monday urged regulators to deny a new program proposed by TransCanada Corp for its Marketlink oil pipeline from Cushing, Oklahoma, to Gulf Coast markets, saying it violates sections of the Interstate Commerce Act (ICA): Shell Trading (US) Company (STUSCO), a shipper on Marketlink, said the proposed “”flexible short-term program” is also inconsistent with the FERC-approved rate structure. FERC’s rate structure provides that walk-up shippers pay a higher rate for the same type of flexibility being offered to the flexible short-term shippers, STUSCO said. TransCanada in April filed for the program, effective June 1. Tre Madden Jersey
India to launch ninth round of bidding for City Gas Distribution today
India will formally launch the ninth round of bidding for City Gas Distribution today. Oil minister Dharmendra Pradhan will kickstart the round for which the downstream regulator Petroleum and Natural Gas Regulatory Board (PNGRB) has invited bids for 86 Geographical Areas spread across 174 districts in 22 states and Union Territories. The GAs cover 24 per cent of the country’s area and 29 per cent of its population, Pradhan said in a tweet today, ahead of the Delhi roadshow. The latest round of CGD bidding assumes importance as the regulator has introduced new guidelines and framework superseding the earlier 2008 regulation, in an attempt to attract serious investor interest. The last day for submitting the bids for the ninth round ends on 10 July. Multiple rounds of bidding for CGD areas have attracted less than expected response from companies in the past. The sixth round held in 2015 included 34 Geographical Areas, of which only 20 areas received bids while the seventh round for setting up CGD infrastructure in 11 smart cities under smart city mission received only 1 bid. The eight round was a success as compared to previous rounds and almost all the players have been awarded CGD licences under it, according to PNGRB Chairman D K Sarraf. The new guidelines have revamped the bidding criteria with maximum weightage of 50 per cent for number of piped gas connections proposed in eight years from the date of authorization, as compared to 30 per cent earlier. The number of natural gas stations proposed to be installed has been assigned 20 per cent weightage; pipeline length 10 per cent; and the tariff proposed for city gas and Compressed Natural Gas (CNG) have 10 per cent weightage each. “The amended regulation has addressed most of the concerns of the sector. The bidding criteria has been revised such that 80 per cent weightage, as compared to 0 per cent earlier, is assigned to infrastructure creation so that gas network penetration is maximised while at the same time, participation of more players is incentivised with the extension of marketing exclusivity period for authorized entities to eight years as compared to five years earlier,” said K Ravichandran, Senior Vice President at ICRA. He added the change should push the bidding entities to commit the highest resources to reach the largest number of consumers, which has been a key thrust area of the government. The amended regulation has a provision for pre-determined penalty to be levied on players within three months from the end of each contract year, if the physical performance target provided by the player is not achieved at the end of the contract year. The regulator will impose a penalty of Rs 750 for shortfall in each piped gas connection, Rs 1.5 lakh for missing each inch-kilometer of pipeline, and Rs 20 lakh for each natural gas station not installed. Also, the new rules have placed a tariff floor of Rs 30 for city gas and Rs 2 per Kg for CNG in order to deter bidders from quoting unviable tariff of 1 paise per unit. The new guidelines have also provided for natural gas stations where a bidder can dispense natural gas in the liquefied form providing impetus to Petronet’s plan to construct 20 LNG stations on the west-coast of India. Matt Prater Jersey
SoCalGas lifts estimated cost of Aliso Canyon natgas leak to $954 mln
Southern California Gas Co (SoCalGas) boosted its estimated cost for the massive leak at its Aliso Canyon natural gas storage facility between October 2015 and February 2016 to around $954 million, up 4.4 percent from the estimate of $913 million last quarter, according to a quarterly report with U.S. financial regulators. SoCalGas, a unit of California energy company Sempra Energy , warned the “estimate may rise significantly” due to pending lawsuits, possible fines and other costs. It said costs not covered by insurance or delays in receiving insurance payments “could have a material adverse effect on SoCalGas’s and Sempra Energy’s cash flows, financial condition and results of operations.” The utility said the latest estimate included $928 million of costs already recovered or likely to be recovered from insurance. It said about 60 percent of the total cost was for temporary relocation of residents who live near the facility, which is close to the Porter Ranch neighborhood in Los Angeles, including cleanup costs. Aliso Canyon, with a capacity of 86 billion cubic feet (bcf), is SoCalGas’ biggest storage facility. State regulators estimated 4.62 bcf of gas leaked at Aliso Canyon. One billion cubic feet is enough gas to supply about five million U.S. homes for a day. The facility represents 63 percent of the utility’s gas storage capacity, making it a key part of the company’s ability to deliver fuel to customers, especially on the coldest days when demand for heating is highest and the hottest days when a lot of gas is used to generate power for air conditioning. State regulators have limited the amount of gas SoCalGas can inject into Aliso Canyon to a total of 24.6 bcf. They have also said the company can only withdraw gas from the facility when other options are not available to meet demand. Many residents and government officials want SoCalGas to shut the Aliso Canyon facility. Elfrid Payton Womens Jersey
Global energy companies get drilling on booming gas demand in Asia
With global natural gas prices on the rise, international oil and gas exploration companies have rolled up their sleeves, aiming to drill deeper to get more gas and capitalize on the booming demand in Asia. More upstream final investment decisions are expected in 2018-2019. The number of project greenlights worldwide has more than doubled compared to 2015-2016, according to Wood Mackenzie, a leading energy research and consulting company. That matches the situation in Southeast Asia, where Thailand has resumed a long-delayed auction for the Erawan and Bongkot gas blocks in the Gulf of Thailand to secure the continuity of gas supply for the country’s power-generating sector. They are brownfield projects whose concessions are due to expire in 2022 and 2023, respectively. Sources at the Energy Ministry said at least three international oil and gas companies are expected to join the bidding: PTTEP, Chevron and Abu Dhabi sovereign wealth fund Mubadala Investment. Gas from the two fields provide a combined 2.1 billion standard cubic feet per day, or around 40% of total gas demand in Thailand. Chevron is the production operator of the Erawan block, while PTT Exploration and Production operates the Bongkot block. In Malaysia, the state energy company Petroliam Nasional Berhad (Petronas) is also slightly increasing capital expenditures for upstream activities in 2018 from last year, according to upstream CEO Mohd Anuar Taib. Petronas, like other oil majors, was hit hard by the plunge in oil prices from mid-2014 highs, but sharp cost cuts since then and a modest price recovery that began last year has helped the company boost profits so it can spend more. Petronas allocated 26 billion ringgit ($6.6 billion) for upstream expenditures in 2018, slightly up from 2017. However, the company did not give a precise comparison. This is still little more than half the 48.7 billion ringgit spent on upstream activities in 2015. The natural gas market is undergoing a fundamental transformation. Industry has overtaken the power sector as the driving force behind the growing use of gas, thanks to rising demand in China, developing Asia, the Middle East and the U.S., according to the International Energy Agency. The IEA’s forecast is in line with research by major international oil and gas companies, which have forecast that many countries, particularly in Asia, will shift toward gas-based economies, resulting in a rise in gas demand. In China, the National Development and Reform Commission, which guides national energy policy, announced on April 25 a goal of boosting reserves to the equivalent of 16% of domestic consumption in 2020, up from less than 6% today. The World Bank said in its April Commodity Markets Outlook that global natural gas prices will rise by 20% in 2018 and could continue uptrend during 2020-2025, rebounding from the sluggish period during 2015-2016, when demand dropped in line with the weak global economy. U.S. oil prices also rose above $70 a barrel on Monday for the first time since November 2014, as traders braced for a re-imposition of U.S. sanctions on Middle East crude producer Iran. That has encouraged international oil companies, such as BP, Chevron, ExxonMobil, Shell, and Total, which have all signaled their intentions to increase the share of gas in their reserves. This will result in more investment in both the short and long term across the supply chain of natural gas. India’s state energy company, Oil and Natural Gas Corporation, kicked off the $5.07-billion KG-DWN-98/2 project in the Krishna Godavari basin off the east coast of India by spudding (doing the initial drilling) for the first of the planned 34 subsea wells. The Italian energy company Eni also announced the approval of a development plan for the Merakes field, off East Kalimantan, Indonesia. The Indonesian government has granted approval just three months after submitting the plan and less than 11 months after Eni started production from its deepwater Jangkrik asset in Muara Bakau, Indonesia. However the new gas-exploration projects are much smaller in size due to cost-cutting efforts, analysts noted. “We are seeing significantly smaller projects, alongside a greater appetite for brownfield and expansion projects, and more subsea tie-backs,” said Jessica Brewer, a principal analyst at Wood Mackenzie. “Brownfield developments are popular in the current capital-constrained environment, with less spending and execution risk than a greenfield project, and a faster route to first production,” said Brewer, adding that both investors and operators want to see faster cycle times and quicker returns on upstream projects. Len Dawson Womens Jersey