France’s Total, Germany’s Siemens hope to sign Cuban LNG deal soon
French energy firm Total SA and German industrial giant Siemens AG hope to sign a deal soon with Cuba to build a 600 megawatt gas-fired power plant on the island, according to diplomats and businessmen with knowledge of the talks. The two are leading a consortium that has been in negotiations with Communist-run Cuba since last year when they won a tender for the project, said the sources, who did not identify the other members “Total, with some international partners, is looking at a LNG power project in Cuba, one of several countries where Total is exploring similar LNG potentials,” the company said in a statement to Reuters. A Siemens spokesman in Germany was not immediately available for comment. The sources cautioned that many details of the project were under negotiation and that the combination of U.S. sanctions and Cuban bureaucracy meant there was no guarantee the agreement would be finalized, though they were hopeful. The potential deal is the latest example of companies from the European Union moving to take advantage of Cuba opening to foreign investment. “The EU has become Cuba’s first trade partner and was already the first in investment and development cooperation,” the European Union’s top diplomat Federica Mogherini said in January while visiting the country. Siemens signed a letter of intent with the Cuban power authority in 2016 to help modernize the grid. “With this important agreement … we will assist and support Cuba on the development of a sustainable and modern electricity system,” Willi Meixner, head of Siemens Power and Gas division, said at the time. In the Matanzas Bay project, 124 kilometers (77 miles) east of Havana, Total would obtain the liquid gas from abroad, and then store, process and supply it to the plant, which would be built by Siemens, the sources said. The project would mean less dependence on oil and less pollution, Jorge Pinon, a Cuban energy expert at the University of Texas in Austin, said. “It could be the best decision that the Cuban government has made toward an energy policy able to react to changes in price, geopolitical events and or supply-demand disruptions,” he said. Cuba was left in the lurch when its sole oil supplier, the Soviet Union, collapsed in 1991. More recently it has been scrambling to find alternative oil supplies as ally Venezuela’s economy and oil production implode. Cuba’s total generating capacity is around 6,000 megawatts and demand is increasing due to growing tourism, digitalization and a new private sector. Around 95 percent of electricity in Cuba is generated by fossil fuels. The government has begun a program to generate 24 percent with renewable sources by 2030. Total and Siemens have engaged in commerce with the Caribbean island nation for decades. Total was the first foreign company to drill for oil just off shore in the 1990s after the Soviet Union collapsed. The company failed to find a commercially viable field. It also has a joint venture with Cuban state oil monopoly Cubapetroleo (CUPET), Elf Gas Cuba, which for 20 years has packed a liquid propane and butane gas mix into cylinders and distributes them for use by households and businesses in eastern Cuba. The Cuban state power authority, Union Electrica, and CUPET did not respond to a request for comment. Colton Sissons Jersey
Dharmendra Pradhan inaugurates three projects in Odisha
Petroluem Minister for Petroleum and natural gas Dharmendra Pradhan on Sunday launched three projects, including a liquefied petroleum gas (LPG) bottling unit built at the cost of Rs 3.21 billion in Balasore district. The three projects were inaugurated near Hidigaon village on Balasore-Chandipur road in the presence of senior officials from the Indian Oil Corporation (IOCL). The Balasore pump station initiated by Pradhan will help in supplying crude oil to five refineries of Paradip, Haldia, Barauni, Bongaigaon, and Guwahati, at Chandipur in Balasore district. The Paradip-Haldia-Barauni Crude Oil Pipeline (PHBPL) was the third project inaugurated by the Union Minister. It is considered as the energy highway to entire Eastern and North-Eastern region of India for supplying crude oil to refineries at Paradip, Haldia, Barauni, Bongaigaon, and Guwahati. These projects are envisaged to cater to the LPG demand of Odisha, Jharkhand, and Chhattisgarh. Jack Butler Authentic Jersey
India Looks To Open Up Natural Gas Sector By Splitting State Firm GAIL
India wants to split its biggest gas marketing and trading firm, state-run GAIL (India) Ltd, into two separate companies by the end of March 2019, in a bid to open up its gas sector to industrial end-users and attract billions of U.S. dollars in investment in liquefied natural gas (LNG) terminals. GAIL, which currently owns most of India’s gas pipelines, is planned to be split into one gas marketing company and one company operating pipelines, the chairman of India’s sector regulator, the Petroleum and Natural Gas Board, D.K. Sarraf, told Reuters on Friday. The split—which is expected to be completed by the end of March 2019, when India’s current fiscal year ends—could allow small industrial users of gas to buy the fuel from pipelines without having to pass through GAIL. “All this un-bundling should be done within this fiscal year,” Sarraf told Reuters, adding that GAIL is already keeping separate accounts for its gas pipeline business and for the marketing division, which would make it easier to split the company into two firms. The official, however, did not specify which of the two businesses GAIL would keep. The plan is ultimately aimed at encouraging gas use instead of dirtier fuels such as diesel and naphtha. India targets to more than double the share of gas in its energy mix, from 6.2 percent to 15 percent within the next 12 years. India, however, has just four LNG terminals now, with three others under construction, and its gas pipeline network—mostly owned by GAIL—does not reach enough customers. The country looks to boost its LNG import capacity more than three times to 70 million tons annually. The government plans to build 11 new LNG import terminals over the next seven years—and more afterwards. For expanding its pipeline network, India would need an investment of almost US$20 billion over the next few years, Sarraf told Reuters. Eric Kendricks Authentic Jersey
Reliance Industries plans to shut oil and gas fields in KG-D6 block
Reliance Industries plans to shut oil and gas production at its main fields in KG-D6 block in the coming months and begin complying with the government’s guidelines for decommissioning facilities in the Bay of Bengal block where output has hit its lowest ever. “Adhering to Site Restoration Guidelines issued by Government of India, RIL submitted Bank Guarantee for Decommissioning activity for existing producing fields (D1D3 and MA),” the company said in an investor presentation post announcing its fourth quarter earnings. RIL had till date made 19 oil and gas discoveries in the Krishna Godavri basin. Of these, MA — the only oil discovery in the block — began production in September 2008. Dhirubhai-1 and 3 (D1 and D3) fields went onstream in April 2009. While the company did not provide any timelines for decommissioning and stopping of production at the fields that have witnessed output drop to a fourth of peak, sources privy to the development said MA field may be shut as early as October after the current lease of a floating production storage and offloading (FPSO) unit, which processes output from the field, expires. E-mails sent to RIL and its partner BP plc of UK, which holds 30 per cent stake, for comments remained unanswered. The government’s Site Restoration Guidelines provide for a one year notice for decommissioning of facilities. In the presentation, RIL said “average production of gas (from KG-D6 block in January-March 2018) was 4.3 million standard cubic metres per day and oil and condensate was at 1,865 barrels per day.” The gas output, which was lower than 4.9 mmscmd in the October-December quarter of 2017, was made up of output from D1 and D3 and MA fields. It said this was due to “continuing natural decline” at the fields. RIL had in the field development plan for D1 and D3 proposed a capital expenditure of USD 8.836 billion. For developing Dhirubhai-26 or MA oilfield, it had in 2006 proposed to invest USD 2.234 billion, which was scaled down to USD 1.96 billion in 2012. The fields were in the investment plans supposed to last a minimum 15 years but have extinguished in less than a decade. KG-D6 fields had hit a peak of 69.43 mmscmd in March 2010 before water and sand ingress shut down wells. This peak output comprised 66.35 mmscmd from D1 and D3, the largest of the gas discoveries on the KG-D6 block, and 3.07 mmscmd from MA field. Besides the fall in output from D1 and D3, gas production from MA field, which had hit a peak of 6.78 mmscmd in January 2012, too has dropped. RIL in the presentation said it is now developing three sets of discoveries — R-Cluster, Satellite Cluster and MJ fields in KG-D6 block at a cost of Rs 400 billion. These fields together would bring 30-35 mmscmd of peak output. Initial gas will begin flowing from 2020. “R-Cluster development activities commenced; drilling to commence by 2Q FY19,” it said. D.J. Reader Womens Jersey
Physical versus virtual gas trading hubs: Which is the right way to for India?
India is currently the fourth-largest importer of liquefied natural gas (LNG) in the world, sourcing nearly 45% of its gas requirements from the international markets. While a large part of these imports is typically bilateral and long-term contracts indexed partly or wholly to crude oil prices, domestically-produced gas is sold on government-mandated prices based on time-lagged rates. As a result, there had always been a discrepancy between prices received by domestic suppliers and the prices paid for the imported gas. If India is to achieve its ambitious goal of moving away from its mainstream use of solid fuels and subsequently increase its share of gas in its energy mix from the current 6.5% to about 15% in the next few years, building a national gas hub and trading platform driven by market-determined price is the need of the hour. A gas trading hub backed by necessary regulatory reforms such as price decontrol and open access to infrastructure utilities such as pipeline/storage/regasification will make way for transparent and market-driven price discovery reflecting India’s demand and supply conditions at any point in time. A trading hub will permit market participants to buy and sell gas on a short-term or daily basis without having to go through a long-term planning/negotiation process. This will provide for purchase and sale of any shortfall or excess gas quickly and anonymously. Additionally, it will not only enable natural gas consumers to optimize their supplies as per requirement but also help the market in mitigating short-term price volatility. It will help encourage a flow of investments in the upstream, thus stimulating domestic production, striking a better balance between imports and domestic suppliers. Moreover, a developed natural gas market can be a critical contributor to India’s prosperity and economic growth, as is evidenced in developed countries such as the US. For example, according to a report by the American Petroleum Institute, natural gas industry accounts for 7.6% of the US GDP and 5.6% of the nation’s employment. Hubs in their structure may differ widely depending upon the supply structure or level of infrastructure development or the geographical spread of user industries. In general, they require a deregulated pricing environment, where suppliers have the freedom to access imports or domestic supplies, while consumers have the flexibility of choosing their suppliers. A hub can be an actual physical point such as the Henry Hub in the US, where several pipelines connecting buyers and sellers converge and serve as a transit point for transportation for consumers, distributors and storage operators. With a perpetually oversupplied long market with users spread across various states, the US Henry Hub provides for the development of a physical hub. Here, parties are required to book the same quantity for both entry and exit on a point-to-point transaction mode, assuming that pre-agreed gas injected into the network at one point will be taken off at a predetermined location. On the contrary, a virtual gas trading hub such as the National Balancing Point (NBP) in the UK provides a trading platform defined through a pipeline grid (interconnected pipelines with no point of origin or end) representing the entire country or a trans-regional zone, managed by a system operator—the National Transmission System (NTS) in this case. Generally, it is seen that countries short of domestic natural gas supply relying on various sources of supplies including LNG imports have a virtual trading system with multiple entry-exit points. It provides for a fee-based access structure that allows traders with the flexibility to inject and extract gas within the grid at any point of varying quantity as well. All gas within the virtual hub can be traded, irrespective of its actual physical location. Individual buyers and sellers can book different quantities for entry and exit into the system without a predetermined destination, thus increasing the flexibility and ease of trading than a physical hub. What suits India’s gas economy? A virtual hub is expected to have a greater market depth and liquidity than a physical hub since there is no specific ‘location’ and there is flexibility to withdraw more than the traded quantity and yet pay for the excess withdrawal. Virtual hubs avoid the need for parties to account for varying distance-based transmission cost that can make price comparisons difficult and complicates trading. In developed countries, the gas shippers or large energy players who buy, trade and sell on the virtual trading platform are given financial incentives to balance out their trades in the system by buying or selling gas. Such virtual trading hubs are designed in a way that a gas shipper typically incurs extra costs in case it does not balance its trades. In case shippers fail to balance, the appointed balancer is obliged to restore the physical balance of the entire system. With a 45% dependence on imports and coming through a few ports, the natural option for India would be to let all gas to enter and exit through a virtual hub. But with few entry nodes, and also with restricted third-party regasification access and pipelines with single convergence points at major trading centres such as Hazira and Dahej, it may suit well to start a market place following the physical hub model of the US and focus on developing interconnected pipelines to move towards a virtual hub being operated by a private system operator with a clear mandate. Moreover, given the lack of interconnectivity among most of the pipelines, the regulators shall plan an incentivised development of interconnected pipelines that will ultimately provide for grid-based trading. Also, the planning focus should be on the development of natural gas storages that can cushion prices at the time of system imbalances in the virtual hub. Potential best fit amid current regulation and market structure The successful British (NBP) and European experience (TTF in the Netherlands, PSV in Italy, NCG and GPL in Germany, PEG in France, and Zeebrugge in Belgium) have proved that virtual hubs can provide for rapid development of the respective underlying economy than a physical hub.
Average price of US gas jumps 9 cents, to $2.83 a gallon
The average U.S. price of regular-grade gasoline spiked 9 cents a gallon over the past two weeks to $2.83. Industry analyst Trilby Lundberg said Sunday that the jump was driven primarily by rising crude oil costs. The current gas price is 37 cents above where it was a year ago. The highest average price in the contiguous 48 states was $3.68 in the San Francisco Bay area. The lowest was $2.45 in Baton Rouge, Louisiana. The average price for diesel fuel rose six cents, to $3.10. Tyreek Hill Authentic Jersey
Panama Canal to carry 30 mln T of LNG by 2020 as global demand grows
The Panama Canal may carry five times as much liquefied natural gas (LNG) in 2020 as it did last year as production of the fuel expands in the United States and Asian import demand rises, the head of the canal’s governing agency told Reuters. LNG volumes traversing the Canal could hit 30 million tonnes a year before the end of 2020, said Jorge Quijano, who leads the Panama Canal Authority, up from 6 million tonnes last year. Demand for LNG has risen significantly in the last three years as the increase of supply, especially from onshore shale fields in the United States and offshore reserves in Australia, has made it more competitive. Many countries including China have also been switching to gas more rapidly than expected, away from dirtier coal, for environmental reasons. The United States has only one LNG export facility, at Sabine Pass in Louisiana, which exports via the Panama Canal mostly to North Asia and the Pacific coast of Latin America. But shipments are expected to surge over the next few years as several U.S. LNG projects are under construction, with total U.S. capacity slated to reach nearly 70 million tonnes a year, up from 18 million tonnes in 2017. “Right now on average, we’re running six (LNG) vessels per week, but in the very near future, you will have several plants exporting and that starts to add up,” Quijano said in an interview with Reuters on Thursday. U.S. LNG exports through the canal are set to rise to as much as 11 million tonnes this year and to around 20 million tonnes in 2019, he said. Reflecting a quickening in traffic, three gas tankers transited the Canal in a single day for the first time on April 17. And since June 2017, there have been 15 days in which two LNG ships passed through the Canal in a 24-hour period. Shipments of LNG through the Panama Canal began to rise after a third set of locks was added in 2016, Quijano said, and the authority projects growing demand for the supercooled fuel will boost such transits through the early part of the 2020s. The Canal is already looking beyond the next few years to adding a fourth set of locks, which would serve a new generation of even bigger ships, Quijano said. Oscar Lindberg Jersey
ONGC targets onshore dollars
India’s biggest oil explorer Oil and Natural Gas Corp is looking to raise US$1bn in the onshore market, in the first big deal to target foreign-currency deposits with domestic lenders. The one-year loan would set a benchmark for size and pricing in the onshore US dollar market, where financings typically come in small sizes of US$30m-$50m. It also offers Indian banks a rare opportunity to invest in one of the country’s top borrowers, since ONGC typically funds in dollars to match its cash flows. Foreign currency non-resident (FNCR) accounts are fixed deposits in foreign currencies, such as US, Canadian and Australian dollars, yen, euros and pounds sterling belonging to non-resident Indians (NRI) or persons of Indian origin (PIO). According to the Reserve Bank of India’s website, outstanding FCNR deposits as of February this year totaled US$21.84bn. ONGC’s pursuit of the FCNR liquidity comes at a time when Indian banks are wrestling with non-performing loans in an environment of risk aversion, declining business opportunities, and corporate governance issues. “Indian banks are smarting from the recent developments around fraud and corporate governance issues that add to their NPL woes. ONGC’s deal brings a great opportunity to lend to one of the best credits from India,” said a senior loans banker in Singapore. In mid-March, India’s central bank barred all lenders from issuing letters of an undertaking – a form of credit guarantee at the centre of what has been dubbed the biggest fraud in Indian banking history. It followed revelations from Punjab National Bank, the country’s second-biggest state-owned lender, which said in February two jewelry groups had defrauded it of about US$2bn. Earlier this month, rating agencies S&P and Fitch flagged the need to improve risk management and governance practices at Indian private-sector banks. Regulators have opened preliminary probes into possible corporate governance breaches at ICICI Bank, while Axis Bank said on April 9 that its long-serving CEO Shikha Sharma would step down at the end of 2018, earlier than expected. LAP IT UP Indian lenders, particularly state-owned banks, have compelling reasons to lap up ONGC’s FCNR loan. Exposure to ONGC, which has Triple A ratings domestically, carries only a 20% risk weighting and comes with rarity value as the company hardly borrows onshore. Furthermore, following the recent developments, Indian banks have turned cautious on lending in general and opportunities have been few and far between for them offshore. Tata Steel’s US$1.86bn-equivalent six-year refinancing launched earlier this month is a good example of their hunger for good quality assets with decent yields. The offshore deal has seven Indian banks in its 23-strong arranger group, including unusual names such as Export-Import Bank of India and RBL Bank. Exim India has previously participated in offshore loans for Indian credits, while RBL is making its debut as an arranger. Tata Steel, rated Ba3/BB-/BB, is offering top-level all-in pricing of 218bp and 210bp based on interest margins of 200bp over Libor/Euribor and average lives of five years. Pricing in the offshore loan markets for top-tier Indian credits has been on a downward trend for a long time, which ONGC’s overseas arm, ONGC Videsh, has taken advantage of frequently. In August, the wholly-owned subsidiary, rated Baa1/BBB? (Moody’s/S&P), raised US$843m-equivalent, paying top-level all-in pricing of 102bp on the five-year US dollar portion and 62bp on the seven-year yen piece. ONGC itself could borrow at extremely tight levels offshore, with some bankers estimating a five-year loan to pay around 50bp-60bp all-in. However, rules governing external commercial borrowings for Indian borrowers stipulate the use of proceeds, minimum average maturities and all-in pricing caps on the offshore loans. FCNR loans do not have any of these requirements. FCNR DYNAMICS Bankers familiar with the workings of the FCNR loan market said financings are mostly bilateral in nature with short tenors of less than three years. Pricing is 250bp-300bp over Libor or higher with the facilities featuring reset options for Libor as well as the interest margin. “The fragmented, volatile and erratic nature of the FCNR deposits makes it hard to get a handle on the size of the market. FCNR deposits have never been a big force of liquidity and never in a syndicated format,” said one senior loan banker in Mumbai. ONGC is raising the FCNR loan to partially refinance bilateral facilities from Indian banks totaling Rs180.6bn (US$2.84bn) signed in January that helped fund its Rs369.15bn purchase of the government’s 51.1% stake in HPCL, a downstream energy company. ONGC is averse to raising rupee bonds because it earns its revenues in foreign currency. But should it decide to take that route, bankers said it could easily raise longer-tenor money at around 8.00%-8.50%. However, that would be far more expensive than the FCNR loan, which also provides a natural hedge for the company. Nate Allen Jersey
Petrol price hits highest level under BJP govt, diesel at record peak
Petrol price today hit Rs 74.40 a litre – the highest level under the BJP-led government, while diesel rates touched a record high of Rs 65.65, renewing calls for a cut in excise duty to ease the burden on consumers. State-owned oil firms, which have been since June last year revising auto fuel prices daily, today raised petrol and diesel rates by 19 paise per litre each in Delhi, according to a price notification. The hike necessitated due to firming international oil prices, comes on back of a 13 paise increase in rates of petrol effected yesterday and a 15 paise hike in diesel, it said. Petrol in the national capital now costs Rs 74.40 a litre, the highest since September 14, 2013, when rates had hit Rs 76.06. Diesel price at Rs 65.65 is the highest ever. Oil ministry had earlier this year sought a reduction in excise duty on petrol an diesel to cushion the impact rising international oil rates but Finance Minister Arun Jaitley, in his Budget presented on February 1, ignored those calls. India has the highest retail prices of petrol and diesel among South Asian nations as taxes account for half of the pump rates. Jaitley had raised excise duty nine times between November 2014 and January 2016 to shore up finances as global oil prices fell, but then cut the tax just once in October last year by Rs 2 a litre. Subsequent to that excise duty reduction, the Centre had asked states to also lower VAT, but just four of them – Maharashtra, Gujarat, Madhya Pradesh and Himachal Pradesh – reduced rates while others including BJP-ruled ones ignored the call. The central government had cut excise duty by Rs 2 per litre in October 2017, when petrol price reached Rs 70.88 per litre in Delhi and diesel Rs. 59.14. Because of the reduction in excise duty, diesel prices had on October 4, 2017, come down to Rs 56.89 per litre and petrol to Rs 68.38 per litre. However, a global rally in crude prices pushed domestic fuel prices far higher than those levels. The October 2017 excise duty cut cost the government Rs 26,000 crore in annual revenue and about Rs 13,000 crore during the remaining part of the current fiscal year. The government had between November 2014 and January 2016 raised excise duty on petrol and diesel on nine occasions to take away gains arising from plummeting global oil prices. In all, duty on petrol rate was hiked by Rs 11.77 per litre and that on diesel by 13.47 a litre in those 15 months that helped government’s excise mop up more than double to Rs 2,42,000 crore in 2016-17 from Rs 99,000 crore in 2014-15. State-owned oil companies – Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation – in June last year dumped the 15-year old practice of revising rates on the 1st and 16th of every month. Instead, they adopted a daily price revision system to instantly reflect changes in cost. Since then prices are revised on a daily basis. Evan Gattis Womens Jersey
Lakdanavi wins Kerawalapitiya 300MW LNG power plant tender
After a string of bureaucratic hullabaloo in tender procedure, the much delayed Kerawalapitiya 300MW Liquified Natural Gas (LNG) power plant bid was recently awarded to Lakdanavi Ltd, the largest independent power producer in the country, a top bureaucrat divulged. The 18 month impasse in selecting a suitable bidder to build the 300MW Kerewalapitiya LNG Power Plant has ended marking a significant step forward for a new era of LNG power in Sri Lanka, Secretary to the Ministry of Power and Renewable Energy Dr. Suren Batagoda said. Lakdanavi Ltd, a power plant construction and operation subsidiary of LTL Holdings (Pvt) Ltd, which is a subsidiary of the state-owned Ceylon Electricity Board (CEB), placed the lowest bid, he told the Business Times. Proposals for this 20 year Build, Own, Operate and Transfer (BOOT) project were opened in April 2017 and it took almost one year to fast track the project due to tender irregularities and political pressure, a senior member of the CEB engineers union said. The delay has caused a loss of over Rs. 18 billion, he said adding that plans to build the power plant were suspended after detecting certain irregularities in the tender procedure to select the company to construct the plant. The awarding of the tender had dragged on further owing to certain disagreements in opening the financial bid of Samsung JV Korea Group without considering bids of seven other firms. The Standing Cabinet Approved Procurement Committee (SCAPC) had opened tenders that pass the technical evaluation of the Tender Evaluation Committee(TEC), in order to ensure transparency in procurement. In another development, Petronet LNG Ltd, India’s biggest importer of gas, and its Japanese partners have completed a feasibility study for the proposed Liquefied Natural Gas (LNG) Terminal and the Floating Storage Regasification Unit (FSRU), Dr. Batagoda said. Sri Lanka has signed a tripartite MoU with India and Japan to conduct this feasibility study with the approval of the cabinet. The Cabinet of Ministers has also authorised Sri Lanka Gas Terminal Ltd to enter into agreements with the Indian and Japanese partners to establish the proposed pubic private partnership. Sri Lanka Gas Terminal Ltd will hold a 15 per cent stake in this joint venture while 47.5 per cent of the stake will be with the India’s Petronet LNG Ltd. Some 37.5 per cent shareholding of this venture will be jointly vested in Japan’s Sojitz Corporation and Mitsubishi. The LNG terminal is to be located within the Colombo Port and pipelines from the port will transport the gas to two dual-fuel power plants in Kerawalapitiya expected to be completed around 2021. Petronet LNG Ltd. will finalise negotiations with Sri Lankan authorities to build the country’s first liquified natural gas terminal project in Colombo and expects to receive commercial clearance by August this year. The project capacity of the floating LNG receipt facility off the island’s western coast, is 2.6-2.7 million tonnes per year and would cost around US $350 million. Johnny Hekker Authentic Jersey