Continuing Gas Price Cuts To Deter Fresh Exploration Capex, India Ratings Says
The ongoing rupee surge coupled with continuing price reductions of gas will push fuel cost down by around 5 percent, which in turn will lower the gross margins of upstream oil and gas players and deter fresh investment into the sector, says a report. For the fifth consecutive time since implementation of the domestic gas pricing formula in November 2014, the government in March lowered domestic gas prices by 0.8 percent to $2.48 per million British thermal units (mmbtu). The price will be in force from April 1 to September 30, 2017. This came even as the average Henry Hub gas prices rose 12 percent y-o-y to $2.52/mmbtu during the same period. “The latest lowering of domestic gas prices, coupled with the 4 percent rise of the rupee against the greenback in the second half of FY17, will lower the gross margins for upstream players, especially for ONGC and Oil India which contribute around 80 per cent of the domestic production, while their operating cost is around $2.5/mmbtu,” India Ratings said in a note. The price ceiling for gas produced from discoveries in deep-water, ultra-deep water and high pressure-high temperature areas for the period April-September 2017 is $5.56/mmbtu on gross calorific value basis, while the domestic prices has been lowered to $2.48/mmbtu on gross calorific value basis for this period. The report further cautioned that “any reduction in the realization from this level will adversely impact their gross margins and will act as a deterrent for fresh investments towards gas exploration and related capex”. However, it will marginally benefit the midstream entities like Gail (India) Ltd., which will see its trading revenue fall by Rs 2.50 billion from domestic sales during the first half of FY18. But since Gail. sells its domestic gases on a cost-plus basis, its gross margins will be protected. The report also warned that petroleum crack spreads and GRMs will drop in FY18 in the absence of inventory gains, while crack spreads will have a downward bias. The products crack spread, which is the difference between wholesale petroleum product prices and crude prices, is estimated to remain under pressure in FY18, on the back of the fragile global demand growth amid net capacity additions as Chinese and the US export volumes are likely to remain high helping maintain utilisation levels. The agency expects the rally in crude prices to fade and price to remain in a narrow range in FY18. C.J. Miles Jersey
India’s eighth sedimentary basin to go live in 2 years
The state-owned Oil and Natural Gas Corporation (ONGC) will open up India’s eighth sedimentary basin — the first in over three decades — for oil and gas production in two years, Chairman Dinesh K Sarraf said today. ONGC, which laid open for commercial production six out of India’s seven producing basins, has made a significant natural gas discovery in the Gulf of Kutch off India’s west coast, which it plans to bring to production in two years. “This will be the eighth-producing basin in India,” he told reporters on the margins of an industry event here. India has 26 sedimentary basins, of which only seven have commercial production of oil and gas. Except for the Assam shelf, ONGC opened up for commercial production all the other six basins, including Cambay, Mumbai Offshore, Rajasthan, Krishna Godavari, Cauvery and Assam-Arakan Fold Belt. Declining to give details, he said the discovery made in the Gulf of Kutch is in shallow waters, but cannot be tied to either the production facilities in Mumbai High fields or Hazira and may require a new landfall point. The company, the chairman, said had had a record number of oil and gas discoveries in the fiscal year to March 31. “In all, we had 23 discoveries,” he said. ONGC has continued to spend on exploration and development of discovered reserves despite the worldwide trend of putting on hold future investment in view of low oil prices. The International Energy Agency (IEA) yesterday stated that global oil discoveries fell to a record low in 2016 as companies continued to cut spending and conventional oil projects sanctioned were at the lowest level in more than 70 years. “We made 35 per cent more discoveries in 2016-17 as compared to 17 we made in 2015-16,” he pointed out. Of the 23 new discoveries, 12 are new prospects — a potential trap which may contain hydrocarbons while 11 are new pools — a geological term for subsurface hydrocarbon accumulation. As many as 13 new discoveries were made in onland and 10 in offshore wells. “A total of 100 exploratory wells were drilled as compared to 92 wells drilled in the previous year 2015-16. Of these, 37 wells proved hydrocarbon bearing registering success ratio of 37 per cent,” he said. He added that the accretion of in-place hydrocarbons was 203.24 million tonnes of oil and oil equivalent gas and the ultimate reserve accretion was 64.32 mt. The reserve replacement ratio (RRR) for the year has been 1.49. J.R. Sweezy Authentic Jersey
Ageing oilfields drag down India’s crude output for fifth straight year
India’s crude oil production fell for the fifth straight year in 2016-17 as output continued to slide at ageing oilfields. Output fell 2.5% from the previous fiscal to 36 million metric tonnes as production at the Oil and Natural Gas Corporation’s Mumbai High field and Cairn India’s fields in Rajasthan slipped, according to Petroleum Planning and Analysis Cell (PPAC), an arm of the oil ministry. “The delay in deployment of Sagar Samrat rig to mobile offshore production unit as well as development of western periphery of Mumbai High (MH) South field has also affected the crude production for ONGC,” PPAC said in its monthly note. “The major decline was observed in Rajasthan’s fields due to closure of a few high water cut wells in Mangala field and poor reservoir performance of Bhagyam wells.” Meanwhile, a rapidly expanding economy pushed up country’s oil demand 5% in 2016-17. Though lower than 11% demand growth witnessed in 2015-16, increased consumption, along with falling output, prompted a 5.2% jump in the import of crude to 213 million metric tonnes worth $70 billion during the fiscal. This increased India’s import dependence to 82% of its requirement in 2016-17 from 81% in the previous year. The government is aiming to bring down import dependence to 67% by 2022 by raising local output and increasing use of biofuel in transportation, a bid to reduce dependence on overseas energy sources and save on valuable foreign exchange. Domestic natural gas production fell 1% to 30.8 billion cubic meters in 2016-17 while consumption went up 6%. Import of liquefied natural gas (LNG), accounting for 45% of total domestic consumption, rose 15% during the year. Indian state firms’ production from overseas fields, however, rose sharply to 15.9 million tonnes of oil equivalent (mtoe) in 2016-17 from 9.7 mtoe in the previous year, driven mainly by stake purchases in Russia’s Vankor field. ONGC Videsh’s production jumped 40% to 12.5 mtoe. It is expected to go up another 15% in the current fiscal. India imported 22% more petroleum products in 2016-17, mainly due to increase in petcoke import by the private sector. The country exported 7% more petroleum products, with private sector accounting for 80% of total export. Pierre Desir Authentic Jersey
State-owned ONGC makes 23 oil and gas discoveries last financial year
State-owned Oil and Natural Gas Corp (ONGC) made 23 oil and gas discoveries in the fiscal year ended March 31 as a record number of wells drilled helped it uncover new reserves. While the International Energy Agency (IEA) stated that global oil discoveries fell to a record low in 2016 as companies continued to cut spending and conventional oil projects sanctioned were at the lowest level in more than 70 years, ONGC stepped up its exploratory efforts to augment new production. “FY 2016-17 has been one of the most successful years of the last decade in exploring oil and gas with more thrust in increased exploration activities during the year,” a top company official said. Its exploratory efforts yielded 23 new discoveries, a 35 per cent jump over 17 finds made in 2015-16 fiscal. Of the 23 new discoveries, 12 are new prospects — a potential trap which may contain hydrocarbons, while 11 are new pools — a geological term for subsurface hydrocarbon accumulation. As many as 13 new discoveries were made in onland and 10 in offshore wells. “A total of 100 exploratory wells were drilled which is higher by 9 per cent as compared to 92 wells drilled in the previous year 2015-16. Of these, 37 wells proved hydrocarbon bearing registering success ratio of 37 per cent,” he said. IEA in a report today said oil discoveries declined to 2.4 billion barrels in 2016, compared with an average of 9 billion barrels per year over the past 15 years. Also, the number of projects that received a final investment decision dropped to the lowest level since the 1940s. “This sharp slowdown in activity in the conventional oil sector was the result of reduced investment spending driven by low oil prices,” IEA said. However, ONGC continued to spend more to help achieve Prime Minister Narendra Modi’s target of reducing import dependence by 10 per cent by 2022. The official said the accretion of in place hydrocarbons was 203.24 million tons of oil and oil equivalent gas and the ultimate reserve accretion was 64.32 million tons. Reserve Replacement Ratio (RRR) for the year has been 1.49. The discoveries include two in Kutch and Saurashtra basin, off Gujarat coast. Also, SRI-1 discovery in the NELP block KG-OSN-2009/2 in KG basin has established huge potential for syn-rift/deeper play in east coast shallow water. Jabera-4 discovery established hydrocarbons for the first time in Vindhyan Basin and has given impetus for putting Vindhyan basin on hydrocarbon map of India, he said. The official said ONGC is working on early monetisation of new discoveries. Nine onland discoveries made during the year have been monetised and put on production with average oil rate of 445 cubic meters per day and gas rate of 220,000 cubic meters a day. The discoveries have cumulatively produced 38,809 tons of oil and 23.78 million standard cubic meters of gas during the year. Chris Scott Womens Jersey
Oil firms sell petrol at Rs 29 litre, government adds another Rs 48 in taxes
Sharon Furtado and her three friends who work with media firms in Parel, car-pool every day from Borivali to their workplaces. Saturday’s hike in petrol prices will add at least Rs 120 to each one’s monthly travel bill. But what has upset Sharon the most is a little-known detail: they are now paying 153% in taxes over the per litre price at which petrol is sold by refineries to oil companies. Given today’s crude price and dollar-rupee exchange rates, the cost of petrol supplied by oil companies inclusive of their marketing charges is Rs 29.54 per litre. But in Mumbai, consumers end up paying Rs.77.50 per litre owing to a raft of duties and cess. Consumers here pay Rs 47.96 per litre in taxes and duties over and above the price at which it lands in the market. These levies include central excise duty, state VAT, octroi, cess and commission for petrol pump owners, translating into 153 % in taxes. A senior economist working closely with the government, on condition of anonymity, admitted that government was trying to boost its revenues by hiking the cess on petrol. At a time when its debt level has crossed a virtually unsustainable Rs 4.13 lakh crore, it has reached a stage in which it cannot afford to increase borrowings to fund additional expenditure. Extra duties and cess on goods within its ambit (GST will soon reduce its elbow room)may be the only option. Opinions on the impact of the Rs 3 hike in petrol rates are divided. Some say it will have an effect on prices, especially of goods and services delivered at the door. Others, however, insist that in the existing scenario, a rise in petrol prices will not have a big effect on inflation considering it is not the fuel used by freighters and transporters. Transport expert Ashok Datar went so far as to say that a hike in petrol prices may even be a welcome step as it will discourage use of private vehicles and decongest the city’s roads. “Government should say it wants to discourage private transport and that they will use this extra money generated to strengthen public transport. Of course, this price hike will also affect those who car-pool everyday,” he added. Luca Sbisa Authentic Jersey
Global oil discoveries and new projects fell to historic lows in 2016
Global oil discoveries fell to a record low in 2016 as companies continued to cut spending and conventional oil projects sanctioned were at the lowest level in more than 70 years, according to the International Energy Agency, which warned that both trends could continue this year. Global oil discoveries declined to 2.4 billion barrels in 2016, compared with an average of 9 billion barrels per year over the past 15 years. Meanwhile, the volume of conventional resources sanctioned for development last year fell to 4.7 billion barrels, 30 per cent lower than the previous year as the number of projects that received a final investment decision dropped to the lowest level since the 1940s. This sharp slowdown in activity in the conventional oil sector was the result of reduced investment spending driven by low oil prices. It brings an additional cause of concern for global energy security at a time of heightened geopolitical risks in some major producer countries, such as Venezuela. The slump in the conventional oil sector contrasts with the resilience of the US shale industry. There, investment rebounded sharply and output rose, on the back of production costs being reduced by 50% since 2014. This growth in US shale production has become a fundamental factor in balancing low activity in the conventional oil industry. Conventional oil production of 69 million barrel per day (mbpd) represents by far the largest share of global oil output of 85 mbpd. In addition, 6.5 mbpd come from liquids production from the US shale plays, and the rest is made up of other natural gas liquids and unconventional oil sources such as oil sands and heavy oil. With global demand expected to grow by 1.2 mb/d a year in the next five years, the IEA has repeatedly warned that an extended period of sharply lower oil investment could lead to a tightening in supplies. Exploration spending is expected to fall again in 2017 for the third year in a row to less than half 2014 levels, resulting in another year of low discoveries. The level of new sanctioned projects so far in 2017 remains depressed. “Every new piece of evidence points to a two-speed oil market, with new activity at a historic low on the conventional side contrasted by remarkable growth in US shale production,” said Dr Fatih Birol, the IEA’s executive director. “The key question for the future of the oil market is for how long can a surge in US shale supplies make up for the slow pace of growth elsewhere in the oil sector.” The US shale industry has lowered its costs to such an extent that in many cases it is now more competitive than conventional projects. The average break-even price in the Permian basin in Texas, for example, is now at USD 40-45/bbl. Liquids production from US shale plays is expected to expand by 2.3 mb/d by 2022 at current prices, and expand even more if prices rise further. The offshore sector, which accounts for almost a third of crude oil production and is a crucial component of future global supplies, has been particularly hard hit by the industry’s slowdown. In 2016, only 13% of all conventional resources sanctioned were offshore, compared with more than 40% on average between 2000 and 2015. Marquel Lee Jersey
Australia to restrict natural gas exports as energy crisis bites
Australia will enforce export restrictions on major gas producers, the prime minister said Thursday, to shore up domestic supply as a growing energy crisis sees power prices rise and blackouts more common. The country is expected to surpass Qatar as the world’s largest liquid natural gas producer by 2020 — with Japan, China and South Korea key buyers. But booming export demands have left it short of local supplies. Prime Minister Malcolm Turnbull said exporters were dipping into domestic reserves to fulfil foreign contracts and intervention was needed to curtail “dramatically higher prices” paid in Australia. “It is ridiculous for us to be on the edge of becoming the largest LNG exporter in the world and not have to have enough gas for our businesses, for our households, for industries, great industries like this here in Australia,” he said at a manufacturing plant in Queensland. The move — which from July 1 will allow the government to put export controls on producers to ensure they put more into the domestic market than they take out — was a “temporary measure” until Australia could unlock more reserves, he added. Turnbull accused state governments, who in some instances have banned gas production on environmental grounds, of “putting the energy sector and manufacturing at risk”. “We should be able to export plenty of gas and have plenty of gas available for our domestic market. We should be able to do both and we need to get more production.” Major Australian gas producer Santos said it would collaborate with the government. “As an Australian company, Santos has been a long term supplier of natural gas at affordable rates in support of the domestic market on the Australian Securities Exchange,” it said in a statement. “Moving forward Santos will supply more gas into the Australian domestic market than it purchases for its share of LNG exports.” Despite being one of the world’s biggest coal and gas producers, political debate over energy supply has raged since South Australia suffered a statewide blackout in September and record-high temperatures in recent months put pressure on the national energy grid. The Australian Competition and Consumer Commission announced last week an industry-wide investigation into Australia’s gas market, fearing that soaring prices would put Australian firms out of business. “The inquiry will examine how gas suppliers will make more gas available to Australian industry and other domestic gas users, and the effect this has on overall market dynamics,” ACCC chairman Rod Sims said. Cameron Wake Jersey
Poland to receive its first U.S. LNG supplies in June as part of deal with Cheniere
Poland will receive its first liquefied natural gas supplies (LNG) from the United States in mid-June as a result of a deal Polish gas firm PGNiG signed with Cheniere Energy, state-run PGNiG said on Thursday. Cheniere Energy will make the spot delivery at the Swinoujscie terminal on the Baltic Sea. Poland, which consumes around 15-16 billion cubic metres (bcm) of gas annually, built its first LNG terminal in Swinoujscie as part of a bigger plan to reduce reliance on gas it imports from Russia’s Gazprom. The terminal, which started commercial operations in 2016, has a capacity of 5 bcm per year. Since then it has been receiving LNG from Qatargas, which in March agreed to double deliveries to 2 million tonnes (3 bcm) per year. It also took one delivery on the spot market from Norway. “This is a historical moment for PGNiG. We have won a new partner in the LNG trade,” PGNiG Chief Executive Officer Piotr Wozniak said in a statement. The ambition of Poland’s conservative Law and Justice government is to replace the Russian deliveries with other supplies after 2022, when the long-term deal with Gazprom expires. “This is a very important agreement, favourable in financial terms,” Prime Minister Beata Szydlo told public broadcaster TVP Info. Poland also plans to build a gas pipeline to the Norwegian shelf via the Baltic Sea. Foreign Minister Witold Waszczykowski told daily Rzeczpospolita in an interview published on Thursday that the U.S. could also participate in this project. T.J. McDonald Authentic Jersey
IOC gets green nod to revamp Bongaigaon refinery at a cost of Rs 4185 crore
State-owned Indian Oil Corp (IOC) has received green nod for upgradation of its Bongaigaon refinery for production of BS-VI grade fuels in Assam at a cost of Rs 4,185 crore. The company wants to upgrade its Bongaigaon Refinery (BGR) as the government aims to implement BS-VI fuel in the entire country from April 2020 to curb pollution. Oil firms will have to be prepared to retail BS VI-compliant fuel by then. BGR, the eighth operating refinery of IOC, is situated at Dhaligaon in Chirang district, 200 km west of Guwahati. “The environment ministry after taking into account the recommendations of its expert appraisal committee has granted the environment clearance (EC) to IOC for revamp of Bongaigaon refinery,” a senior government official told PTI. The environment clearance is subject to certain specific and general conditions, he added. As per the proposal, IOC will increase the crude processing capacity from 2.35 million metric tonnes per annum (MMTPA) to 2.7 MMTPA, Diesel Hydrotreating Unit (DHDT) capacity from 1.2 MMTPA to 1.8 MMTPA , CRU-MSQ revamp and setting up of a Selective De-sulfurisation Unit (SDS). The proposed project will be carried out within the existing premises and it would cost about Rs 4,185 crore. The BS-VI compliant fuel will help bring down the Nitrogen Oxide emissions from diesel cars by 68 per cent and 25 per cent from petrol engine cars, the company said. Besides, the project would also improve the smoke point of the kerosene stream from Assam and help reduction in emissions, it added. Al Kaline Womens Jersey
India’s petroleum import bill rose 9 per cent last fiscal, import dependency of crude rises to 82 percent
India’s gross petroleum import bill, including shipments of both crude oil and petroleum products, rose 9 per cent last financial year to $ 80.3 billion on the back of seven percent rise in volumes and a three percent increase in the average crude price, according to fresh data released by the oil ministry. Crude oil imports rose by more than five percent to 213 million tonne (MT) and the crude oil import bill increased by more than nine percent to $70 billion last fiscal as compared to $64 billion recorded in 2015-2016. India’s petroleum product imports by quantity rose by 22 percent last fiscal year to 36 MT from 29.5 MT in 2015-2016. “The increase in petroleum product imports can be attributed to increase in pet-coke imports by the private sector,” the oil ministry’s technical arm Petroleum Planning and Analysis Cell (PPAC) said in a report. In terms of value the country’s petroleum product import bill rose by five percent to $10.6 billion last fiscal year. Cumulatively, the country imported around 249 million tonnes (MMT) of crude and petroleum products during 2016-2017, a seven percent growth over 232 MT imported in previous fiscal year. The Indian basket of crude – that represents a mix of 71 per cent Oman and Dubai grades and 29 per cent of dated Brent – averaged $47.56 per barrel in 2016-17 as compared to $46.18 per barrel in the previous fiscal, according to data published by Petroleum Planning and Analysis Cell (PPAC), the oil ministry’s technical arm. According to data available on PPAC, petroleum product production – including petrol, diesel and LPG — from indigenous crude fell one percent to 34.7 million tonne (MT) last fiscal year from 35.2 MT in 2015-2016, while the country’s consumption of petroleum product increased by five percent to 194 MMT. The country’s self-sufficiency in petroleum products declined from 22 percent in 2013-2014 to 18 percent in 2016-2017 due to strong consumption growth and declining domestic production. India’s import dependency on crude further increased marginally to 82 percent in 2016-2017 from 81 percent a year ago. Import dependence stood at 77.6 percent in 2013-2014. On petroleum products’ exports front, India’s shipments grew seven per cent to 65 MT last fiscal. The Oil Marketing Companies accounted for 20 per cent of the exports volume. Deryk Engelland Womens Jersey