KG-D6 gas dispute may cost Reliance Ind over $1.2 billion
Reliance Industries Ltd and one of its partners in the KG-D6 block — Niko Resources — may end up paying the government about $1.25 billion as compensation for benefits they derived from the natural gas that allegedly migrated from ONGC’s adjacent fields in the Krishna-Godavari Basin off the Andhra Pradesh coast. Officials remain tight-lipped about the monetary compensation payable by RIL. However, the buzz is that Mukesh Ambani’s company and its partner in the block may be asked to pay compsnation of that magnitude. Sources said the Directorate-General of Hydrocarbons (DGH) had, in its first draft, given the indicative number of $1.25 billion to the Ministry for Petroleum and Natural Gas. The DGH has been working on the monetary compensation based on the recommendations and model suggested by the single-member Justice AP Shah Committee. Indications are that the figures have been derived based on calculations in respect of gas price and volume done on a monthly basis, and after deducting the royalty, cess and profit petroleum that the contractors have paid the government on the produce so far. A tough call Sources told BusinessLine that the government will not find it easy to determine the precise amount of compensation, which in any case will be open to challenge by the contractors. For instance, between April 2009 and March 2015, the royalty calculations rose from 5 per cent to 10 per cent; the variance could influence the determination of the compensation. Second, it’s not clear what the gas price will be taken as. The prevailing gas price — $4.2/unit (gas is measured in million British thermal units) — is in dispute. Whether the government will work within the terms of the production sharing contract (PSC) or outside it is not known, sources said. Devil in the details Both Reliance Industries and ONGC will want to read the fine print of any government formulation before respoding to it. ONGC believes that the Shah panel has been unfair to it. Confirming the continuity of reservoirs, the committee had said that independent consultant DeGoyler & MacNaughton’s report must form the basis for the migration of gas up till 2015, and that migration of gas post-2015 has to be inquired into by the government. Quantifying the migration It had quantified the amount of gas that migrated from Godavari PML and D1 discovery area of ONGC’s KG-DWN-98/2 to RIL’s Block of KG D6 from April 2009 to March 2015. It also quantified the amount of gas that is likely to further migrate from April 2015 to March 2019. The D&M report found that up to 15 per cent of the gas could belong to ONGC. It calculated that from April 2009 till March 2015, about 7.009 billion cubic metres and 4.116 billion cubic metres of gas had migrated from the Godavari PML and D1 discovery of ONGC’s acreage to RIL’s block. Of this, 5.968 billion cubic metres and 3.015 billion cubic metres, respectively, were produced. The reserves in the D-1 and D-3 fields of the Reliance-BP-Niko KG D6 block total 2.9 trillion cubic feet, of which 2.1 trillion cubic feet or more have been extracted. Brandon Marshall Womens Jersey
GLOBAL LNG-Prices rise as South Korea to wrap up major tender award
Asian spot liquefied natural gas (LNG) prices rose this week as strong expected demand from South Korea added to appetite from India and Taiwan, while supply from the United States was slow to return from maintenance. The price of LNG for December delivery was $6.95 per million British thermal units (mmBtu), up around 15 cents from a week earlier. Attention was on a tender by Korea Gas Corp which has by all accounts exceeded its initial scope and drawn bids by 25 companies offering to supply around 50 cargoes in total – even though it only advertised demand for four shipments. In reality, though, Korea Gas Corp is expected to purchase up to 15 or more cargoes to cover strong winter needs as nuclear outages and low LNG stocks prompt a buying spree. Exact numbers could not be confirmed, but companies in line to supply include Royal Dutch Shell, BP, Trafigura, Statoil, PetroChina as well as others, trade sources said. Transaction levels are estimated in the high $6/mmBtu and, depending on delivery period, $7/mmBtu, traders said, while the large number of cargoes put forward suggests suppliers had more on tap than they were letting on. Two separate South Korean firms also picked up a cargo from Japanese trading firm Itochu in a tender, traders said. Taiwan’s CPC is to bring in two cargoes over November-December, traders said. Egypt also launched the world’s biggest mid-term LNG purchase tender for 96 cargoes over 2017 and 2018, drawing significant interest despite new rules forcing suppliers to wait up to six months to get paid. Given Egypt’s worsening credit profile, traders said participation in the bidding round could be less, potentially pushing some conservative oil majors into supplying the country through trade houses. Argentina, meanwhile, withdrew from further buying activity until March owing to low gas demand, ample hydroelectric reserves and high fuel oil stocks, according to traders. State-run buyer Enarsa has pushed back shipments due this year until August 2017, as well as having cancelled other cargoes altogether. Spot trading interest was firmly fixed on Far East markets, showing premiums to the Middle East, helping rekindle arbitrage plays between Atlantic and Pacific markets. Indian demand remains strong. Bharat Petroleum and Gail India are seeking to buy a combined four shipments over December-January and Torrent Power seeks 38 cargoes over four years beginning April 2017. Due back from its month-long maintenance a week ago, Cheniere Energy’s Sabine Pass liquefaction plant is only now moving to restart, judging by gas intake levels. Spot demand was weak in top LNG consumer Japan. “In November, Japanese utilities negotiate their annual delivery programmes (ADP) for next year, and so for January, February and March they won’t be looking seriously for spot cargoes if they get what they want in their ADP talks,” a source said. Dont’a Hightower Womens Jersey
OVL completes acquisition of 11% add’l stake in Vankor
ONGC Videsh Ltd, the overseas arm of state-owned Oil and Natural Gas Corp, has completed the acquisition of additional 11 per cent interest in Russia’s Vankor oilfield, taking its total stake to 26 per cent. The company signed a deal with Rosneft Oil Company to acquire additional 11 per cent stake in the East Siberian field for USD 930 million on October 28. “We raised a bridge loan of USD 930 million from overseas lenders to pay for the acquisition cost of 11 per cent stake,” OVL CEO and Managing Director Narendra K Verma said here. OVL, which had previously bought 15 per cent stake in Vankor from Russian national oil firm Rosneft for USD 1.268 billion, will get an 7.3 million tons of oil equivalent from its 26 per cent stake. OVL will tie-up long-term financing in the next 6 to 9 months to replace the bridge loan, he said. Besides OVL’s 26 per cent, a consortium of comprising Oil India (OIL), Indian Oil Corporation (IOC) and Bharat PetroResources (BPRL) has acquired 23.9 per cent stake in the field at a cost of USD 2.02 billion, giving them 6.56 million tons of oil. After the stake sales, Rosneft holds 50.1 per cent stake in JSC Vankorneft, the company that operates the Vankor oilfield. Verma and Igor Sechin, CEO, Rosneft, had on September 14 in Moscow inked an agreement to take the additional equity stake in Vankor. That agreement was subject to certain conditions including approvals from the Indian and Russian governments. All approvals are in place, leading to closure of the deal, he said. “The completion within very short period of the binding agreement reflects the speed and cooperation with which both OVL and Rosneft have moved and the support that the investments by Indian companies in Russian oil sector enjoy with the Russian and Indian governments.” Vankor is Rosneft’s (and Russia’s) second largest field by production and accounts for 4 per cent of the country’s production. The daily production from the field is around 410,000 barrels per day of crude oil and 26 per cent stake would give OVL about 107,000 bpd. “The acquisition of additional 11 per cent would add about 30 per cent to the existing OVL’s production at the current rate and approximately 2.2 million tons of oil and 1.0 billion cubic meters of gas annually,” he said. The field has recoverable reserves of 2.5 billion barrels. The USD 2.2 billion OVL spent for acquiring 26 per cent stake in Vankor will be its third biggest acquisition. It had in 2013 paid USD 4.125 billion for 16 per cent stake in Mozambique’s offshore Rovuma Area 1, which holds as much as 75 Trillion cubic feet of gas reserves. In 2009, it had bought Russia-focused Imperial Energy for USD 2.1 billion. Prior to that, it had in 2001 paid USD 1.7 billion for 20 per cent interest in the Sakhalin-1 oil and gas field off Russia’s far eastern coast. Devontae Booker Jersey
Bangladesh considers buying Chevron’s local natural gas assets – sources
Bangladesh is considering buying Chevron Corp’s interest in three natural gas fields in the country, worth an estimated $2 billion, two senior government officials said, as Dhaka looks to secure the supply of a critical source of energy. Chevron, the second-largest U.S.-based oil producer, said in October last year that it plans to sell about $10 billion of assets by 2017 amid a prolonged slump in energy prices. Chevron recently said it is in discussions about the potential sale of three fields it operates in the northeast of Bangladesh. Dhaka sees the gas fields, which account for more than half of the country’s production, as a matter of “national interest” and a purchase is on the table, said Istiaque Ahmad, chairman of Petrobangla, the state-owned oil and gas company, on Thursday. He added, however, that their efforts were at a preliminary stage. Ahmad said Petrobangla was waiting for Chevron to approach it about a bid. Petrobangla is also likely to appoint a consultancy firm to assess the assets, including proven and recoverable gas reserves, to arrive at a valuation, he said. A Chevron spokesman said the company has been in commercial discussions about its assets but no decision had been made so far to sell them. “We will only proceed if we can realize attractive value for Chevron,” the spokesman said in an emailed statement on Monday. Bangladesh officials have said that the South Asian nation of 160 million needs more energy to realize its vision of becoming a middle-income country by 2021. The country is currently short of about 500 million cubic feet a day of gas, according to the energy ministry. Bangladesh will buy the assets through an open bidding process, a government source said last week. “Why should we hand it over to someone else?” the source said. Dhaka’s interest would likely make it harder for a third-party to buy the assets. The Chevron unit sells its entire output from the three fields to Petrobangla under a production sharing contract. Under the terms of the contract, the Bangladesh government has the right of first refusal in any asset sale, Mohammad Hussain Monsur, former Petrobangla chairman, said on Monday. Monsur also said that funding the purchase of the assets would not be a problem since the country could rely on its foreign exchange reserves, which stand at more than $31 billion. In 2015, Chevron’s net daily production in the country averaged 720 million cubic feet of natural gas and 3,000 barrels of condensate, accounting for more than half the gas production in Bangladesh. Cameron Artis-Payne Womens Jersey
Subsidized LPG prices hiked by over Rs 2 per cylinder; non-subsidized LPG costly by Rs 37.5
The Oil Marketing Companies (OMCs) on Monday raised the prices of subsidized cooking gas or Liquefied Petroleum Gas (LPG) by over Rs 2 per cylinder to Rs 430.64, the sixth such hike in four months since July this year. Post the price revision, effective from 1 November, every 14.2 Kilogram cylinder of subsidized LPG will cost Rs 430.64 in Delhi as compared to the existing rate of Rs 428.59, according to Indian Oil Corporation (IOC), the nation’s largest fuel retailer. Also, the OMCs raised the prices of non-subsidized LPG – which consumers utilize after exhausting their subsidized quota of 12 cylinders — by 7.6 per cent or a steep Rs 37.5 to Rs 529.5 per cylinder. Each 14.2 Kg cylinder of non-subsidized LPG is currently priced at Rs 492. The government had recently decided to take the diesel route for eliminating subsidies on LPG and kerosene. Diesel price was deregulated in November 2014 after the previous United Progressive Alliance (UPA) government effected 50 paise hikes every month to eliminate subsidies. The three fuel retailers — Indian Oil Corporation, Hindustan Petroleum and Bharat Petroleum — revise non-subsidised LPG prices on the first day of every month, based on the average international price in the preceding month. Conor Timmins Jersey
Indonesia offers three unconventional oil and gas blocks – official
Indonesia is offering three new unconventional oil and gas blocks on the islands of Sumatra and Kalimantan to potential bidders, an energy ministry official said on Monday. The assets on offer are one shale gas block in East Kalimantan, with potential resources of 7 trillion cubic feet of gas and 21 million barrels of oil, as well as two coalbed methane blocks in South Sumatra. Bidders can propose a production split or make an upfront payment for the right to develop the block, Tunggal, an upstream director at the directorate-general of oil and gas who goes by one name, told reporters. Previously, any split in production was pre-determined by the Indonesian government. Eddie Giacomin Jersey
Private sector has big role in energy security: Dharmendra Pradhan
Oil minister Dharmendra Pradhan wants a big role for the private sector in energy security and sees no reason for acrimony between the government and companies. Pradhan inherited a ministry mired in bitter disputes with companies including RIL, but transparent pricing policies have eased matters. Cairn India also went to court over contract renewal, but this dispute is also on its way to policy-based resolution. Also Read: Corporates and govt should not have acrimonious ties, says Pradhan “Why should there be an acrimonious relationship between corporates and government? They are equal partners of this growth story. Private investment has a big role in energy security. The relationship is better when they are based on policies; when discretion is reduced, decision making in isolation ends,” he told ET in an interview. The government allowed higher gas prices for challenging fields if the operator does not have a legal dispute. Pradhan said field-level activity suggested companies are preparing to pump gas from such fields. Nazair Jones Womens Jersey
Black & Veatch Achieves World’s First LNG Production on a Floating Facility
Mumbai based Energy professionals of Black & Veatch India played a pivotal role in project design. Its proprietary PRICO® Single Mixed Refrigerant Technology used in more than 30 LNG projects worldwide becomes the World’s First Proven Floating LNG (FLNG) Technology. Black & Veatch, a global EPC leader in delivering ‘concept to commissioning’ project solutions in the segments of power, oil & gas, water and telecom, has today announced that its patented PRICO® Single Mixed Refrigerant (SMR) technology has become the world’s first proven FLNG technology to achieve production on a floating facility after successfully completing performance testing of the liquefaction unit in Nantong, China. This is of immense significance for the company as, for the first time in history; LNG has been produced on board a floating facility. Project Details Black & Veatch’s patented PRICO® technology was used in the Caribbean FLNG project for the world’s first Floating Liquefied Natural Gas (FLNG) unit by global oil and gas shipper Exmar to meet the rising demand for alternative, clean fuel for Pacific Rubiales Energy. The single train liquefaction unit has a production capacity of 72 million cubic feet a day of LNG (or about 500,000 ton per annum) on board the non-propelled barge. The LNG temporarily stored in on board tanks; can be subsequently offloaded to LNG carriers. Black & Veatch delivered engineering and procurement for the top side liquefaction unit, along with construction support, onsite commissioning and start-up services. From an Indian perspective, energy professionals in Black & Veatch’s Mumbai office in Vikhroli contributed to the project design. Test Results With the average liquefaction process load exceeding 100 percent during the 72-hour performance test, the flawless performance of the FLNG ensured all design requirements and production capacities were achieved for the unit’s operational effectiveness. In addition to the design and production capacity of the liquefaction unit, the 72-hour performance test also confirmed the other systems designed by Black & Veatch, including gas treating, boil-off gas handling, and supporting utilities, ensured that the entire FLNG production process worked seamlessly. “The results from the in-depth performance testing further confirms the leadership in FLNG project delivery that we are bringing to the industry through our floating LNG solutions program,” said Bob Germinder, Senior Vice President, Oil & Gas business, Black & Veatch. “Our PRICO® technology is being applied in more than 30 LNG operations worldwide, and with the completion of this performance testing, the first of five Black & Veatch designed FLNG trains are now proven in the marketplace, demonstrating how we are helping to meet the growing demand for energy”, he added. “This performance test completion is a major milestone in our company’s floating LNG liquefaction program to help meet the growing demand for energy. It demonstrates our leadership in FLNG solutions, allowing owners of stranded gas reserves to monetize their reserves on a very fast track basis under a build, own, operate basis with Exmar,” said Nicolas Saverys, Chief Executive Officer, Exmar. Marlon Mack Jersey
With bid submission deadline for discovered small fields extended, first round under HELP may be delayed
India’s first bid round to implement its new hydrocarbon exploration policy may get delayed with the government extending the deadline for bid submission for 67 discovered small fields. Earlier, the last date for submitting bids for the discovered small fields was 31 October which was later extended to 21 November. This comes in the backdrop of India’s stagnant hydrocarbon production. With the nine bid rounds under the New Exploration Licensing Policy unable to attract the desired level of investments, the National Democratic Alliance government approved marketing freedom for crude oil and natural gas under new Hydrocarbon Exploration and Licensing Policy (HELP) in March this year. The first HELP round was expected next year. “Because of the extension of dates, it will be difficult to wrap the (discovered small fields) bids within this year. The last date now for submitting the bids is 21 November after which it shall be difficult to complete everything within the year,” said a senior petroleum ministry official requesting anonymity. These fields were earlier held by state-run Oil and Natural Gas Corp. (ONGC) Ltd and Oil India Ltd. Discovered small fields bidding was launched in New Delhi on 25 May 2016. Under this round, India is offering 46 contract areas with 67 oil and gas fields, estimated to hold over 625 million barrels of oil and oil equivalent gas in-place, spread over 1,500 sq. km. Another government official who also did not want to be named confirmed the development and said, “After postponing the deadline, the last date for completion shall be automatically extended as well.” The first bid round under HELP will mark the culmination of the government’s bet for a revenue-sharing model from the controversial cost-recovery model which involves cost recovery by firms before the government receives its share of the revenue. The cost recovery model was also criticised by the Comptroller and Auditor General of India due to it being inadequate to incentivise private contractors to reduce capital expenditure. The new policy also allows for exploration for all types of hydrocarbon resources, including coal-bed methane or gas hydrates under a single licence. Moreover, an open acreage approach would finally allow firms to choose the areas of their liking for exploration. Queries emailed to the spokesperson of petroleum and natural gas ministry on 25 October remained unanswered. India has 26 sedimentary basins covering an area of 3.14 million sq. km, out of which seven basins have established commercial productions in progress. India has a total reserve of 763.476 million tonne of crude oil and 1,488.73 billion cu. metre of natural gas. Experts concur with the expected delay. “As per my assessment it will be difficult to launch HELP early next year because the top priority of the government would be to ensure quick evaluation of the offers of all the contacts and signing the contracts (under DSF). Only after this is taken care of shall the government get into HELP,” said R.S. Sharma, former chairman and managing director, ONGC. As part of India’s efforts towards energy security, the ministry of petroleum and natural gas is strengthening its exploration division and has introduced an additional position of a joint secretary in the exploration division. Derek MacKenzie Authentic Jersey
Nigeria’s oil-for-cash deal with India
The Federal Government of Nigeria is currently negotiating a $15 billion oil-for-cash deal with India, which will spin many years. Perhaps, it will last longer than President Muhammadu Buhari – even if he serves two terms. That is a long-term commitment of Nigeria’s crude oil, while the proceeds might be spent, perhaps, within a couple of years. To be fair to the current administration, this is not the first time such a long-term arrangement is being made by a government which had suddenly run out of sufficient dollars to keep exchange rates, interest rates and inflation within tolerable limits. The Nigerian Liquefied Natural Gas (NLNG) project would not have been possible if the Babangida regime had not made the same sort of long-term commitment of our gas in exchange for ready cash. Today, the nation is better for it. So, on no account must we discard this idea just because it is a variation on the former approach which brought badly needed dollars in the late 1980s and early 1990s. Certainly, it has its merits. But, it also poses dangers for the future. To start with, Babangida acted then as a military President and only made a perfunctory show of “consulting broadly” with Nigerians when, invariably, the decision had already been made. Furthermore, the “Age of Gas” was just starting. It was the discovery that Nigeria had more gas reserves than oil that changed the classification from an oil-producing nation to one which is now known as “gas associated with oil”. The global gas market was characterised by scarcity and Nigeria had lots of it unused. It was not so difficult to find takers in the joint venture. We negotiated from position of strength. Today, even the gas market is now experiencing some glut. Right now, there is no oil scarcity; all the producers are experiencing production cutb-acks. It is much more difficult to drive a good bargain when you are negotiating on your knees. We, therefore, ask the Federal Government to fully disclose all the details of this deal; and for the National Assembly to interrogate them critically. The Assembly must approve it before the deal is sealed. The consequences of getting it wrong are too frightening to contemplate. Granted, what the Buhari administration seeks to do amounts to mortgaging the future. But, if the proceeds are directed towards remedying infrastructural deficits and promoting education and agriculture, it will be beneficial in the long-term. But, if it is applied to “give-away” programmes, the future would have been mortgaged for nothing. We also want to know if the volumes sold to India under this arrangement will form part of our OPEC quota. If so, succeeding governments would be in deep trouble if low crude oil prices persist.