India seeks to cash in on LNG glut
The market for liquefied natural gas (LNG) is about to attract more players and more trading as new supply from the US and Australia strengthens buyers’ bargaining power. Historically, LNG has been sold on long-term contracts that guaranteed buyers supply and helped producers finance liquefaction plants at a time when less of the product was shipped. Now, a natural gas glut is causing countries that import LNG to support renegotiating existing deals that can run 20 years or more as suppliers lower their prices in a move to shrink stockpiles. India already is encouraging importers to rework long-term accords to better align costs with spot market prices. Japan, the world’s largest LNG importer, may soon join them. That country’s Fair Trade Commission is in the process of probing resale restrictions in longer deals in an effort that could mean the renegotiation of more than $600 billion in contracts and boost the number of shorter-term agreements. “There will be 40 million to 50 million tons of homeless LNG by 2020, which can go anywhere or doesn’t have any fixed customers,” said Hiroki Sato, a senior executive vice president with Jera Co., a fuel buyer that plans to increase spot and short-term LNG deals. “Homeless LNG will provide a great opportunity to improve liquidity in Asian and global markets.” Global LNG trade rose 2.5% to a record 245.2 million tons in 2015, according to the International Group of Liquefied Natural Gas Importers. A million tons of the super cooled fuel is equivalent to about 48 billion cubic feet of natural gas, which is enough to heat about 690,000 homes for winter in the US Northeast. About 28% of LNG traded in 2015 was on a spot or short-term basis, according to the importers’ group. That’s up from 18.9% in 2010, according to the group. Asian spot prices for LNG have already slumped by about 60% since September 2014 amid new supplies. Additional projects like Inpex Corp.’s Ichthys project in Australia and the Cove Point export terminal on the US East Coast that are expected to begin operation in 2017 may weaken prices by almost a fifth over the next two years, according to BMI Research. Japanese traders are getting ready for the opportunities that would arise if that nation’s Fair Trade Commission determines destination clauses in long-term contracts, which prevent resale of the fuel, violate competition laws. US shale gas already has shaken up markets as American producers write contracts that allow buyers to resell LNG wherever they want. Trade flows As the oversupply intensifies next year to the point Asian buyers can’t absorb the surplus, new trading flows may emerge from Asia to Europe, according to Kazuhiko Inomata, a deputy director with Itochu Corp., Japan’s third-largest trading house. Itochu plans to increase its LNG staff in Singapore by two to three people within two years, according to Inomata. Japanese rival Mitsui & Co. aims to increase the number of LNG traders at its Singapore subsidiary to as many as six over one to two years, the company said in July. The South-East Asian city state is competing with Shanghai and Tokyo to be a regional hub for the fuel. Itochu has leased an LNG tank at South Korea’s Gwangyang terminal that is one of only handful in Asia that can receive the fuel and then re-export it. Commodities trader Trafigura Beheer BV has similar capacity through a storage and re-loading site in Singapore. European resale Jera, a joint venture of Chubu Electric Power Co. and Tokyo Electric Power Company Holdings Inc., plans to resell LNG to Europe as it seeks to expand trading operations. Sumitomo Corp., the fourth-biggest Japanese trader, is said to be considering starting a LNG trading office in Europe. India, which aims to more than double its regasification capacity to 55 million tons within five years, wants to turn the oversupply to its favour as it seeks to make natural gas more affordable for users and increase the fuel’s use in its energy mix, Oil Minister Dharmendra Pradhan said in an interview. Natural gas currently accounts for about 7% of the South Asian nation’s fuel basket. The world’s fourth largest LNG buyer was among the first countries in Asia to renegotiate a long-term deal after Petronet LNG Ltd. in December reworked a 25-year contract with Qatar’s RasGas Co., resulting in prices dropping by almost half. GAIL India Ltd. is seeking to defer a 20-year supply deal with Gazprom PJSC signed in 2012 and has said it will consider getting LNG from other sources at prices closer to spot-market rates. “It isn’t necessarily that spot LNG is always cheaper than those supplied under long-term contracts,” said Kentaro Kimoto, an executive officer at Tokyo Gas Co., which has traditionally relied on long-term deals. “But we will need to start buying some LNG under spot or short-term contracts to minimize the divergence with market prices.” Will Witherspoon Womens Jersey
Petroleum ministry slaps $250-mn profit petroleum penalty on Reliance Industries
The petroleum ministry has slapped a penalty of nearly $250 million on Reliance Industries (RIL) to make good the government’s loss of “profit petroleum” owing to the firm’s inability to meet the natural gas production targets from the Krishna-Godavari (KG) D-6 block. “In a communication sent on June 3 to RIL by the government, the penalty has revised from $195 million as on March 31, 2014, to $246.9 million till March 31, 2015,” a senior official told FE. The KG-D6 fields started production in April 2009. The current production of around 8 million metric standard cubic metres per day (mmscmd) is a far cry from the peak of over 69 mmscmd achieved in early 2010. The block was envisaged to produce more than 80 mmscmd of the fuel. Profit petroleum is the main source of revenue for the government from a hydrocarbon block. It is calculated using what is called an investment multiple that denotes how many times the earnings are to the investment. Trey Hopkins Authentic Jersey
LTHE Sees India Investing $5B in Offshore Upstream Sector Over 5 Years
India’s L&T Hydrocarbon Engineering Ltd. (LTHE), an oil and gas integrated solutions provider to the offshore oil and gas sector owned by Larsen & Toubro (L&T), sees the domestic offshore petroleum industry generating approximately $5 billion in investments over the next 4 to 5 years, a senior company executive said, as quoted Sunday in local daily The Economic Times. Industry sentiments in India’s petroleum sector appeared more positive, compared to the global industry where international, national and local oil and gas companies have cutback on capital spendings over the past 1 to 2 years to combat the effects of lower oil prices. “(The) hydrocarbon industry is currently going through a difficult period. At $40-50 a barrel, capital expenditure has reduced across the globe though there is lesser impact on gas development,” LTHE CEO and Managing Director Subramanian Sarma said in The Economic Times, adding that business prospects gets more difficult for deepwater players as the development costs are higher. Still, industry sources said the market situation in India’s oil and gas sector is relatively bright — given rising energy consumption in recent years — compared to the rest of the world as the South Asian country attempts to raise domestic production by capitalizing on the decline in development cost for projects. India’s daily oil demand expanded 8.1 percent last year to 4.159 million barrels, making it the second largest oil consumer after China, according to BP Statistical Review of World Energy 2016. “However, with domestic market poised to improve, especially on the back of the ‘Make In India’ initiative of the government and other programs, we hope the sector will attract nearly $5 billion investments in the next 4-5 years … Given our capabilities, we hope to bag nearly $1 billion worth contracts in the next 2-3 years,” Sarma said. The LTHE CEO pointed out that most of India’s upstream investments are likely to come from the public sector as the state has a higher capacity to spend. “There are very few private players who may also embark on new development and between private and public investments, we should be able to capture a reasonable size of market,” he said. LTHE has expanded its cooperation with major industry players to improve its service offerings to the offshore upstream oil and gas sector. In February, the company signed a long term exclusive agreement with McDermott International, Inc. to work together on local subsea projects. In December 2015, both parties bagged a $366.3 million (INR 24.5 billion) engineering, procurement, construction and installation (EPCI) contract for the Vashishta deepwater development offshore India’s east coast. In addition, LTHE inked a memorandum of understanding with GE earlier this month to jointly manufacture subsea manifolds for deepwater projects in the Krishna-Godvari basin on the country’s east coast. Chee Yew has covered the upstream and downstream sectors of the oil and gas industry in Asia for more than 15 years. Charles Barkley Jersey
EY to re-evaluate GSPC onshore blocks
Gujarat State Petroleum Corporation (GSPC) Ltd has hired consulting firm EY to re-evaluate onshore exploration and production assets held by the company, two GSPC officials said. GSPC holds a participating interest in 24 blocks of which 20 are onshore while four are offshore. Of the 24 blocks, it is an operator in six blocks and a non-operating partner in 18. “EY has been appointed for carrying out evaluation of onshore blocks only. The exercise is aimed at evaluating if it is possible to induct a strategic-cum-technical partner by farming out a part of GSPC’s participating interest and improve the performance of producing onshore blocks,” said a GSPC spokesperson in an email. Of the 20 blocks, 17 onshore blocks are producing properties. “EY is assessing our blocks for us. Blocks where we are not an operator, we would want to get out of and invest our energy and finances in fields where we are operators,” added a senior GSPC official on condition of anonymity. The official said the re-structuring exercise would help the firm save on exploration costs. EY declined to comment. “EY shall carry out evaluation of all onshore blocks—both operated and non-operated. Based on the evaluation carried out by EY, the report will be placed for consideration of the board of directors of GSPC for an appropriate decision,” the spokesperson said. GSPC is the flagship company of the GSPC Group, involved in exploration and production (E&P) of oil and gas. The government of Gujarat owns 87% of the company’s equity capital. GSPC has already approached state-run Oil and Natural Gas Corporation Ltd (ONGC) to sell a stake in its primary asset, the Deen Dayal field in the Krishna-Godavari basin (KG basin), located off the east coast of Andhra Pradesh. GSPC is the operator of the block with 80% participating interest. The firm clarified this block is not included in the evaluation exercise, as it is an offshore asset. GSPC has invested $3.5 billion (approximately Rs.200 billion) in the block and taken on about Rs.195 billion of debt. Though it started test production from the block in 2014, it is yet to begin commercial output. A second GSPC official, on condition of anonymity, said the KG basin field is one of the most difficult to extract gas from. GSPC has been facing financial headwinds and has undertaken a business restructuring exercise to improve its credit profile. A deal with ONGC will reduce its debt burden of nearly Rs.200 billion as of December 2015. According to the restructuring scheme, set in motion in late 2015, GSPC will hive off its participating interest in the Krishna-Godavari Deen Dayal West (KG-DDW) block and its related assets and liabilities to GSPC’s offshore unit. The remainder of GSPC’s businesses (including exploration and production blocks other than KG-DDW, gas trading, wind power generation, and investments in subsidiaries and associates) will be merged into an energy unit. The scheme is subject to approval by lenders, the Gujarat high court, and regulatory agencies. In a report on public sector firms in Gujarat for the year ended March 2015, the Comptroller and Auditor General of India pulled up GSPC for mismanaging its exploration and development-related activities in its KG basin and overseas assets, leading to higher costs and financial losses. “The delay in commencement of gas production from KG-DDW, which has led to sizeable debt, has weakened GSPC’s credit risk profile. Priority for GSPC currently should be to deleverage the balance sheet and get the company in the right shape,” said an analyst with a domestic brokerage on condition of anonymity. In fiscal 2016 GSPC incurred a net loss of Rs.8.0442 billion, as it wrote off exploration expenditure. It recorded income from operations of Rs.106.073 billion on a stand-alone basis, compared with Rs.109.463 billion in the previous year. Albert Wilson Authentic Jersey
Hike in refining capacity
Refining has been one of the biggest success stories in the Indian economy. About 15 years ago, India had to import refined products, but today it has become a net exporter. The country’s refining capacity has gone up to 240 million tons and the consumption of products – petrol, diesel, kerosene, etc. – is 180 million tons. The challenge is in crude oil production; India produces just 40 million tons of crude oil. Says B. Ashok, Chairman, Indian Oil Corporation Ltd (IOCL): “GDP and population expansion, coupled with India’s low per capita energy consumption, will drive massive fuel growth. Oil will continue to feature prominently in India’s energy mix even in 2040, despite rapid growth in renewable sources.” Indian Oil is bullish on its latest high-complexity refinery at Paradip, which will significantly improve the refining competitiveness of the company and India. The chairman of IOCL also foresees a paradigm shift in retailing as competitions shifts to the thriving rural hinterlands. With all its brownfield expansions in line, Indian Oil would cross 100-million-tonne mark in about six years. It is also planning to set up a world-scale refinery in the west coast and all three state-owned refiners – Indian Oil, Hindustan Petroleum and Bharat Petroleum – will jointly establish the refinery. Indian Oil is also present in both domestic and overseas exploration and production projects. “Overseas, we have stake in three producing states – one is a gas field at British Columbia where we have a 10 per cent stake. It is a 12-mt LNG project. We have some small production in Venezuela and the US. We have recently acquired stake in Russian assets.” Lester Hayes Jersey
Convening over oil and gas
One of Asia’s largest oil and gas events, Petrotech, will be held in New Delhi between December 5 and 7 this year. ‘Hydrocarbons to fuel the future: Choices and challenges’ is the theme of the event. “As the prime showcase of India’s hydrocarbon sector, Petrotech-2016 is already attracting technologists, scientists, policy makers, management experts, entrepreneurs, service providers and vendors from countries and companies worldwide,” says Verghese Cherian, Director (HR), Indian Oil Corporation Ltd (IOCL), which is organising the event this year. “We aim to put together a spectacular value-added 12th edition, which will be a bigger conference and larger exhibition in Delhi than the previous editions.” Rajesh Ahuja, Executive Director, IOCL, who is also the Convenor of Petrotech-2016, says the event has grown rapidly since its first edition. “When we started in 1995, about 1,500 delegates from a dozen countries participated in the event,” he notes. “This time, we are targeting 6,000 delegates from 50 countries.” The Petrotech series of international oil and gas conference and exhibition is a biennial platform for national and international experts in the oil gas industry to exchange views and share knowledge, expertise and experiences. This year’s event is being organised by Indian Oil, which alternates with Oil and Natural Gas Corporation in staging the mega events. “India being a booming economy, and with the Prime Minister creating a novel brand image across the globe, it has fascinated many international players,” says Cherian. “They are keen to participate and partake in this new edition of Petrotech as we are an emerging nation with strong demands for energy at all levels of our growth, be it the lowly farming sector or the increasing industrial sector.” As the Indian economy flourishes, the country is set to witness an upswing in energy demand. Cherian says that the rising per capita income, the multifarious initiatives to promote economic growth, infrastructure development, and the drive towards ‘Make in India’ are expected to boost the country’s energy demand in a big way. “The world is indeed taking note and watching with interest as the discourse unfolds on a range of hot topics such as clean energy, rising energy demand, smart cities, etc,” he adds. “Solar energy is being projected in a big way across the globe and so is India as this energy from the sun is both sustainable and infinite.” Over the years, Petrotech has garnered an enviable reputation in international circles as one of the most coveted forums for the global hydrocarbon industry. With a plethora of topics and technical sessions, the 2016 edition will sow the seeds of a vibrant future and engage participants in a memorable and eventful conference, adds Cherian. “India’s oil and gas sector is facing a major talent challenge from competing sectors that could potentially affect its ability to operate and grow,” he adds. To increase awareness of the challenges in the oil and gas sector among engineering graduates, a special Youth Forum is being organised to showcase opportunities in the sector. Beau Bennett Womens Jersey
After Reliance, Essar Oil too keen on subsidised LPG supply
Essar Oil wants to distribute subsidised cooking gas cylinders if the government allow this, its chief executive has said. Essar Oil is planning to enter the domestic cooking gas, or liquefied petroleum gas (LPG), distribution segment that is expected to expand by 60% in three years as the government has set a target for state firms to enroll 100 million new cooking gas consumers. “We would like to get into domestic LPG distribution but the subsidy is an issue. The government should sort out the subsidy issue and allow private players into this,” said Lalit Kumar Gupta, chief executive of Essar Oil. He, however, didn’t confirm if Essar has written to the government seeking permission for this or suggesting any change in the way subsidy is disbursed that would allow private players an entry in this rapidly growing segment. Essar’s bigger rival, Reliance Industries, has already written to the government, expressing its intent to enter subsidised domestic LPG distribution, beginning with the cities. Reliance argues that every domestic cooking gas customer should be treated equally and the current practice of limiting subsidy to just the customers of state firms be scrapped. For this to happen, the government may have to bring in a system whereby it directly transfers subsidy into customers’ bank accounts. The government then reimburses state companies. Essar currently doesn’t have any cooking gas distribution but Reliance has a base of about 1 million consumers to whom it supplies non-subsidised cylinders, mostly in Gujarat and Maharashtra. Essar Oil sells LPG produced at its Gujarat refinery to state firms. But a collapse in oil prices that has dramatically shrunk subsidy and a direct cash transfer to consumers have made private players reconsider business opportunity in this fast growing segment. Total LPG consumption in the country has grown for the last 34 months in a row and jumped 7.8% in the first quarter of this fiscal year. Domestic packed LPG consumption grew 6.4% in the quarter as 4.25 million new customers were acquired. Reliance Industries is planning to lure away many of the 10 million LPG consumers who have given up subsidy with better services. Entry of private players in the domestic subsidised space has the potential to raise the service level for consumers and challenge. Cory Joseph Womens Jersey
Oil, gas industry to lose out heavily from GST: Icra
New tax law does not seek to include oil and gas products as well as tobacco and liquor under its purview. The oil and gas sector will not gain from the goods and service tax (GST) and will lose out due to compliance with dual taxation regimes and non-creditable tax costs, says a report. The GST law in its present form excludes a major portion of the oil and gas industry products thereby excluding the industry from most of the benefits of the one-tax-one-nation proposal. Not just that, the new taxation regime will impose an additional burden on the industry due to compliance to a dual tax regime, said a report by the domestic rating agency. Profitability of the industry could also be modestly hit because of tax-related under recoveries, Icra warned. The new tax law does not seek to include oil and gas products as well as tobacco and liquor under its purview. “The impact of the GST will be negative on the oil and gas industry due to the compliance with dual taxation regimes and non-creditable tax costs,” Icra analysts K Ravichandran, Prashant Vasisht andAnoop Bhatia say in the report. Last week, Parliament passed the 122nd Constitution Amendment Bill 2014. While the Rajya Sabha passed the Bill on August 3, the Lok Sabha did the same on August 8. The government hopes to roll out the new tax regime, which will subsume several Central (central excise, service tax, special additional duty of customs etc) and state (octroi, entry tax, value added tax, purchase tax etc) taxes into a single tax, from April 1, 2017. The GST will mitigate cascading taxation and facilitate a common national market. For the Bill to become a law, it has to be passed by at least 19 state Assemblies besides setting up a GST Council that will make recommendations on taxes to be subsumed, exemptions, rates, date from which GST would be levied on crude, high speed diesel, natural gas, aviation turbine fuel and petrol. Explaining the rationale for their conclusion, the analysts point out that the present GST law does not include five petroleum items — crude oil, natural gas, motor spirit, high speed diesel and aviation turbine fuel — at present but would be included at a later date, while LPG, naphtha, kerosene, fuel oil etc are included. Steven Kampfer Womens Jersey
PSU oil cos book 60% floating terminal capacity of Swan Energy
ONGC, IOC and BPCL have booked 60 per cent of the capacity of Swan Energy Ltd’s upcoming floating LNG terminal off the Gujarat coast, giving the Nikhil Merchant-led firm much-needed backing to complete the Rs 56 billion project. Oil and Natural Gas Corp (ONGC), IOC and Bharat Petroleum Corp Ltd (BPCL) have agreed to take one million tons per annum capacity each on the 5 million tons a year floating LNG terminal planned at Jafrabad port in Gujarat, sources privy to the negotiations said. Gujarat State Petroleum Corp Ltd (GSPC) too is in talks to take 1.5 million tons capacity in the floating, storage and regasification unit (FSRU). The companies hiring the capacity will bring their own LNG from abroad and pay Swan a tolling fee. Swan Energy is building the project in joint venture with Exmar of Belgium. The company had last year secured all necessary permits for the project and the state-owned firms agreed to hire 60 per cent capacity of the terminal on tolling basis for importing their own gas will help Swan take the final investment decision and tie-up project financing. Antonio Gates Authentic Jersey
Plans for new gas pipelines to connect Bangladesh and India
According to the Executive Director of Oil and Natural Gas Corp. (ONGC), S C Soni, the Indian government has recently begun planning to build a 6900 km gas pipeline that will link Bangladesh and West Bengal. The Economic Times has claimed that Soni told reporters: “As part of Hydrocarbon Vision 2030 for north-eastern region, 6900 km pipelines would be laid connecting Sitwe [in Myanmar], Chittagong [in Bangladesh] and most north-eastern states, Siliguri and Durgapur.” Large quantities of gas are flared (burned) in the north-eastern region of India since, at present, it cannot be piped to the consumers, he noted. Thus, the plan is to carry the gas elsewhere to make it more readily available for productive purposes. Bangladesh Petroleum Corp. (BPC) and Indian Oil Corp. (IOC) signed an agreement in April 2016 to jointly set up a liquefied petroleum gas (LPG) terminal plant in Chittagong to help pipe gas to the north-eastern states. Thirteen routes with a total length of approximately 6900 km of pipelines have been proposed for the purpose. An Indian financial newspaper has also claimed that the government hopes the planned pipeline will boost mutual co-operation in the region’s energy sector, supporting this with a quote by the country’s Petroleum and Natural Gas Minister, Dharmendra Pradhan. Interacting with the media at the launch of Pradhan Mantri Ujjwala Yojana (PMUY) in Kolkata, Pradhan is reported to have said: “The Petroleum and Natural Gas Regulatory Board (PNGRB) has started the process for constructing a pipeline from Contai in West Bengal via Haldia to Duttapulia on the India-Bangladesh border for supplying oil and natural gas.” “We have discussed with Bangladesh and agreed to take the pipeline to the country. There are also talks to bring the pipeline back to India through Shiliguri.” According to The Financial Express, the minister also suggested that there are plans to lay a pipeline from the Numaligarh refinery in Assam, which would supply high-speed diesel to Bangladesh. He continued to state that India is increasing its natural gas terminal capacity. “We have booked substantial gas in several parts of the world, including America, Australia and Mozambique. We have a long-term contract with Qatar and are also discussing with Iran. So, we have plenty of gas bookings and India as a whole is augmenting its LNG terminal capacity,” Pradhan stated. The future According to Soni, the ONGC Board has approved a plan to invest Rs. 50.50 billion to explore more gas in Tripura by 2022. “Under this plan, new wells would be drilled and additional surface facilities would be created to increase gas production from 5.1 million to 6.25 million m3/d from Tripura gas fields,” he said. Butch Goring Authentic Jersey