Natural Gas: Demand-supply dynamics in India

India’s natural gas sector is on the threshold of rapid growth backed by increasing demand, greater exploration efforts under the New Exploration Licensing Policy, the commissioning of liquefied natural gas (LNG) import terminals on the western coast, upcoming LNG terminals and the government’s initiatives on a nation-wide natural gas pipeline grid.

On the supply side, additional Regasified LNG (RLNG) terminals, a transmission pipeline network and transnational pipelines would help to meet demand and achieve a higher share of natural gas in the overall installed capacity of energy – from 9% in 2014 to 20% by 2030.

Yet, greater supply will not be able to catch up with the incremental demand, resulting in a shortfall. This shortfall will reduce by 2017-18 due to more LNG imports. However, this deficit is projected to steadily increase again till 2030.


Figures in million metric standard cubic meter per day (MMSCMD). Source: Petroleum and Natural Gas Regulatory Board

Energy availability is the key to economic growth and India is on the cusp of an energy crisis fuelled by the poor availability of coal to fire thermal plants. At present, a little over half of India’s energy needs are met by coal-fired plants. India has lost more than 15 billion units of electricity due to non-availability of coal in the past two fiscal years.

In such a scenario, switching to natural gas to generate power is a prudent choice. Factors such as higher availability, development of transmission and distribution infrastructure, cost savings and its eco-friendly characteristics are propelling its use.

By volume, the power sector accounts for 28% of natural gas consumption in India. In the future, the increased substitution of oil by natural gas is set to alter the primary energy mix; the share of natural gas in the mix is expected to increase to 20% by 2030. A study by the Petroleum and Natural Gas Regulatory Board projected that gas-based power generation would contribute 36% to 47% of the increased demand for natural gas till 2029-2030.

The demand for natural gas persists as it has become easier for users in the power, fertiliser and city gas distribution to switch to gas. Collectively, they accounted for 70% of the natural gas consumption in 2013. A higher emphasis on food security coupled with the increasing price of urea is likely to increase the fertiliser sectors’ dependency on natural gas.

In the absence of any major domestic discovery, additional capacity is likely to be filled through RLNG or transitional pipelines. The government should promote environmental conservation through policy support and favourable pricing. At the launch of McKinsey & Company’s report ‘India: Towards Energy Independence 2030’ in early 2014, Paul Sheng, the consultancy’s Hong Kong director, was quoted in Economic Times as saying: “India can reduce its import dependence by 15%-20% by 2030. It will have to introduce appropriate policies to explore domestic resources and offer a viable market to investors.”

Source: Gail Voice

It will cost half for India to build and raise strategic crude oil reserves, must take advantage: ASSOCHAM

It would take just about half in building strategic crude oil reserves throwing a tempting opportunity for India to increase the storage capacity by raising    investment multi-fold in physical infrastructure besides signing forward contract with the exporting countries, an ASSOCHAM paper has pointed out. “It is once in several decade opportunity for India to scale up its strategic oil reserves at much higher level than even three months’ consumption, which itself is a long way to go for us at this point of time,” the paper said.  India’s crude oil import bill in November, 2014 as compared to May is giving a  saving of  about USD three billion per month on this head as the price of Indian basket of the fuel has dropped to less USD 60 per barrel from over USD 106 per barrel about six months ago. It will cost India a  40 per cent less to build  strategic energy reserves at the present prices.

“But to take advantage of the situation, we need to build physical infrastructure which cannot be built over night and would take at least a few months even if the brick is laid today. Who knows by the time our storage capacity for the reserves is ready, the crude would not have bounced back. In any case, the capacity has to rise , though some initiatives are underway”, the ASSOCHAM  paper said.  Prime Minister Mr Narendra Modi’s Office should quickly get the viable projects examined and take quick decisions while those in the private sector should be given the support in terms faster RBI clearances and easier tax administration Presently, , there are three strategic reserves – one  in Andhra Pradesh and two in Karnataka and four more facilities are  proposed at Bikaner in Rajasthan, Rajkot in Gujarat, Padur in Karnataka and Chandikholein Odisha..

The government may be planning to spend about Rs 5,000-6,000 crore on building these capacities. Given the opportunity, the government must commit and increase this investment at least three-four times to Rs 15,000-20,000 crore and let the oil marketing companies invest in the same along with the special purpose vehicle- Indian Strategic Petroleum Reserves Ltd  (ISPL). The resources at the command of ISPL should be increased mani-fold.    According to the  2001 agreement, all member countries of   the International Energy Agency must have a strategic petroleum reserve equal to 90 days of prior year's net oil imports for their respective country. “All out efforts must be made to first reach this benchmark and then move further so that we ring-fence ourselves from the energy shocks and do not indulge in splashes during good times”, ASSOCHAM Secretary General Mr D S Rawat said.

Given the fact building of physical infrastructure takes long time, we must also go in for, on a larger scale, forward commercial storage agreements in countries from where we ship crude into our country. The refineries, both in the public and private sector, should be aggressively exploring such opportunities. Of late, such arrangements have been witnessing increased movements.  Alongside this, PSUs in different sectors like Chemicals and Fertilisers, Steel, Coal, Mines and the Finance should encash the situation and scout for global assets in Africa, Australia, CIS countries and Indonesia  in different commodities including coal fields, natural gas , coal and aluminium .   Now is the time to buy these assets, as we have the resources backed with comfortable foreign exchange reserves and tempting prices.

Moreover, China may even go slow in its global hunt for the strategic assets as it is witnessing slowdown home.

Source: Orissa Diary

Saudis to Non-OPEC Producers: Cut Your Own Output, We're Good

Saudi Arabia and the United Arab Emirates reiterated pledges to keep pumping the same amount of crude, blaming non-OPEC producers for the glut of oil that’s driven prices to the lowest in five years.

Suppliers from outside the Organization of Petroleum Exporting Countries should cut “irresponsible” output, U.A.E. Energy Minister Suhail Al Mazrouei said in Abu Dhabi yesterday. Even if non-OPEC producers were to offer cuts, OPEC probably wouldn’t follow suit, Saudi Oil Minister Ali Al-Naimi said. The biggest oil producers outside OPEC are the U.S. and Russia.

Oil fell about 20 percent since OPEC chose to maintain its production target at a Nov. 27 meeting, seeking to defend market share rather than prices. The highest U.S. crude output in at least three decades is contributing to a glut that Qatar estimates at 2 million barrels a day. Saudi Arabia is confident prices will rebound as economic growth boosts demand and “inefficient producers” trim output, Al-Naimi said.

“OPEC’s recent decision to leave production targets unchanged now places greater pressure on non-OPEC output to rebalance an oversupplied market,” analysts from ANZ Banking Group Ltd. including Melbourne-based Mark Pervan wrote in an e-mailed report. “Expanded production by all OPEC members next year would likely cause sharper falls in prices.”

Non-OPEC Supply

OPEC produced more than its 30 million-barrel daily target in each of the past six months, data compiled by Bloomberg show. Non-OPEC production will expand 2.3 percent next year to 57.84 million barrels a day after climbing 3.5 percent this year, the International Energy Agency forecast in a Dec. 12 report.

“Irresponsible production from outside OPEC is behind the fall in prices,” Mazrouei said. “We call on all other producers to stop the increase.”

Saudi Arabia and the U.A.E. account for about 40 percent of OPEC supply.

Brent fell 1.7 percent to $60.34 a barrel on the London-based ICE Futures Europe exchange at 5:33 p.m. local time. West Texas Intermediate declined 2.8 percent to $55.52 in New York.

Crude tumbled into a bear market this year as oil extraction soared at shale formations in Texas and North Dakota as companies split rocks using high-pressure liquid, a process known as hydraulic fracturing, or fracking. Global demand has grown less quickly than expected this year, at about 700,000 barrels a day instead of the 1.2 million barrels projected, Al-Naimi said.

“The oil market will recover,” he said. “Fossil fuel will remain the main source of energy for decades to come.”

$20 Oil

OPEC doesn’t intend to cut its output “whatever the price is,” Al-Naimi said in an interview with the Middle East Economic Survey. “Whether it goes down to $20, $40, $50, $60, it is irrelevant.”

Saudi Arabia has 265 billion barrels of oil reserves, according to the minister. The nation will increase refining capacity to 3.3 million barrels a day by 2017 from 2.1 million barrels in 2014, Al-Naimi said.

Russia’s crude oil output in 2015 will be similar to this year’s 10.6 million barrels a day, Energy Minister Alexander Novak said on Dec. 17. The country’s economy must brace for prices falling to $40 a barrel, President Vladimir Putin said the following day.

A drop in prices to less than $50 a barrel would be negative for the industry, Novak said today on state television Rossiya 24.

U.S. oil output is set to reach 9.42 million barrels a day in May, which would be the highest monthly average since November 1972, according to the Energy Department’s statistical arm. Oil companies, while trimming 2015 budgets to cope with the lowest crude prices in five years, are also shifting their focus to their lowest-cost fields, which means extracting more oil with fewer drilling rigs, said Goldman Sachs Group Inc.

Source: Bloomberg

India projects Nat Gas demand for 2014-15 at 405 MMSCMD

India's overall Natural Gas demand, ignoring the issue of price sensitivity, would be 405 MMSCMD by various sectors during 2014-15, according to an official statement.

Against demand projection of 293 MMSCMD and 371 MMSCMD for the year 2012-13 & 2013-14, the actual demand was 134.28 MMSCMD and 121.13 MMSCMD respectively. During the period from April to September 2014, 74.79 MMSCMD of domestic gas and 44.55 MMSCMD of RLNG was supplied to various sectors.

In order to bridge the gap between demand and supply of gas, Government has taken several steps to improve the availability of gas which, inter-alia, include revision in the price of domestic natural gas, intensification of domestic exploration and production activities through New Exploration Licensing Policy (NELP) rounds, development of shale gas policy framework, research and development of gas hydrate resources in the country, import of Liquefied Natural Gas (LNG), exploring possibility of transnational gas pipelines, clearance for exploration and development of some NELP blocks, exploration in the Mining Lease Area with certain conditions and acquisition of overseas oil and gas assets.

Natural Gas is imported in the country in the form of Liquefied Natural Gas (LNG) by different public/private entities under Open General License keeping in view the demand of customers in various sectors.

Presently, for allocation of domestic gas government is broadly following the order of priority as mentioned in reply to part (a) of the Question. During the first half year of the current financial year, 91.772 mmscmd of gas has been produced in the country.

After making deduction for internal consumption including technical flaring, 74.79 mmscmd of domestic gas has been supplied to various user industries. In addition, 44.55 mmscmd of imported RLNG has also been supplied.

The price of domestic natural gas is determined as per New Domestic Gas Pricing Guidelines, 2014 notified by the Government of India on 25.10.2014, and provisions of the respective Production Sharing Contract and sold by different companies to different consumers after adding taxes, transportation charges and marketing margin etc. as applicable.

Source: Commodity Online

Policy changes, crude prices energize oil, gas firms

While 2014 was a lacklustre year for many industries, for the country’s oil and gas sector, the year will go down as one in which two controversial and politically sensitive decisions were finally taken. On 18 October, the government decided to stop controlling diesel price, allowing it to be set by the market. This was accompanied by a decision to increase the domestic price of natural gas to $5.6 per million metric British thermal units (mmBtu) from the earlier $4.2 per mmBtu. The government also relaunched a scheme to directly transfer cooking gas subsidies to customers’ bank accounts.

Together, the three decisions have set the stage for companies in the sector for the next few years, starting 2015. Decontrolling diesel benefits the oil marketing companies (OMCs)—Indian Oil Corp. Ltd (IOCL), Bharat Petroleum Corp. Ltd (BPCL) and Hindustan Petroleum Corp. Ltd (HPCL)—the most. They no longer have to sell the fuel below cost, which adds to under-recoveries. This also clears the way towards higher marketing margins and lower working capital needs. In a 20 October note, Jal Irani of Edelweiss Financial Services Ltd said OMCs will have less working capital requirements now, leading to higher profits.

“Our preliminary calculations suggest that their (OMCs) profits could rise by 20-30% following dip in working capital requirements. Moreover, their profits could rise by a similar amount over the longer term, too, as we believe their current retail margins of Rs.0.70 per litre shall increase, as the existing margins are not viable for new entrants,” said Irani in the report. Overall under-recoveries on fuel are also set to decline sharply to Rs.78,600 crore in fiscal 2015 and Rs.55,600 crore in fiscal 2016 from Rs.139,000 crore in fiscal 2014, said a 18 December report by Nomura International Plc. BPCL is expecting to save Rs.10,000 crore on cooking gas sales with the relaunched direct benefit transfer scheme, executive director (LPG) George Paul, told Mint in early December. Companies involved in energy exploration are also expected improve their financials in 2015. The long-pending price increase of domestically produced natural gas came in below expectations for the producers, especially private sector explorers such as Reliance Industries Ltd (RIL). However, the 33% increase, with a provision for revising it every six months, definitely benefits India’s biggest oil explorer Oil and Natural Gas Corp. Ltd (ONGC) and its smaller peer Oil India Ltd (OIL). To be sure, new gas discoveries from deep- and ultra-deep-water blocks—RIL’s D6 block in the KG basin falls in the latter category—will get a premium over the domestic price, though the formula to fix this premium has not been finalized. For every one dollar increase in the price of natural gas, ONGC’s annual net revenue increases by Rs.4,000 crore and its annual net profit by Rs.2,300 crore, D.K. Sarraf, chairman and managing director, ONGC told Mint in November.

A similar but relatively smaller benefit is expected to accrue to OIL. State-owned upstream oil companies too will benefit from the deregulation of diesel prices, as these companies were bearing some of the burden of the subsidies, along with the government. With that burden reduced, ONGC and OIL could see an increase in their realizations, say analysts. According to a 11 December report by Morgan Stanley Research, after diesel deregulation, subsidized volumes have declined to one-fourth at almost 21 million tonnes per annum (mtpa), which is much lower than the domestic production of ONGC and OIL. “Sensitivity to oil has thus fallen from $650 million to $205 million for each $1/bbl ($1/barrel) change in oil prices. We estimate this also puts a floor of $45/bbl, as net realization for ONGC and OIL,” the report said. This is a marked shift from the $40 per barrel realization that ONGC earned in fiscal 2014. However, a lot remains to be done. “The government has taken a very good step. Now, what we need are more project and business specific impetus from the government in the following year, or else we will miss the bus again,” said Deepak Mahurkar, leader (oil & gas) at PricewaterhouseCoopers India. Mahurkar says that clarity is needed on some provisions of the production sharing contracts. “There are almost 195-odd blocks where contractors are either awaiting extension of appraisal period or extension of time for submitting the field development plan,” he said. Dhaval Joshi, analyst with brokerage Emkay Global Financial Services, adds that clarity is also needed on the premium for deep-water blocks if the government hopes to spur investments. “Unless the extent of premium for deep-water blocks is clear, it will continue to deter private companies from investing in the sector,” he said. The crude price crash has added some uncertainty. Since the start of 2014, benchmark Brent crude prices have crashed by almost 43% to under $60 per barrel—the steepest drop in six years, according to Bloomberg data.

“Diesel price deregulation, new gas price announcement, direct subsidy transfer were key developments of 2014, but by the end of the year, the single issue that dictated the agenda in the oil and gas sector was the crash in the crude prices and this issue will dominate the action in 2015 as well,” said Debasish Mishra, senior director-consulting, Deloitte Touche Tohmatsu India Pvt. Ltd. While the fall helps public finances, it may lead to a decline in the gross refining margins for companies. According to petroleum planning and analysis cell, a body under the oil ministry, the three OMCs have seen their GRMs—the main determinant of their profitability—fall to a four-year low. Every one dollar per barrel drop in crude price trims annual net revenue by roughly Rs.800 crore and net profit by Rs.450-475 crore, A.K. Banerjee, director-finance at ONGC told Mint in November. Experts suggest the best way out is to raise volumes. “It is high time the capacities of BPCL Numaligarh and Bina refinery are expanded while a final decision is taken on HPCL’s Barmer refinery. There should also be a strict monitoring of IOCL’s upcoming Paradip refinery,” said PwC India’s Mahurkar.

Source: Livemint

Region's shale gas will help fuel India

An Indian natural gas company has signed a long-term agreement to buy natural gas sourced from the region's shale fields. Over the next 20 years, the midstream subsidiary of Washington, D.C.-based WGL Holdings Inc. will be selling between 3.4 million and 4.3 million cubic feet of natural gas to India's leading natural gas company, Gail Ltd.

The gas will be piped to Dominion's Cove Point export facility along the shores of the Chesapeake Bay. There it will be liquefied and shipped overseas.

The agreement takes effect once the facility is completed – it's under construction now as its being converted from an import facility to an export facility. The Federal Energy Regulatory Commission approved the project in September.

WGL said the majority of the gas -- 3.3 million cubic feet -- will sourced through an existing agreement between its WGL Midstream subsidiary and Antero Resources Corp. Antero operates in eastern Ohio's Utica fields and southwestern Pennsylvania's and northern West Virginia's Marcellus fields.

Source: bizjournals.com

When India's oil economy marked new beginning

Complete decontrol of diesel marketing, new pricing formula for domestic gas after five years and a plunge in global crude prices flagged a new beginning for country's oil economy in 2014 but there was little news on stake sale in state-run oil firms and fresh auctions for hydrocarbon assets.
After years of selling diesel below cost and of subsidising the rich consuming this key transport fuel, the government in October allowed its deregulation in the face of profits accruing on its sale from the fall of international crude prices - from around $140 per barrel to around $63.

Together with the decision on revising the price of natural gas, the decision made the industry watchers give a stable outlook for India's oil industry - as opposed to the negative outlook which they were planning for lack of reforms. But they also had their set of warnings.

"The rating outlook for Indian oil and gas entities remains stable in 2015. The benefits from oil price reforms and lower global oil prices for refining and marketing companies will be offset by their large capex needs in the medium term that will lead to negative free cash flows," Fitch Ratings said.
Earlier, prior to the Narendra Modi government taking over the reins in May, the price of diesel was being raised by oil marketing companies in marginal doses of 50 paise a litre since the previous government's decision in January 2013 to reduce subsidy load on the fiscal deficit.

At the time of deregulation in October, the oil marketing companies were making a profit of over Rs 3 a litre, of which the government took back a portion in excise duty towards compensating the states. Petrol pricing had already been deregulated since June 2010.

On India's quest for energy security by scouting for hydrocarbons assets abroad, the overseas arm of the Oil and Natural Gas Commission made some headway in 2014, acquiring new blocks in New Zealand, Myanmar, Bangladesh and Brazil, besides signing pacts with South Africa, Vietnam, Mozambique and Turkey.

There was some movement forward in pricing of gas as well. After elections forced the previous government to delay notifying a new gas price, an upward revision to $5.61 per unit was finally announced against the industry's demand for at least doubling it to a little over $8 per unit.
Accepting the recommendations of the Rangarajan panel, constituted by the previous government, would have meant a gas price of $8.4 per unit, instead of the $5.6 effective from November for five months.
But the decision was only partial. While the price of $5.61 per unit was to apply for the normal discoveries, for all new discoveries in the ultra-deep, deep-water areas and high pressure-high-temperature areas, all that the government said was that a premium will be given.
But it did not spell out further details on how it will be calculated. While shallow-water blocks are at a depth of up to 100-500 metres, deep-water blocks descend to around 1,000 metres. Those at depths beyond 1,500 metres are classified as ultra-deep-water blocks.

The main company affected by this decision was Reliance Industries, as it was not immediately entitled to avail of the new price, as it remained locked in an arbitration with the government over alleged shortfall in production from its Krishna-Godavari basin fields.

To make up for fall in taxes due to the sustained decline in international crude prices, the government hiked the excise duty twice in November-December, saying the money would fund welfare schemes. This deprived consumers lower retail price to the extent of the fall in global crude prices.
For oil companies in the downstream sector, analysts forecast that their profit after tax will increase by Rs 33-Rs 36 billion year-on-year in 2014-15 and by another Rs 7-Rs 10 billion in 2015-16, said Crisil Research in the post-reform prospects for the oil and gas sector.
"Their interest cost will decline and they wont have an under-recovery (loss) burden," Crisil Research said in the post-reform prospects for the oil and gas sector," it said.

"On the other hand, upstream companies (companies engaged in oil exploration and extraction) will see a sharper improvement of Rs105-210 billion year-on-year in profit-after-tax in 2014-15 and a further improvement of 70-75 billion in 2015-16."

Indeed, with the dramatic fall in global oil prices towards $60 a barrel at this point, its favourable impact on country's current account and fiscal deficits has quickly changed the macro-economic scenario of the country, increasing the clamour for rate cuts by the central bank.
Going forward, analysts expect the government to take a call on further sale of stake in some of the oil companies, both in the upstream and downstream sectors, notably the Oil and Natural Gas.

Highlights of country's oil economy in 2014:

- Diesel prices deregulated giving the freedom to oil firms
- New gas price announced after elections delayed its notification
- Deep water, difficult blocks to get new gas price in New Year
- Reliance denied new gas price pending arbitration decision
- Government hiked excise duty on petrol, diesel
- Plunging oil prices changed country's macro-economic scenario

Source: Business Today

Azerbaijan keen to meet India's energy needs: Envoy

Economic relations between India and Azerbaijan are on the upswing, especially with an agreement inked between state-run GAIL and a gas firm of the resource-rich south Caucasus nation which is keen to meet India's energy needs, its envoy said Tuesday.

Ambassador Ibrahim Hajiyev, speaking at a book release function, said that energy cooperation between his country and India is poised to grow and the agreement between GAIL and the State Oil Company of Republic of Azerbaijan (SOCAR) is an example.

The envoy was speaking during the release of the book "Azerbaijan" written by well-known journalist Sheikh Manzoor Ahmad, editor-in-chief of Alam Urdu service). The book is in English, Hindi and Urdu.

Hajiyev said that bilateral trade, which stands at $1.14 billion, is set to go up multifold as Azerbaijan is trying to meet the energy needs of India.

GAIL entered into an MoU with the Azerbaijan firm last month for the marketing, sourcing and shipping of LNG.

In addition, GAIL and SOCAR are to pursue business opportunities in upstream assets across the world and joint investment in petrochemical projects.

Gas production in Azerbaijan is expected to reach 30 billion cubic metres (bcm) in 2018 compared with 29.45bcm in 2013.

A major portion of Azerbaijan's natural gas is produced from the giant Shah Deniz field in the Caspian Sea. Azerbaijan's projected reserves are 2.3 trillion cubic metres (tcm), which can go up to 6tcm, according to reports.

Source: indiagazette.com

Oil prices struggle after WTI crude sinks below USD 60

Oil prices sank further in Asia today, with analysts warning of little respite from the the selling after plunging more than 40 percent since June. US benchmark West Texas Intermediate (WTI) for January deliver was down 86 cents at USD 59.09 in mid-morning trade.

The contract closed below the psychological USD 60 mark for the first time since July 2009 yesterday. Brent crude was down 52 cents at USD 63.16. "There just doesn't seem to be any relief for oil prices at the moment," Michael McCarthy, chief market strategist at CMC Markets in Sydney, told AFP. "The bearish sentiment is unlikely to change until the end of the year unless we see a significant drop in global production levels or a supply disruption," he said.

WTI and Brent prices have fallen precipitously since hitting 2014 peaks of USD 106 and USD 115 respectively in June. The drop has been attributed to slowing growth in China and emerging-market economies, a recession in Japan and a near-stall in the eurozone.

On top of that, OPEC last month said it would maintain output levels despite ample global supplies, in part due to cheaper oil extracted from North American shale rock. McCarthy said at levels below USD 60, prices falls are likely to face "more resistance than at the moment". Analysts said the crude market had largely ignored data showing a healthy rise in US retail sales in November that raised hopes about consumer demand in the world's largest economy.

Source: Moneycontrol

ONGC to use GSPC's under-sea infra to bring gas from KG basin

State-owned Oil and Natural Gas Corp (ONGC) plans to use Gujarat firm GSPC's undersea infrastructure to bring gas from its KG-basin fields in Bay of Bengal to land.

ONGC had last year signed an agreement to use Reliance Industries' under-utilised KG-D6 infrastructure to move gas from neighbouring KG-DWN-98/2, or KG-D5 block, to land.

The company has now submitted plans to the government to use infrastructure of Gujarat State Petroleum Corp, which has laid out under-sea pipelines and other systems to take gas from its block in the vicinity of Andhra Pradesh, sources said.

ONGC has made 11 discoveries in KG-D5 which it plans to develop in three clusters or groups. In the first cluster, it plans to club gas finds D and E in the northern part of KG-D5 with a discovery in its adjoining G-4 block.

These finds, sources said, are in close proximity to the pipeline system that are to take gas from GSPC's KG-OSN-2001/3 block to onland.

So, ONGC will pump 14.5 million standard cubic meters per day of peak output envisaged from Cluster-1 to the GSPC network for onward transmission to land.

Cluster-2, which is also in the northern part of KG-D5, will have two components - 91,000 barrels per day of oil which will be transported to a floating processing system from where it will be sent to refineries by tankers. About 12.5 mmscmd of gas will be transported to an onshore terminal at Odalarevu through a separate ONGC-laid sub-sea pipeline network.

The third Cluster is made up of UD-1 gas discovery in the Southern part, which lies in extremely challenging water depths of 2400-3200 meters.

Sources said ONGC is currently not pursuing development of this as it is yet to get a suitable technological solution.

The company is targeting mid-2018 for start of natural gas production from the block and mid 2019 for oil.

The block KG-D5, which sits next to RIL's KG-D6 block, is divided into the Northern Discovery Area (NDA) and Southern Discovery Area (SDA). NDA has 121 million tons of inplace oil reserves and 78 billion cubic meters of gas while SDA has an inplace reserve of 80.9 bcm.

ONGC and RIL won KG-D5 and KG-D6 block in the first round of auction under New Exploration Licensing Policy (NELP) in 2000.

RIL began production from the oil discovery in KG-D6 in September 2008 and put gas find on production in April 2009. It created capacities to carry as much as 80 mmscmd of gas but current output of less than 12 mmscmd utilises only 15 percent of this resource.

Source: First Post

Falling crude oil price: Valuation of foreign energy assets declines

Indian oil companies like Oil and Natural Gas Corporation Limited (ONGC), Bharat Petroleum (BPCL), Oil India, and Reliance Industries are seeing the value of energy assets bought overseas in the last few years eroding with the decline in crude oil prices.

India's energy asset buying spree occurred when Brent crude was hovering at above $100 a barrel but with prices falling 35 per cent to a five-year low of $65 a barrel, the valuation of these assets has fallen by as much as 25 per cent, analysts say.

Reliance Industries has put its shale gas assets on the block. The company is expecting $4.5 billion for its 45 per cent stake in a shale gas venture with Pioneer Natural Resources of the US. The problem is there are no takers. If the deal does go through, analysts say, the valuation will be far lower than what Reliance Industries expects.

"The oil assets all over the world are valued on the basis of net present value and depending on probable reserves. With the oil prices coming down so sharply, the valuation will also take a sharp fall," says Phani Sekhar, fund manager with Angel Broking.

"This (valuation) is more of a notional loss. If oil prices pick up again by 2016, the game will change for these companies," said an analyst with a foreign brokerage.

Reliance Industries is not alone. Last year, state-owned ONGC and Oil India bought a 10 per cent stake in a Mozambique gas field for $2.5 billion from Videocon. Since then, the valuation of the field is down by as much as 25 per cent, say analysts.

BPCL, Oil India and ONGC are sitting on an asset whose valuation may fall further from its dizzy height of $25 billion last year. "Oil price is just one of the reasons. The project will require investments worth $18-20 billion for setting up infrastructure," said an analyst.

With oil blocks needing big investments to keep the wells flowing, falling oil prices will lower cash flows. ONGC is particularly affected because its $2.1 billion acquisition of the Russia-focused Imperial Energy's oil reserves turned out to be way below projections made prior to the purchase.

Experts say there are other sides to the issue as well. "First, do we regard this fall in crude oil as being temporary in nature or a permanent one? Will conditions change once the world economy recovers and China starts pulling up demand? Besides, the future of shale gas is still uncertain and hence there could be reason to believe that this is temporary. Hence for these companies planning to sell assets, they have to take a medium term view. There is one theory that OPEC (Organization of the Petroleum Exporting Countries) is standing by allowing the price to fall so that it can squeeze the shale producers out of the market. Second, the lower price does provide a positive to these OMCs (oil marketing companies) in terms of savings from the subsidies and their own absorption of the same. This could counter a part of the potential downside to the asset value overseas," says D R Dogra, chief executive officer and managing director of Care Ratings.

Since most of these foreign acquisitions were done through loans taken abroad, a further fall in oil prices will make takeovers more expensive.  The rupee is expected to fall to around Rs 65 to a dollar in 2015. Indian companies will have to pay more if the loans are to be repaid from cash flows of local companies.  But if they have hedged against the currency risk, the cost may not be that high.

The last fall in oil prices in the 1990s led to consolidation in the global industry. Small oil companies will need cash to expand and the big ones will need money to prop up reserves. Indian companies can either buy out smaller firms at low valuations or wait for the tide to turn. In either case, they will need more cash.

Source: B.S

Here's What A $10 Move In Oil Does To GDP Around The World

Oil affects countries around the world differently. Generally speaking, low prices are great for net importers of oil, but bad for net exporters.

UBS's macro strategy team considered what a permanent $10 drop in a barrel of Brent crude would mean.

"Oil-producing economies such as Russia and Norway and OPEC clearly lose out when oil prices fall, with the former seeing an impairment of its GDP of over 1 percentage point," UBS analysts wrote on Thursday.

"Among large developed economies, the US and Japan are least affected. Although Japan has a relatively high dependency on imported oil the weight of energy products in its consumer price basket is quite low compared with other developed economies. That means the real income-related benefits for Japan's consumers from weaker oil prices are relatively low compared with elsewhere."

For the US, the energy dependency and sensitivity story has been evolving rapidly as more and more oil has been fracked out of America's shale basins.

"Prior to the shale revolution model simulations would have suggested a boost of 0.2 to 0.3 percentage points to US growth for every USD 10/bbl decrease in the price of oil," they write. "That estimate is now only 0.1%."

Overall, they estimate that a sustained $10 drop in prices will add around 0.2 percentage points to global GDP.

Source: UBS

India, Russia to set out energy vision, Siberian deals eyed

India and Russia will strike an energy partnership when Prime Minister Narendra Modi hosts President Vladimir Putin on Thursday to prepare the way for two Siberian oil deals and chart a route for a first pipeline between the two countries.

But a joint ‘vision’ document is likely to lack hard details, with terms still being thrashed out for India’s ONGC Videsh to acquire an interest in Rosneft’s Vankor and Yurubcheno-Tokhomskoye oilfields, officials and industry sources on both sides say.

There are doubts over the viability of proposed oil and gas pipeline routes that would either cross conflict-ridden Afghanistan and Pakistan – India’s arch enemy – or mountainous tracts of inner China.

Russia, isolated by the West over its annexation of Crimea and backing of an armed uprising in eastern Ukraine, has a friendship with India that dates back to the Soviet era. “In the present circumstances, when Europe is trying to isolate Russia, Putin wants to show that he has friends in the world,” said Gulshan Sachdeva, head of the Centre for European Studies at Jawaharlal Nehru University in New Delhi.

“Modi and Putin are similar leaders. They like to announce big schemes,” Sachdeva added. “It might make sense to do so – whether or not they come to fruition is another matter.” New Delhi explicitly rules out joining Western sanctions against Russia although Modi has struck up an increasingly warm friendship with President Barack Obama since winning power in May, and will host the U.S. leader in January.

Putin has been a regular visitor to India since becoming president in 2000 but the trip will be a one-day affair. A proposal for him to address India’s parliament was quietly dropped.
Russo-Indian trade, at $10 billion, is only one-ninth of the volume between Russia and China.

NEW TIES
Indian and Russian officials say the strategic declaration will encompass issues from defence to nuclear power and even diamonds, with state monopoly Alrosa keen to ramp up exports to India.
“The visit will solidify the political relationship; confirm Russia as India’s principal purveyor of arms; and expand ties in other areas, such as nuclear energy,” said Dmitri Trenin, director of the Carnegie Moscow Center.

State-controlled Rosneft, the world’s largest listed oil firm by output, is strapped for cash due to Western sanctions, and is showing increased willingness to offer upstream projects to India.
But wrangling continues over the interest ONGC Videsh would get in Vankor, which is expected to reach peak output of 500,000 barrels per day in 2019.

Indian government sources say that Rosneft has offered a 10 percent stake in the Vankor operating company, but that New Delhi is pushing for a 25 percent interest that would allow ONGC Videsh to book equity barrels.

India is also seeking tax breaks on a proposed 49 percent stake in Yurubcheno-Tokhomskoye, a greenfield project in eastern Siberia, because under Russia’s existing fiscal regime the field would lose money.

State oil firm Oil and Natural Gas Corp’s overseas arm partners Rosneft and U.S. ExxonMobil in the Sakhalin-1 offshore energy project. ONGC also owns struggling Siberian producer Imperial Energy.
The aspiration to build a pipeline passage to India will be “there” in the joint Indo-Russian statement, a second Indian official said, but details remain sketchy. Russia’s ambassador to India, Alexander Kadakin, told reporters that an export route via China’s westernmost province of Xinjiang was under consideration but needed to be studied further due to challenging terrain.

Indian officials have pushed the idea of a $40 billion pipeline to pump Siberian gas to India, but even if it is practicable it would struggle to compete with tanker-shipped liquefied natural gas.
India imports 80 percent of the 4 million bpd of crude that it consumes daily, making an oil link a more promising option, yet proposals have so far failed to get off the drawing board.
Russia’s Eastern Siberia-Pacific Ocean oil pipeline has a capacity of 1.6 million bpd, while state natural gas monopoly Gazprom is working to finalise a $400 billion deal to pump gas to China

Source: FE

Time For India To Look At Energy Security From Geostrategic Perspective

India, unlike China, has tended to look at energy security through an economic prism rather than from a purely strategic perspective. China has been aggressively making energy deals – be it acquiring assets or negotiating decades-old procurement deals – without seemingly being worried about the cost to its exchequer, and has thereby succeeded in expanding its influence in several regions of the world by tying up its vast energy market with energy-exporting countries.

But is India now looking at energy through the strategic prism? Its recent signing of the TAPI deal is certainly indicative of that. Why else would New Delhi support a project that, despite the hype surrounding the recent activity regarding the deal, has as little chance of implementation as the IPI (Iran-Pakistan-India) project? Further, given that TAPI does not make much commercial sense, why is there so much optimism surrounding it?

The first, and perhaps the most crucial, aspect of the TAPI project is that it has the blessings of the US. Washington is keen to provide South Asian countries with alternatives to Iranian gas in order to starve Tehran of revenues from the IPI and nudge it towards a more pliant position on its nuclear programme, as well as to break Russia’s monopoly over Central Asia’s energy sector.

Secondly, it gives India the opportunity to gain a foothold in the Central Asian energy sector, which it has been seeking for a while. It is notable that during his recent visit to Ashkabad, Petroleum Minister Dharmendra Pradhan talked about expanding energy cooperation beyond TAPI into other projects in the energy sector – upstream, mid-stream as well as downstream. More importantly, with China raising its profile in the region by tying up energy deals with the Central Asian states, India too wants to mark its presence, and TAPI could be the vehicle for its geostrategic goals in the region.

But the question remains: will TAPI actually translate into a viable project?

As of now, only an expression of intent has been established, with no actual breakthrough having taken place, although the setting up of the TAPI Pipeline Company Limited (TPCL) by the four participating countries, viz., Turkmenistan, Afghanistan, Pakistan and India, which will own, finance, construct and operate the 1,800 km pipeline, was hailed as an indication of the viability of the project.

Secondly, a leader for the project has yet to be chosen by the partners, although the process has to be completed before early February 2015. However, given the continuing instability along the route of the pipeline, it remains to be seen whether a company/consortium will take on the high-risk project. No details regarding pricing of the gas have been discussed, which could make or break the project. After all, one of the reasons for the IPI’s failure was the lack of consensus on gas pricing. Moreover, India was reluctant to tie itself to a project where it would be dependent on Pakistan for transporting the gas. Neither of these factors has changed.

Finally, finding an international company that will accept the risk of financing the project will not be easy. For example, Chevron and Total had initially shown interest in leading the consortium in the TAPI project but backed out after Turkmenistan refused to accept the condition of a stake in the gas field that will source the pipeline. Now there are reports that India may propose a Chinese company to lead the consortium on the grounds that the Chinese are already present in Turkmenistan as well as their growing influence in Afghanistan.

However, the fact that China National Petroleum Company (CNPC) has been given access to Turkmenistan’s on-shore gas fields, including Galkhynysh, which will supply TAPI, may become a source of a problem. Given that developing Turkmenistan’s fields is cost-intensive, it would entail the use of Chinese capital and may require Ashkabad to borrow money from China to meet its share of the development costs. This would not only place Ashkabad in the danger of becoming a debtor nation to China, but could also affect negotiations on the pricing of gas to China, thus placing China in a dominant position. In turn, this could have repercussions on the price of the gas to be fed into the TAPI project as well.

In fact, Turkmenistan is wary of becoming increasingly dependent on China. As a result, Ashkabad is looking at alternative markets. Apart from TAPI, two other projects are also being negotiated — the Trans-Caspian pipeline to deliver Turkmen gas to Europe and the Trans-Anatolia (TANAP) project for transporting gas from both Turkmenistan and Azerbaijan to Europe through Turkey. If these projects take off, the more attractive European market will become a priority for Ashkabad.

Nevertheless, from a geostrategic perspective, India should remain engaged with the project, and initiate discussions with Moscow on bringing gas through a pipeline transiting the restive Xinjiang province of China. However, at the same time, India should also actively pursue the Iran option — though not necessarily the IPI model — as a more viable option. While Iran is still not out of the sanctions woods, there are signs that over the next few months it may reach a rapprochement with the US. Once that happens, Iran will, in all probability, prefer to pursue the more profitable European market for its gas. While the IPI project may not be acceptable to India due to its relations with Pakistan, the deep sea pipeline project through Oman should be looked at more closely, despite American opposition. After all, if the Modi government can seriously pursue the pipeline option with Moscow despite sanctions being imposed on Russia, the sub-sea pipeline from Iran, either through Oman or Qatar, is far more feasible, both technically and commercially. The window of opportunity with Iran is open for now, but may soon close if kept pending for much longer.

Source: Eurasiareview.com

Asia’s Energy Producers Focused on Long Game

Shock and awe: that’s an apt description of Joko Widodo’s approach to shaking up Indonesia’s energy industry.

Having warmed the president’s chair for less than two months, Joko has moved quickly to stamp his authority on Indonesia’s national oil company, Pertamina, as part of the new government’s plan to reform the corruption-riddled oil and gas industry and underwrite the energy security of the world’s fourth most populous nation.

The blood-letting has been quick - and brutal. Pertamina’s entire board of directors was dismissed, while long-time cement industry executive Dwi Soetjipto has been parachuted in as new chief executive and charged with reviving the fortunes of the national oil company at a time when Indonesia’s production of oil and gas has fallen. It’s hard to believe that the one-time member of the Organization of Petroleum Exporting Countries (OPEC) has become an increasing larger importer of foreign oil. Having barely settled into the job, Dwi announced plans during the week to build new refineries and upgrade existing facilities to reduce Pertamina’s fuel imports to zero by 2019. If successful, Pertamina will play a substantial hand in reining in the country’s hefty current account deficit.

But the sharpened focus on energy policy is not unique to Southeast Asia’s largest economy. Policymakers across the region are addressing all aspects of energy policy, be it fuel subsidies, the need to boost production of oil and gas, and the embrace of new technologies to bolster energy efficiency and combat pollution. The need to increase oil and gas production remains a focus for many countries in the energy hungry region. While the slump in oil prices to a four-year low has prompted the gnashing of teeth and a lot of handwringing in the Middle East and the U.S. shale industry, many Asian companies – both state-backed and publicly listed – continue to push ahead with projects that will ensure longer term energy security.

Given the forecast for Asia’s longer term energy demand, it’s little surprise that many Asian companies are continuing to invest despite the weak price environment. The International Energy Agency expects China to overtake the U.S. as the world’s largest oil consumer by 2030, with India and Southeast Asia emerging as growing sources of demand. On a shorter term horizon, JPMorgan expects Asian oil demand growth of around 500,000 barrels a day in 2015, a similar level to 2014 as rising demand from China, India and Southeast Asia offsets weaker demand in Japan. The broker is forecasting Chinese demand growth of around 300,000 barrels a day, driven mainly by rising demand for petrol amid increasing car ownership in the world’s second largest economy. India’s oil demand is expected to grow between 3% and 4% next year.

The robust demand outlook helps explain why many Asia-based producers are pushing ahead with new projects or deals, a stark contrast to the ongoing debate about who will blink first and cut oil production, Middle East oil producers or U.S. shale players. Over the past couple of weeks, we’ve seen PetroChina ( 857.HK ) and its partners commit to investing over $4 billion to drilling for shale in the China’s Southwestern municipality of Chongqing. Meanwhile, the partners in Australia’s massive North West Shelf Project liquefied natural gas project have committed $1.2 billion to the development of the Persephone gas field. This is the third major gas development in six years for the country’s largest operating oil and gas project. Two of the joint venture partners include BHP Billiton ( BHP.AU ) and Woodside Petroleum ( WPL.AU ), the latter being the operator of the NWS, which has exported LNG to Asia for 25 years.

Meanwhile, India’s Oil and Natural Gas Corp (500312.IN) is set to extend its reach well beyond the borders of the world’s second most populous country. The company, which was recently analyzed by Barron’s Asia’s Thomas Streater, is expected to ink an agreement next week to take a stake in two Siberian oil fields. Timed to coincide with the visit by Russian president Vladimir Putin to India, the deal involves Rosneft (ROSN.RU) selling a 10% stake in the Vankor field, the largest field to have been brought into production in Russia over the past 25 years. The deal comes quickly on the heels of an agreement to sell a 10% stake in Vankor to China’s CNPC in early November.

But to be clear, not all Asian energy producers are immune to the pain being inflicted by low oil prices. Malaysia’s national oil company, Petronas, has delayed a decision on its proposed Pacific Northwest LNG terminal due to concerns about the project’s high costs at a time when its revenues are being squeezed by lower oil prices. Meanwhile, Australia’s Santos ( STO.AU ), which is developing a major LNG project in the Australian state of Queensland, continues to be brutalized by investors. The stock plumbed to a 10-year low this week after the company announced it had pulled a EUR500 million hybrid capital raising and said it would review its spending plans for 2015.

While the low price environment will weed out those projects with dubious economics, longer term investments in Asian energy make sense given the robust outlook for demand. It is a point well appreciated by the many of the region’s energy companies, especially those with political masters who see the value in long term energy security. Energy stocks may be on the nose among investors, but seeking out those producers who can withstand the short term pain of lower prices in order to benefit from the gains provided by strong Asian demand over coming years could reward patient investors over the long term.

Source: barrons.com

Reliance Industries charters smaller vessel to ship diesel to Singapore

India's Reliance Industries has chartered a medium-range vessel to carry diesel from India to Singapore in December, a rare move for the refiner that typically uses larger vessels for the route, traders said on Friday.

Medium range vessels can carry about 35,000 to 40,000 tonnes of diesel. Reliance usually ships diesel to Singapore in long-range 2 sized vessels, or Aframaxes, that can carry about 80,000 to 100,000 tonnes of fuel, or in a long-range 1 sized vessel, or Panamaxes, that can carry about 50,000 to 60,000 tonnes.

As much as possible, Reliance ships diesel to Europe or Africa when arbitrage economics are viable and moves the fuel to Singapore only when demand in Europe is weak, traders said. "It is not economical in terms of freight costs to move the cargo in a smaller ship to Singapore, compared with moving larger volumes to the west from India," a shipbroker said.

It is unclear if Reliance plans to store the oil product in Singapore or sell it directly to a customer in the region. India shipped about 94,000 tonnes of diesel to Singapore in the week to Dec. 3, data from International Enterprise shows.

Reliance, controlled by billionaire Mukesh Ambani, operates the world's biggest refining complex in India's western state of Gujarat, where its two adjacent plants can process about 1.4 million barrels per day of oil.

In the past, it has sold diesel to countries like Australia, which is Asia's top diesel importer and where import demand is growing due to closures of its ageing refineries, traders said.

Source: HBL

cheap oil may change India’s destiny

Petroleum prices touched a new four -year low of $72.5 per barrel after the Organization of Petroleum Exporting Countries (OPEC) decided last week against reducing production . The 35 per cent price drop is a huge relief for India, where petroleum products comprise a third of the import bill. Cheaper oil means narrower current account and fiscal deficits, and reduced prices at the pump for consumers shopping for food-grains, vegetables, cement and steel.

Can this happy situation last? Will 2015 be the year in which high oil prices do not disadvantage India? Judging by history, it may be.

Before oil prices began to rise in 2003, a 20-year run of price stability fuelled global growth. But cheap oil killed off investments in exploration and production. OPEC gained market share, from 30 per cent of global production in 1983 to over 40 per cent by the end of 1990s.

Then the cycle turned: the lack of alternatives to OPEC and accelerating oil demand through the 1990s pushed oil prices up again to over $100 per barrel.

High oil prices revived investments in new exploration and alternatives in the last decade; both became financially rewarding. Huge oil and gas discoveries were made in Uganda, Mozambique and Brazil. From zero known oil reserves, Uganda now sits on 6.5bn barrels of oil, discovered since 2006. Mozambique has seen similar finds of natural gas.

But the largest new discoveries have come from the Americas. Brazil, already an important oil producer, has added 5bn barrels to its reserves. Argentina also has large shale oil and gas reserves. Ditto with shale gas in the US, the oil sands of Canada (reserves at 167.8bn barrels) and the Orinoco heavy crude of Venezuela (reserves of 220bn barrels). Canada and Venezuela alone account for a quarter of the world’s oil.

Technology has helped. Cheaper natural gas is now used as vehicle fuel, and the last five years has seen 80 per cent more gas-driven vehicles globally. They’re still just 2 per cent of all vehicles, but increasing. The energy efficiency focus has also paid off. The US, Japan, Germany, UK, France, Spain and Italy have cut oil consumption by 3.5m barrels per day between 2003 to 2013.

The boom-bust pattern is predictable. The oil shocks of the 1970s led to lower energy prices, which undermined exploration. After a generation, the global oil market found itself at the same spot – lacking alternatives and higher prices.

This time too, the pattern is similar, but with two new considerations:

1. China may be nearing its consumption peak. Its infrastructure build-out is complete, and growth is starting to slow. In the recently-inked US-China climate deal, it pledged to peak its emissions by 2030.

2. Renewable energy sources – sun and wind – are now large enough to dent fossil fuel demand. From 0.67 per cent in 2003, they now comprise 2 per cent of world energy supply – and will be 20 per cent of new demand over 30 years.

That means continued low and stable oil prices for at least two decades.

US speculators claim that OPEC, by keeping prices down, is sabotaging the development of US shale resources . This is unlikely. Most shale oil is produced by private companies, which can stay profitable longer than many OPEC governments can remain solvent.

Civil war and terrorism have not hit oil production or the infrastructure of major producing nations such as Iraq, Nigeria or Libya. Indeed, terrorists depend on illegal oil exports for financing their world domination objectives, and therefore they protect oil assets.

So, barring a catastrophic geopolitical event like Iran or Saudi Arabia seeing a major output disruption, oil will stay low. India’s fuel bill then, is set to fall drastically and remain there through the administration of Narendra Modi, the Indian prime minister.

Now is the time for India to build its strategic petroleum reserve – currently at a miniscule 10 days worth of oil use (compared to 90 days for OECD nations). It should also tie up contracts with emerging suppliers in North and South America, diversifying away from West Asia.

Lastly, New Delhi can invest in a more energy-efficient economy. Petroleum products in India are used for transporting goods and people. Investment in public transport and stringent standards for vehicle fuel consumption are easy to mandate. After years, a major global shift – low energy prices – has provided India an opportunity to improve energy security and shock-proof the economy.

Amit Bhandari is a fellow for energy and environment studies at Gateway House, Indian Council on Global Relations, a foreign policy think tank based in Mumbai

Source: FT Blog

India receives its biggest shipment of liquefied natural gas

India has received its biggest shipment of liquefied natural gas (LNG) by ship as it looks to diversify supplies and economise parcel size to meet growing energy demand. A Q-Max LNG vessel, the largest LNG carrier in its class, with a capacity of about 261,000 cubic meters, was received at Petronet LNG Ltd's Dahej import terminal in Gujarat yesterday.

The receipt of the ship, carrying cargo from Ras-Laffan, Qatar, has set another benchmark, the company said in a statement here. Last year, Petronet had successfully unloaded 1,000th cargo at Dahej in a short span of about 9 years.

"We are glad to receive first Q-Max LNG vessel, one of the biggest size LNG ships available today, at Dahej Terminal and expect to receive more such cargoes in future," Petronet Managing Director & CEO Ashok Kumar Balyan said.

In April, Petronet had signed a short-term contract with Qatar's Ras Laffan Liquefied Natural Gas Co to import 800,000 tonnes of LNG over 12 months to supply to refineries. Petronet currently imports 7.5 million tonnes a year of LNG from RasGas on a long-term contract that was signed in 2004.

"The global energy supplier currently makes regular deliveries to Petronet's Dahej and Kochi terminals. After South Korea, India is RasGas' largest recipient of LNG by volume," the statement said. RasGas will load its 1,000th cargo destined to Dahej in mid-December.

"The safe berthing and unloading of the Mekaines Q-Max vessel at Dahej is another significant milestone to highlight relationship between RasGas and Petronet. "As the largest single supplier of LNG to India, RasGas stands ready to assist Petronet in meeting India's growing demand for eco-friendly fuel.

"The delivery of the Q-Max cargo to Dahej Terminal demonstrates our flexibility in meeting our long-standing customer's needs," said Khalid Sultan R. Al Kuwari, RasGas' Chief Marketing and Shipping Officer. Petronet currently has two operational LNG import terminals - 10 million tonnes a year Dahej facility in Gujarat and 5 million tonnes per annum facility at Kochi in Kerala.

The firm, which meets about 30 per cent of the country's gas demand, has so far sourced over 1,250 cargoes at its Dahej LNG terminal. "The Dahej terminal is further being expanded to 15 million tonnes capacity. In September, 2013, Petronet has commissioned its 5 million tonnes LNG terminal at Kochi. "Petronet is also pursuing setting up of its third terminal at Gangavaram on the East Coast of India," the statement added.

Source: ET

Govt will focus on gas-based power: Narendra Modi

Prime Minister Narendra Modi said on Monday that the government would promote gas-based generation to power India's economy. On the last leg of his three-day visit to the Northeast, Modi announced state-owned ONGC would double its exploration budget for natural gas.

Modi was addressing a public rally after the inauguration of ONGC Tripura Power Company (OTPC)'s second unit of 363 Mw at Palatanam, in which ONGC holds 50 per cent equity in the project, while ILF&S has a 26 per cent stake. Prime Minister Narendra Modi said on Monday that the government would promote gas-based generation to power India's economy.

On the last leg of his three-day visit to the northeast, Modi announced state-owned Oil and Natural Gas Corporation (ONGC) would double its exploration budget for natural gas.

Modi was addressing a public rally after the inauguration of ONGC Tripura Power Company (OTPC)'s second unit of 363 Mw at Palatanam, in which ONGC holds 50 per cent equity in the project, while ILF&S has a 26 per cent stake.

During his speech, Modi said the government would convert its 'Look East' policy into 'Act East'. He added the government had signed an agreement with Japan to open an economic corridor with Myanmar, which would start from the northeast and boost employment in the region.

"Since the 21st century is said to belong to Asia, the northeast has the potential to become the gateway to Asia," Modi noted. Towards this end, the government would build modern infrastructure in the northeast, to unlock the region's potential, Modi added. He also said that if Bangladesh wanted to buy power, India was willing to sell it.

Striking a different cord, Tripura chief minister Manik Sarkar said the state government was keen on setting up gas-based urea and petrochemical plants instead of using gas just for the power plant.

The Palantala power plant has a capacity of 726 Mw, of which Assam has an allocation of 240 Mw, Tripura 196 Mw, Meghalaya 79 Mw, Manipur 42 Mw, Nagaland 27 Mw, Arunachal Pradesh 22 Mw, Mizoram 22 Mw and 98 Mw is to be sold on merchant basis by OTPC. Bangladesh is likely to get power from OTPC's share.

ONGC owns significant natural gas reserves in Tripura. However, these could not be commercially developed owing to low industrial demand in the region. In order to optimally utilise the gas available in the state, ONGC decided to monetise the gas reserves by setting up the 726.6-Mw Combined Cycle Gas Turbine power plant close to its gas fields along with an associated power transmission system from the project site to Bongaigaon in Assam.

During his speech, Modi said the government would convert its 'Look East' policy into 'Act East'. He added the government had signed an agreement with Japan to open an economic corridor with Myanmar, which would start from the northeast and boost employment in the region.

"Since the 21st century is said to belong to Asia, the northeast has the potential to become the gateway to Asia," Modi noted. Towards this end, the government would build modern infrastructure in the northeast, to unlock the region's potential, Modi added. He also said that if Bangladesh wanted to buy power, India was willing to sell it.

Striking a different cord, Tripura chief minister Manik Sarkar said the state government was keen on setting up gas-based urea and petrochemical plants instead of using gas just for the power plant.

The Palantala power plant has a capacity of 726 Mw, of which Assam has an allocation of 240 Mw, Tripura 196 Mw, Meghalaya 79 Mw, Manipur 42 Mw, Nagaland 27 Mw, Arunachal Pradesh 22 Mw, Mizoram 22 Mw and 98 Mw is to be sold on merchant basis by OTPC. Bangladesh is likely to get power from OTPC's share.

ONGC owns significant natural gas reserves in Tripura. However, these could not be commercially developed owing to low industrial demand in the region. In order to optimally utilise the gas available in the state, ONGC decided to monetise the gas reserves by setting up the 726.6-Mw Combined Cycle Gas Turbine power plant close to its gas fields along with an associated power transmission system from the project site to Bongaigaon in Assam.

Source: B.S

National interest, energy security more important than procedures: CAG

The national auditor, in a clear departure from its past stance, has asked the oil ministry to let national interest and energy security determine its approach towards commercial discoveries instead of niggling with procedural issues and sought "critical review and rationalisation" of contractual provisions that have troubled the industry.

In a keenly watched report on production sharing contracts for oil and exploration firms tabled in Parliament on Friday, the Comptroller & Auditor General (CAG) said in view of energy security, the country cannot afford to lose out on even a small discovery as it urged the government to speed up approvals of budgets and work programmes of blocks, which have been delayed by as much as 16 months after the end of the fiscal year.

The auditor also kept an eagle eye on the expenditure and claims by companies such as Reliance Industries, Cairn India and state-run ONGC, citing contractual provisions in observations about lapses. The report revealed that the price of crude oil produced from Cairn India's Rajasthan block had still not been finalised by the government, making payment of royalty, tax and state share of profit, tentative. It also recommended disallowing some costs of Reliance Industries in the KG-D6 block, and noted that state-run ONGC sold its share of gas from a joint venture to Torrent Power at a price lower than what was prescribed.

This report of CAG was keenly watched because its previous audit had made stern observations that prompted the oil ministry to initiate action against Reliance Industries. This led to arbitration and the company said its contract has a provision only for a financial audit, not the comprehensive performance audit by the CAG.

In what should cheer industry, the latest report highlighted huge delays in approvals of budgets for oil and gas blocks and called them a matter of concern.

"Timely approvals for budgets and development plans, efficient decision-making on the part of government in respect of valuation of hydrocarbons, signing commercial agreements, etc, are areas where delays are a matter of concern," it observed and urged the ministry of petroleum and natural gas (MoPNG) and the directorate general of hydrocarbons (DGH) to take timely action.

The ministry has already informed the audit team that DGH had given an assurance that from next year, the work programme and budget would be received by December 31 and all efforts would be made to approve it in three months. CAG said certain provisions of the contractual regime needed a thorough relook.

"Provisions relating to relinquishment of contract area, declaration and assessment of the viability of discoveries and their commerciality, sharing of risk, approval of development plans are some of the areas in the existing PSC model, which may require critical review and rationalisation so that there are no loose ends or vagueness."

It demonstrated this approach in its scrutiny of hurdles to exploration activity carried out in what is defined as a "discovery area", where Reliance Industries had spent $427 million.

CAG observed that "normally" the entire expenditure of $427 million would have to be disallowed for cost recovery because of certain contractual provisions.

However, from a pragmatic point of view, it has to be kept in mind that the exploration has resulted in commercial discovery viz D34 for which a development plan has already been approved. In three other cases viz D29, D30, D31 discoveries, review of commerciality is under finalisation," CAG noted.

"At this stage, keeping in mind the national interest and energy security, audit recommends that MoPNG should accept sharing of exploration cost of only those of the above mentioned wells which resulted in a commercial discovery and disallow the cost recovery of $118.99 million already effected by the operator on the remaining wells," it said.

Responding to the CAG report, RIL said it had "differences " on "basic issues" with the national auditor. "Our attention has been drawn to the CAG report tabled today in the Parliament. There are obvious differences between the CAG and RIL on certain basic issues concerning the Production Sharing Contract (PSC). Once we receive a formal communication of audit exceptions by the government, we will respond to the government in accordance with the provisions of the Accounting Procedure under the PSC and also exercise such other rights as are available to us in law," RIL said.

On the issue of gas reserves in the producing fields of the KG-D6 block, which turned out to be much lower than what was envisaged in the field development plan (FDP), the CAG report noted that the oil ministry and DGH are responsible for scrutinising the FDP before approving it.

Source: ET

Reliance Gains After India Auditor Eases Gas Block Stand

Reliance Industries Ltd. (RIL) rose after India’s federal auditor reversed its view of the oil producer and asked the government to resolve price disputes and allow some exploration cost recoveries.

The shares rose 0.3 percent to 991.60 rupees at the close in Mumbai after surging as much as 2.9 percent. The stock has gained 11 percent this year, lagging behind the benchmark S&P BSE Sensex (SENSEX)’s 36 percent gain, as output from its biggest gas field KG-D6 continues to decline.

The Comptroller & Auditor General of India submitted a report to lawmakers today asking the oil ministry to approve exploration and production budgets on time, which it had failed to do every year from 2008 to 2012. It also said Reliance and its partners should be allowed to recover some of the costs incurred to drill wells in the KG-D6 block, a proposal rejected by the government.

The auditor’s “indication shows Reliance has done things according to its contract,” Dhaval Joshi, a Mumbai-based oil and gas analyst with Emkay Global Financial Services Pvt., said by phone. “A company which has spent so much in that block will have enough evidence to prove it’s right.”

Reliance owns 60 percent of the KG-D6 block, BP Plc 30 percent and Calgary-based Niko Resources Ltd. (NKO) 10 percent.

No Recovery

Reliance has not been allowed to recover $2.38 billion of expenses as of March 31, 2014, Oil Minister Dharmendra Pradhan said in parliament this week. It was penalized because gas output from KG-D6 was less than planned.

In 2011, the auditor had written in a report that the government’s share of profit from the KG-D6 deposit may have been curtailed because Reliance incurred higher operating costs in awarding contracts. It said Reliance placed some orders after getting single bids and revised the scope and specifications of contracts.

“We could not derive assurance as to the reasonableness of costs incurred” on the contracts awarded in the two years ended March 2008, the auditor said in the report submitted in parliament on Sept. 8, 2011.

The payments may have “adverse implications” for the recovery of exploration costs and the government’s share of profit from the field, it said, without quantifying the loss.

Reliance started arbitration against the government’s order in November 2011.

‘National Interest’

Producers in India are allowed to recover investments in their fields from the sale of oil and gas. Reliance and its partners spent $10.44 billion on the block off the nation’s east coast until March 2013 and have recovered $9.29 billion, according to today’s report.

Today’s report also recommended that “keeping in mind the national interest and energy security” Reliance and its partners be allowed to recover some of the $427.03 million they spent to drill 14 other wells in the block. Some of these wells resulted in gas discoveries. Of this amount, $119.99 million shouldn’t be allowed to be recovered, the auditor said.

The federal auditor also wants the oil ministry to resolve disputes on estimates on gas reserves in the block and take steps to raise output. The auditor can only recommend and doesn’t have any power to form policy.

“If the government takes a cue from this and sorts out all contract issues, than it’ll only be good for the companies and the country,” Joshi said.

Falling Output

Gas production from the KG-D6 block has been falling since August 2010 after it started output in April of the previous year and increased it to about 60 million cubic meters a day. Reliance has said output is dropping because the field is more difficult to produce from than it initially estimated. The oil ministry says Reliance has drilled enough wells.

Production from the block fell 57 percent to 40.6 billion cubic feet in the quarter ended Sept. 30 from a year earlier, Reliance said Oct. 13.

India’s Prime Minister Narendra Modi came to power in May, ending 10 years of Congress party rule. He has promised to revive the economy from the slowest pace of growth in almost a decade and create jobs. For this to happen, he needs to ensure fuel supplies, including gas, consumed primarily by power and fertilizer plants and used in homes for cooking.

Source: Bloomberg

India’s crude oil production returns to growth in October 2014

After witnessing a year-on-year fall for seven consecutive months, India’s crude oil production staged a modest recovery in October 2014. According to data released by Ministry of Petroleum & Natural Gas, crude oil production in the country increased by one per cent (y-o-y) in October 2014 to 3.2 million tonnes.

The recovery in oil production was possible due to higher output by Oil & Natural Gas Corporation (ONGC) and private/joint venture companies. ONGC produced 1.9 million tonnes of crude oil during the month. This was 1.6 per cent higher compared to the corresponding month a year ago. Oil production by private/joint venture companies increased by 0.9 per cent to one million tonnes. These companies also managed to exceed their monthly production target by 3.9 per cent.

During April-October 2014, domestic crude oil production fell by 0.9 per cent. The planned production target for this period was 22.7 million tonnes. However, the industry could achieve only 96.2 per cent of this. ONGC and Oil India recorded a fall in oil production during this period. ONGC’s oil production slipped by 0.4 per cent to 13 million tonnes. Closure of oil wells and and other technical issues took a toll on ONGC’s oil production. Crude oil production of Oil India declined by 4.7 per cent to two million tonnes. This can be attributed to bandhs and blockades in Assam. Private/joint venture companies witnessed 0.7 per cent fall in oil production. These companies produced 6.8 million tonnes of crude oil during April-October 2014 as compared to 6.9 million tonnes a year ago.

Natural gas production in India declined by 4.2 per cent in October 2014 to 2.8 billion cubic metres (bcm). Both, public and private sector companies recorded a year-on-year fall in natural gas production in October 2014.

During the first seven months of financial year 2014-15, natural gas production came down to 19.6 bcm from 20.8 bcm in the corresponding period year ago. This translates into 5.6 per cent fall. During this period, gas production by Oil India increased by 2.9 per cent. However, poor performance by ONGC and private/joint venture companies took a toll on overall gas production.

ONGC witnessed a 5.1 per cent fall in gas production during April-October 2014. This was mainly due to lower production from offshore blocks which contribute more than 75 per cent to ONGC’s total gas output. Gas production from these blocks fell by four per cent. Besides, production from onshore blocks also declined by 9.1 per cent. Less offtake by consumers and closure of wells due to burst of GAIL pipeline resulted in this fall. Private/joint venture companies recorded a 9.1 per cent decline in gas production. This can be attributed to lower production from offshore blocks. Private/joint venture companies produced 4.5 bcm of gas from offshore blocks during April-October 2014, which was 13.1 per cent lower compared to a year ago.

Source: Economic Outlook

OPEC needs to 'wake up' to shale revolution

The Organization of Petroleum-Exporting Countries (OPEC) is facing a "shale-tinged" reality and needs a "wake-up call," energy analysts have warned.

Analysts in Citi's commodities research team warn that the shale gas and oil revolution in the U.S. has been ignored for too long by OPEC, the powerful group of 12 global oil producers, and it must agree to cut production when it meets on Thursday or else oil prices "will resume their slide."

"The reality of the shale revolution in the U.S., long scoffed at from within OPEC as high-cost folly, is now hitting the producer group where it hurts, while oil demand growth has underperformed significantly," a group of Citi energy analysts said in a report published late on Monday.

"After years of inaction, the shale revolution [has issued] the producer group with a wake-up call, against a weak demand backdrop," Citi analysts Seth Kleinman, Eric Lee, Christopher Main, Edward Morse and Anthony Yuen, said in their "Energy Weekly" report.

The analysts' comments come ahead of OPEC's meeting in Vienna on Thursday (November 27), a meeting at which the group could decide whether to reduce oil production in the face of a steep decline in the oil price since the summer.

The price of Brent crude for January delivery has fallen around 30 percent from a high of $115 per barrel (pb) in June to currently trade around $80pb amid a global over-supply. On Tuesday, Brent crude futures were trading at $79.43.

Iran, Venezuela and Ecuador have put pressure on fellow OPEC members to reduce oil output to stem falling prices but, so far, OPEC's biggest producer and exporter Saudi Arabia has shown no signs of being ready to cut.

On the contrary, Saudi Arabia has signaled that it is comfortable with lower prices, seen by many as a sign the country was ready to fight the U.S. -- and its shale oil producers -- for market share.

Saudi intentions?

The U.S. energy market has received a massive boost as a result of its domestic shale oil and gas industry, bringing with it a supply not only of cheaper gas but oil onto the market.This has led to greater competition for the likes of traditional producers like Saudi Arabia. Indeed, the entrance of the U.S. into the global oil market added a new twist to OPEC's decision making, one investment strategist told CNBC on Tuesday.

"If you think about this from [a historic point of view] it used to be Saudis keeping OPEC in line and then being under-cut by non-OPEC [producers] which as Russia and the other guys got bigger and bigger became more important, "Sean Corrigan, Chief Investment Strategist at Diapason Commodities Management told CNBC Europe's "Squawk Box" on Tuesday.

"But now we've got the Americans as the other third big producer we have this three-way tie. We now have all these underlying geo-political currents of who's trying to do what to whom."

"If we don't get cuts obviously the danger is that the oil market lurches down very quickly…but they're [Saudi Arabia] not going to be the ones to switch everything off and let everyone else cheat the quotas," he added. Citi's analysts expected there to be "some sort of a cut" decided upon at Thursday's meeting, "or at least a renewed commitment to observe the overall group's 30 million barrels a day (b/d) production ceiling in place since late-2011."

But they said Citi "remains very sceptical" that the members will be able to overcome disagreements and forge a convincing cut on the order of magnitude required to remove the oversupply currently hanging over the market. They also expected increase in that overhang in 2015. "Absent a convincing cut, Citi expects oil prices to resume their slide," they warned.

In the face of competition from the U.S., the global oil market needs clarification on Saudi Arabia's position and intentions, according to oil analysts at UBS, William A. Featherston and Jon Rigby.

"If OPEC does not cut its quota, we expect another slide in oil prices as markets interpret it as Saudi's desire to either defend market share or punish non-OPEC producers (Russia, U.S. shale)," they said in a note on Tuesday. "Although the current over-supply is clear, the OPEC meeting outcome is not."

Source: cnbc.com

Reliance Starts Crude, Fuel Trading in Singapore, Official Says

Reliance Industries Ltd. (RIL), the operator of India’s largest oil refinery, started trading crude and refined products in Singapore this month as it seeks to expand supplies to markets including Indonesia and Australia.

The Mumbai-based company currently trades products including naphtha and fuel oil from the Indian city, according to Mike Omar, the head of Reliance Global Energy Services Ltd. The Singapore unit has joined the trade ministry’s Global Traders Programme, which offers lower tax rates to businesses that set up trading operations in the country, he said.

“Singapore will have its own trading book,” Omar said in response to questions by phone today. “We’re looking to grow the manpower size over time. The increase will be dependent on the growth of the portfolio.”

Reliance will lease storage facilities in Singapore to blend gasoil, or diesel, and gasoline to supply the Southeast Asian and Australian markets, according to Omar. Singapore is Asia’s biggest oil-trading center.

Reliance, which operates the Jamnagar refining complex in western Gujarat state, with a total capacity of 1.24 million barrels a day, also exports gasoline to the U.S. The company will continue to trade crude and fuels from Mumbai, Omar said.

India has shipped 183,000 barrels of the fuel to the U.S. this year, data from the Energy Information Administration in Washington show. That’s down from 518,000 barrels for all of last year and 2.7 million barrels in 2010.

Singapore supports international traders who set up physical trading and corporate functions in the city-state, said International Enterprise, a unit of the Trade and Industry Ministry. It declined to provide details of tax rates offered to Reliance.

Source: Bloomberg

Qatar’s Q-Max tanker to make first delivery to India

India will receive its largest cargo of liquefied natural gas by ship next month as it takes delivery of a cargo from Qatar. The Q-Max vessel, the largest LNG carrier in the world with a capacity of about 260,000 cubic meters (about 5.5 billion cubic feet of gas), is expected to reach Dahej in western Gujarat state in the first week of December, Petronet LNG Chief Executive Officer Ashok Kumar Balyan said.

"India needs to build capabilities to receive bigger vessels," said Ashish Sethia, head of Asia-Pacific gas and power analysis at Bloomberg New Energy Finance. "This is a crucial infrastructure as it builds appetite for more and more LNG from distant markets." In April, Petronet signed a short-term contract with Qatar's Ras Laffan Liquefied Natural Gas Co. to import 800,000 tons of LNG (a little less than 40 billion cubic feet of natural gas) over 12 months to supply Indian Oil's refineries.

In a few more years, state-run GAIL (India) will start taking delivery of LNG from the Cheniere Energy liquefaction and export terminal under construction at Sabine Pass, La. GAIL has agreed to buy 3.5 million tons of LNG a year (about 170 bcf of gas a year) for two decades from the Cheniere terminal. The New Delhi-based company also has booked 2.3 million tons a year capacity at the Cove Point LNG liquefaction and export terminal at Lusby, Md. Those shipments are expected to start in 2017 or 2018.

Source: arcticgas.gov

Oman-India gas pipeline a most promising option

Natural gas, a very highly consumed commodity in India, is at present supplied from two sources: domestic production and imported liquefied natural gas (LNG). Energy demand and supply projections indicate that by 2021-22, due to rising demand, India will also need to start sourcing natural gas from cross-border pipelines to fill the gap between demand and availability. In such a situation, India will have to examine its options carefully to minimise the cost of imports and consider appropriate sources of natural gas to keep the import bills under check.

Importing LNG is a rather costly process, but unavoidable because the sources of gas are far away. This cost can be avoided if gas is imported through pipelines and then transported across the country through existing and future-planned pipelines in India.

India, as on April 1, 2013, had 14,578 km of pipelines, including 1,146 km of offshore pipelines. Further expansion of pipeline is also being planned.

Gas Pipeline options:

There are two options for importing natural gas through pipelines - the land route and/or the sea route. Over the years, several routes for gas pipelines have been proposed, of which the following proposals have been making rounds in the recent past:

Iran-Pakistan-India gas pipeline:

This pipeline was envisaged to link the South Paras Gas field in Iran with India, via Pakistan. The total length of the proposed pipeline is 2,700 km, costing $7.5 billion (current cost may be much higher) to transport 22-110 billion cubic metres per year. The pipeline will be 1,100 km in Iran, 1,000 km in Pakistan and 600 km in India. Initially, this project was planned to link Iran and Pakistan. India later joined as a partner but withdrew, citing security reasons and the pricing of gas.

Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline:

This project was an offshoot of the sanctions imposed by the US and other European countries on Iran. The length of the envisaged pipeline is 1,700 km, at a cost of $7.6 billion (may be higher with present rates). Because this pipeline will pass through Taliban-infested Afghanistan and terror-infested Pakistan, it is unlikely to be favoured by India, even though Turkmenistan may have business interests in this project, and it is favoured by the US.

Oman-India Deep Sea Pipeline:

In the last few years, deep sea gas pipeline technology has matured. Since India has serious security concerns with regard to pipeline projects over land, a deep sea pipeline is probably the most promising option.

The project intends to transport 8 tcft (trillion cubic feet) of natural gas to India over a period of 20 years. The pipeline is planned to be about 1,300 km long, laid at a depth of 3,400 metres below the seabed. It will connect the Middle East Compression Station near Oman with the receiving terminal near Gujarat. The estimated cost of this project is $4-5 billion and can be executed in about five years.

Geographically, the Oman-India Pipeline is comparatively more feasible because India is close to the sources of natural gas in the Middle East and the undersea distance is less than 1,500 km. Another reason in favour of this project is the landed cost, which will be lesser by $1.5 to $2 per million BTU as compared to LNG imports. Furthermore, this pipeline could be linked to other natural gas sources in the Middle East and even to Turkmenistan and Iran if need be.

Considering the fact that known sources of natural gas in India till date is just 1.33 trillion cubic metres, India will need to source a major portion of natural gas supply from outside to meet the rising demand. The government will need to make planned efforts to find a lasting solution to the problem. The sooner the government takes a serious view on the proposal, the better it will be in the interest of the country to ensure its energy security.

Source: ET

India to Receive Its Biggest LNG Cargo Ahead of U.S. Shipments

India will receive its biggest shipment of liquefied natural gas by ship next month as it prepares to import the fuel from North America.

The Q-Max LNG vessel, the largest in its class with a capacity of about 260,000 cubic meters, is expected to reach Dahej in western Gujarat state in the first week of December, Petronet LNG (PLNG) Ltd. Chief Executive Officer Ashok Kumar Balyan said in an interview. “We will receive the LNG cargo at our new jetty and will be supplied to Indian Oil Corp.,” he said.

State-run Gail India Ltd. (GAIL) has agreed to buy 3.5 million tons of LNG a year for two decades from Houston-based Cheniere Energy Inc.’s Sabine Pass terminal in western Cameron Parish, Louisiana. The New Delhi-based company also booked 2.3 million tons a year capacity in the Cove Point LNG liquefaction terminal at Lusby, Maryland. The shipments are expected to start in 2017 or 2018.

“India needs to build capabilities to receive bigger vessels,” said Ashish Sethia, head of Asia-Pacific gas and power analysis at Bloomberg New Energy Finance. “This is a crucial infrastructure as it builds appetite for more and more LNG from distant markets.”

In April, Petronet signed a short-term contract with Qatar’s Ras Laffan Liquefied Natural Gas Co. to import 800,000 tons of LNG over 12 months to supply Indian Oil refineries.

Source: Bloomberg

IEA recognises importance of natural gas in energy mix

The International Energy Agency’s (IEA) recent recognition of natural gas as a growing part of the global energy mix should reinvigorate efforts to grow the industry in Australia, the APPEA reports.

The 2014 World Energy Outlook highlights the role natural gas plays in strengthening the world’s energy mix. The report finds that over the period to 2040, demand for natural gas will grow by more than half, the fastest rate among the fossil fuels, and increasingly flexible global trade in LNG will offer some protection against the risk of supply disruptions.

LNG plants

Australia currently has seven LNG plants under construction with a combined capital cost of more than AU$ 200 billion and these huge projects will soon be shipping Australian natural gas to our trading partners.

However, labour market strains, increased production costs, and increasing competition from North America and East Africa could damage Australia’s potential for future growth.

Global contribution

The APPEA stated: “Australia can continue to make a meaningful global contribution to reducing emissions and enhancing economic prosperity, but only if the LNG sector’s full potential is harnessed via regulatory and labour market reform.”

The US has already recorded some of its lowest carbon emissions in 20 years thanks to the shale gas revolution that has increased use of natural gas for power generation. China, a key market for Australian gas exports, is also moving away from coal-fired electricity generation in favour of natural gas.

LNG production in Australia

For every tonne of CO2-equivalent emitted in LNG production within Australia, up to 9.5 tonnes of emissions from coal-fired generation can be avoided globally.

In 2012-13, Australia shipped 23.9 million tonnes of LNG cargoes, earning AU$ 13.7 billion in export revenue. Australia’s LNG exports are expected to quadruple over the next five years.

Source: lngindustry.com

GSPC seeks higher rates, writes to oil ministry

In first signs of dissent over the new gas pricing, Gujarat government firm GSPC has demanded market price for its output from KG basin fields saying it cannot be forced to sell fuel at a rate which is less than the cost of production.

Days after the October 18 government decision to raise natural gas prices to USD 5.61 per unit from USD 4.2, Gujarat State Petroleum Corp (GSPC) shot off a letter to the Oil Ministry, demanding "market determined price" for its ready-to-produce Deen Dayal West (DDW) fields in Bay of Bengal.

"GSPC cannot be put to irreparable harm by directing it to sell at a gas price which is less than the cost of gas production (which includes exploration, development and production cost) from DDW field," the company wrote.

The firm owned and run by the Gujarat government had last year discovered a market formula that gives a price of about $ 10.5 per million British thermal unit at current oil rate of USD 80 per barrel.

India is not endowed with rich natural resources and most of the reserves are in ultra-deep water, deepsea, and High Pressure-High Temperature (HPHT) areas which requires investment of substantial capital to develop the gas fields irrespective of time of discoveries.

Company, it said, "invested substantial capital in these areas with the assumption of having freedom for marketing the natural gas at market determined price which was the essential and most important feature of NELP contracts". GSPC had won the Block KG-OSN-2001/3 in the third round of auctions under New Exploration Licensing Policy (NELP), which was launched by the BJP-led NDA government, in 2003. DDW field in the block was discovered in 2005-06.

Source: BS

India, 3 other states to build, operate gas pipeline

The four state gas companies of Turkmenistan, Afghanistan, Pakistan, and India have established a company that will build, own and operate the planned 1,800-kilometer Turkmenistan-Afghanistan-Pakistan-India (TAPI) natural gas pipeline. State Concern “Turkmengas”, Afghan Gas Enterprise, Inter State Gas Systems (Private) Limited, and GAIL (India) Limited own equal shares of the company.

“Establishment of the TAPI pipeline company is a key milestone in the development of the pipeline. It is a tangible sign of transformational cooperation among the parties that presages the enhanced energy security, business prospects, and overall peace and stability in the region promised by the pipeline,” said Klaus Gerhaeusser, Director General of ADB’s Central and West Asia Department.
ADB was appointed the transaction advisor for the TAPI gas pipeline project in November 2013. In that role, ADB advised on the establishment of the TAPI pipeline company as an integral part of the larger goal of identifying and selecting a commercial consortium leader to spearhead the construction and operation of the pipeline. When selected, the commercial consortium leader will take a substantial stake in the company.

The TAPI pipeline will export up to 33 billion cubic meters of natural gas a year from Turkmenistan to Afghanistan, Pakistan, and India over 30 years. Turkmenistan has the world’s fourth-largest proven gas reserves, and the pipeline will allow the landlocked country to diversify its gas export markets to the southeast. Turkmen gas in turn will provide a key new source of fuel for southern Afghanistan, Pakistan, and northern India.

Source: http://sirulu.com/