BP Pledges More Accountability For Its Role in Climate Change

BP plc plans to acknowledge more about its role in how its operations may impact the climate after shareholders -- with full board support -- overwhelming passed a resolution at the company’s annual meeting urging more disclosure.

Special Resolution 25 received 98% of shareholder support, according to a tally of the vote. The resolution needed 75% of the votes to make it binding. BP management had urged its passage.

"Climate change is a clear challenge for the world," Chairman Carl-Henric Svanberg told shareholders on Thursday. He noted that BP's energy outlook to 2035 is forecasting global demand for energy over the period to increase by 37%, with greenhouse gases increasing by 25% (seeDaily GPI, April 2; Feb. 17). "The world has made encouraging headway in disconnecting these historic trends through energy efficiency and low carbon initiatives. But the increase is still in excess of what scientists and governments say is needed to keep the temperature rise within 2 degrees."

BP wants an "orderly transition to a low carbon economy." Svanberg said. "First and foremost, we want to put a price on carbon as we believe is the most efficient way to steer toward lower carbon alternatives. Second, we want to push for a transition from coal to gas. This reduces emissions to half and will buy critical time over the next decades as renewables mature."

BP, like many of its peers, for years has applied a carbon price in making investment decisions (see Daily GPI, Dec. 5, 2013). Although many U.S. legislators have fought against imposing carbon taxes, BP, ExxonMobil Corp. and Shell executives have argued that taxing carbon dioxide (CO2) emissions actually creates incentives to invest in research and development (R&D) to implement new technologies (see Daily GPI, Feb. 13; April 16, 2010; Feb. 14, 2007).

Group CEO Bob Dudley said BP executives had "consistently advocated for stronger government action and have been open and transparent about our environmental impact. The challenge ahead is to make the case for the necessary role of fossil fuels, and further transparency supports that case. BP's portfolio is already 50% natural gas. We are working on a number of major projects that will add more gas," including Shah Deniz 2 in Azerbaijan, the Southern Gas Corridor to Europe, Khazzan in Oman and a $12 billion investment in Egypt.

The shareholder resolution followed announcements by high-profile investors that include the Church of England, which have pressured BP and Royal Dutch Shell plc to disclose climate risks. Last December the Church of England became the first mainstream religious organization in the UK to raise the prospect of divesting its fossil fuel investments unless the oil majors took more action to tackle climate change.

The Church of England's announcement was followed with action in January by a coalition of about 150 churches and pension funds that together represent about 1% of BP's and Shell's total shares. The groups, led by ClientEarth and ShareAction, urged the oil giants to assess, announce and tackle issues posed by changes in the climate. Shell, which is holding its shareholder meeting in May, already has voiced support for a similar resolution.

The coalition praised the resolution's passage by BP shareholders.

"As a result of the vote, annual reporting at BP will now be significantly expanded with additional transparency around operational emissions management, asset portfolio resilience, low carbon energy R&D and investment, executive incentivization during the low carbon transition and public policy activity relating to climate change," the coalition said.

The resolution also calls on BP to commit investments toward renewable energy, a business in which the oil major at one time was a global leader. BP today invests in energy efficiency technologies and alternative energies for operations and products, which include R&D investments through proprietary research, corporate venturing investment and university programs.

In fact, BP, which years ago advertised that the company’s business went "Beyond Petroleum," in 2006 received a score of 90 points out of 100 from investor coalition Ceres for working to develop climate-friendly technologies (see Daily GPI, March 22, 2006). However, in 2009 BP downsized the alternative energy unit in part because of the recession (see Daily GPI, July 2, 2009).

"Based on mixed investment outcomes in alternative energies, where we invested $8.7 billion since 2005, we are now focused on scalable Brazilian biofuels, which do not require a subsidy or regulatory regime to be cost effective," the board said in its support for the resolution. "Brazilian biofuels will now compete for capital with other business opportunities in our portfolio. Other alternative energies businesses have been divested or disbanded, with the exception of U.S. wind, which is currently retained as an operational asset, with no further growth investment planned."

Source: naturalgasintel.com

Gas Pricing Reform in India – Implications for the Indian gas landscape

Most discussion on the future of the market for internationally traded gas focuses on the ‘swing towards Asia’. Specifically, China and India, the world’s two most populous nations, are frequently highlighted as major drivers of future demand. Yet, there is considerable ambiguity over the assumptions underpinning this observation, particularly with regards to India. In fact, despite several years of relatively high economic growth in the last decade, it is difficult to make a confident and accurate assessment of India’s potential as a major Asian gas market. Official government forecasts carried out within a central planning framework tend to be overly optimistic, whereas projections by multilateral organisations tend to be cautious but confused. The reason for this lack of clarity is that the Indian gas sector is broadly characterised by two moving parts: one which has prices and quantities set by the Indian government, and another which utilises gas at market (LNG import) prices. Additionally, there is some overlap between the two, further complicating attempts to assess these as separate markets. The lack of a clear pricing signal therefore makes it difficult to determine future levels of demand.

This paper analyses whether or not recent reforms to the pricing of domestic gas could potentially change the Indian gas landscape by making price signals clearer. It investigates three important questions: First, could gas pricing reforms reverse the recent decline in domestic production? Second, could they lead to new upstream investments in gas? Finally, what is the impact of the reforms on downstream consuming sectors? The paper begins with an analysis of the 2014 gas pricing reform, followed by an overview of demand, supply and consumption. It then delves into the three broad questions posed above, and concludes with observations on whether reforms to gas ‘price formation’ (as opposed to ‘price level’) in India are in fact achievable, or whether they will continue to elude successive governments, and on whether India can ever be Asia’s next gas market ‘Goliath’.

Source: http://www.oxfordenergy.org/2015/04/gas-pricing-reform-in-india-implications-for-the-indian-gas-landscape-2/

International Energy Agency chief economist Fatih Birol says India needs $100 bln investment

India must spend $100 billion every year to meet the ballooning energy demand of its expanding economy, the chief economist of International Energy Agency told a conference on Monday.

"India needs three things for its energy sector: investment, investment and investment," Fatih Birol said, laying emphasis on India's need to attract investment in the energy sector.

The country's energy needs have rocketed in the past decade, when its economy grew at an average pace of more than 7 percent despite global hiccups. Many of India's power plants are lying idle, while coal, oil and gas production have struggled to rise for years.

Meanwhile, a growing prosperity has pushed up energy needs of households, offices and factories, leaving a wide gap between the demand and supply in an economy, which is one of the world's fastest growing today. At least a fourth of its citizens are not connected to the grid power.

Birol said the investment of $100 billion every year should be split with one-fourth going to coal, oil and gas sectors and the rest to develop power generation and transmission capacity. He didn't offer details on how he had arrived at the $100 billion a year figure.

For an investment of this scale, India needs to attract international capital, he said. International investors are ready to invest but are waiting for the "right conditions" of price and legal framework, Birol said.

"When I look at the last six months of the government, they seem to be moving in the right direction," Birol said, referring to the gas prices and other policy pronouncements. He expects the government to resolve the legal issues in a year, which will enhance the confidence of the private investor.

Retrospective tax legislation has rattled international firms in India. India's demand from oil and gas explorer Cairn India and former UK parent Cairn Energy Plc to pay about Rs 20,000 crore in tax and interest for an eight-year-old transaction has induced uncertainty in the investment climate.

Late last year, the government introduced a formula for domestic gas price. The formula is based on international gas prices and revised every six months.

Source: Economic Times

RIL's MJ-1 discovery may hold 1.4 Tcf of gas resources

Reliance Industries’ (RIL) most significant recent gas discovery, MJ-1, in KG-D6 block may hold 1.4 trillion cubic feet (tcf) of gas resources, roughly half of these in the block’s main gas fields.

Located about 2,000 metres below the producing D1-D3 field in the eastern offshore KG-D6 block, MJ-1 might hold contingent resource of between 0.988 tcf (low estimate) and 2 tcf (high estimate) of gas and condensate, according to the firm’s minority partner, Niko Resources of Canada. Niko cited an “independent resources evaluation report for the MJ discovery in the D6 block from Deloitte LLP” to state that the find could hold a best case estimate of 1.4 Tcf of gas and condensate.

The estimate is a comparison to the downgraded reserves of 3.10 tcf in the main Dhirubhai-1 and 3 gas fields, which have been on production for six years. If proved correct, MJ-1 would be the third biggest gas field in KG-D6 after D1&D3 and R-Series, which hold about 2 Tcf of recoverable reserves.

RIL, the operator of the Krishna-Godavari basin KG-D6 block with 60-per cent interest, has so far made 19 gas discoveries, of which D1&D3 were put on production in April 2009. MA oil and gas field was put on production in September 2008.

The Canadian firm holds 10 per cent interest, while the remaining 30 per cent is with BP plc of UK. Niko, which had earlier this year put up its stake in the KG-D6 block for sale, got the resource estimation done on its own. RIL and BP were not party to the exercise.

“Deloitte’s best case estimate of gross unrisked contingent resources of 1.4 tcf of equivalent relates to the Central (North), Northern and Central (South) fault blocks that were drilled by the MJ-1, MJ-A1, and MJ-A3 wells, based on an estimated a real extent of approximately 24 square kilometres, approximately twice the real extent of the analogous MA field that is currently producing,” it said.

Regulatory approval from the Indian government will be required to bring this field on-stream, it said, adding block operator RIL was currently doing appraisal work, and development planning work is underway.

NIKO RESOURCES ON THE DISCOVERY

MJ-1 might hold contingent resource of between 0.988 tcf (low estimate) & 2 tcf  (high estimate) of gas & condensate, according to Niko Resources

Niko cited an “independent resources evaluation report for the MJ discovery in the D6 block from Deloitte LLP” to state that the find might hold a best case estimate of 1.4 tcf of gas & condensate

Niko, which had earlier this year put up its stake in the KG-D6 block for sale, got resource estimation done on its own, and RIL and BP were not part of the exercise

Source: Business Standard

Oil Min submits proposal on premium for risky gas fields

The Oil Ministry has submitted a proposal to the Finance Ministry for paying a premium to natural gas producers for difficult fields, a top official said. "We will very soon decide" on the premium to be paid for gas discoveries in deepwater, ultra-deep sea or high- temperature and high-pressure fields, Oil Secretary Saurabh Chandra said on Wednesday.

A formula, based on recommendation of the Directorate General of Hydrocarbons, has been approved by Oil Minister Dharmendra Pradhan and it has now been forwarded to the Finance Ministry for vetting. The government, while approving a new gas pricing formula based on international hub rates in October last year, had decided that new gas discoveries in deepwater, ultra-deep sea or high-temperature and high-pressure fields will be given a premium over and above the approved price. Gas price, according to the formula, was USD 5.05 per million British thermal unit till March 31 and has subsequently been cut to USD 4.66 in line with international movements.

The premium to gas from difficult fields will be over and above this rate. An official said that a graded formula for the premium based on difficulty of the field is on the anvil. DGH had in January submitted a formula for calculating the premium on such projects. The Cabinet headed by Prime Minister Narendra Modi had in October approved a revised natural gas price and stated that discoveries made after this announcement in difficult regions would be given a premium as exploration and drilling is costly and challenging. The official said DGH had suggest different rates of premium based on a formula for deepwater, ultra-deep sea and high-pressure and high-temperature (HPHT) fields.

Source: Moneycontrol

5 Largest Markets for Natural Gas

Natural gas used to be an unwanted byproduct of oil production. Many oil companies simply burned it off because there wasn't a market for the gas. That has changed in recent years as the world has realized just how valuable this fuel is to modern society. Today the cleaner-burning, versatile fuel is used as a home heating fuel, a vehicle fuel, and a petrochemical feedstock, and for generating electricity. In 2013 alone, 3,346.6 billion cubic meters of natural gas were consumed globally, according to BP's  latest Statistical Review of World Energy. Here are the top five natural gas-consuming countries in the world.

No. 5: Japan
Japan consumed 116.9 billion cubic meters of gas in 2013. That was up 0.2% from its consumption in 2012 and represented 3.5% of the global total. Japan's numbers are up substantially since 2010 when it consumed just 94.5 billion cubic meters of gas. Virtually all of the country's natural gas was imported as Japan produces little of its own gas supplies. In fact, it's the world's No. 1 LNG importer and since 2012 has accounted for 37% of the global that market.

One reason Japan's natural gas consumption has increased so much over the past few years is because of the Fukushima Daiichi nuclear power plant accident in 2011. The country has shifted away from nuclear and is now using natural gas as a primary fuel for electricity generation.

No. 4: China
China consumed 161.6 billion cubic meters of gas in 2013, which was roughly 4.8% of global consumption and up 10.8% from 2012. Given its rapid demand growth rate the nation is expected to climb up this list in future years.

China, like Japan, is a big importer of natural gas. In 2013 it produced just 117.1 billion cubic meters of gas and imported the rest. While China is working to increase domestic gas supplies by unlocking its vast shale gas reserves, it isn't having much luck yet. This is why it is also increasing its access to imports, by pipeline from Russia and via LNG. One reason China wants to use more gas is because its heavy use of coal to generate electricity has made it the world's top emitter of carbon dioxide. It is looking to switch more of its power generation to cleaner-burning natural gas.

No. 3: Iran
Iran just beat China in 2013 as it used 162.2 billion cubic meters of natural gas. That was up 0.7% from 2012 and equated to about 4.8% of total global consumption. As with the U.S. and Russia, the primary reason Iran uses so much natural gas is because it's one of the world's top gas producers. In 2013 it produced 149.9 billion cubic meters of gas, which ranked it third globally at 4.9% of output. It also holds the world's second-largest proved natural gas reserves, at 17% of the global total.

In 2013 Iran's natural gas consumption was spread between residential and commercial at 34%, electric power at 28%, industrial consumption at 25%, transportation at 5%, and all others at 8%. In addition, Iran uses a lot of natural gas for enhanced oil recovery to increase its petroleum production. In 2012, for example, it reinjected more than 28 billion cubic meters of gas into its oil fields to boost production.

No. 2: Russian Federation
Russia is the second-largest consumer of natural gas. In 2013 it used 413.5 billion cubic meters, which was 12.3% of the world's total. That's actually down 0.4% from its consumption in 2012. Russia has abundant domestic production, which it heavily subsidizes, encouraging residential and industrial consumers to use more gas. Furthermore, as one of the world's coldest countries, demand for gas used for heating and electricity is high.

Russia is also the world's No. 2 natural gas producer, in 2013 producing 544.3 billion cubic meters, or 17.9% of the global total. Gas that is not consumed domestically is exported primarily to Europe. The nation also exports liquefied natural gas, primarily to Japan and South Korea.

No. 1: United States of America
The U.S. is by far the world's largest market for natural gas. In 2013 it used 737.2 billion cubic meters of natural gas, or 22.2% of the global total, according to BP's review. Natural gas consumption in the U.S. has steadily grown over the years, rising 2.4% in 2013 from the prior year. Of the four primary consumption markets for natural gas -- residential, commercial, industrial, and electric power -- usage increased in three, with consumption declining only for electric power.

One reason for the nation's high consumption level is because it is by far the world's largest natural gas producer and what gas isn't produced domestically can be easily imported from Canada. In 2013 the U.S. produced 687.6 billion cubic meters of gas, or 20.6% of the world's total. While the U.S. wasn't yet self-sufficient on natural gas in 2013, production has surged in recent years thanks to the discovery of massive shale gas reserves. This is leading to a significant decrease in imports from Canada and build out of export facilities to ship the expected excess American natural gas to foreign markets.

Investor takeaway
What was once an afterthought is quickly becoming an important fuel for the global economy. One of the biggest trends over the next few years will be China's growing demand for gas, which will provide an export outlet to top gas producers such as the U.S. and Russia. Meanwhile, changes in energy consumption, such as Japan's shift from nuclear to gas, will provide even more fuel for what appears to be a robust LNG export market over the next decade.

Source: fool.com