Thu, 22nd June 2017

Anirudh Sethi Report


Archives of “liquefied natural gas” Tag

(Oil – Weekend piece on) Floating LNG production- “superseded” by rising U.S. output

An item over the weekend with some background on developments in floating liquefied natural gas (FLNG)

There is nothing new, but it’s a reminder of what’s been going on in that space.
It says:
  • FLNG projects have been firmly relegated to the backburner as global gas producers seek cheaper ways to compete with a surge in U.S. shale supplies and slumping prices
  • monthly U.S. LNG exports have risen above 1 million tonnes since the start of this year
  • Hit a record 1.05 million tonnes in February (Thomson Reuters Eikon trade flow data)
  • 8.6 billion cubic feet per day of U.S. gas production (68.3 million tonnes per annum of LNG) is currently under construction and scheduled to come on stream by 2020

Chevron, the second-largest US oil group logs deeper-than-expected quarterly loss

Chevron, the second-largest US oil group, has reported a larger loss than analysts had expected, hit by the fall in oil and gas prices and a squeeze on refining margins.

The after-tax loss was $725m for the first quarter, almost double the average of analysts’ forecasts

The company said exchange rate effects had cut earnings by $319m, contributing about 44 per cent of the reported loss.

Oil and gas production lost $1.46bn in the quarter, outweighing the $735m profit from refining.

John Watson, chief executive, said:

Our efforts are focused on improving free cash flow. We are controlling our spend and getting key projects under construction online, which will boost revenues.

He added:

China May Surpass US in 2016 Crude Oil Imports

China is likely to get ahead of the United States and become the world leader in oil imports in 2016, the vice president of Unipec, a subsidiary of China’s oil giant Sinopec, said Thursday.
According to China’s General Administration of Customs, the country imported a record volume of oil in 2015 amid low crude prices — 6.7 million barrels daily. The US imports of crude oil in 2015 stood at 7.4 million barrels per day.

“For the first two months of this year, imports of crude oil to China surpassed eight million barrels per day. According to our estimates, the average annual rate will stand at 7.5 million barrels per day. There is a possibility that China will overtake the United States in 2016 and become the world leader in the volume of imported crude oil,” Zhong Fu Liang said at the China — Russia Oil & Gas 2016 event in Beijing.

According to Unipec’s vice president, the volume of oil imports to China will continue to increase, but the growth may slightly slow down compared to previous years.

Unipec was founded in 1993 and is the largest Chinese international trade company. Unipec’s business covers trade in crude oil, oil products and liquefied natural gas, as well as warehousing and logistics.

Resource write-downs at Japan’s trading houses seen topping 1 trillion yen ($8.87 billion)

Japan’s five leading trading houses are expected to book over 1 trillion yen ($8.87 billion) in impairment losses for the year ending March 31, with troubled resource markets wreaking havoc on earnings at top players.

     Mitsubishi Corp. is expected to log a 150 billion yen net loss this fiscal year. Even when parent-only results fell into the red in fiscal 1999, the group as a whole saw a net profit. Mitsui & Co. announced Wednesday that it expects a 70 billion yen net loss for the year due to 280 billion yen in write-downs. This would be the first year that either company ends up with a group net loss.

      “Our resource-related assets have grown, and an inflow of investment has made prices volatile,” said Mitsubishi President Ken Kobayashi.

     Kobayashi, who will step down as president to become chairman on April 1, strove to balance Mitsubishi’s volatile resource businesses with stable nonresource ones. He has pushed for a number of acquisitions, for example, such as a roughly 150 billion yen purchase of a Norwegian salmon farming company in 2014. He said that nonresource businesses performed well this fiscal year. But plunging resource prices brought the whole trading house down.

     A prime example is copper development in Chile in which both Mitsubishi and Mitsui took part. They jumped in in 2011 and 2012, right when copper prices were at their peak.

Shell swings to $6bn loss on oil price slump and axed projects

Royal Dutch Shell has taken a huge $8bn hit from the plunge in crude prices and its decisions to pull out of Alaska and axe a Canadian oil sands project.

Reporting a multibillion-dollar headline loss for the third quarter, the Anglo-Dutch energy group said on Thursday that it was cutting another 1,000 jobs and was determined to “become a more focused and competitive company”.

Ben van Beurden, Shell’s chief executive, described last month’s halt to a contentious exploration campaign in Alaska and the scrapping of its Carmon Creek oil sands project in western Canada as “difficult” decisions.

After writing down its shale gas assets in the Marcellus and Utica regions of the US, Shell recorded $8.2bn in one-off charges, sending it to a headline loss of $6.1bn in the three months to September 30, compared with a $5.3bn profit during the same period last year.

“These charges reflect both a lower oil and gas price outlook and the firm steps we are taking to review and reduce Shell’s longer-term option set,” Mr van Beurden said.

In early afternoon trading in London, Shell’s A class shares were down 2.4 per cent to £16.96.

Qatar gas reserves ‘to last 138 years’ on current output rates

Qatar’s gas reserves are so vast it can maintain production at current rates for another 138 years, according to an official report published on Sunday.

An “Economic Commentary” from the Qatar National Bank (QNB) said the vast reserves of the tiny Gulf country will ensure it maintains its prominent position in the hydrocarbon sector “for years to come”.

It added that “Qatar has enough gas reserves to maintain production at current rates for 138 years”.

“Looking forward, Qatar is expected to maintain its dominant role in the global hydrocarbon sector,” read the QNB report.

“Global demand for clean energy is expected to continue rising, and Qatar is a leader in the Liquified Natural Gas (LNG) market.”

Shell in talks with BG over £46bn deal

Royal Dutch Shell is in advanced talks to acquire BG Group for around £46bn ($68bn), in a deal that would expand the Anglo-Dutch group’s foothold in some of the world’s most exciting oil provinces and cement its dominance of the global trade in natural gas.

Since the price of crude began its rapid decline last June, expectations have been high that the oil sector could see a repetition of the mergers and acquisitions fever that reconfigured the industry in the late 1990s — another period of low oil prices.

That created the current crop of big oil companies such as BP, Chevron and ExxonMobil. Shell’s bid is worth about £46bn, according to people familiar with the matter, which represents a 50 per cent premium to BG’s market value. BG shares closed up 6.3 per cent at 910.4p on Tuesday, valuing the company at £30.7bn, before news of the talks broke.

Some significant deals have already materialised: Halliburton, the oil services group, recently bought rival Baker Hughes for $35bn and Repsol of Spain late last year acquired Talisman Energy of Canada for $8.3bn. Rex Tillerson, chief executive of ExxonMobil, said last month that the company could be open to a large deal.

Chance of gas price cut high-From $ 5.61 mBtu to $ 5 mBtu

The price of natural gas is likely to drop to around $5 per million British thermal unit (mBtu) from $5.61 per mBtu in the half-yearly revision to be announced by the government later this month.

“Steps are being taken to arrive at the gas price based on the approved formula. The final price will be announced in advance for the explorers and consumers to make the necessary changes in the contract,” a senior oil ministry official said.

Analysts expect the price to be lower than the one announced in October because of a fall in global crude and LNG prices at the international hubs, which are taken into account while calculating the domestic price.

“Domestic gas prices would decline to around $5 per mBtu because of subdued global demand and crude prices,” rating agency Crisil said in a research report.

A passage to India — Putin Coming to Delhi

Russia’s President Vladimir Putin heads to New Delhi next weekend and will sign a deal with India on energy supply, marking the latest step in a remarkable set of developments that will reshape the international energy business and particularly the natural gas market for years to come.

The deal between India and Russia will centre on the long-term supply of gas and oil. The deal is likely to account for a substantial proportion of India’s growing needs well into the 2020s. This will follow the deal signed in May and another signed last month which will give China more than 30bn cubic metres of gas annually from east Siberia, once the necessary infrastructure is in place. The first Chinese deal was said to be worth $400bn; the second slightly less. The agreement with India also follows last week’s announcement that Russia is considering abandoning the South Stream project to supply gas through a pipeline running through southern Europe in favour of creating a new gas trading hub in Turkey.

The South Stream story may be a political manoeuvre, intended to separate thecountries in southeast Europe — such as Hungary and Bulgaria — which hoped to benefit from South Stream from the rest of the EU when it comes to considering whether to maintain or extend sanctions against Russia to punish its behaviour in Ukraine. In a union of 28, every member country has a veto and the insecure coalition over Ukraine looks very shaky. In the gas market, however, the focus will be on the deal with Turkey and the creation of a new hub through which a strong flow of Russian supplies could swamp the Mediterranean market.


Government has  finalised details of a package to rescue 16,000 MW of gas-based power plants lying stranded as it looks to increase supplies by raising generation without burdening consumers.

 Power Minister Piyush Goyal met Petroleum Minister Dharmendra Pradhan on Wednesday to chalk out the rescue package that may involve rescheduling of loans to power companies as well as making available fuel at affordable price through means like pooling of average cheaper domestic gas price with costly imported LNG.

The two ministers did not divulge details of the rescue package finalised today which may need the Cabinet approval.”Today’s meeting was a precursor to final decisions which will be taken very fast,” Goyal told reporters here after the meeting.”We are drawing up plans to increase the generation of power, to put national assets to good use and keep the energy cost affordable with a sustained policy framework,” he added.