Wed, 10th February 2016

Anirudh Sethi Report


Archives of “liquefied natural gas” Tag

Petronet LNG-When Will It Close Shop?

Around the year 2003 the only gas IPO that needed a bail-out was Petronet LNG. The issue would have devolved had it need not been saved by the then country head of Abn Amro, who provided the back stop to pick up 10 per cent of the issue-should it fail. And old timers would remember, Petronet LNG was the only IPO that listed below par. It was known even in mid 90s that RILs KG basin was neither large nor significant enough to meet the energy needs of India. MNC Shell which had been scouting for growth, came to India with a proposal to set up as many as 18 coastal terminals that could regasify liquified natural gas. A hype was created and Petronet LNG started moving.

The company roughly owned half by OMC like IOC, HPCL, BPCL and GAIL set up a  unit at Dahej, and added another unit at Kochi. While gas for Dahej was to come from Qatar under a 25 plus 20 year contract, the gas for Kochi was to come from the Exxon Gorgon field in Australia. The pricing was complicated and no one believed that LNG would benefit India. But not only was Rs 5000 crore sunk into Dahej, an even larger sum was sunk in Kochi. 
Imagine had Shell put in 18 LNG terminals, at current price atleast Rs 100,000 cr worth of LNG Terminals would have been insolvent, The reasons are two. One the capital cost of a LNG Terminal is extremely high-over USD 1 Bn for a one MTPA unit. Second is the landed price-which has no relation to the Oil price or to the price that consumers in India would pay and make fertiliser and power plants viable.

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.

ONGC to cut gas production by 40%

OMG-FTState-owned Oil and Natural Gas Corp will cut gas production from its biggest fields in the Arabian sea by about 40 per cent as it carries out repair work on a pipeline that carries the gas to shore.

ONGC produces 33 million standard cubic meters per day of natural gas from the Bassein field in the western offshore. The gas is carried to shore by two under-sea pipelines, a 42-inch line and a 32-inch line.

The company plans to carry out repair work on the 42-inch pipeline that carries natural gas from the Bassein field to Hazira, from July 7 to 27.

“The repair work was to last 24 days but we have squeezed it in less than three week,” a top official said. “The repair work is to tentatively start from July 7 but could be pushed back to July 8 or 9.”

This would lead to stoppage of production at some wells. “The output will fall by 13-14 mmscmd during the shutdown period,” he said.

State gas utility GAIL India Ltd, which sells gas produced from the ONGC fields to the customers, has been intimated of the shutdown.

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.

Sacrifices all round to fuel gas gencos

To salvage 14,305 MW of stranded gas-based power capacity, the government has decided to put in place a transient mechanism where the plants can run at 30% plant load factor with assured supply of gas, but subject to a tariff cap of Rs 5.50 per unit. The operators of gas-based power units will get monetary support from thegovernment for a period of one year so as to be able toservice their debt while forgoing their return on equity.

In a reverse bidding method, the plant willing to take the lowest amount of support from the government’s power system development fund (PSDF) to maintain tariff at R5.50 will be given imported gas. The move would benefit Lanco Infratech, Essar Power, Reliance Power, GVK Group and GMR Energy, among others.

Announcing the Cabinet Committee on Economic Affairs decision on Wednesday, power and coal minister Piyush Goyal said with this new arrangement, electricity generation in the country would be enhanced by 79 billion units worth R42,000 crore.

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.

Fitch: Most Major Asian Economies to Benefit from Lower Oil

 The 25% drop in the price of oil since July is likely to lift economic growth prospects, improve terms of trade, and have a potentially positive credit impact for a number of Asia-Pacific sovereigns if the lower prices are sustained below USD90/bbl through 2015, in line with our latest forecast, says Fitch Ratings.

Most major Asian economies – including China, Japan, Korea and Thailand – would see an effective overall income boost from sustained lower oil prices. In addition, countries with large oil import needs facing external adjustment pressures such as Indonesia and India are among the best positioned to see a positive impact on sovereign credit profiles, although the broader policy response will matter too.

All but one of the Fitch-rated APAC sovereigns are net oil importers. Net oil import bills range significantly, from greater than 10% of GDP for Thailand to less than 2% for Bangladesh and Vietnam. Korea, Japan and China have net import bills of 6%, 3% and just over 2% of GDP, respectively.

For consumers, there would be a positive consumption effect from falling retail energy prices. Disinflation as a result of lower oil prices could also contribute to GDP growth less directly in some countries, by facilitating a more accommodative monetary policy than would otherwise be followed. Notably, several key Asian economies, including Japan, have been increasingly relying on liquefied natural gas (LNG) as part of their energy mix, and Asian LNG prices are linked to Brent crude.