Energy News Monitor | Volume XIV; Issue 52 | ORF

 ENM, Energy Monitor, GST, Cairn, OIL, CAD, IOC, ONGC, LNG, RBI

GAS TRADING HUB TAKES SHAPE

Gas News Commentary: May 2018

India

The PNGRB expects the proposed gas trading hub to be functional by the end of the calendar year and ratings agency CRISIL has been appointed to assist the regulator and the government in framing rules for the exchange. The hub will work in the lines of Power Exchange which determines the price based on supply and demand and market forces. Currently, the central government fixes the price of the bulk of domestically produced natural gas. The rate, arrived at using price prevalent in gas-surplus nations of US, Canada, UK, and Russia, is $3.06 per mmBtu for six month period beginning April 1. In comparison, the cost of imported LNG into India is around $7.5 mmBtu. The current round of CGD bidding covers 86 geographical locations for selling CNG and piped cooking gas in 174 districts in 22 states and union territories and likely to attract an investment of ₹ 700 billion. In addition to Hyderabad, the current bidding covers 20 districts of Telangana. There is about 16,000 km of pipeline existing and operating and another 12,000 km pipeline is under construction. The PNGRB focuses on increasing the sale of natural gas in the overall energy basket from 6.2 percent to 15 percent as mandated by the government. The regulator will review the performance of the companies which were awarded contracts in the earlier bidding. In a major step towards ushering in a clean gas-based economy, India launched its biggest auction of CGD networks, offering permits for selling CNG and PNG in 86 geographical areas. Awards from the 9th CGD licensing round would help bring gas coverage to 174 districts in 22 states and Union Territories, covering 29 percent of the country’s area and 24 percent of the population. According to the PNGRB, which organised a roadshow to promote the auction, the ninth bid round is expected to attract investment of ₹ 700 billion. Cities for which CGD licences are on offer include Bhopal, Ahmednagar, Ludhiana, Jalandhar, Barmer, Alwar, Coimbatore, Salem, Allahabad, Amethi, Rai Bareli, Burdwan and Dehradun.

The share of city gas distributors in domestic gas consumption pie is on the rise and is likely to increase in the short to medium term, according to India Ratings and Research report on oil and gas sector. The government in the Domestic Gas Allocation Policy has accorded the highest preference to city gas distribution. Thus, the share of fertiliser sector came down gradually to around 25% in March 2018 from around 37% in November 2015 while that of city gas distributors increased to around 19% from around 11%. This has also led to an increase in pooled natural gas price for domestic urea manufacturers. Additionally, with the government focusing on expanding the city gas distribution network and higher number of cities being bid for, the city gas distribution sector is likely to grow. This would result in a lower allocation of domestic gas to the fertiliser sector. Petroleum Planning and Analysis Cell estimates crude import of 227 mt in FY19. The increase in gas prices is likely to impact the fertiliser, power and city gas distribution entities which are the primary consumers of NG.

ONGC registered 6.3 percent increase in natural gas production in 2017-18 and is on track to double the output by 2022. It produced 23.484 bcm of gas in 2017-18 as against 22.088 bcm in 2016-17. This is the highest gas output by ONGC in five years and the growth rate is higher than the global average of 3-4 percent year-on-year. ONGC has stepped up on bringing newer fields into production after the government set a stiff target of reducing oil import dependence by 10 percent by 2022. India currently imports over 80 percent of its oil needs. The overall gas production, which includes production from the joint ventures, registered a growth of 5.8 percent at 24.610 bcm, as against 23.270 bcm in the previous year. During the last financial year, ONGC’s offshore gas production stood at 17.845 bcm against 16.883 bcm produced in 2016-17. The onshore registered a production of 5.639 bcm gas in the last fiscal year against the production of 5.205 in the previous fiscal. ONGC has been aggressively pursuing the gas production growth in line with the government’s drive for cleaner gas economy.  The company has charted out a mission to double the gas production at 42.7 bcm by 2021-22. The total investment in the ONGC’s ambitious gas projects stands at ₹ 570 billions, which is one of the highest investments in the world as far as the gas projects are concerned. This investment includes the high potential KG-DWN-98/2 project which is being implemented on a fast track basis. First gas from the project is targeted for 2019. ONGC has drastically reduced gas flaring during the last fiscal, leading to considerable savings. The gas flaring stood at 1.92 percent in 2017-18, lowest since 1999-2000. This is only technical flaring and due to non-availability of customers like in the previous years.

ONGC will by early 2019 quadruple the output from an offshore gas block in the Bay of Bengal that it spent a billion dollars on last year. Output from the Deendayal natural gas block off India’s east coast will reach as high as 1 mmscmd per day by January 2019, according to ONGC. ONGC bought the Deendayal field in 2017 from Gujarat State Petroleum Corp while it was still undergoing test runs for commercial gas production.

ONGC and RIL along with partner BP Plc, are developing several natural gas discoveries in the KG basin. These discoveries could contribute up to 50 mcm of daily output, or about a third of India’s current demand. ONGC, which meets up to 40 percent of India’s total natural gas demand, had been saddled with ageing fields and dropping production for almost a decade. But the company registered a marginal jump in production in fiscal 2016/17, and then production increased by another 6 percent last year in the year through March 2018. Analysts said the increase in output from the Deendayal field will help ONGC in clocking an increased overall output in the current fiscal year as well.

The Deendayal gas field was discovered in 2005. The field was said to hold up to 20 trillion cubic feet (560 bcm) of natural gas, although delays and cost overruns in developing the field had some analysts questioning the quality of the investment for ONGC. ONGC will be able to monetise the gas at a higher price and with more marketing freedom under new rules meant to encourage the development of frontier offshore reserves. India consumed around 145 mcm per day, nearly 50 percent of it imported, in 2017/18. The government has projected India’s potential demand at nearly 500 mcm per day.

GAIL (India) Ltd has switched its focus to short-term and spot deals for the purchase of LNG to meet rising demand and hedge against price volatility. The move from longer-term deals comes as India builds infrastructure, including pipelines and import facilities, to raise the share of gas in its energy mix to 15 percent by 2030 from the current level of about 6.5 percent. Supply under GAIL’s long-term deals with companies in the United States began this year. GAIL has deals to buy 5.8 mtpa of LNG from the US. Price-sensitive customers in the South Asian nation have already forced renegotiation of three long-term LNG deals. From next month the company will start getting supplies under a reworked 2.5 mtpa long-term deal with Russia’s Gazprom. GAIL also buys 1 mtpa from Qatar while marketing 5 mtpa procured by India’s Petronet LNG. The company will gradually ramp up supplies under the Gazprom deal and should start receiving the contracted 2.5 mtpa by 2022-2023. Pricing of US LNG is linked to a formula but other charges including freight to India add an extra $2-$3 per mmBtu leading to GAIL scouting for destination, time and volume swap deals. In 2018/19, the state-run firm will receive 100 LNG cargoes, mostly through long-term deals, compared with 52 cargoes imported a year ago. The company will bring 68 cargoes to India and trade the remainder on the global market. GAIL, which operates 11,000 km of pipelines, is laying 5,000 km of gas lines at a cost of ₹ 250 billion ($3.66 billion). GAIL will look at tying up new long-term supplies beyond 2022-23, when the country’s six new fertiliser plants begin operation, consuming about 3.5 mtpa of LNG.

The EWPL has sought nearly tripling of the tariff it charges for transporting KG gas from east coast to Gujarat. PNGRB floated a public consultation paper on EWPL, earlier known as Reliance Gas Transportation Infrastructure Ltd, seeking a rise in pipeline tariff from ₹ 52.23 per mmBtu charged till 2017 to ₹ 151.84 per mmBtu for 2018-19 to 2035-36. A rise in tariff would lead to increase in the price of electricity and fertiliser as well as city gas like CNG. The pipeline primarily transports KG-D6 gas, which has steadily dipped from 69.43 mmscmd achieved in March 2010 to just 4.3 mmscmd in January-March quarter. Originally, EWPL had proposed a levelised tariff of ₹ 55.91 per mmBtu for transporting Reliance Industries’ eastern offshore KG-D6 gas from Kakinada in Andhra Pradesh to Bharuch in Gujarat beginning April 1, 2009. However, the PNGRB fixed a provisional tariff at ₹ 52.23 per mmBtu. The company on October 27 last year proposed a final tariff for the pipeline at ₹ 78.72 per mmBtu effective from April 1, 2009, till the end of economic life of the pipeline — up to March 31, 2034. When PNGRB sought clarifications, EWPL updated the tariff filing to state that ₹ 52.23 per mmBtu would be the tariff till 2017 and ₹ 151.84 per mmBtu would be charged from 2018-19 to 2035-36, the regulator said in the notice.

Ending the deadlock over Kochi-Bengaluru LNG pipeline project, the GAIL has awarded the work to lay 94 km pipeline along the Koottanadu-Walayar stretch to Corrtech International Private Ltd. The completion of the stretch is vital for Kerala as the state would get domestic LNG at half the existing price if it is connected to national gas grid in Bengaluru. Though the Kochi-Koottanadu-Bengaluru-Mangaluru LNG pipeline project was started in January, 2013, the GAIL had to terminate the contractors in November, 2013 as they couldn’t make any progress in the laying of pipes. The main reason for delay was the objection from land owners.

India asked Japan to help build infrastructure needed to boost the usage of LNG in India and elsewhere in Asia. India wants to increase the share of gas, which is a cleaner fuel than oil, to 15 percent of its energy usage by 2030 from 6.2 percent currently India is preparing to create a network with other major oil consumers in Asia, such as China, South Korea and Japan, to negotiate better terms with sellers. The world’s biggest LNG buyers, all in Asia, are increasingly clubbing together to secure more flexible supply contracts in a move that shifts power to importers from producers in an oversupplied market. The world’s three biggest LNG buyers – China, Japan and South Korea – joined together last year in March to secure flexible supply contracts. India was not part of that group. However, in October the Indian cabinet approved a plan allowing New Delhi to work with Japan to make long-term LNG import deals more affordable for its consumers.

India’s first Floating Storage Re-gasification Unit-based terminal at JSW Jaigarh Port in Ratnagiri district was inaugurated in Maharashtra. The LNG terminal will provide clean, safe and affordable natural gas. H-Energy Gateway Private Ltd’s LNG Terminal is also expected to greatly benefit the state by providing clean fuel for transportation and domestic use. H-Energy Gateway Pvt Ltd will commence commercial operations by the end of the financial year.

Rest of the World

Australia’s biggest LNG producer Woodside Petroleum outlined plans to accelerate and expand its Scarborough gas project off northwestern Australia, now expected to cost $10 billion. Fresh from buying out ExxonMobil Corp to gain control over the Scarborough field, Woodside is looking to start producing gas in 2023, two years earlier than previously flagged, with LNG production from an expanded Pluto plant starting in 2024. First gas would be piped to the North West Shelf LNG plant, operated by Woodside, via a link from the Pluto facility. This meant Woodside would reap revenue on up to 3 mt of LNG one year ahead of completing a second LNG production unit at the Pluto plant, which would then handle Scarborough gas. Woodside said it has increased the planned size of the second unit, or train, at Pluto to 4-5 mtpa which would double the plant’s capacity. The original plan was for a second train that could produce 2-3.3 mtpa. The expanded plant could take gas from other long stranded fields in the area, which have substantial reserves but no way of getting the gas to market, including fields owned by Chevron Corp and Royal Dutch Shell. As operator of Australia’s biggest LNG plant, North West Shelf LNG, as well as Pluto LNG, Woodside sees other companies relying on it to help them develop remote, deepwater gas fields discovered over the past 40 years to fill what is expected to be a gas supply gap opening up around 2023, as Asian demand soars.

Cheniere Energy Inc said it had approved the construction of a third liquefaction unit, known as a train, at its Corpus Christi export terminal in Texas, the first new LNG project to go ahead in the US since 2015. The positive investment decision on the 4.5 mtpa LNG train comes as Washington and Beijing have stepped back from the brink of a trade war and agreed to hold further talks to boost US exports to China.  Cheniere itself is now marketing capacity on Train 6 at Sabine pass, competing with would-be producers like Venture Global LNG and Tellurian Inc. The first two trains at Corpus Christi are expected to enter service next year. There is no timeline for the third train, though the builds generally take about four years each.

China’s interest in reducing its trade surplus with the US through increased energy imports could advance plans for US LNG plants and ethanol sales, analysts and energy executives involved in developing new LNG facilities said. Washington and Beijing stepped back from the brink of a full-blown trade war after talks last week, with the US appearing to set aside for now its demands that China revamp key planks of its industrial policy. The LNG and ethanol markets are not big enough by themselves to meet President Donald Trump’s goal of reducing the Chinese trade deficit by $200 billion per year. Cheniere Energy Inc said its board approved financing for an LNG unit, the first new approval in the US since 2015. The decision adds a third unit capable of producing 19.8 mcm per day of LNG to its Corpus Christi, Texas, plant. China overtook South Korea in 2017 as the world’s second biggest buyer of LNG behind Japan. The country, which imported 158 mcm per day is looking to buy more low-cost sources of energy, like gas, to reduce its use of coal and cut pollution.

Cuadrilla has applied to the British government for consent to frack the country’s first ever horizontal shale gas well at its site in Lancashire, the company said. The drilling of this well at Cuadrilla’s Preston New Road exploration site was completed in April and the firm has all the necessary permits required for hydraulic fracturing. The drilling of a second horizontal shale gas exploration well is nearing completion and an application for hydraulic fracturing will then be submitted, Cuadrilla said.

A pipeline across Australia and gas imports from as far away as the US are on the drawing board as the country races to plug a domestic supply gap that is driving up east coast gas prices and threatening jobs. Although Australia is the world’s No. 2 LNG exporter, much of its east coast gas is tied up in long-term export contracts while mainstay supplies in the populated southeast are drying up more quickly than expected. The government is under fire from angry household gas users and industry, particularly big gas users such as petrochemical and fertilizer manufacturers which have warned that high prices are making some businesses uncompetitive. Coal seam gas from Queensland, which now supplies around 30 percent of the east coast market, costs around A$6 ($4.50) a GJ to produce, then has to be piped at a cost of around A$1.85-A$2.45 per GJ, which has driven up gas prices to well above A$8. Shortages will grow from 2022 due to a steep output decline in the main gas field that has supplied southern Australia for five decades, the Australian Energy Market Operator has warned. In the longer term, gas is expected to flow from developments around the country, including more coal seam gas from Queensland, new finds off the coast of Victoria, and shale gas from the Northern Territory, but these are years from development. At least two groups – AGL Energy and a consortium led by iron ore mining tycoon Twiggy Forrest – are looking to import LNG to eastern Australia to meet demand from around 2021. Woodside Petroleum and Chevron Corp, the two big LNG producers in Western Australia, have expressed interest in supplying AGL’s proposed floating storage and regasification facility.

Anadarko Petroleum is seeking to raise a record $14-$15 billion from banks and export credit agencies for its huge LNG project in Mozambique. Fast-growing gas demand from China and Southeast Asia is reassuring export project developers sitting on huge untapped gas discoveries in Mozambique and elsewhere that the market cycle is turning after three years of low prices. The full amount would be the largest loan ever in the LNG sector. French bank Societe Generale, the financial adviser on the $20 billion Mozambique LNG project, has already received interest for a combined $12 billion in cover and direct lending from ECAs in China, South Africa, Italy and Japan. Asian and Chinese ECAs in particular have provided billions of dollars in loans and cover to Africa’s largest energy and infrastructure projects in recent years, paving the way for additional commercial bank financing. In all, Anadarko has agreed commercial terms including volume and price for 5.1 mtpa of LNG supplies from Mozambique, closing in on the 8.5 mtpa target needed to trigger its final investment decision on the project.

Britain’s busiest LNG import terminal, South Hook, is seeking to broaden its sources of supply as robust Asian demand diverts cargoes from Qatar – the world’s biggest exporter and the terminal’s majority shareholder. Volumes to the terminal, in which Qatar Petroleum owns a controlling stake, have halved so far this year from a year ago to 1.2 mcm and amount to just 15 percent of 2016 volumes for the same period. The terminal, with ExxonMobil and Total as minor shareholders, has been importing LNG from Qatar since it was fully commissioned in 2010. With capacity of 15.6 mtpa, it is one of the biggest in Europe.

PetroChina has curbed supplies of the fuel to some industrial users in northern and western regions, in the first sign of emerging tightness only two months after China experienced one of its worst winter gas crunches. PetroChina started from early May limiting gas supplies and hiking prices for major customers, including city gas distributors and inland gas liquefaction plants in some western provinces. China’s natural gas consumption rose almost 14 percent in the first four months of the year to 71.1 mt. China operates more than 100 small inland LNG plants that source gas from state producers PetroChina and Sinopec and supply super-chilled fuel to steel mills, glass makers and residential compounds, users that are not covered by the pipeline grid.

Russian natural gas producer Novatek could make a decision in the second half of 2019 on investments in the Arctic LNG-2 project which it is running. Italy’s Saipem planned to take part in a tender to build a drilling platform for the project, and that Novatek was also continuing talks with Saudi Arabia about its possible participation in the project.

The planned Nord Stream 2 gas pipeline from Russia to Germany raises US intelligence and military concerns since it would allow Moscow to place new listening and monitoring technology in the Baltic Sea. US Congress had given the president new authority to impose sanctions against a variety of Russian pipeline projects. Washington’s objections included past Russian moves to turn off gas supplies to Ukraine and other countries, adding that it would perpetuate “vulnerabilities” in Russian-European ties for another 30 to 40 years. Suggestions that Washington is opposing the pipeline to help US LNG exports was rejected. The Nord Stream 2 project has said it will tap banks for financing in the fourth quarter of 2018 or early next year. Washington supported the planned Danish-Polish Baltic Pipe because it would diversify sources and routes. The pipeline, to be built by 2022, is aimed at reducing reliance on Russian gas.

The British government announced measures to speed up planning applications to support development of the country’s shale gas industry. Increasing reliance on imported gas as Britain’s domestic North Sea output declines is one of the driving forces behind government support for hydraulic fracturing, which involves extracting gas obtained from rocks broken up or fractured with water and chemicals at high pressure. However, it is impossible to know exactly how much shale gas might be underground – and, more importantly, how much can be extracted – until fracking has started in earnest. Commercial production of shale gas in Britain is not expected for two years and developers complain that progress has been slowed by protests and regulatory processes. The government will introduce measures to streamline and improve the regulation process for shale gas planning applications so decisions are made more quickly. Shale gas developers say it can take up to three years to obtain permission to drill a test well in Britain, compared with only a month in the US. The government will also launch a new 1.6 million pound ($2.2 million) shale support fund over the next two years to build capacity and expertise in local authorities dealing with shale planning applications and set up a shale environmental regulator. The government also said it will open a consultation on whether exploration wells will be allowed to be drilled without the need for a planning application. However, shale gas developers such as IGas, Cuadrilla and Ineos, welcomed the measures, particularly those to speed up the planning process.

Total will pull out of a multibillion-dollar gas project in Iran if it cannot secure a waiver from US sanctions, the French energy company said. Total signed a contract in 2017 to develop phase 11 of Iran’s South Pars field with an initial investment of $1 billion – a contract Tehran repeatedly hailed as a symbol of the accord’s success. Total’s announcement comes after German insurer Allianz and Danish oil product tanker operator Maersk Tankers said they were winding down their businesses in Iran. Italy’s Eni, which last June signed a provisional agreement with Tehran to conduct oil and gas feasibility studies, said after Washington’s decision to quit the nuclear deal that it had no plans for new projects in Iran.

The LNG Canada project on British Columbia’s northern coast was committed to starting construction on the C$40 billion ($31.1 billion) LNG export project this year. An investment decision on the terminal was delayed in 2016, due to sagging oil prices that hit cash flows, along with an unfavorable supply-demand outlook, but remains on track for 2018.

Bangladesh has terminated talks with Swiss-based commodity trader Trafigura to install a small floating LNG import terminal due to delays in agreeing terms, while rival trader Gunvor advances with a separate project. Once considered an energy backwater, Bangladesh’s LNG demand is set to hit 17.5 mt annually by 2025 after importing its first cargo last month, and as traders target Southeast Asia’s booming gas markets to boost sales. Trafigura, Vitol and Gunvor were all pursuing LNG import projects in Bangladesh, and smaller peer AOT Energy has provisionally agreed to supply the country with 1.25 mt annually for 15 years. Bangladesh secured more competitive LNG pricing with AOT compared to its contract with Qatar. Under its 15-year, 2.5 mtpa deal with Qatar, Bangladesh agreed to pay 12.65 percent of the three-month average price of Brent oil plus a constant of $0.50 per mmBtu. Bangladesh also has a 10-year LNG import deal with Oman Trading International for 1 mt.

Russia has decided not to suspend LPG loadings and transportation at railway stations in regions hosting the soccer World Cup for the duration of the tournament, according to an order from the rail regulator. Some restrictions, including on transportation of explosives, will remain in place, according to the document. Initially, Russia had planned to suspend loadings of LPG, such as propane and butane, from May 25 until July 25. Traders had said the restrictions could have hit the supplies of LPG to processing plants, including Nizhnekamskneftekhim.

Asian spot prices for LNG edged lower over the past week amid plentiful supply, despite strong oil and coal markets. Asian LNG prices for delivery in June LNG-AS slipped 20 cents to $7.90 per mmBtu and the July contract was assessed at $8.20 per mmBtu. Demand emerged from several countries, including Mexico, Argentina, Taiwan, Kuwait, Turkey and India, but supply kept pace as producers from Indonesia to Trinidad churned out cargoes sold via tenders. LNG markets are in the midst of the northern hemisphere’s low-demand spring season, during which little gas is typically used, except that demand has been relatively strong this year, driven not just by China but also by India and South America. Overall, the LNG market in Asia has tightened over the past year, with the winter seasonal demand peak (December/January) and spring low (April/May) seeing significantly higher prices in 2017/2018 than in 2016/2017.

Osaka Gas may sign new long-term LNG contracts as Japan’s second-biggest city gas supplier boosts its trading operations amid a shake-up in the Asian market for the fuel. The resistance to long-term contracts among buyers in Japan, the world’s biggest importer of LNG, in recent years has been one factor for a dearth of new big export projects coming online, as developers need commitments over many years. Osaka Gas has signed contracts to resell more than 3 mt of LNG in 2020, nearly three times the amount in the year ended March 31, 2017, a move that may boost liquidity in Asia’s natural gas markets. The Osaka-based utility plans to increase LNG purchases, including for resale, to more than 10 mt in 2020, up from 9.5 mt in the year through March 2017. Japan’s anti-trust agency ruled last year that so-called destination clauses in long-term LNG contracts that prevent the resale of cargoes are anti-competitive.

Japanese trading house Mitsui & Co Ltd expects a final investment decision on a US Anadarko-led offshore LNG project in Mozambique in the year to March 31, 2019. Spending on the 2 trillion yen ($18.3 billion) project will start in the following financial year, he said. The two-train, 12 mtpa project is expected to be completed in 2022-2023, and has secured more than 9 mtpa in total binding and non-binding commitments from buyers.

JAPEX is seeking LNG cargoes after its joint venture LNG project in western Canada was scrapped last year. The oil and gas developer is seeking three to six cargoes a year of LNG starting from 2020. It has given the seller the option of delivering the cargoes over five or 10 years. JAPEX has been looking for a portfolio of LNG supplies since the $29 billion Canadian project, in which it had a 10 percent stake, was scrapped. Petronas, the Malaysian state-owned energy company, in July abandoned plans to build the Pacific Northwest LNG plant in northern British Columbia due to low prices. JAPEX will look for a mix of spot, mid-term and long-term supplies without specifying a supply source, until 2030.

LNG production in Trinidad, a top 10 global exporter, is recovering thanks to a new field start up, but competition from US shale is forcing sellers of its output to go much further afield. Trinidad built LNG facilities during a second wave of the industry’s expansion in the 1990s with the goal of supplying North and Latin America. But supplies from the US shale gas revolution have since dented that strategy. Trinidad’s 15 mtpa Atlantic facility, which liquefies natural gas for export and in which BP and Royal Dutch Shell are major shareholders, ran at 75 percent of capacity last year as gas deposits become depleted. Its production fell almost 30 percent from a peak of 34.32 mcm of LNG in 2010 to 25.07 mcm LNG last year. The latest data from the energy ministry, issued, showed total March output rose to 2.6 mcm LNG, up 0.4 mcm from February and 0.7 mcm higher than a year ago.

Pakistan has invited neighbouring Iran to resume the stalled talks over the Iran-Pakistan Gas Pipeline project. The Petroleum Division of the Ministry of Power said that the Islamabad has extended an invitation to the Tehran to visit Pakistan and conduct negotiations on the Gas Pipeline Project before the Holy month of Ramadan, which sets in during the third week of May. Pakistan and Iran had signed the Gas Sales Purchase Agreement in 2009, according to which Pakistan was liable to pay a fine of $1 million per day if it was unable to take gas supplies from Iran. With the gas pipeline project hitting the roadblocks, Iran sought $1.2 billion in damages from Pakistan in February this year as per the penalty clause from January 1, 2015. The Iranian government has threatened to file an international arbitration case against Pakistan at The Hague for unilaterally shelving the two-country gas pipeline project. The Iran-Pakistan Gas Pipeline Project has been in the peril for more than three years. Iranian government has already completed construction of the pipeline on its side of the project. Pakistan said it failed to raise funds for the gas pipeline project largely due to the sanctions on Iran by the United States and the United Nations. The Islamabad requested the Tehran for force majeure to avoid penalty worth $1 million per day but the neighbouring country refused to pay heed to the request.

A planned pipeline connecting Cyprus’ Aphrodite gas field to Egypt’s LNG facilities will cost between $800 million and $1 billion. Egypt has rapidly increased its production of natural gas and hopes to become a hub for exporting to Europe after making a series of big discoveries in recent years. Cypriot gas would be used in part for domestic consumption and in part for export.  Egypt aims to sign an agreement with Cyprus for a pipeline to transport gas from the Aphrodite field to its LNG facilities. A final agreement on the pipeline would be signed as quickly as possible but did not specify when. Egypt hopes to halt gas imports by 2019 and achieve self-sufficiency. Egypt has an extensive pipeline network and two idle gas liquefaction plants ready to export new gas as it arrives.

Sri Lanka’s state-run investment body has approved a $500 million LNG plant by China Machinery Engineering Corp near a Chinese-controlled port and industrial zone. The state-run Board of Investment has approved investment projects worth $1 billion in the first quarter, said, the largest of which was the LNG project in Hambantota, where China Merchants Port Holdings controls a Chinese-built port on a 99-year lease.


PNGRB: Petroleum and Natural Gas Regulatory Board, mmBtu: million metric British thermal units, US: United States, CGD: city gas distribution, CNG: compressed natural gas, km: kilometre, PNG: piped natural gas, mt: million tonnes, FY: Financial Year, ONGC: Oil and Natural Gas Corp, bcm: billion cubic meters, KG: Krishna-Godavari, mmscmd: million metric standard cubic meter per day, RIL: Reliance Industries Ltd, mcm: million cubic meters, LNG: liquefied natural gas, mtpa: million tonnes per annum, GJ: gigajoule, LPG: liquefied petroleum gas, EWPL: East West Pipeline Ltd, ECAs: export credit agencies, JAPEX: Japan Petroleum Exploration Company Ltd


NATIONAL: OIL

India reports flat crude oil production in April

5 June. India’s crude oil production in April 2018 remained nearly flat, decreasing marginally by 0.83 percent to 2,915 thousand metric tonne (tmt) as compared to 2,939 tmt produced in the corresponding month a year ago, pushing the country’s import dependence to 83.7 percent for the month, latest figures published by the oil ministry showed. Oil and Natural Gas Corp (ONGC), the state-owned upstream player, recorded a 3.7 percent drop in crude oil production to 1,777 tmt in April on the back of decreased output from the company’s onshore and offshore blocks. ONGC’s crude production from onshore blocks declined marginally by 0.6 percent to 496 tmt in the month as compared to the corresponding month a year ago. The decrease in production was primarily due to lower output from the company’s Andhra Pradesh block. Production from other onshore blocks in Asssam, Gujarat and Tamil Nadu remained flat. The firm’s production from offshore blocks decreased 5 percent to 1,281 tmt for April mainly owing to lower output from western offshore blocks. Oil India Ltd (OIL), the second-largest state-run upstream player, witnessed crude oil production increasing marginally to 274 tmt in April. The near-flat production was due to less than planned contribution from old wells. OIL’s crude production from fields in Assam increased marginally and declined from fields in Arunachal Pradesh and Rajasthan. Crude production from fields operated by Private upstream companies and joint ventures (JVs) increased 5.37 percent to 863 tmt mainly due to increased production from the Rajasthan block. Onshore production by private upstream firms and JVs increased 5.61 percent to 715 tmt in April 2018 as compared to the corresponding month a year ago. The rise in production is mainly due to increased production from the Rajasthan block and marginal increase in output from Andhra Pradesh, Gujarat, Assam and Tamil Nadu blocks. Offshore production rose marginally by 6 tmt to 148 tmt in April primarily due to increased production from Gujarat offshore.

Source: The Economic Times

India’s Nayara sees no problem in replacing Iranian oil, if required

5 June. Indian private refiner Nayara Energy, a key buyer of Iranian oil, is prepared to replace Iranian oil if required under US (United States) sanctions and hopes to settle dues owed to Tehran for past purchases ahead of a November deadline. Uncertainties cloud Iran’s oil exports after US President Donald Trump abandoned a 2015 nuclear agreement this month and ordered the re-imposition of US sanctions on Tehran. Some sanctions take effect after a 90-day “wind-down” period ending on August 6, and the rest, notably on the petroleum sector, after a 180-day “wind-down period” ending on November 4. Nayara, formerly known as Essar Oil, would leverage the vast network of its promoters – Russia’s Rosneft and trader Trafigura, to replace Iranian oil, if required under the US sanctions. The company operates a 400,000 barrels per day (bpd) sophisticated refinery at Vadinar in the country’s west coast. In April, the company was aiming to buy 120,000 bpd)of oil from Iran in 2018/19, the same as the previous year, adding his company was receiving the same concessions as state-owned Indian refiners for Iranian oil purchases.

Source: Reuters

Oil Minister rules out review of daily fuel pricing mechanism

4 June. Oil Minister Dharmendra Pradhan ruled out a daily price review of petrol and diesel, but said the government was concerned about increasing fuel prices and is working on a long-term solution. He asked state governments to tax petrol and diesel within a “reasonable and responsible” band and not continue to reap a bonanza from rising oil prices. Daily revision in petrol and diesel prices, which was introduced in mid-June last year, had come under criticism after rates were hiked everyday last month in step with firming international oil rates. It was speculated that the long-term solution being worked out by the government to deal with the volatility may involve review of the daily price review mechanism. Pradhan said fuel prices have started to decline during the five days but the rates continue to “pinch”. After hitting all-time high of Rs 78.43 a litre for petrol and Rs 69.31 for diesel on May 29, rates have marginally fallen during the subsequent days on softening in international oil prices and rupee strengthening against the US dollar. Petrol price has dropped by 47 paisa a litre and diesel by 34 paisa. This compares to Rs 3.64 a litre hike in petrol and Rs 3.24 a litre hike in diesel rates in Delhi in the fortnight after state-owned oil firms ended a 19-day pre-Karnataka poll hiatus to resume daily price revision on May 14. Petrol in Delhi currently costs Rs 77.96 and diesel by Rs 68.97. Prices in Delhi are the lowest among all metros and most state capitals due to lower sales tax or VAT (Value Added Tax). The central government levies Rs 19.48 excise duty on a litre of petrol and Rs 15.33 on diesel. State sales tax or VAT varies from state to state. Unlike excise duty, VAT is ad valorem and results in higher revenues for the state when rates move up. In Delhi, VAT on petrol was Rs 15.84 a litre, and Rs 9.68 on diesel in April.

Source: Hindustan Times

High oil prices could inflate India’s CAD to $31 bn

4 June. High crude oil prices are likely to inflate India’s Current Account Deficit (CAD) – excess of imports of goods and services over exports – in a range between $22 billion and $31 billion in the current financial year ending March 2019. India is a net commodity importer, and in the case of oil, the country has 80 percent import dependence. A surge in oil import bill is compensated to an extent by export bill of petroleum products. But this cushion is low and insufficient to offset the adverse impact of the oil import bill on the trade and current account. In the last financial year (2017-18), the average price of Indian crude basket increased 18.6 percent year-on-year to $56.43 per barrel. Therefore, oil import bill rose 25.7 percent to $109.1 billion and petroleum products export bill rose 24.2 percent to $38.9 billion. The net impact was an increase of $14.7 billion in oil trade deficit, which was 30.73 percent of the incremental trade deficit. Petroleum products – including petrol and diesel — have a weight of 4.417 in retail prices and have the potential to add 4 basis points to retail inflation with every one percentage point increase in retail prices. The impact of higher crude prices alone or in combination with weak currency has the potential to increase retail inflation maximum by 160 basis points. This may add 30-35 basis points to the retail inflation forecast of 4.3 percent for 2018-19. The Monetary Policy Committee of the Reserve Bank of India (RBI), in its April 2018 monetary policy, projected retail inflation of 4.7-5.1 percent in the first half of 2018-19 and 4.4 percent in the second half. The average price of Indian crude basket, both in April and May 2018, has been in excess of the RBI’s oil price assumption.

Source: The Economic Times

State governments objected to bring fuel prices under GST’

2 June. Defence Minister Nirmala Sitharaman said the state governments have still not given their consent to bring petrol and diesel under GST (Goods and Services Tax), but Oil Minister Dharmendra Pradhan is holding discussions with the oil companies to chalk out alternative ways to bring down fuel prices. She said, the Centre alone cannot be blamed for the fuel price rise as the state governments have not given their consent to bring petrol and diesel under GST in the meeting of GST council as they, on an average, earn Rs 7-9 crores per day from the fuel sale under the present taxation structure.

Source: The Times of India

Oil thieves pilfer 40k litres of diesel in Jharsuguda

1 June. Within the space of a week, unknown miscreants have pilfered nearly 40,000 litres of diesel from the Indian Oil Corp (IOC)’s Jharsuguda-Ranchi pipeline at Budhapada village under Laikera police station limits. The theft came to light during routine patrolling by IOC personnel, who later informed Laikera police. According to the police, the miscreants dug up a four-feet ditch and drilled a hole into the pipeline. They fitted a valve into the hole to control its outward flow and ensure water, if any, from outside doesn’t enter the pipeline. They then fitted the valve to a pipe which went into an oil tanker. Because of the high pressure that oil is passed through the pipeline, filling one tanker doesn’t take much time. Police suspect three tankers may have been used in the pilferage since one tanker can carry a maximum of 18,000 litres. It is believed that on May 24 around 27,000 litres of diesel was pilfered while on May 28 nearly 13,000 litres was stolen. While two tankers may have been used in the first case, one would have sufficed the second time, the police said. The estimated cost of the pilfered diesel is believed to be around Rs 29 lakh. Police said after the oil was pilfered from the pipeline, the miscreants sealed the valve and filled up the ditch to evade detection. They also feel there could be petrol pump owners involved in the pilferage. They suspect that the diesel was sold to petrol pump owners at a cheaper rate. The police are likely to question petrol pump stations in the vicinity to check whether they may have bought the fuel.

Source: The Times of India

Extend Cairn India’s oil block contract by 10 yrs on same terms: Delhi HC

1 June. The Delhi High Court (HC) has ordered extension of Cairn India Ltd’s Rajasthan oil block contract for 10 years beyond 2020 on old terms and conditions, the company said. The court in an order directed the government to extend till 2030 the Production Sharing Contract (PSC) for Rajasthan block on the same terms and agreements when it was first entered into in 1995. The 25-year contract for exploration and production of oil and gas from Barmer block RJ-ON-90/1 is due for renewal on May 14, 2020, but Cairn India has to, as per a new policy, apply for a 10-year extension. The government had in March last year approved a new policy for extension of PSCs that provided for an extension beyond the initial 25-year contract period only if companies operating the fields agree to increase the state’s share of profit by 10 percent. The company moved Delhi HC as it felt that the May 1995 PSC for the block provided for an automatic 10-year extension on same commercial terms if there are oil and gas left to be produced. But the government had midway retrospectively changed fiscal terms. Oil and Natural Gas Corp (ONGC), which as a government nominee picked up 30 percent stake in the Rajasthan block in 1995, also was of the opinion that PSC provides for an extension on same terms. ONGC had first in May 2015, then again on at least two occasions in 2016, concurred with Cairn’s interpretation of the PSC for extension of the Rajasthan contract by 10 years on same terms.

Source: Business Standard

Kerala government to cut petrol, diesel prices by Rs 1

30 May. Kerala government decided to reduce the fuel price in the state by Rs 1 per litre, with effect from June 1 onwards. The state cabinet has decided to forgo Rs 1 each from the state tax on petrol and diesel. Chief Minister Pinarayi Vijayan said that the government decision should be treated as a token initiative which should prompt the central government to take immediate steps to cut down the price of petrol and diesel. The price per litre of petrol in the state of Kerala is over Rs 85 and Rs 75, respectively for petrol and diesel as on May 30. At present, the state levies 32.2 percent tax on petrol and 25.58 percent tax on diesel. In other words, the state pockets Rs 19.50 as tax from per litre of petrol and Rs 15.51 from single litre diesel.

Source: The Times of India

Government has no role in fuel price fixation: Oil Minister

30 May. With opposition parties mocking the one paisa cut in the prices of petroleum products, Oil Minister Dharmendra Pradhan said the prices are decided by the oil companies and the government has no role in it. Earlier in the day, Indian Oil Corp (IOC) reduced the prices of petrol and diesel by one paisa after accidentally showing a fall of 50-60 paisa per litre due to a “technical glitch”. The minor reduction came after a daily hike for the last 16 days totalling to Rs 4 per litre. The Congress slammed the government for “playing a cruel joke” on the people. However, Pradhan said oil is an international commodity and its prices are determined by several factors like quantum of oil production, international market and politics, oil companies and the taxes levied by the Centre and states.

Source: Business Standard

LPG connections for 130 mn families by 2019: Oil Minister

30 May. The Narendra Modi government will match the 67-year record of previous governments by providing liquefied petroleum gas (LPG) connections to 130 million families in five years of its tenure, Oil Minister Dharmendra Pradhan said. Pradhan said that out of 270 million households in India, only 130 million had LPG connections four years ago. The Modi administration is promoting usage of the clean cooking fuel as it saves women from pollution and saves them time. It will also improve the share of the clean fuel in the country’s fuel mix. Under the Pradhan Mantri Ujjwala Yojana, poor women are given LPG connections without an upfront charge.

Source: Livemint

If one paisa cut in fuel prices PM Modi’s ‘prank’, it is in poor taste: Congress President

30 May. Congress President Rahul Gandhi slammed the one paisa cut in fuel prices, saying if this was Prime Minister (PM) Narendra Modi’s idea of a “prank”, it was “childish and in poor taste”. Petrol and diesel prices were cut by one paisa per litre each, the first reduction after 16 days of relentless price hikes. Gandhi said the one paisa cut in petrol rates was not a “suitable response” to the fuel challenge he threw to the prime minister a few days ago. The marginal decline in the fuel prices had its share of excitement with state-owned Indian Oil Corp (IOC) first announcing a reduction of 60 paise — the biggest since daily price revision was introduced in mid-June last year, only to retract it within a couple of hours citing a technical error. The oil companies this morning announced reduction in petrol price by 60 paise to Rs 77.83 a litre and diesel by 56 paise to Rs 68.75 in Delhi. This was rectified to 1 paisa a litre. Meanwhile, State government of Kerala has decided to cut petrol and diesel prices by Rs 1 per litre.

Source: The Times of India


NATIONAL: GAS

India might hold world’s second largest gas hydrate reserves

5 June. When Oil Minister Dharmendra Pradhan recently said India might well have hydrocarbon reserves to serve the country for 300 years, it raised many eyebrows. However, according to the latest estimates of the US (United States) Geological Survey, we have the second largest gas hydrate reserves after America. The Krishna-Godavari (KG), Cauvery and Kerala basins alone contributing 100-130 trillion cubic feet of estimated reserves. In a meeting on the National Gas Hydrate Programme (NGHP), the recent estimates were discussed. The government has given a nod to the third stage of the ambitious programme. Natural gas hydrates are a mixture of ice-like forms of water and gas in molecular cavities. However, no country in the world has so far developed the technology to produce gas hydrates commercially and economically. Apart from the US and Japan, India has entered into an agreement with Canada to develop technology in this regard. The gas hydrate programme by India began in 1997 and with the help of a consortium (including Overseas Drilling, Fugro, McClelland Marine Geosciences, Geo-TeK, Lamont, Doherthy and Earth Observatory), it first conducted studies in 2006.

Source: Business Standard

India gets cheapest LNG as Russia’s Gazprom begins supplies

5 June. India received its cheapest LNG (liquefied natural gas) under a long-term deal as Russia began shipping natural gas at a delivered price of close to $7 per million metric British thermal units (mmBtu). At current oil prices, the Russian rate is $1.5 per mmBtu less than the price at which Qatar, India’s oldest supplier, delivered LNG. Russian supplies are also cheaper by $1-1.5 per mmBtu than the LNG sourced from Australia and the US (United States). Oil Minister Dharmendra Pradhan, who flew in here to witness arrival of first LNG ship under a 20-year import deal with Gazprom, termed the event as “Golden Day” in the India’s energy pursuit. GAIL (India) Ltd had in January taken advantage of Russian company’s inability to deliver LNG from the previously agreed Schtokman project in the Barents Sea, to renegotiate price agreed in 2012. GAIL also deferred taking deliveries of full 2.5 million tonnes (mt) a year LNG. The contract period was extended by three years to accommodate the supplies not taken in initial years as well as get an additional 2 mt over-and-above the 50 mt it had agreed to take in 2012 over the 20 year contract period. LNG carrier ‘LNG Kano’, bringing cargo from Russian supplier Gazprom, docked at Petronet LNG Ltd’s import facility. India will import LNG worth an estimated $25 billion over the contract period from Russia, he said. India is dependent on imports to meet 45 percent of its gas needs. Beginning of supplies from Russia comes within weeks of India importing its first ever LNG cargo from US under a long-term import deal. Pradhan said the starting of LNG imports from Russia has added a new dimension to the Indo-Russian bilateral relations, particularly in the oil & gas sector.

Source: The Pioneer

ONGC told to prove 50 percent KG basin fields in deep water

5 June. While ONGC (Oil and Natural Gas Corp) has written to the government seeking ‘marketing freedom’ for gas produced from its block in the Krishna-Godavari (KG) basin to be able to sell the product at a higher price, the oil explorer has been asked to prove that at least 50% of the fields in the block are in deep water in order to get a special pricing dispensation. According to ONGC, the company wants either arm’s length price for the gas from the above mentioned block or a government-fixed price for products from difficult fields which should be higher than that for shallow-fields gas. The company, they said, has written again to the upstream regulator Directorate General of Hydrocarbons (DGH) pressing this demand. An arm’s length price is arrived at through transparent and competitive bidding. The government in March, 2018 increased the price of domestic natural gas in shallow fields by 6% to $3.07 per million metric British thermal units (mmBtu) as per gross calorific value for the April-September, 2018 period from $2.89 per mmBtu during October 2017-March 2018 period. The board of ONGC had approved the work programme for the field in March, 2017 else the company would have been forced to relinquish the block. However, it had asked the government for special pricing given — in the company’s view — the then-prevailing price of $2.89 per mmBtu was too low to make the required investments of around $600 million in the block commercially prudent. Even the revised price of $3.07 per mmBtu is not enough, ONGC said.

Source: The Financial Express

ONGC suffered Rs 40 bn loss on gas production due to cap on prices

3 June. Oil and Natural Gas Corp (ONGC) logged a Rs 4,000 crore loss on natural gas output in the fiscal year ended March 31, 2018 as the government mandated price for the fuel was less than the cost of production. As per a new mechanism approved by the government in October 2014, the price of domestically produced natural gas is to be revised every six months — April 1 and October 1 — using weighted average of rates prevalent in gas surplus markets like Henry Hub (US), National Balancing Point (UK excluding Russia), Alberta (Canada) and Russia. Using this formula, the price for April to September came to $3.06 per million metric British thermal units (mmBtu) as compared to $2.89 in previous six months. Prices have been less than $4 since October 2015. ONGC has sought a review of the natural gas pricing formula. India’s largest natural gas producer is demanding a floor or minimum price of natural gas be fixed at $4.2 per mmBtu for the business to make economic sense. ONGC’s significant discoveries in KG (Krishna-Godavari) basin and Gulf of Kutch would need higher price to bring them to production. Gas discoveries in the shallow sea off Andhra Pradesh on the east, and off Gujarat on the west are economically unviable to produce at the current government-mandated price of $3.06. The Krishna Godavari basin block KG- OWN-2004/1 is in shallow water and does not qualify as a ‘difficult field’, which get higher gas price of USD 6.78 per mmBtu. On the western side, the block GK-28 in Gulf of Kutch is a nomination block which does not qualify for higher rates. While the KG block will produce a peak output of 5.35 million metric standard cubic meter per day (mmscmd), the same from Gulf of Kutch block will be around 3 mmscmd. It would take a minimum three years to bring the gas finds to production. The combined output is about 14 percent of the ONGC’s current output of 60 mmscmd. ONGC also has a couple of smaller fields with a total expected peak production of 1.1 mmscmd, which cannot viably produce at the current domestic gas prices. Natural gas constitutes around 45 percent of ONCG’s total crude oil and natural gas production volume. It produces around 75 percent of the country’s natural gas output.

Source: The Economic Times

More than half of Telangana may get PNG and CNG

30 May. More than half of Telangana, roughly over 2 crore people, will have access to clean natural gas — piped natural gas (PNG) for cooking and CNG (compressed natural gas) for driving — if everything goes well. As part of the national policy to turn India into a gas-based economy, oil regulator Petroleum and Natural Gas Regulatory Board (PNGRB) sought bids from investors for 20 districts in Telangana entailing an overall investment of Rs 10,000 crore. In what is touted as India’s biggest city gas licensing auction, the 9th City Gas Distribution (CGD) bidding round covers 86 geographical areas for selling piped gas and CNG covering 174 districts in 22 states and Union Territories. Telangana will cover 20 districts which could lead to 70-75% of PNG and CNG coverage in the state. Currently, only Hyderabad has PNG covering a miniscule 7,757 households. The oil regulator has been working towards increasing the share of natural gas in the energy basket in India from the current 6% to 15% by 2022. To achieve this, an additional 12,000 kilometre (km) of pipeline is under construction. Further, PNGRB is looking to set up a Gas Exchange hub similar to the Power Exchange India Ltd. The hub will determine the price of gas depending on the market forces eliminating the government’s role in fixing gas prices.

Source: The Times of India

NATIONAL: COAL

CIL’s dispatch to power sector up 15 percent in April-May

4 June. Coal India Ltd (CIL) said the fuel dispatch to power sector grew by 15 percent in the April-May period of the current fiscal. With the objective to increase the consumption of coal in the power sector, CIL has requested the power ministry to prevail upon power plants situated within 20 kilometres of coal mines to lift their entire requirement by road from 2018-19 onwards and to increase the availability of rakes for movement to power plants located far away from the mines. According to CIL, the miner and railways through “their coordinated efforts” have increased rail loading from miner’s own sidings to sustain the spurt in demand from power sector. Besides enhancing dispatches through rail mode, power stations within the vicinity of 50-60 km of the mines having FSA (fuel supply agreement) are being offered coal through road and rail-cum-road mode to be lifted by their own transport for further augmenting the dispatch, it said. At the Dadri and Badarpur power plants located in the Delhi Region, CIL is now supplying at least 10 rakes of coal per day as against linked requirement of 7 rakes, to mitigate the immediate spurt in power demand in the region. CIL is holding a stock of about 44 million tonnes of coal as on May 31 and there is “no dearth of coal”, it said.

Source: The Financial Express

CIL to pilot new billing system with NTPC

3 June. Coal India Ltd (CIL) will try out a new customer-friendly billing system for consumers with NTPC Ltd on a pilot basis, in line with a global quality practice framework. The new billing mechanism will compute prices on every unit of Gross Calorific Value (GCV) of coal, doing away with the grade policy at present. The GCV unit-based pricing of coal was first announced by Gopal Singh in January this year, when he was holding temporary charge as chairman of CIL. Singh had expected the rollout of the new pricing method from April this year. The trial will be conducted with 1-2 plants of NTPC and 1-2 mines of CIL in the first round. If the initial results are positive then the new pricing will cover all the NTPC plants in the second round before extending the new billing system to all consumers, Coal India director (marketing) S N Prasad said. CIL had also met the stakeholders to deliberate on the proposed pricing mechanism and claimed that most of them had supported it. CIL has 17 grades — from 2000 to 7000 GCV — with difference of 300 GCV between two grades. CIL expects the new mechanism to bring down corruption and leave a positive impact on coal production. Earlier, mining workers were not encouraged to cross a grade which was difficult but all miners will now be encouraged to produce more, Singh had said.

Source: Business Standard

Coal loading in India up 19 percent in April-May: Goyal

30 May. Loading of coal increased by 18.7 percent during April-May to 431.5 rakes, Railway and Coal Minister Piyush Goyal said. In financial year 2017-18, there was the highest-ever transportation of coal in India, he said. The load has come on the “domestic coal roughly increasing demand of 20-22 million tonnes because of the less imports and less import based generation”, he said. He also said that import of power from Bhutan also has declined around 53 percent, which also has increased the pressure on the domestic coal industry.

Source: Business Standard


NATIONAL: POWER

‘India became net power exporter in last 4 yrs’

5 June. India became a net exporter of electricity for the first time during the last four years and aims to achieve the target of universal household electrification by the year-end three months ahead of the original deadline, Power Minister RK Singh said. In a media briefing on the government’s achievements in the four years of NDA rule at the Centre, he also referred to the issue of stressed projects, saying efforts are underway to revive some of the non-performing assets (NPAs) in the sector. In September last year, the government had launched the Pradhan Mantri Sahaj Bijli Har Ghar Yojana (Saubhagya) scheme aimed to connect all households with electricity March 2019. With 100 percent village electrification being achieved by the end of April, the government brought ahead the Saubhagya target of powering around 4 crore households three months ahead of the original deadline. He said 100,000 MW of power generation capacity and one lakh circuit km (ckm) of inter state transmission capacity had been added in the last 4 years. Besides, 25,000 ckm of transmission capacity were added per year, as against 3,400 ckm during previous governments.

Source: The Financial Express

DMRC yet to clear Rs 90 mn electricity bill: Administration

5 June. The district administration made a public announcement near the Botanical Garden metro station in Sector 38 claiming that the DMRC (Delhi Metro Rail Corp) owed Rs 9.70 crore to the NPCL (Noida Power Corp Ltd) as electricity dues incurred in operations of the metro in Noida. The administration gave 48 hours to the DMRC to clear the payment or face action. DMRC said that there is a dispute over payment of electricity tax due to which the payment has not been cleared.

Source: The Times of India

MP government approves electricity at Rs 200 for 77 lakh beneficiaries

5 June. Five months before the assembly elections in Madhya Pradesh (MP), the Shivraj Singh Chouhan government took a major decision to freeze and thereafter, waive all electricity dues of 77 lakh persons registered under the Mukhya Mantri Jan Kalyan Yojana (MMJKY). The decision was taken at the cabinet meeting headed by the chief minister. It was also approved that all these beneficiaries will henceforth, be supplied electricity for domestic consumption at a flat rate of Rs 200 per month. The MMJKY has been recently introduced to give benefits like free medical treatment to labourers and BPL (Below Poverty Line) families. Chief Minister Shivraj Singh Chouhan will launch the scheme on June 13 and with this will start the process of implementation of power supply for households at Rs 200 per month. After July, these beneficiaries under the scheme will be entitled to power supply for domestic use at a flat rate of Rs 200 per month. For Rs 200, they may use one fan, light one bulb and run a television set. State government has earmarked Rs 1806 crore as subsidy to be paid to the power distribution companies for payment of surcharge and dues of the beneficiaries till June 30, 2018. However, the government is yet to calculate how much this scheme would cost the state exchequer annually though it expects the burden to be around Rs 1000 crore.

Source: The Times of India

Cut power subsidy to farmers who pay tax: Punjab draft policy

5 June. The Punjab Farmers’ Commission has proposed restricting the state’s power subsidy to non-income tax-paying farmers in its draft Punjab State Farmers’ Policy. The objective is to stop giving subsidy to those farmers who have other sources of income. The draft policy was released by chairman of the Punjab State Farmers’ Commission Ajay Vir Jakhar and state agriculture commissioner Balwinder Singh Sidhu. Punjab’s power subsidy bill for agriculture comes to Rs 6,000 crore annually. The policy, expected to be presented to the Punjab government in the first week of July after addressing public objections, also proposes rationing of subsidy to a financial cap for such farmers.

Source: The Times of India

Centre releases Rs 80 bn for power sector in Jammu & Kashmir

3 June. The Centre has released Rs 8,000 crore to boost power sector in the state, Power Minister Sunil Sharma said, assuring improvement in the electricity supply in coming months. He said the government is committed to improve power scenario in the state and therefore augmentation of the infrastructure will be intensified in the coming days. Power infra augmentation work is being stepped up from this month as tender process for pending works has been completed, he said. He expects cooperation and patience from the public and expressed hope that augmentation work will be completed in a stipulated time. He said around 650 MVA (mega volt amp) power is required in Jammu region and the supply is 500 MVA, resulting in power curtailment. On the issue of power theft and unnecessary use of power, the minister stressed that the power needs to be used judiciously. He said the department is initiating a strict surveillance against power theft and the corruption within the department will not be spared at any cost. Three to four Grid Stations of Jammu city are going to be upgraded soon while the Canal Grid Station with the capacity of 50 MVA has been already installed, he said. He said 20 MVA additional transformer will be commissioned at Janipur Grid, and Barn to Janipur line is in process of augmentation.

Source: The Economic Times

Power companies without wilful defaulter tag can’t be taken to NCLT, rules HC

2 June. The Allahabad High Court (HC) ruled that a power company can’t be taken to bankruptcy court for not repaying loans unless it has been declared a wilful defaulter, recognising the stress that the sector is under. It also directed the finance secretary to meet power producers in June to discuss their financial woes. This follows a February directive from the Reserve Bank of India (RBI) asking lenders to resolve stressed loans within 180 days of default, failing which the company had to be referred to the National Company Law Tribunal (NCLT) for resolution. This was applicable to loans above Rs 2,000 crore for all sectors including companies in power sector that suffered due to several factors such as the inability to sign power purchase agreements (PPAs), delays in government approvals and unavailability of coal. A wilful defaulter is one that has not repaid loans despite having the wherewithal to do so. Also, around 22% of India’s installed power-generation capacity is already counted as non-performing assets. The exposure of India’s banks to the power sector was Rs 5.19 lakh crore in April, according to RBI data. The high court order was in response to a petition filed by the Independent Power Producers Association of India. The court asked the finance secretary to “consider the grievance” of power producers and “see whether any solution to the problem is possible”. According to the Association of Power Producers, about 70,000 MW of generation capacity faces the threat of

liquidation due to the new RBI norms. In the recent past, meetings of the power ministry, RBI and lenders to find ways to resolve stressed loans in the power sector were twice cancelled. Measures taken by the government and regulators to resolve the problems of the power sector could take 8-12 months to have an effect, Association of Power Producers said.

Source: The Economic Times

Power demand in Delhi soars to record 6.6 GW

1 June. Delhi’s power demand spiked to an all-time high of 6,651 MW and may go up to 7,000 MW in the coming days as the city sweats it out in near-heatwave conditions, straining the electricity distribution network though officials have said there is no risk of power cuts for now. This year’s increase represents a big jump over the peak demand logged last year, when consumption in the city crossed the 6,000MW-mark for the first time on May 19. By June 6, the peak current draw had risen to 6,526 MW. While there has been no major blackout, many neighbourhoods have been going through outages mostly due to local faults. Some of the other affected areas include, Preet Vihar, Mayur Vihar Phase III, Seelampur, Krishna Nagar, Uttam Nagar west, Rohini east, Rithala, Chhattarpur and Karawal Nagar. While outlining a summer action plan on March 8, Delhi’s Power Minister Satyendar Jain said the city was equipped to deal with demands of up to 7,000 MW. This year, the month of May recorded its highest ever power consumption. Chief Minister Arvind Kejriwal said a coal shortage in thermal power plants supplying to Delhi threatened to plunge the city into a series of blackouts. But the matter was resolved with the extra coal being rushed to the plants.

Source: Hindustan Times

Bad news for discoms: Modi government proposes to penalise them for load-shedding

31 May. The draft amendment to the National Tariff Policy, 2016, released by the power ministry proposed to introduce a penalty mechanism for gratuitous load-shedding by electricity distribution companies (discoms), capping cross subsidies at 20% of the power supply cost and compute tariffs assuming aggregate technical and commercial (AT&C) losses of 15%. The ministry would await stakeholders’ comments on the proposed amendments till June 20. The draft also said that regulators should not take into account the subsidy component disbursed by the states while calculating tariffs and if state governments decide to subsidise certain consumer categories, it has to be done solely through direct benefit transfer (DBT) mechanism. The draft also proposes to reduce the cost of electricity units and increase the fixed monthly rental, in line with the two part tariff (fixed and variable) mechanism through which discoms pay power generators. While the fixed charges, roughly 40-45% of the tariff, are used to recover the costs of establishing and operating power plants, the variable charges are used to compensate for fuel charges and other taxes.

Source: The Financial Express


NATIONAL: NON-FOSSIL FUELS/ CLIMATE CHANGE TRENDS

India sees record low solar prices returning on China reforms

5 June. India may be the biggest beneficiary of solar industry reforms in China that are poised to reduce prices for photovoltaic panels. China announced it was halting approvals of some new solar projects this year and cutting subsidies to developers to ease its pace of expansion. That’s expected to slow demand in the world’s biggest market, weakening prices, and force the country’s manufacturers to ship more panels overseas. Tariffs in India’s next solar auction scheduled for mid-June may fall below the Rs 2.44 per kilowatt hour record set May 17 last year, Solar Energy Corp of India said. India is seeking to boost its clean energy generation as Prime Minister Narendra Modi has pledged to double India’s renewable power capacity to 175 GW by 2022, a target second only to China, as part of his plan to spearhead global efforts to combat climate change. India’s maximum annual solar-cell manufacturing capacity is about 3 GW while average yearly demand is 20 GW, meaning the remainder needs to be procured on the international market, according to India’s Ministry of New & Renewable Energy.

Source: Bloomberg

Amazon installs solar panels at fulfilment centres, to generate 8 MW of solar power

5 June. Amazon India has launched a new initiative to generate clean energy through installation of solar panels on the rooftops of its fulfilment centres and sortation sites in India. The company said it has already installed close to 1600 kilowatts (kW) of solar power panels at its two fulfilment centres in Delhi and Hyderabad. Amazon plans to further deploy large-scale solar panel systems on rooftops of an additional five fulfilment centres and two sortation sites located in Bengaluru, Mumbai and Chennai while further expanding existing capacity in Delhi. With this deployment, by the end of 2018, Amazon India will be able to generate solar energy close to 8,000 kW, the company said. Installations at these fulfilment and sort centres would cover an area of approximately 1 million square feet, reduce CO2 emission by around 9000 tons a year and provide energy to support the building’s annual energy needs. Amazon has also has set up solar energy systems in four Amazon Cares Community and Resource Centres in Haryana, which provide solar power to support the community programs in these centres all year round. The company has also donated solar energy systems to 19 government schools and 1 mini-planetarium in Bhiwandi, Maharashtra.

Source: The Economic Times

Over $42 bn invested in renewable energy sector in India in 4 yrs: Government

5 June. India’s renewable energy sector attracted investments of over $42 billion over the past four years and green energy projects have created over 10 million man-days of employment per annum over the period. These figures are part of the list of 4-years achievements of the Modi government shared by the Ministry of New and Renewable Energy (MNRE).

Source: The Economic Times

DGTR to hold public hearing on safeguard duty probe of solar cells on June 26

5 June. The Directorate General of Trade Remedies (DGTR), under the commerce ministry, will hold a public hearing on June 26 on safeguard duty investigation of solar cells. The meeting assumes significance as domestic solar manufacturers are demanding imposition of safeguard duty on imports of solar cells and modules. Earlier the Directorate General of Safeguards, which is now subsumed in DGTR, had recommended imposition of duty on imports of solar cells for a period of 200 days. India is targeting to 100 GW solar capacity by 2022.

Source: India Today

J&K to host first ever ‘global investors meet’ on hydropower in July

4 June. In a bid to boost the Jammu and Kashmir (J&K) economy, the Mehbooba Mufti-led government is all set to host in July-end its first ever ‘global investors meet’, aimed at harnessing hydro power potential of 20,000 MW in the state. J&K has exploited only about 16 percent of the estimated 20,000 MW of hydropower potential for the past two decades even as the energy demand has been growing gradually, creating a wider demand-supply gap. Some of the world’s top most hydropower generation companies are expected to take part in the global investor meet in Srinagar by July-end. The estimated hydropower potential of Jammu and Kashmir is 20,000 MW, of which about 16,475 MW has been identified.

Source: Business Standard

India’s wind energy capacity addition to improve by 3-3.5 GW in 2018-19

4 June. India’s wind energy capacity addition is set to improve by 3-3.5 GW in the current financial year against 1.7 GW in last fiscal due to the viability of bid tariffs and inter-state connectivity key headwinds for developers, Rating agency ICRA said. The Ministry of New and Renewable Energy (MNRE) along with the distribution utilities in Gujarat, Maharashtra and Tamil Nadu have awarded wind-power capacity of 7.6 GW over the past 15 months and another 10 GW each are proposed to be awarded in FY 2019 and FY 2020.

Source: The Economic Times

Small hydropower units making big impact on Western Ghats

2 June. The first ever scientific study in India of small hydropower projects (SHPs) in Western Ghats has revealed that despite being promoted as clean energy, they have significantly impacted ecology and caused alterations in the course of streams. Also, quality of water and freshwater fish too has taken a hit. Western Ghats represent a continuous band of natural vegetation extending over a distance of 1,500 kilometre and is spread across the six states of Gujarat, Maharashtra, Goa, Karnataka, Kerala and Tamil Nadu. SHPs are hydroelectric plants with relatively smaller power-generating capacity compared to larger ones. They are often promoted as a cleaner and greener alternative as it is assumed that they have little or no environmental impact. In India, they are defined as those that generate power up to 25 MW.

Source: The Times of India

Coal-fired power plants killing 80k adults every year

1 June. More than 10,000 people (above 25 years) in Maharashtra die prematurely every year due to toxic emissions from thermal power plants, which is the highest in the country. Nationally the figure is nearly 80,000 adults. All this because 300 thermal power plants have failed to meet the air pollution norms that were granted an extension by the Central Electricity Authority and Central Pollution Control Board. The study by Louisiana State University (LSU) released and it revealed that 9 lakh premature deaths in the country can be avoided if mitigation measures to curb air pollution are taken. An earlier study conducted by the Conservation Action Trust, Greenpeace India and Urban Emissions had stated that pollution from coal-based power plants resulted in 85,000-1.15 lakh premature deaths between 2011-12. While this study included people of all age groups, the one by LSU only takes into account the population above 25 years. As stated by the World Health Organisation (WHO) earlier, household air pollution is taking away maximum lives in India. LSU’s study, which is based on mathematical modelling, concluded that reducing the use of solid fuel in households by 50%, especially in Punjab, Uttar Pradesh and the North-East can avoid 2.58 lakh deaths annually. Uttar Pradesh witnesses maximum premature deaths due to residential pollution — 1.43 lakh per year. Next in line is Bihar with 75,300 deaths annually.

Source: The Economic Times

Vikram Solar commissions 10 MW solar project in Itarsi

31 May. Vikram Solar said it has commissioned a 10 MW solar power project for Bharat Electronics Ltd at the ordnance factory in Itarsi, Madhya Pradesh. Apart from installation, Vikram Solar will also provide operations and maintenance service to the plant for a period of 10 years from the date of commissioning, the company said.

Source: Business Standard


INTERNATIONAL: OIL

Kenya launches pilot oil export scheme via Mombasa

3 June. Kenya has launched a pilot scheme to export crude oil via Mombasa as part of efforts to capitalize on the country’s oil reserves. The East African country discovered commercial oil reserves in its Lokichar basin in 2012 and a 800 kilometre (500 mile) pipeline is due to be built before production starts up in 2021/22. The national government and the regional administration of the northwestern Turkana region agreed on revenue sharing that will come into force when production reaches full capacity by 2022. That agreement paved the way for the passage of a law on petroleum production, which will enable Tullow Oil – which operates the Kenyan fields – to start shipping oil that has been held in storage tanks for a year. Tullow has hired Wood Group to design the pipeline needed to bring crude from Lokichar’s onshore fields to a port in Lamu along the Indian Ocean coast. The cost of the pipeline is estimated at $1.1 billion, with a further $2.9 billion needed for upstream operations, the company said.

Source: Reuters

Iraq and Iran swap Kirkuk oil in strategic boost for Tehran

3 June. Iraq and Iran have begun exchanging crude oil, the Iranian oil ministry said, in a deal that will position Tehran to expand its interests in its most important Arab ally in the face of growing pressure from Washington. Crude from the Kirkuk field in northern Iraq is being shipped by truck to Iran. Tehran will use the oil in its refineries and will deliver the same amount of oil to Iraq’s southern ports, on the Gulf. After helping Iraq stifle a Kurdish push for independence last year, OPEC (Organization of the Petroleum Exporting Countries) producer Iran positioned itself to take control of oil exports from the region’s giant Kirkuk field. Baghdad agreed for the first time to divert crude from Kirkuk province, which it retook from the Kurds, to Iran, where it will supply a refinery in the city of Kermanshah. Iraq and Iran plan to build a pipeline to carry the oil from Kirkuk to avoid having to use trucks. The swap deal allows Iraq to resume sales of Kirkuk crude, which have been halted since Iraqi forces took back control of the fields from the Kurds in October 2017.

Source: Reuters

Arab Oil Ministers stress need for continued OPEC, non-OPEC cooperation

3 June. OPEC (Organization of the Petroleum Exporting Countries) and non-OPEC Arab Oil Ministers stressed the need for continued cooperation between oil producers who are part of a pact for a global supply cut that is due to expire at the end of 2018. The OPEC, Russia and several other producers agreed to cut output by about 1.8 million barrels per day (bpd) starting from January 2017. The curbs have driven down inventories and pushed up oil prices. OPEC Ministers from Saudi Arabia, the United Arab Emirates, Kuwait and Algeria along with their counterpart from non-OPEC Oman gathered in Kuwait for an unofficial meeting of a joint ministerial committee that monitors compliance with the agreement. The agreement has helped raise oil prices to above $80 a barrel and reduce a global oil supply glut. OPEC could decide to raise oil output as soon as June to cool the market and due to worries over Iranian and Venezuelan supply and after Washington raised concerns the oil rally was going too far, OPEC said. OPEC meets next on June 22 to set oil policy.

Source: Reuters

Russian oil output stagnant but remains above quotas

2 June. Russian oil output was stagnant at 10.97 million barrels per day (bpd) for a third month in a row in May, again exceeding quotas set under a global deal, energy ministry data showed. Russia, one of the world’s largest crude producers, and the Organization of the Petroleum Exporting Countries (OPEC) agreed to cut their combined output by 1.8 million bpd in order to smooth out bloated oil inventories and prop up prices. Russia has undertaken to cut its production by 300,000 bpd from 11.247 million bpd reached in October 2016, the baseline for the agreement. Production for the past three months in Russia has been at the highest level since output of 11 million bpd in April 2017. Russian oil majors Lukoil and Surgutneftegaz kept their production unchanged last month from April. Output at Gazprom Neft, the only Russian company, which produces oil offshore in the Arctic, declined by 1.1 percent. Output at the world’s largest listed oil producer Rosneft edged up by 0.2 percent in May from April. Analysts said Rosneft is able to restore 70,000 bpd of output in just two days if global production limits are lifted.

Source: Reuters

Russia, UAE sign partnership deal, aim for stability in oil markets

1 June. Russian President Vladimir Putin and Abu Dhabi Crown Prince Sheikh Mohammed bin Zayed of the United Arab Emirates (UAE) signed a declaration on a strategic partnership which included an agreement to continue cooperation in the oil and gas sphere. This cooperation is aimed at providing balance and stability on the global oil market, the declaration said.

Source: Reuters

OPEC efforts have been good for oil prices: Russian President

1 June. Russian President Vladimir Putin told Abu Dhabi Crown Prince Sheikh Mohammed bin Zayed of the United Arab Emirates (UAE) that efforts by the Organization of the Petroleum Exporting Countries (OPEC) have been good for oil prices.

Source: Reuters

No oil refineries will close in touted merger: Japan’s Idemitsu

31 May. Japan’s Idemitsu Kosan does not expect to close any domestic oil refineries as part of its long-delayed merger with smaller rival Showa Shell Sekiyu even as local demand for oil continues to fall. That comes as Idemitsu, Japan’s No.2 oil refiner by sales, battles to overcome entrenched opposition to the touted merger from its founding family at a time when the country’s refining market is going through the biggest shake-up in its history. The two refiners have struck a business alliance ahead of the possible merger, integrating the so-called loading programs they use to buy crude and working to jointly operate their seven group refineries. Idemitsu currently operates two filling stations in Vietnam, where it participates in the 200,000 barrels per day Nghi Son oil refinery project, and wants to increase that to 10 as it mulls the best way to expand in the country.

Source: Reuters

Rising oil prices bring hope to gloomy Canada sector

31 May. Years of low oil prices and high costs spurred a stampede by multinational majors out of Canada’s oil sands last year, leaving the remaining crude producers struggling to weather painful drops in profit. Environmentalists derided the “tar sands” as too dirty for investment, and analysts said the region’s high production costs made little sense in a world of $50 a barrel oil. Plunging output from heavy-crude competitor Venezuela – amid a sprawling crisis in its socialist government’s state-run oil firm, PDVSA – adds further opportunity for sales of Canadian crude to US (United States) Gulf of Mexico refiners.

Source: Reuters

UK’s Tullow Oil eyes new Ghana offshore assets: CEO

31 May. Tullow Oil is interested in new oil blocks off Ghana’s coast as part of the British explorer’s plans to consolidate its operations in the West African nation, Chief Executive Officer (CEO) Paul McDade said. Tullow is leading two operations offshore Ghana, including the country’s flagship 100,000 barrel per day Jubilee field, which began commercial production in late 2010. Ghana’s energy ministry said it would award nine new upstream oil blocks for commercial exploration off its coast beginning this year.

Source: Reuters

Chinese refiner Hengli to receive first Saudi crude oil by July

30 May. Chinese private chemical producer Hengli Group will receive its first cargo of Saudi crude oil by July as it prepares a new refinery for trial runs to be held in October. The 400,000 barrels per day (bpd) refinery in the northeastern port city of Dalian will become one of the five largest refineries in China and a major Saudi crude oil buyer. The plant is configured to process medium and heavy crude grades from Saudi Arabia. The first cargo – 2 million spot barrels of Saudi Arab Medium crude – will be loaded in June and imported by Chinese state oil firm Sinochem Corp. Hengli expects to import up to 22 million barrels of crude this year for trial runs at the plant. New refineries typically take up to six months to produce fuel that meet commercial specifications and to ramp up output. Construction of Hengli’s refinery and petrochemical complex is expected to be completed in July and trial runs would start in October, the company has said.

Source: Reuters

Brazil Senate passes bill that includes tax exemption for diesel

30 May. Brazil’s Senate passed a bill that includes an exemption of diesel from the PIS/Cofins payroll and social security tax, a pledge made by the government to striking truckers to lower the price of the fuel. President Michel Temer, however, is expected to line veto the diesel provision inserted by the lower chamber because it did not cut the price by the 46 cents per liter agreed upon. The government will still have to find a way to deliver the price reduction.

Source: Reuters


INTERNATIONAL: GAS

Singapore port authority awards grant to build LNG bunker ships

4 June. Singapore’s port authority will provide S$6 million ($4.5 million) to help build two liquefied natural gas (LNG) bunker vessels, in a bid to promote ship-to-ship LNG bunkering in the city-state. FueLNG, a joint venture between Keppel and Shell Eastern Petroleum, and Pavilion Gas will each receive a S$3 million co-funding grant for the vessels due for delivery in 2020, the Maritime and Port Authority of Singapore said. Coming International Maritime Organization rules will slash the amount of sulphur emissions that ships worldwide are allowed to burn, with ship owners looking at a range of solutions to meet the new regulations.

Source: Reuters

Golar’s Cameroon FLNG project starts commercial operations

4 June. Golar LNG said it had started commercial operations at a pioneering floating liquefied natural gas (FLNG) production platform in Cameroon, $70 million under budget. It is the first FLNG vessel of its kind and is likely to boost demand for Golar’s technology in Africa and beyond. The Hilli Episeyo FLNG vessel, converted from an aging tanker for $1.2 billion, produced the first LNG on March 12 but only exported its first cargo in May, to China, after technical issues delayed a ramp up in production. After continuously producing LNG over 16 days at an average of 7,500 cubic meters per day, Golar’s project clients have contractually accepted the facility, marking its commercial start, Golar said. Golar is in talks to develop similar projects in Senegal-Mauritania with BP and with Ophir Energy in Equatorial Guinea. Developer Golar provides the liquefaction facility and services under a production tolling agreement with oil firm Perenco and Cameroon’s state-run Societe Nationale Des Hydrocarbures (SNH). Golar LNG said commercial tolling fees will add about $164 million to its earnings before interest, tax, depreciation and amortization annually, plus an estimated $45 million in operating cash flow based on current oil prices.

Source: Reuters

Poland confident of meeting 2022 deadline for completing gas link to Norway

4 June. Poland is confident of meeting a 2022 deadline for completing a new Baltic Sea gas pipeline to Norway. The Baltic Pipe project, which will connect Poland to Norwegian gas deposits via Denmark and aims to reduce Polish reliance on Russian gas, had been delayed. Construction of the pipeline, with capacity of 10 billion cubic meters per year, is set to begin in spring 2020. Polish state-run gas firm PGNiG buys most of the gas Poland consumes from Russia’s Gazprom under a long-term deal set to expire in 2022. Poland does not intend to extend the contract beyond that date. In other attempts to diversify sources of supply, Poland opened its first liquefied natural gas (LNG) terminal on the Baltic Sea, which it plans to expand, and PGNiG has been buying more and more gas from sources other than Gazprom.

Source: Reuters

Japan consortium picks Port Kembla as site for Australia LNG import terminal

4 June. A consortium including Japan’s JERA Co and Marubeni Corp aiming to ship liquefied natural gas (LNG) to Australia’s east coast has chosen a site south of Sydney at Port Kembla for an import terminal, it said. The project will allow access to a new gas supply for local industries in New South Wales state by 2020, the consortium, Australian Industrial Energy (AIE), said. AIE also includes iron ore magnate Andrew Forrest’s Squadron Energy. Top global LNG buyer JERA is a joint venture of Tokyo Electric Power Company and Chubu Electric Power Company. Shipping LNG within Australia or importing from elsewhere is viable at the moment because LNG is cheap, but prices are expected to rise in the early 2020s. The Port Kembla terminal would have the capacity to supply more than 100 petajoules per year, sufficient to meet more than 70 percent of New South Wales’ total gas requirements. Building the terminal is likely to require a capital investment between A$200 million and A$300 million ($152 million and $228 million), AIE said. Australia’s biggest power generator, AGL Energy, is also considering building an LNG import terminal off the neighbouring state of Victoria for taking up to 2.5 million tonnes a year, but that would be mostly for its own needs, to supply its gas-fired power stations and households.

Source: Reuters

Malaysia’s Petronas buys 25 percent stake in LNG Canada project

31 May. Malaysia’s state-owned oil and gas company Petroliam Nasional Bhd (Petronas) said it is buying a 25 percent stake in a Canadian liquefied natural gas (LNG) export project, nearly a year after cancelling its own planned terminal. Petronas scrapped plans to build a $36 billion ($28 billion) LNG export terminal in British Columbia last year over concerns of a glut in the market that led to depressed fuel prices. But surprisingly strong demand from China, South Korea and India has erased those concerns, and market sentiment has recovered. Petronas said in a statement that it would buy an equity stake in LNG Canada, an export project led by Royal Dutch Shell located in Kitimat, British Columbia. The purchase is expected to close in the next few months, the company said. The C$40 billion LNG Canada project will consist of two LNG production facilities, known as trains, that are expected to export a combined 13 million tonnes per year of LNG. Petronas is joining as Shell and its partners prepare for a final decision to go ahead with the project, which would be the first large-scale LNG plant constructed in several years.

Source: Reuters

Germany’s RWE may double LNG derivatives trades this year

31 May. Germany’s RWE Supply & Trading may double or triple its trades of liquefied natural gas (LNG) derivatives this year from 2017 as it manages price risk for its physical cargoes, the company said. The trading arm of RWE AG, Germany’s biggest power generator and one of the most active utilities involved in trading, buys coal, LNG and oil products globally, and traded 1.5 million tonnes of LNG derivatives last year. Asia’s potential shift away from oil-linked prices and a need to manage risk for the company’s physical cargoes will boost the financial trades, the global head of the trading unit’s LNG division Javier Moret said. The company traded 6 million tonnes a year of physical LNG last year, up from 4.5 million tonnes in 2016.

Source: Reuters

Norway’s 2018 gas output to match or just lag 2017 record: Gassco

30 May. Norway’s gas production in 2018 is expected to match or just lag last year’s record, the Chief Executive Officer (CEO) Frode Leversund of pipeline system operator Gassco said. Norway last year produced 124.2 billion standard cubic meters of gas, of which 117.4 billion was exported via pipelines to Europe and 5.6 billion was shipped as liquefied natural gas (LNG). In 2019, production was also seen at around 2017-2018 levels, the CEO said. Gassco’s yearly maintenance schedule, which started in April, is so far on track, and any additional needs that may arise will be handled during the summer window, the CEO said. At Nyhamna, a major processing plant that will start receiving additional gas from the new Aasta Hansteen field in late 2018, Gassco is in final negotiations with electricity grid operators to boost the security of its power supply. Separately, Gassco has also been contacted by companies that want to transport natural gas from the Arctic Barents Sea, and is currently making an infrastructure plan for the remote region, the CEO said.

Source: Reuters


INTERNATIONAL: COAL

China’s Hebei to cut over 12 mt of coal capacity in 2018

1 June. China’s smog-prone Hebei province plans to phase out 12.17 million tonnes (mt) of coal capacity at 22 mines in 2018, accounting for 13 percent of its total capacity, local authorities said. Of the 22 mines, 10 belong to state-owned Jizhong Energy Group and eight are owned by Kailuan Group. The province aims to cut a total of 51.03 mt of coal capacity by 2020, leaving 70 mt of capacity. In 2018, China aims to cut 150 mt of coal capacity across the country.

Source: Reuters

BHP-Mitsubishi JV to sell Australia coal mine to Japan’s Sojitz

30 May. Global miner BHP Billiton said that its joint venture (JV) with a unit of Mitsubishi Corp would sell a coal mine in Queensland in Australia to Japan’s Sojitz Corp for A$100 million ($74.89 million). The Gregory Crinum hard coking coal mine had ceased production by the end of 2015. BHP said its annual capacity was 6 million tonnes prior to that.

Source: Reuters


INTERNATIONAL: POWER

Nordlink cable to Germany may initially lower Norway power prices: Statnett

1 June. A power cable being laid between Germany and Norway may lower Norwegian energy prices in its first years as wind power in northern Germany at times cannot be exported further south due to grid bottlenecks, Norway’s Statnett said. NordLink, a 1.4 GW interconnector that will begin operations in 2020, will export power produced by hydro-electric dams from Norway to Germany. It could also import power. The project and other planned cables have been under fire in Norway over concerns the Nordic country would lose its cheap power supply by exporting electricity to Germany. Cheap power has been a draw for energy-hungry industries in Norway. Statnett said the new cable could initially lower prices for Norwegian customers until Germany’s grid is upgraded to distribute the extra supplies from Nordlink, although he said prices would rise after 2025. After 2025, the € 1.5-2 billion ($1.8 billion-$2.3 billion) cable would increase Norwegian power prices by an estimated one euro per megawatt hour, Statnett said. Statnett began laying the second of two 0.7 GW subsea wires that together make up the interconnector, in a fjord in the southwest of the country. NordLink is being developed by Statnett, Dutch-German grid firm TenneT and Germany’s KfW investment bank. French cable maker Nexans is installing the cable in Norway. NordLink is due to start commercial trials by the end of 2020, with upgrades on the Norwegian grid completed by 2022, Statnett said.

Source: Reuters

IFC, EBRD and FMO help upgrade and expand electricity grid in Turkey’s Western Anatolia

1 June. IFC, a member of the World Bank Group, EBRD, European Bank for Reconstruction and Development and the Dutch Development Bank FMO have joined forces to finance improvements in the electricity distribution network in Turkey’s Osmangazi region in Western Anatolia. The financing package of Turkish Lira equivalent of $330 million to Osmangazi Elektrik Dagitim A.S (OEDAS) will help to upgrade, modernisation and expansion of the distribution network which serves around 2.7 million people in 194 towns and 1,596 villages. OEDAS is the electricity distribution company of the Osmangazi region, which includes five provinces: Afyonkarahisar, Bilecik, Eskisehir, Kutahya and Usak. IFC is extending a loan worth $ 80 million, the EBRD is providing $ 110 million and FMO is contributing US$ 65 million.  The World Bank Group has been a long-time partner in the development of power sector in Turkey. Since 2008, IFC consistently continues to support the sector with a series of high impact projects. IFC has financed over 5GW capacity generation by investing or mobilizing more than $3 billion in the Turkish power sector.

Source: WebWire

Construction union lashes failed Anglesea power plant implosion

31 May. The construction union has attacked the botched demolition by explosives of the former Anglesea power station, saying it was bewildered by the lack of care taken during the failed operation. Alcoa (Aluminum Company of America) attempted to raze the six-storey building but only succeeded in leveling two steel structures attached to the old power station. The former power station and coal mine sit within 143 hectares of land owned by Alcoa, which has plans for tourism and residential development at the site. The power station supplied power to Alcoa’s Point Henry aluminium smelter but was shut down in 2015 after 46 years of operation.

Source: The Age

China’s State Grid to invest $38 bn in Brazil power sector

31 May. Power company China State Grid Corp Ltd will invest 140 billion reais ($38 billion) in Brazil over the next five years, including investments in transmission and generation, Qu Yang, vice president of State Grid’s Brazilian unit, said. Investment in the transmission segment alone will total more than 90 billion reais, Qu said. He said it could use ultra-high voltage transmission technology – which sends huge amount of power long distances with low losses – to connect remote areas that can generate large amounts of wind and solar to population centers in Rio de Janeiro, Sao Paulo and the rest of the Americas.

Source: Reuters

Britain’s SSE to raise standard electricity and gas prices

30 May. Britain’s SSE said it would raise its standard electricity and gas prices, leading to a 6.7 percent increase on average to a typical dual fuel bill. The price rise, effective from July 11, reflects the impact of higher wholesale and policy costs, SSE said. Power suppliers in Britain have been under pressure from the emergence of small, cut-price rivals, as well as the cap on retail prices proposed by Prime Minister Theresa May’s government. SSE said the price rise equates to an increase of 5.7 percent for gas and 7.7 percent for electricity, meaning 2.36 million customers with SSE Energy Services and M&S Energy will see their bills go up by about 1.50 pounds per week, or 76 pounds per year.

Source: Reuters

China Southern Power reports record power demand

30 May. China Southern Power Grid Co Ltd reported record power demand this month, the government said, the latest sign that China’s power market is already under pressure as weather forecasters predict a hotter-than-usual summer. The state power company has increased its load to a record of 164 GW this month, up 0.9 percent from the previous peak load and an increase of 25.5 percent year-on-year, the National Development & Reform Commission said. It is the first time the peak load has reached a new high before the official start of the Northern Hemisphere summer on June 21, when power demand surges as a result of air conditioner use. China Southern Power is one of two state-owned power transmission firms covering five provinces in the south, including Yunnan, Hainan, Guangxi, Guangdong and Guizhou, with the rest of the country covered by the State Grid Corp.

Source: Reuters


INTERNATIONAL: NON-FOSSIL FUELS/ CLIMATE CHANGE TRENDS

Israel plans country’s largest solar energy field

5 June. Israel is planning to put to tender a 500 MW solar energy project, which would be the country’s largest, the energy ministry said. Plans for the photovoltaic field, which will be built by one or more groups near the southern Israeli town of Dimona, were approved by the government’s National Infrastructure Committee, though they still need final endorsement from the government. Most of the project will be put to tender by the start of 2020, the ministry said.

Source: Reuters

Brazil-Canada JV to grow though acquisitions in renewable power

5 June. A joint venture (JV) formalized by one of Brazil’s largest conglomerates and a Canadian retirement fund plans to become a major renewable power generator in Brazil, mostly through acquisitions. Brazil’s Votorantim Energia, controlled by privately-held Votorantim SA, and the Canada Pension Plan Investment Board closed a deal to form a 50-50 venture to invest in renewable energy in Brazil. The venture manages two large wind parks in northeastern Brazil with combined generation capacity of 565 MW. It is looking at expansion opportunities in a sector where there have been several deals as indebted local companies sell projects to new investors after Brazil’s deepest depression. The JV sees a future in Brazil for the so-called hybrid parks, which will combine in the same location wind, solar and, in the near future, storage capacity through batteries.

Source: Reuters

Rich nations spend $100 bn a year on fossil fuels despite climate pledges

4 June. The world’s major industrial democracies spend at least $100 billion each year to prop up oil, gas and coal consumption, despite vows to end fossil fuel subsidies by 2025, a report said ahead of the G7 summit in Canada. Britain, Canada, France, Germany, Italy, Japan and the United States (US) – known as the Group of Seven (G7) – pledged in 2016 to phase out their support for fossil fuels by 2025. But a study led by Britain’s Overseas Development Institute (ODI) found they spent at least $100 billion a year to support fossil fuels at home and abroad in 2015 and 2016. Researchers scrutinised and scored each country against indicators such as transparency, pledges and commitments, as well as their progress towards ending the use, support and production of fossil fuels. France was ranked the highest overall, scoring 63 out of 100 points, followed by Germany (62), Canada (54) and the UK (47), the report said. The US scored lowest with 42 out of 100 points due to its support for fossil fuel production and its withdrawal from a 2015 global pact to fight climate change. President Donald Trump announced a year ago he was ditching the deal agreed upon by nearly 200 countries over opposition from businesses and US allies. The 2015 Paris agreement committed nations to curbing greenhouse emissions and keeping the global hike in temperatures “well below” 2 degrees Celsius (3.6 Fahrenheit) above pre-industrial times. Britain scored the lowest on transparency for denying that its government provided fossil fuel subsidies, even though it supported tax breaks for North Sea oil and gas exploration, the report said.

Source: Reuters

White House expected to announce compromise on biofuels

4 June. The Trump administration is expected to announce changes in biofuels policies, including a plan to count ethanol exports toward federal biofuels usage quotas and allowing year-round sale of fuels with a higher blend of ethanol. After hosting several meetings between representatives of the corn and refining industries, the administration was in the “last stages” of formally proposing changes to biofuels regulations intended to appease both sides. The changes are aimed at easing tensions between the oil and corn industries, which have been clashing for months over the future of the US (United States) Renewable Fuel Standard (RFS) – a law that requires refiners to add increasing amounts of biofuels into the nation’s gasoline and diesel. While the RFS has helped farmers by creating a 15 billion-gallon-a-year market for corn-based ethanol, oil refiners have increasingly complained that complying with the law incurs steep costs and threatens the very blue-collar jobs President Donald Trump has promised to protect. The administration is expected to announce that it plans to allow exports of biofuels like ethanol to count toward the annual biofuels volume mandates under the RFS – which could ease the burden on domestic refiners by reducing the amounts they would have to blend domestically.

Source: Reuters

Toshiba withdraws from South Texas nuclear power plant project

1 June. Toshiba Corp said it was scrapping a plan to build two nuclear reactors at a US (United States) power plant after long delays in which it failed to find investors because of sharply lower electricity rates and increased global regulation. Toshiba America Nuclear Energy Corp, the Japanese company’s wholly owned US subsidiary, reached an agreement in March 2008 to build the third and fourth reactors for utility NRG Energy Inc’s South Texas Project. The plant has two 1,280 MW reactors. The project is part of the Nuclear Innovation North America, which is 90 percent owned by New Jersey-based NRG and 10 percent owned by Toshiba. The Fukushima nuclear disaster, the worst since Chernobyl in 1986, forced a reassessment of atomic power, and cheap shale gas and coal has led to the closure of several older plants in the US.

Source: Reuters

World Bank helps Bangladesh expand access to renewable energy

31 May. The Bangladesh government has signed a $55 million financing agreement with the World Bank to expand renewable energy uses in rural areas. The additional financing to the Second Rural Electrification and Renewable Energy Development (RERED II) Project will install 1,000 solar irrigation pumps, 30 solar mini-grids and about 4 million improved cooking stoves in rural areas, the Washington-based lender said. Since 2003, the World Bank said it has been helping Bangladesh expand solar-powered electricity in remote and rural areas. The country has one of the world’s largest domestic solar power programmes, covering 14 percent of the population, it said.

Source: The Economic Times

Uzbekistan offers Russia to build nuclear power plant in Navoi

31 May. Uzbekistan proposed Russia to build a nuclear power plant in the Navoi region, Director General of Rosatom State Nuclear Energy Corp Alexei Likhachev said. Earlier, a deal was signed by Likhachev and the Uzbek Deputy Prime Minister Nodir Otazhonov. The agreement creates a legal basis for bilateral cooperation between Russia and Uzbekistan regarding the peaceful use of atomic energy.

Source: AzerNews

Buffett utility to be first in US to reach 100 percent renewables

30 May. MidAmerican Energy Co will become the first US (United States) investor-owned utility to source 100 percent of its customers’ electricity needs from renewable energy when it completes a $922 million wind farm in 2020, the company said. The utility owned by Warren Buffett’s Berkshire Hathaway Inc began investing in wind power about 15 years ago to both hedge against volatile fuel prices and generate more pollutant-free power. The company, based in Des Moines, Iowa, serves 770,000 electric customers. With the completion of the utility’s twelfth wind project, MidAmerican will generate enough renewable energy to equal the amount consumed by customers in its Iowa service territory. Wind power accounts for more than 35 percent of the electricity generated in Iowa, more than any other US state. MidAmerican’s 591 MW Wind XII project is subject to approval by the Iowa Utilities Board.

Source: Reuters

DATA INSIGHT

Supply of Coal to Power Sector During 2017

Million Tonnes

MonthCILSCCL
January36.44.975
February33.84.702
March36.75.362
April31.94.516
May33.44.332
June32.24.053
July31.14.104
August31.23.93
September32.33.955
October374.194
November38.54.677
December38.64.857

Coal Supply to Power Sector: Contracted & E-auction

Source: Rajya Sabha, Unstarred Q. No. 49 (Ministry of Coal)


Publisher: Baljit Kapoor

Editorial Adviser: Lydia Powell

Editor: Akhilesh Sati

Content Development: Vinod Kumar Tomar

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