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Nov 2015
In all, Cairn India will end up investing as much as $694 million to fully develop gas reserves at the Raageshwari fields, which includes laying of a pipeline from the Barmer field to Palanpur. The total amount of $694.39 million will be spent as under:
88Seismic activities: $0.98 million
8Development studies: $11.79 million
8Drilling: $243.00 million
8Project management: $12.45 million
8Engineering: $3.50 million
8Surface facilities: $311.20 million
8Commissioning: $4.70 million
8Pre-operations: $6.56 million
8Land acquisition: $52 million
8Insurance: $1.47 million
8Office costs and overheads: $7.98 million
8G&A expenses: $6 million
8Contingency (5%): $32.76 million
Total: $694.39 million
Click on Details for more Details
88Seismic activities: $0.98 million
8Development studies: $11.79 million
8Drilling: $243.00 million
8Project management: $12.45 million
8Engineering: $3.50 million
8Surface facilities: $311.20 million
8Commissioning: $4.70 million
8Pre-operations: $6.56 million
8Land acquisition: $52 million
8Insurance: $1.47 million
8Office costs and overheads: $7.98 million
8G&A expenses: $6 million
8Contingency (5%): $32.76 million
Total: $694.39 million
Click on Details for more Details
Dramatic changes are sweeping the oil and gas market.
8In the past, just a word from OPEC could send the oil markets into turmoil. The mere mention of a need to curtail output will send oil prices soaring to dizzying heights.
8Not any more.
8The unity of OPEC has since taken a dent after Saudi Arabia refused to allow OPEC to try to raise prices by pumping less crude, in the hope that a low price would drive competitors, especially America’s shale-oil producers, out of business.
8OPEC members are now fighting a grim battle among themselves and with other producers to carve out more market share. Saudi Arabia for example has fought with Russia and fellow OPEC members to sell oil to China. It has recently sought to displace Russian crude going into refineries in Sweden and Poland, and cut prices across Europe.
8The market now reacts to a different kind of news. Market move on news of an oil-workers’ strike in Brazil; cuts to Iraq’s investment budget; a Saudi bond issue that may enable it to withstand lower prices for longer.
8These kind of factors were never at play earlier but they are now.
8But beyond this, in the longer run, the cancellation of at least $150 billion of investments this year, with more cuts to come next year, will hurt supply.
8On the other hand, developing countries like India are showing record growth in use of hydrocarbons. Overall the IEA expects demand to grow by 1.9% this year, well above the average for the past decade, of 0.9%.
8But this demand-supply juxtaposition may not impact prices in the way it normally should.
8IEA predicted that a relatively sluggish recovery in demand and decline in supply would yield a price of $80 a barrel in 2020. But it also aired an alternative scenario in which oil stays in a range of $50-60 a barrel until well into the 2020s. One of the main reasons it hedged its bets is American shale oil, which has not been responding as promptly to changes in the price as analysts had assumed and has shown a surprising resilience so far. Details
8In the past, just a word from OPEC could send the oil markets into turmoil. The mere mention of a need to curtail output will send oil prices soaring to dizzying heights.
8Not any more.
8The unity of OPEC has since taken a dent after Saudi Arabia refused to allow OPEC to try to raise prices by pumping less crude, in the hope that a low price would drive competitors, especially America’s shale-oil producers, out of business.
8OPEC members are now fighting a grim battle among themselves and with other producers to carve out more market share. Saudi Arabia for example has fought with Russia and fellow OPEC members to sell oil to China. It has recently sought to displace Russian crude going into refineries in Sweden and Poland, and cut prices across Europe.
8The market now reacts to a different kind of news. Market move on news of an oil-workers’ strike in Brazil; cuts to Iraq’s investment budget; a Saudi bond issue that may enable it to withstand lower prices for longer.
8These kind of factors were never at play earlier but they are now.
8But beyond this, in the longer run, the cancellation of at least $150 billion of investments this year, with more cuts to come next year, will hurt supply.
8On the other hand, developing countries like India are showing record growth in use of hydrocarbons. Overall the IEA expects demand to grow by 1.9% this year, well above the average for the past decade, of 0.9%.
8But this demand-supply juxtaposition may not impact prices in the way it normally should.
8IEA predicted that a relatively sluggish recovery in demand and decline in supply would yield a price of $80 a barrel in 2020. But it also aired an alternative scenario in which oil stays in a range of $50-60 a barrel until well into the 2020s. One of the main reasons it hedged its bets is American shale oil, which has not been responding as promptly to changes in the price as analysts had assumed and has shown a surprising resilience so far. Details
It looks like the government has not decided yet on the contours of the next round of auctions for oil and gas blocks in India.
8This is evident from the fact that it has circulated a consultation paper inviting comments from stakeholder on how to hammer together a new policy in the face of the changing dynamics of the oil and gas sector today.
8Depending upon the comments, the government is open to finetuning the policy. "We are flexible as we know that the industry is going through a difficult phase worldwide," a petroleum ministry official told this website.
8The previous government too came out with a Model Revenue Sharing Contract and put it in the public domain, seeking stakeholder comments.
8The intentions of the Modi government are however clear.
8It is not going to backtrack on exploiting India's oil and gas reserves hidden underneath for fear of global warming. At least not yet.
8"The Government proposes to award future acreages under a new fiscal and contractual regime." the paper said.
8The theme seems to be to encourage investment by providing adequate sops and by making it easier to do busienss for E&P companies.
Click on Reports for more Details
8This is evident from the fact that it has circulated a consultation paper inviting comments from stakeholder on how to hammer together a new policy in the face of the changing dynamics of the oil and gas sector today.
8Depending upon the comments, the government is open to finetuning the policy. "We are flexible as we know that the industry is going through a difficult phase worldwide," a petroleum ministry official told this website.
8The previous government too came out with a Model Revenue Sharing Contract and put it in the public domain, seeking stakeholder comments.
8The intentions of the Modi government are however clear.
8It is not going to backtrack on exploiting India's oil and gas reserves hidden underneath for fear of global warming. At least not yet.
8"The Government proposes to award future acreages under a new fiscal and contractual regime." the paper said.
8The theme seems to be to encourage investment by providing adequate sops and by making it easier to do busienss for E&P companies.
Click on Reports for more Details
This is the first time that the new government has brought out a Consultation Paper on the Indian oil & gas industry. The paper enunciates some of the key elements of the new policy,, for which it is now seeking stakeholder comments.
8One key cornerstone of the new policy will be the Open Acreage Licensing Policy (OALP)
The following are going to be the basic parameters of OLAP as formulated by this government:
8An offer system is to be put into place which is continuous in nature and allows the companies to submit bids for areas of their choice.
8The DGH has already demarcated the entire sedimentary area of 3.14 million sq km into sectors of size 10’ (minute) x 10’ (minute). Each sector measures approximately 336 sq km and there are 9300 such sectors in India.
8Upon Receipt of Expression of Interest (EOI) from the interested bidders and while demarcating the proposed blocks, DGH will exercise application of its own available Geological & Geophysical (G & G) data to validate authenticity of the submitted EOI for an area and shall carve out the block.
8After obtaining the necessary clearances, the bids from all the interested companies, including those which submitted the EOIs, would be invited as per contractual & fiscal terms under an Uniform Licensing Policy.
Click on Reports for more Details
8One key cornerstone of the new policy will be the Open Acreage Licensing Policy (OALP)
The following are going to be the basic parameters of OLAP as formulated by this government:
8An offer system is to be put into place which is continuous in nature and allows the companies to submit bids for areas of their choice.
8The DGH has already demarcated the entire sedimentary area of 3.14 million sq km into sectors of size 10’ (minute) x 10’ (minute). Each sector measures approximately 336 sq km and there are 9300 such sectors in India.
8Upon Receipt of Expression of Interest (EOI) from the interested bidders and while demarcating the proposed blocks, DGH will exercise application of its own available Geological & Geophysical (G & G) data to validate authenticity of the submitted EOI for an area and shall carve out the block.
8After obtaining the necessary clearances, the bids from all the interested companies, including those which submitted the EOIs, would be invited as per contractual & fiscal terms under an Uniform Licensing Policy.
Click on Reports for more Details
What are going to be the basic contours of the contractual and fiscal terms of the policy.
One part of it will be a Uniform Licensing Policy, with the following elements:
8A uniform licensing policy will,, according to the Consultation Paper, enable E&P operators to explore and extract all hydrocarbon resources covered under the Oilfields Regulation and Development (ORD) Act, 1948, and Petroleum and Natural Gas (PNG) Rules, 1959 under one PEL/PML, and one contractual regime will replace the NELP and CBM regime for the Contracts to be awarded in future.
8The uniform licence will enable the contractor to explore conventional and unconventional oil and gas resources including CBM, shale gas/oil, tight gas, gas hydrates and any other resource to be identified in future which fall within the definition of “Petroleum” and “Natural Gas” under PNG Rules, 1959.
8In other words, every possible energy resource under the acreage will be allowed to be exploited, including gas hydrates.
8As is now established, gas hydrate production is soon going to be economically viable and some pilot exploitation programmes are already underway. In this context, allowing companies to have the first right on this asset in an E&P block is going to be seen as a favourable parameter by potential bidders for offshore E&P acerages.
8A reasonably large volume of gas hydrates are likely to be a part of the energy basket in the future and in this aspect India has made significant strides in looking at this hydrocarbon source for the last one decade.
Click on Reports for more Details
One part of it will be a Uniform Licensing Policy, with the following elements:
8A uniform licensing policy will,, according to the Consultation Paper, enable E&P operators to explore and extract all hydrocarbon resources covered under the Oilfields Regulation and Development (ORD) Act, 1948, and Petroleum and Natural Gas (PNG) Rules, 1959 under one PEL/PML, and one contractual regime will replace the NELP and CBM regime for the Contracts to be awarded in future.
8The uniform licence will enable the contractor to explore conventional and unconventional oil and gas resources including CBM, shale gas/oil, tight gas, gas hydrates and any other resource to be identified in future which fall within the definition of “Petroleum” and “Natural Gas” under PNG Rules, 1959.
8In other words, every possible energy resource under the acreage will be allowed to be exploited, including gas hydrates.
8As is now established, gas hydrate production is soon going to be economically viable and some pilot exploitation programmes are already underway. In this context, allowing companies to have the first right on this asset in an E&P block is going to be seen as a favourable parameter by potential bidders for offshore E&P acerages.
8A reasonably large volume of gas hydrates are likely to be a part of the energy basket in the future and in this aspect India has made significant strides in looking at this hydrocarbon source for the last one decade.
Click on Reports for more Details
The new government claims says that the present fiscal system of production sharing based on Pre-Tax Investment Multiple (PTIM) and cost recovery or production linked payment will be replaced by a revenue sharing model.
8In this model it is proposed that the bidders will bid the percentage of revenue that they will share with the government against two revenue scenarios
--when revenue is less than or equal to the Lower Revenue point and
--when revenue is more than or equal to Higher Revenue point.
8The percentage Government Revenue Share at revenue points falling between the lower and higher Revenue points will be interpolated on a linear scale.
8Revenue, net of royalty (as applicable) will be shared between the Contractor and the Central Government based on revenue accrued for oil and gas on a monthly basis.
Click on Reports for more Details
8In this model it is proposed that the bidders will bid the percentage of revenue that they will share with the government against two revenue scenarios
--when revenue is less than or equal to the Lower Revenue point and
--when revenue is more than or equal to Higher Revenue point.
8The percentage Government Revenue Share at revenue points falling between the lower and higher Revenue points will be interpolated on a linear scale.
8Revenue, net of royalty (as applicable) will be shared between the Contractor and the Central Government based on revenue accrued for oil and gas on a monthly basis.
Click on Reports for more Details
It is pertinent to note that the indigenous oil and gas industry stands opposed to the revenue-sharing contracts.
8The industry has objected to one of the major assumption for moving to the revenue sharing model: that the PSC (with cost recovery) system encourage contractors to inflate costs.
8This argument has been faulted on the ground that the operator in fact recovers less and not more under the cost recovery model than what he spends (as the financing cost is not recoverable under the contracts) in the blocks.
8Thus a higher expense is a net loss to the contractor. In addition, higher investment increases risks, delaying full cost recovery. In light of these facts, the industry had earlier argued that no prudent investor will inflate the capex because he stands to lose more than he gains
8The industry is of the view that the interests of the contractor and the government in the PSC are perfectly aligned and there is no need to tinker with the Pre-Tax Investment Multiple (PTIM) model.
Comment: How would a company know by scanning sparse seismic data made available in a DGH data room on a deepwater block whether it will have enough oil or gas for it to come up with a revenue share number while bidding for the block? A deepwater well can cost anywhere above $ 25 to 100 million and it is not possible for anyone to accurately project what kind of revenue it will generate at the very beginning, even before exploration work can starts in the block. The revenue share model can work when there is some kind of certainty on the prospectivity of a block or the exploration work has been completed and a Field Development Plan has been drawn up. Then again, there is so much uncertainty on the gas pricing front that it will be difficult to get investors to make long term commitments without more clarity on the future gas price. There is also uncertainty over how the oil and gas sector will fare in the years ahead given changes on the ground brought about by global warming and disruptive technologies. Lobbies are already calling for keeping most of the global oil and gas reserves untapped in order to ensure that global warming does not cross the 2 degree threshold. This website predicts that the revenue share model will fail in India. And the sooner policy makers realize it, the better it is for the country. The best way to encourage the industry will be to retain the PTIM Model despite its obvious disadvantages.
Click on our "Reports" section for more Details
8The industry has objected to one of the major assumption for moving to the revenue sharing model: that the PSC (with cost recovery) system encourage contractors to inflate costs.
8This argument has been faulted on the ground that the operator in fact recovers less and not more under the cost recovery model than what he spends (as the financing cost is not recoverable under the contracts) in the blocks.
8Thus a higher expense is a net loss to the contractor. In addition, higher investment increases risks, delaying full cost recovery. In light of these facts, the industry had earlier argued that no prudent investor will inflate the capex because he stands to lose more than he gains
8The industry is of the view that the interests of the contractor and the government in the PSC are perfectly aligned and there is no need to tinker with the Pre-Tax Investment Multiple (PTIM) model.
Comment: How would a company know by scanning sparse seismic data made available in a DGH data room on a deepwater block whether it will have enough oil or gas for it to come up with a revenue share number while bidding for the block? A deepwater well can cost anywhere above $ 25 to 100 million and it is not possible for anyone to accurately project what kind of revenue it will generate at the very beginning, even before exploration work can starts in the block. The revenue share model can work when there is some kind of certainty on the prospectivity of a block or the exploration work has been completed and a Field Development Plan has been drawn up. Then again, there is so much uncertainty on the gas pricing front that it will be difficult to get investors to make long term commitments without more clarity on the future gas price. There is also uncertainty over how the oil and gas sector will fare in the years ahead given changes on the ground brought about by global warming and disruptive technologies. Lobbies are already calling for keeping most of the global oil and gas reserves untapped in order to ensure that global warming does not cross the 2 degree threshold. This website predicts that the revenue share model will fail in India. And the sooner policy makers realize it, the better it is for the country. The best way to encourage the industry will be to retain the PTIM Model despite its obvious disadvantages.
Click on our "Reports" section for more Details
After laying out the framework on which the new policy is to be based, the government has now asked for comments from stakeholders on the following issues:
8Operationalising open acreage licensing, modalities and standard procedure thereof
8Work Programme- mandatory or biddable- weightage in bid evaluation
8Pricing and marketing of natural gas produced from the areas to be awarded under the new contractual and fiscal regime.
8Technical Qualification- weightage in bid evaluation
8Incentivising E&P in the unconventional hydrocarbon
8Role of DGH and Management Committee to align with the Government’s goal of ‘minimum government-maximum governance’.
8Methodology for calculation of cost of unfinished work programme
8Timely implementation of Field Development Plans submitted by the operator
8Environmental and social issues in exploration and production of oil and gas
8Any other issue
Click on Reports for more Details
8Operationalising open acreage licensing, modalities and standard procedure thereof
8Work Programme- mandatory or biddable- weightage in bid evaluation
8Pricing and marketing of natural gas produced from the areas to be awarded under the new contractual and fiscal regime.
8Technical Qualification- weightage in bid evaluation
8Incentivising E&P in the unconventional hydrocarbon
8Role of DGH and Management Committee to align with the Government’s goal of ‘minimum government-maximum governance’.
8Methodology for calculation of cost of unfinished work programme
8Timely implementation of Field Development Plans submitted by the operator
8Environmental and social issues in exploration and production of oil and gas
8Any other issue
Click on Reports for more Details
Big oil companies do not think that fossil fuels are facing extinction anytime soon.
8Exxon Mobil, the world’s biggest publicly traded oil company, argues that fossil fuels will still account for three-quarters of primary energy demand even in 2040, only slightly below their current share
8But the International Energy Agency (IEA), a body that represents oil-consuming countries, says that to keep global warming to two degrees, fossil fuels would need to fall to 60% of the energy mix by 2040.
8Oil majors expect energy efficiencies to go up, causing demand for fossil fuels to drop but not by enough to force them out of business. There is concern that some of the hydrocarbon reserves will become "stranded" in the future.
8But even of fossil fuel is still in use, the move is towards owning gas assets because they give out less emissions.
8Some oil companies are turning towards solar energy. Total of France has a majority stake in SunPower, one of the world’s biggest solar-power firms. Eldar Saetre, the boss of Statoil, Norway’s state-run oil company, says that in 15 years there may be more opportunities outside oil and gas than within.
Comment: It is now necessary for Indian oil companies to come out with their own blueprints on how they will get out of the oil and gas sector and yet stay relevant and in business. In India, there are a wide range of options. The steps they take here and now will determine their future like never before. Details
8Exxon Mobil, the world’s biggest publicly traded oil company, argues that fossil fuels will still account for three-quarters of primary energy demand even in 2040, only slightly below their current share
8But the International Energy Agency (IEA), a body that represents oil-consuming countries, says that to keep global warming to two degrees, fossil fuels would need to fall to 60% of the energy mix by 2040.
8Oil majors expect energy efficiencies to go up, causing demand for fossil fuels to drop but not by enough to force them out of business. There is concern that some of the hydrocarbon reserves will become "stranded" in the future.
8But even of fossil fuel is still in use, the move is towards owning gas assets because they give out less emissions.
8Some oil companies are turning towards solar energy. Total of France has a majority stake in SunPower, one of the world’s biggest solar-power firms. Eldar Saetre, the boss of Statoil, Norway’s state-run oil company, says that in 15 years there may be more opportunities outside oil and gas than within.
Comment: It is now necessary for Indian oil companies to come out with their own blueprints on how they will get out of the oil and gas sector and yet stay relevant and in business. In India, there are a wide range of options. The steps they take here and now will determine their future like never before. Details
Enel is one of Europe's largest electricity companies and it is shutting down 23 coal based power stations in Italy with a capacity of a massive 13,000 Mw.
8The power stations have become uneconomical in face of more competitive renewable power supply.
8These defunct power plants are being bought off and they are being transformed into a logistical warehouse while some others will be turned into galleries and museum.
8It is not just Enel which is shutting down power plants. Eon, Germany’s biggest utility, reported a record third-quarter loss, driven mostly by €8.3 billion ($8.8 billion) of impairment charges, particularly on fossil-fuel plants that are struggling because subsidised renewables are clobbering electricity prices. Next year it will split itself in two: a conventional power-plant business, and one dominated by greener energy.
8Many other European utilities are struggling with overcapacity and low wholesale power prices. It is estimated that Europe's conventional power plants suffered a cumulative hit to operating profits of €36 billion between 2008 and 2013. They will have to reinvent themselves in the coming years.
8In India too, some of the older and inefficient units are going to get stranded as less expensive renewal power infusion into the grid gains traction.
8But shutting down these units are not going to be that easy here like in Euirope. There is a lot of red tape in between, and there will always be attempts to renovate or modernize them without doing the math in the correct manner.
8India's power companies will have to move faster than its oil and gas companies to reduce their carbon footprint, for while there is no carbon free electricity, there if carbon free oil. Details
8The power stations have become uneconomical in face of more competitive renewable power supply.
8These defunct power plants are being bought off and they are being transformed into a logistical warehouse while some others will be turned into galleries and museum.
8It is not just Enel which is shutting down power plants. Eon, Germany’s biggest utility, reported a record third-quarter loss, driven mostly by €8.3 billion ($8.8 billion) of impairment charges, particularly on fossil-fuel plants that are struggling because subsidised renewables are clobbering electricity prices. Next year it will split itself in two: a conventional power-plant business, and one dominated by greener energy.
8Many other European utilities are struggling with overcapacity and low wholesale power prices. It is estimated that Europe's conventional power plants suffered a cumulative hit to operating profits of €36 billion between 2008 and 2013. They will have to reinvent themselves in the coming years.
8In India too, some of the older and inefficient units are going to get stranded as less expensive renewal power infusion into the grid gains traction.
8But shutting down these units are not going to be that easy here like in Euirope. There is a lot of red tape in between, and there will always be attempts to renovate or modernize them without doing the math in the correct manner.
8India's power companies will have to move faster than its oil and gas companies to reduce their carbon footprint, for while there is no carbon free electricity, there if carbon free oil. Details
Given the turmoil in the oil and gas industry in India, orders are difficult to come by but Cairn India is now seeking a full compressor package for its Barmer block in Rajasthan.
8The package is meant for the Raageshwari Deep Gas (RDG) field
8The Raageshwari Gas Terminal (RGT) is located 80 Km from Mangala Processing Terminal (MPT).
8The company is looking for the following major items:
8Gas turbine driven centrifugal package capable of handling a capacity of 60 - 120 MMSCFD of water saturated Natural Gas (No H2S, CO2 < 1%) suitable to compress inlet hydrocarbon gas from a minimum of 3.0 barg to ~ 46 barg.
8Cairn is looking for a complete integrated package, with scrubbers, coolers (air cooled), piping, instrumentation & control systems, automated valving, machine protection systems and emission monitoring systems.
8The terminal will also need a gas driven reciprocating compressors with each compressor, each capable of handling 10 - 50 MMSCFD of gas.
8There are other elements to the package as well, including gas turbine driven power generator (“GTG”) package including waste heat recovery system with circulating hot oil. The generator package suitable to deliver power of minimum 6 MW at alternator terminals.
Click on Reports for more Details
8The package is meant for the Raageshwari Deep Gas (RDG) field
8The Raageshwari Gas Terminal (RGT) is located 80 Km from Mangala Processing Terminal (MPT).
8The company is looking for the following major items:
8Gas turbine driven centrifugal package capable of handling a capacity of 60 - 120 MMSCFD of water saturated Natural Gas (No H2S, CO2 < 1%) suitable to compress inlet hydrocarbon gas from a minimum of 3.0 barg to ~ 46 barg.
8Cairn is looking for a complete integrated package, with scrubbers, coolers (air cooled), piping, instrumentation & control systems, automated valving, machine protection systems and emission monitoring systems.
8The terminal will also need a gas driven reciprocating compressors with each compressor, each capable of handling 10 - 50 MMSCFD of gas.
8There are other elements to the package as well, including gas turbine driven power generator (“GTG”) package including waste heat recovery system with circulating hot oil. The generator package suitable to deliver power of minimum 6 MW at alternator terminals.
Click on Reports for more Details
Cairn India's gas pipeline will run from its Raageshwari Deep Gas (RDG) Terminal at Gudamalani in Barmer (Rajasthan) to the Gujarat State Petronet’s (GSPL) Palanpur Terminal in Gujarat.
8The gas will be sold through the GSPL`s grid, around 200 km away at Palanpur in Gujarat.
8The gas produced from the RDG field would be gathered and treated at the RDG terminal, from where it will be evacuated through a 24-inch pipeline to GSPL`s Gujarat gas grid.
8The cost of the 24-inch pipeline is expected to come roughly to around Rs 1,000 crore.
8Along with the pipeline, the company also plans to create a gas processing and export hub at the Raageshwari Gas Terminal (RGT) in line with the Mangala Process Terminal (MPT) for oil handling and processing.
8A final decision on the laying of the pipeline will be taken by the PNGRB.
Click on Details for more Details
8The gas will be sold through the GSPL`s grid, around 200 km away at Palanpur in Gujarat.
8The gas produced from the RDG field would be gathered and treated at the RDG terminal, from where it will be evacuated through a 24-inch pipeline to GSPL`s Gujarat gas grid.
8The cost of the 24-inch pipeline is expected to come roughly to around Rs 1,000 crore.
8Along with the pipeline, the company also plans to create a gas processing and export hub at the Raageshwari Gas Terminal (RGT) in line with the Mangala Process Terminal (MPT) for oil handling and processing.
8A final decision on the laying of the pipeline will be taken by the PNGRB.
Click on Details for more Details
While the global economy slows down, there has been much talk about how India has been able to beat this trend.
8But last week's OPEC review says that there are pitfalls in the Indian economy too.
8Indeed, concerns about growth outlook have risen, despite a 0.5% cut in interest rates.
8Greater drag from exports, soft rural demand and continuing lack of private investment will have a short-term negative effect on India’s economic growth in 3Q15.
8In addition, September’s consumer price index (CPI) predictably accelerated as favourable base effects from the previous year reversed.
8The outlook for India's industrial sector and the overall economy is therefore not without a note of caution.
8Purchasing manufacturers’ index (PMI) data for October shows a further loss of growth momentum across India’s manufacturing economy, with a slower rise in new business inflows
resulting in weaker expansion of output.
Click on Reports for more Details
8But last week's OPEC review says that there are pitfalls in the Indian economy too.
8Indeed, concerns about growth outlook have risen, despite a 0.5% cut in interest rates.
8Greater drag from exports, soft rural demand and continuing lack of private investment will have a short-term negative effect on India’s economic growth in 3Q15.
8In addition, September’s consumer price index (CPI) predictably accelerated as favourable base effects from the previous year reversed.
8The outlook for India's industrial sector and the overall economy is therefore not without a note of caution.
8Purchasing manufacturers’ index (PMI) data for October shows a further loss of growth momentum across India’s manufacturing economy, with a slower rise in new business inflows
resulting in weaker expansion of output.
Click on Reports for more Details
Karaikal Port Pvt Ltd continues to make progress in setting up a Floating Storage Re-gasification Unit at its port in Pudduchery.
8All the environmental clearance work has been completed and a public hearing is slated soon. Clearance should be forthcoming shortly thereafter.
8The facility will be designed in a manner so that it will be able to handle 230,000 cubic metre LNG vessels.
8The annual LNG handling capacity is going to be around 6 MMTPA.
8What the port is going to create is a Bulk Liquid Berth that is capable of handling other liquid and gaseous petroleum cargoes should the need arise.
8The facilities will consist of berthing and mooring dolphins capable of handling vessels with a draft of around 13.5 metres, with the surface dredged to around 15 metres.
8Besides building the facilities, there will be business opportunity too for dredging as the need will be to evacuate around 4 million cubi meters of sand.
8The port has a desalination plant of 240 KLD capacity which will now be enhanced to 2 MLD to cater to the port's needs.
8The estimated power requirement is 20 MW.
8Pertinently, the port has been in operation since 2009 and has handled over 20 million tonnes of cargo ncluding liquid petroleum.
Click on Reports for more Details
8All the environmental clearance work has been completed and a public hearing is slated soon. Clearance should be forthcoming shortly thereafter.
8The facility will be designed in a manner so that it will be able to handle 230,000 cubic metre LNG vessels.
8The annual LNG handling capacity is going to be around 6 MMTPA.
8What the port is going to create is a Bulk Liquid Berth that is capable of handling other liquid and gaseous petroleum cargoes should the need arise.
8The facilities will consist of berthing and mooring dolphins capable of handling vessels with a draft of around 13.5 metres, with the surface dredged to around 15 metres.
8Besides building the facilities, there will be business opportunity too for dredging as the need will be to evacuate around 4 million cubi meters of sand.
8The port has a desalination plant of 240 KLD capacity which will now be enhanced to 2 MLD to cater to the port's needs.
8The estimated power requirement is 20 MW.
8Pertinently, the port has been in operation since 2009 and has handled over 20 million tonnes of cargo ncluding liquid petroleum.
Click on Reports for more Details
Given the dramatic pace at which the energy sector is evolving these days and the breathtaking pace of technological change, does it make sense to set up an LNG terminal today in India along with its attendant pipeline network?
8For anyone to set up a terminal, a 15 to 20 year perspective is needed. Is LNG a viable energy option for India in that kind of a time perspective?
8The latest BP Technology report says that gas is the cleanest alternative for the globe until the year 2050.
8Even assuming a steep carbon tax on emissions -- something that the oil & gas industry must realize is inevitable -- gas still remains a viable option to produce power in comparison to coal based power or even renewable energy resources such as solar and wind.
8The problem is that BP's calculation is based on US data, and the cost reasonability holds for domestically priced US gas. The report specifically says that it does not hold for LNG as it involves a large processing and carriage fee that makes the landed price much more expensive.
8There is no doubt a huge amount of LNG capacity coming up world over. Concomitantly, there will be a requirement for gasification terminals. There is near consensus that India will be one of the largest destination points for all the LNG liquefaction erminals that are being built.
8But a promoter of an LNG regasification plant in India will have to get his math right.
8He just can't go by his gut instinct anymore or he cannot put money into a project based on the thumb rule that because there is a huge appetite for energy in India, LNG is an inevitable choice.
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8For anyone to set up a terminal, a 15 to 20 year perspective is needed. Is LNG a viable energy option for India in that kind of a time perspective?
8The latest BP Technology report says that gas is the cleanest alternative for the globe until the year 2050.
8Even assuming a steep carbon tax on emissions -- something that the oil & gas industry must realize is inevitable -- gas still remains a viable option to produce power in comparison to coal based power or even renewable energy resources such as solar and wind.
8The problem is that BP's calculation is based on US data, and the cost reasonability holds for domestically priced US gas. The report specifically says that it does not hold for LNG as it involves a large processing and carriage fee that makes the landed price much more expensive.
8There is no doubt a huge amount of LNG capacity coming up world over. Concomitantly, there will be a requirement for gasification terminals. There is near consensus that India will be one of the largest destination points for all the LNG liquefaction erminals that are being built.
8But a promoter of an LNG regasification plant in India will have to get his math right.
8He just can't go by his gut instinct anymore or he cannot put money into a project based on the thumb rule that because there is a huge appetite for energy in India, LNG is an inevitable choice.
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The question to note now is that if there is going to be an carbon emission tax is India, then which is a cheaper option, coal or LNG?
8A steep tax on carbon may make nascent technologies like Carbon Capture and Storage a viable option for coal based power plants
8In this context, the cost economics will have to be worked out for LNG in India after taking into account a multiple set of parameters that includes the cost of coal, the landed price of LNG, the carbon emission tax and the cost of Carbon Capture and Storage.
8There are just far too many variables at play with at this point in time for the LNG industry, leave along the inexplicably rabid opposition to the laying of gas pipelines in states such as Kerala and Tamil Nadu that has sunk the Kochi LNG terminal.
8There are disruptive changes too that must be taken into account, like the rapid advance of solar and wind energy and their falling cost of production. Already solar power is cheaper than LNG based power.
8Add to it the possibility of using emerging and cost competitive energy storage technology and the math becomes much more complicated thereafter.
8These kinds of disruptive changes are still some time away, but LNG adherents must figure out which segments of the economy will use gas if it become unviable to produce baseload power.
8If LNG becomes unviable for use to produce power, which are the other segments in which LNG usage is going to be viable?
8Will locally made urea based on LNG -- a large volume of gas can be absorbed by new urea plants -- be cheaper than the landed cost of imported urea? Noy really, because American urea, based on Henry Hub prices, will be far cheaper.
8If the price of crude remains low, then competitive liquid fuels can fill up the gap, albeit in the short run, in Indian furnaces.
8Gas will have to be used for cracking purposes to produce ethylene that goes into the manufacture of petrochemicals. But will refineries use naphtha instead of gas?
8So far, gas demand in India has been calculated on a linear basis but a more robust and dynamic model is required to be put in place. Or else a lot of investments made on the basis of Planning Commission or Niti Aayog figures may go absolutely wrong.
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8A steep tax on carbon may make nascent technologies like Carbon Capture and Storage a viable option for coal based power plants
8In this context, the cost economics will have to be worked out for LNG in India after taking into account a multiple set of parameters that includes the cost of coal, the landed price of LNG, the carbon emission tax and the cost of Carbon Capture and Storage.
8There are just far too many variables at play with at this point in time for the LNG industry, leave along the inexplicably rabid opposition to the laying of gas pipelines in states such as Kerala and Tamil Nadu that has sunk the Kochi LNG terminal.
8There are disruptive changes too that must be taken into account, like the rapid advance of solar and wind energy and their falling cost of production. Already solar power is cheaper than LNG based power.
8Add to it the possibility of using emerging and cost competitive energy storage technology and the math becomes much more complicated thereafter.
8These kinds of disruptive changes are still some time away, but LNG adherents must figure out which segments of the economy will use gas if it become unviable to produce baseload power.
8If LNG becomes unviable for use to produce power, which are the other segments in which LNG usage is going to be viable?
8Will locally made urea based on LNG -- a large volume of gas can be absorbed by new urea plants -- be cheaper than the landed cost of imported urea? Noy really, because American urea, based on Henry Hub prices, will be far cheaper.
8If the price of crude remains low, then competitive liquid fuels can fill up the gap, albeit in the short run, in Indian furnaces.
8Gas will have to be used for cracking purposes to produce ethylene that goes into the manufacture of petrochemicals. But will refineries use naphtha instead of gas?
8So far, gas demand in India has been calculated on a linear basis but a more robust and dynamic model is required to be put in place. Or else a lot of investments made on the basis of Planning Commission or Niti Aayog figures may go absolutely wrong.
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Narendra Modi is one Indian leader who had more exposure to leaders from the outside world than most other Prime Ministers.
8He loves the attention and the accolades.
8And there is a good and a bad side to this for the Indian oil and gas industry.
8The good side is that the Prime Minister builds a credible image of India as an investment destination and this has indirect benefits for the industry.
8The reverse side this, as Modi has admitted in his speech in Wembley, is the constant rejoinder he hears from world leaders about the need to stop global warming and India's role in doing so.
8No doubt India today faces a disproportionate burden of tackling climate change as it was slow to catch the development train earlier. The country has the onerous responsibility of providing energy to hundreds of millions of people and yet stop the globe from warming up beyond the 2 degree mark.
8Energy demand is likely to go up disproportionately in India even as it goes down in the rest of the developed world.
8Balancing the demand for lower emissions with higher energy demand will turn out to be one of the biggest challenges of any government in power in New Delhi.
In that sense, Modi is a bit of a maverick and he likes playing to the galleries. With the world as his audience, it is more likely that the Modi government rather than any left-of-centre led government, will impose heftier emission curbs in India
8Against a call from the green lobby to keep fossil fuel reserves untapped in order to save the world, it is possible that the government may not encourage the E&P industry any more.
8Tax sops may not be withdrawn as of now but additional concessions may not be forthcoming.
8The next round of E&P auctions may have the right to price gas at a level that the market can bear but the tax holiday schemes may well get trimmed.
8Since the onus of keeping global warming in check has unfairly shifted to India's shoulders, the oil and gas industry must be prepared for a tumultuous future ahead as far as the policy framework is concerned.
8And given that India has vociferous environmental activism, the industry will find itself in the defensive while lobbying for sops.
8The "Fasten Seat Belt" sign has just been switched on for the oil and gas industry in India.
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8He loves the attention and the accolades.
8And there is a good and a bad side to this for the Indian oil and gas industry.
8The good side is that the Prime Minister builds a credible image of India as an investment destination and this has indirect benefits for the industry.
8The reverse side this, as Modi has admitted in his speech in Wembley, is the constant rejoinder he hears from world leaders about the need to stop global warming and India's role in doing so.
8No doubt India today faces a disproportionate burden of tackling climate change as it was slow to catch the development train earlier. The country has the onerous responsibility of providing energy to hundreds of millions of people and yet stop the globe from warming up beyond the 2 degree mark.
8Energy demand is likely to go up disproportionately in India even as it goes down in the rest of the developed world.
8Balancing the demand for lower emissions with higher energy demand will turn out to be one of the biggest challenges of any government in power in New Delhi.
In that sense, Modi is a bit of a maverick and he likes playing to the galleries. With the world as his audience, it is more likely that the Modi government rather than any left-of-centre led government, will impose heftier emission curbs in India
8Against a call from the green lobby to keep fossil fuel reserves untapped in order to save the world, it is possible that the government may not encourage the E&P industry any more.
8Tax sops may not be withdrawn as of now but additional concessions may not be forthcoming.
8The next round of E&P auctions may have the right to price gas at a level that the market can bear but the tax holiday schemes may well get trimmed.
8Since the onus of keeping global warming in check has unfairly shifted to India's shoulders, the oil and gas industry must be prepared for a tumultuous future ahead as far as the policy framework is concerned.
8And given that India has vociferous environmental activism, the industry will find itself in the defensive while lobbying for sops.
8The "Fasten Seat Belt" sign has just been switched on for the oil and gas industry in India.
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Niko Resources, the 10% shareholder in RIL's D-6 and other blocks, continues to default on its obligations to its borrowers subsequent to the crisis in the oil and gas industry.
8One set of borrowers has now taken the company to court, seeking an enforcement of the obligations under the lending agreement.
8But Niko has sought more time from borrowers, claiming that its core assets should be safeguarded until valuation improves.
8The company brass wants the lenders to commit to sacrifices -- in terms of foregoing interest -- so that it can continue to service its working capital obligations in India and Bangladesh.
8"The strategic plan that the company is pursuing will likely be subject to certain approvals by certain stakeholders and could have a significant negative impact on securityholders and other stakeholders and the value of their interests in the company," the Niko statement said.
8For the time being however, the lenders have no option but the hang in there.
8Pushing the management is not going to help as no one right now is willing to buy our Niko's stake at a price that is viable enough for the lenders or will help them pay off their obligations.
8In the meanwhile Niko is laying off workers, shutting down its exploration offices and concentrating only on its producing assets.
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8One set of borrowers has now taken the company to court, seeking an enforcement of the obligations under the lending agreement.
8But Niko has sought more time from borrowers, claiming that its core assets should be safeguarded until valuation improves.
8The company brass wants the lenders to commit to sacrifices -- in terms of foregoing interest -- so that it can continue to service its working capital obligations in India and Bangladesh.
8"The strategic plan that the company is pursuing will likely be subject to certain approvals by certain stakeholders and could have a significant negative impact on securityholders and other stakeholders and the value of their interests in the company," the Niko statement said.
8For the time being however, the lenders have no option but the hang in there.
8Pushing the management is not going to help as no one right now is willing to buy our Niko's stake at a price that is viable enough for the lenders or will help them pay off their obligations.
8In the meanwhile Niko is laying off workers, shutting down its exploration offices and concentrating only on its producing assets.
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Under pressure, Niko has begun withdrawing from its exploration commitments around the world. In the second quarter of 2016, it closed its Indonesian office and discontinued operating activities related to its remaining Indonesia PSCs. As on September 30, 2015, the Indonesian PSCs had $61 million of accounts payable and $144 million of recorded liabilities for unfulfilled exploration work commitments. So it is withdrawing from there.
8Niko's Trinidad subsidiary had $25 million of accounts payable (including PSC obligations), $75 million of recorded liabilities for unfulfilled exploration work commitments, and $54 million of unrecorded future exploration commitments. The office there has been shut down too.
8But Niko says that it still has enough cash to take care of its working capital obligations but clearly not enough to pay of its debtors.
It has given the following details on its cash balances:
--Unrestricted cash and cash equivalents as at September 30, 2015 of $37 million;
--Restricted cash as at September 30, 2015 of $22 million (subject to terms of the facilities agreement, as amended);
--Receipts of oil and natural gas revenues from its producing assets in India and Bangladesh;
--Potential proceeds from asset sales, farm-outs and other arrangements; and
--Potential proceeds from future equity or debt issuances.
8But will things get better from here on? That is a question that will be very difficult to answer.
8Niko's survival will depend critically on its ability to extract more money from its its producing assets. Rightfully, it is going slow on its exploration work, for the idea now is to preserve rather than splash funds.
8Eventually, it all boils down to the price of oil and gas. If prices remain low, Niko's will be able to barely pay for its operational expenses. If prices do rise and that is what the company is hoping for, the lenders can be taken care of and perhaps a suitor can also be found for its distressed assets.
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8Niko's Trinidad subsidiary had $25 million of accounts payable (including PSC obligations), $75 million of recorded liabilities for unfulfilled exploration work commitments, and $54 million of unrecorded future exploration commitments. The office there has been shut down too.
8But Niko says that it still has enough cash to take care of its working capital obligations but clearly not enough to pay of its debtors.
It has given the following details on its cash balances:
--Unrestricted cash and cash equivalents as at September 30, 2015 of $37 million;
--Restricted cash as at September 30, 2015 of $22 million (subject to terms of the facilities agreement, as amended);
--Receipts of oil and natural gas revenues from its producing assets in India and Bangladesh;
--Potential proceeds from asset sales, farm-outs and other arrangements; and
--Potential proceeds from future equity or debt issuances.
8But will things get better from here on? That is a question that will be very difficult to answer.
8Niko's survival will depend critically on its ability to extract more money from its its producing assets. Rightfully, it is going slow on its exploration work, for the idea now is to preserve rather than splash funds.
8Eventually, it all boils down to the price of oil and gas. If prices remain low, Niko's will be able to barely pay for its operational expenses. If prices do rise and that is what the company is hoping for, the lenders can be taken care of and perhaps a suitor can also be found for its distressed assets.
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Niko's sales volumes from the D-6 block for Q-2, 2015-16 was at 41 mcfd in comparison to 47 mcfd for the same period last year.
8For the six month period ending September 2015, the output was 41 mcfd whereas it was 49 scfd.
8The lower output has also coincided with a fall in the price of gas.
8Pertinently, the figures are in relation with the 10% stake in the D-6 block, overall the sales volumes are about 10 times higher.
8According to Niko, the price of gas between April and September, 2015 was $4.66/mmbtu based on GCV basis and that represented a 23% increase from $4.30/mmbtu that prevailed earlier.
8The price announced for October 2015 to March 2016 of $3.82 / MMbtu GCV (equates to approximately $4.24 / MMbtu NCV) represents a reduction of approximately 18 percent from the price for the April 2015 to September 2015 period.
8But the point to note is that any increase beyond the $4.2/mmbtu level does not go into the pockets of Niko and its partners as the differential goes into another account from where it will reimbursed to the consortium after a dispute over gold plating of natural gas processing facilities is resolved.
8The price for oil and condensate sales for the second quarter of fiscal 2016 decreased by approximately 55 percent compared to the second quarter of fiscal 2015 as a result of the decline in world oil prices. And this impacted cash flows not just for Niko but also for RIL and BP.
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8For the six month period ending September 2015, the output was 41 mcfd whereas it was 49 scfd.
8The lower output has also coincided with a fall in the price of gas.
8Pertinently, the figures are in relation with the 10% stake in the D-6 block, overall the sales volumes are about 10 times higher.
8According to Niko, the price of gas between April and September, 2015 was $4.66/mmbtu based on GCV basis and that represented a 23% increase from $4.30/mmbtu that prevailed earlier.
8The price announced for October 2015 to March 2016 of $3.82 / MMbtu GCV (equates to approximately $4.24 / MMbtu NCV) represents a reduction of approximately 18 percent from the price for the April 2015 to September 2015 period.
8But the point to note is that any increase beyond the $4.2/mmbtu level does not go into the pockets of Niko and its partners as the differential goes into another account from where it will reimbursed to the consortium after a dispute over gold plating of natural gas processing facilities is resolved.
8The price for oil and condensate sales for the second quarter of fiscal 2016 decreased by approximately 55 percent compared to the second quarter of fiscal 2015 as a result of the decline in world oil prices. And this impacted cash flows not just for Niko but also for RIL and BP.
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The consortium of RIL, BP and Niko is going slow on its exploration programme in the D-6 block.
8The first Drill Stem Test (DST) was conducted in the first quarter of 2016 in the block and with the completion of the second DST at the beginning of the third quarter of fiscal 2016, the drilling program in the D6 has been concluded for fiscal 2016
8No programme is expected from here on, according to Niko, and plans will next unfold only in fiscal 2017. The drilling programme will possibly resume for one or more additional sidetracks in the MA field but only in 2017.
8There is no mention for any more side tracking activity for gas wells in the D-6 block as some of this work in the past had not paid results because of high water cut and sand ingress..
8The contractor consortium is now lying low, waiting for government policy initiatives and developments on the pricing front before it begins to take the next steps forward in this block.
8Meanwhile Niko has withdrawn from the NEC-25 block after the RIL-BP duo elected to conduct a DST for one discovery, That way, Niko does not need to pay its share of the DST.
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8The first Drill Stem Test (DST) was conducted in the first quarter of 2016 in the block and with the completion of the second DST at the beginning of the third quarter of fiscal 2016, the drilling program in the D6 has been concluded for fiscal 2016
8No programme is expected from here on, according to Niko, and plans will next unfold only in fiscal 2017. The drilling programme will possibly resume for one or more additional sidetracks in the MA field but only in 2017.
8There is no mention for any more side tracking activity for gas wells in the D-6 block as some of this work in the past had not paid results because of high water cut and sand ingress..
8The contractor consortium is now lying low, waiting for government policy initiatives and developments on the pricing front before it begins to take the next steps forward in this block.
8Meanwhile Niko has withdrawn from the NEC-25 block after the RIL-BP duo elected to conduct a DST for one discovery, That way, Niko does not need to pay its share of the DST.
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Siemens has put together what it has recently dubbed as advanced technological platforms and solutions for the entire LNG value chain.
8From LNG liquefaction to shipping to regasification, the multinational has several innovative and all encompassing solutions.
8But potential Indian clients are interested in LNG regasification terminals and Siemens claims to have the right solutions in this segment.
8Taking integration one step further, Siemens claims to offer a comprehensive energy supply, automation, drive and IT approach for LNG receiving terminals -- and all from a single source.
8Dedicated plant packages include integrated automation and control solutions for unloading (jetty, berthing, mooring), storage plant, storage tanks, boil-off gas compression, vaporiser systems, and send-out.
8Based on proven systems such as SIMATIC PCS7, industrial PCs, RAID-based archiving systems and PROFIBUS network components, these solutions guarantee maximum reliability, going up to SIL 3 rating.
8Pre-engineered standard modules and standard software ensure compatibility across all processes while at the same time reducing time-to-market.
8What’s more, Siemens delivers boil-off gas (BOG) compression solutions of unparalleled performance.
8Documented by references, the company's designs as well as their extraordinary durability and extended operating life made Siemens the worldwide market leader in BOG recovery technology.
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8From LNG liquefaction to shipping to regasification, the multinational has several innovative and all encompassing solutions.
8But potential Indian clients are interested in LNG regasification terminals and Siemens claims to have the right solutions in this segment.
8Taking integration one step further, Siemens claims to offer a comprehensive energy supply, automation, drive and IT approach for LNG receiving terminals -- and all from a single source.
8Dedicated plant packages include integrated automation and control solutions for unloading (jetty, berthing, mooring), storage plant, storage tanks, boil-off gas compression, vaporiser systems, and send-out.
8Based on proven systems such as SIMATIC PCS7, industrial PCs, RAID-based archiving systems and PROFIBUS network components, these solutions guarantee maximum reliability, going up to SIL 3 rating.
8Pre-engineered standard modules and standard software ensure compatibility across all processes while at the same time reducing time-to-market.
8What’s more, Siemens delivers boil-off gas (BOG) compression solutions of unparalleled performance.
8Documented by references, the company's designs as well as their extraordinary durability and extended operating life made Siemens the worldwide market leader in BOG recovery technology.
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Stockpiles of oil at a record 3 billion barrels are providing world markets with a degree of comfort. This massive cushion has inflated even as the global oil market adjusts to below $50/bbl oil.
8Demand growth has risen to a five-year high of nearly 2 mb/d, with India galloping to its fastest pace in more than a decade.
8But gains in demand have been outpaced by vigorous production from OPEC and resilient non-OPEC supply - with Russian output at a post-Soviet record and likely to remain robust in 2016 as well.
8The net result is brimming crude oil stocks that offer an unprecedented buffer against geopolitical shocks or unexpected supply disruptions.
8Moreover, world demand growth is forecast to ease closer to a long-term trend of 1.2 mb/d in 2016 as supportive factors that have recently fuelled consumption are expected to fade. The impact of oil's steep price plunge on end users is unlikely to be repeated and economic conditions are forecast to remain problematic in countries such as China.
8As winter approaches, stocks of diesel - the heating fuel of choice for Europe and the US - are now brimming.
8Between February and August, OECD middle distillate stocks
8This could protect the market from a supply crunch should there be a lengthy spell of cold temperatures. But the current forecast is for a mild winter in Europe and the US. If it turns out to
be true, bulging stock levels will add further pressure and oil market bears may choose not to hibernate.
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8Demand growth has risen to a five-year high of nearly 2 mb/d, with India galloping to its fastest pace in more than a decade.
8But gains in demand have been outpaced by vigorous production from OPEC and resilient non-OPEC supply - with Russian output at a post-Soviet record and likely to remain robust in 2016 as well.
8The net result is brimming crude oil stocks that offer an unprecedented buffer against geopolitical shocks or unexpected supply disruptions.
8Moreover, world demand growth is forecast to ease closer to a long-term trend of 1.2 mb/d in 2016 as supportive factors that have recently fuelled consumption are expected to fade. The impact of oil's steep price plunge on end users is unlikely to be repeated and economic conditions are forecast to remain problematic in countries such as China.
8As winter approaches, stocks of diesel - the heating fuel of choice for Europe and the US - are now brimming.
8Between February and August, OECD middle distillate stocks
8This could protect the market from a supply crunch should there be a lengthy spell of cold temperatures. But the current forecast is for a mild winter in Europe and the US. If it turns out to
be true, bulging stock levels will add further pressure and oil market bears may choose not to hibernate.
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The time has come for Indian oil and gas companies to take very serious notice of the subtle but definitive changes in public policy that is likely to come from growing opposition to the fossil fuel industry.
8It is a global trend and it is likely to backed by government resolve. So the industry must prepare from now on to face a fairly hostile policy environment if not immediately but surely a few years from now.
8There seems to be increasing unanimity that the only way to avoid cataclysmic global warming is to keep most of the fossil fuel reserves untapped.
8According to the Intergovernmental Panel on Climate Change (IPCC) and the International Energy Agency (IEA), three quarters of existing proven fossil fuel reserves must be left in the ground to meet the internationally agreed goal of holding a global average temperature rise to no more than 2°C.
8It is now a do or die situation. If more oil and gas reserves are to be exploited then the world must first have to give up the 2°C goal and move on to a higher but unacceptable 3°C or 4°C change. Any change beyond 2°C can create a cataclysmic chain effect that may push global warming towards an uncontrollable path.
8Policy strategists within Indian oil companies will now have to figure out whether their oil and gas assets in the eastern and western offshore basins fall within those reserves that will go untapped.
8There is unlikely to be a direct government fiat against developing these reserves but there will signals both from the market and policy makers from now on that will discourage the exploitation of such reserves.
8Some of assets held by Indian oil and gas companies abroad may also get stranded as they will be unable to earn an economic rate of return.
8Investments in Mozambique and Russia may become unviable as they face the grim prospect of being priced out of the market.
8Even existing producing assets may become uneconomic, like GSPC's Deendayal field. Additional workover operations in the D-6 field may also reach the point of diminishing physical efficiency because of high water cut and sand ingress, so much so that incremental output may no longer pay for itself at going prices.
8Many of ONGC's new gas fields may just lie unexploited too.
8All these companies have no option but to wait and watch, just to be able to figure out where they stand in relation to fast moving developments on the energy front across the world.
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8It is a global trend and it is likely to backed by government resolve. So the industry must prepare from now on to face a fairly hostile policy environment if not immediately but surely a few years from now.
8There seems to be increasing unanimity that the only way to avoid cataclysmic global warming is to keep most of the fossil fuel reserves untapped.
8According to the Intergovernmental Panel on Climate Change (IPCC) and the International Energy Agency (IEA), three quarters of existing proven fossil fuel reserves must be left in the ground to meet the internationally agreed goal of holding a global average temperature rise to no more than 2°C.
8It is now a do or die situation. If more oil and gas reserves are to be exploited then the world must first have to give up the 2°C goal and move on to a higher but unacceptable 3°C or 4°C change. Any change beyond 2°C can create a cataclysmic chain effect that may push global warming towards an uncontrollable path.
8Policy strategists within Indian oil companies will now have to figure out whether their oil and gas assets in the eastern and western offshore basins fall within those reserves that will go untapped.
8There is unlikely to be a direct government fiat against developing these reserves but there will signals both from the market and policy makers from now on that will discourage the exploitation of such reserves.
8Some of assets held by Indian oil and gas companies abroad may also get stranded as they will be unable to earn an economic rate of return.
8Investments in Mozambique and Russia may become unviable as they face the grim prospect of being priced out of the market.
8Even existing producing assets may become uneconomic, like GSPC's Deendayal field. Additional workover operations in the D-6 field may also reach the point of diminishing physical efficiency because of high water cut and sand ingress, so much so that incremental output may no longer pay for itself at going prices.
8Many of ONGC's new gas fields may just lie unexploited too.
8All these companies have no option but to wait and watch, just to be able to figure out where they stand in relation to fast moving developments on the energy front across the world.
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The focus of the climate lobby seems to be on dramatically cutting all emissions that can cause temperatures to go beyond the 2°C mark. The fossil fuel lobby says that it is impossible to stick by this target but critics claim that drastic changes have to be brought about to stop the globe from warming up beyond this level.
8One radical paper claims that all government subsidies on fossil fuel, including investments made by State Owned Enterprises like ONGC and OIL
8National subsidies, all SOE investments, government grants, funding by state owned financial institutions have to be discouraged, the paper claims should be halted.
8The glut in fossil fuel supplies, falling demand and moves towards energy efficiency have driven oil, gas and coal prices to multi-year lows. And the argument goes that without government support for production and wider fossil fuel subsidies, large swathes of today’s fossil fuel development would be even less profitable, particularly for coal and for new hard-to-reach oil and gas reserves.
8Directing public resources towards these sectors with rising emissions and falling returns represents, therefore, a double folly, the paper concludes.
8Heavy investments were made by the fossil fuel industry in last one decade.In 2014 investments had reached over $1 trillion per year
8Meeting the internationally agreed climate target of 2°C would mean that the fossil fuel industry will lose $28 trillion in revenue by 2035, compared with business-as-usual, the paper claims
8These estimates do not take into account current subsidies doled out by the government. If governments were to remove these, while implementing other climate regulation, the effects could be greater still.
8Then again, globally, big financial institutions are getting out of oil and gas assets.
8This has begun increasing the cost of capital of these companies.
8Groups ranging from the Rockefeller Brothers Fund (whose wealth was made through Standard Oil) to Norway’s sovereign wealth fund (developed through oil revenues) are beginning to divest from fossil fuel companies.
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8One radical paper claims that all government subsidies on fossil fuel, including investments made by State Owned Enterprises like ONGC and OIL
8National subsidies, all SOE investments, government grants, funding by state owned financial institutions have to be discouraged, the paper claims should be halted.
8The glut in fossil fuel supplies, falling demand and moves towards energy efficiency have driven oil, gas and coal prices to multi-year lows. And the argument goes that without government support for production and wider fossil fuel subsidies, large swathes of today’s fossil fuel development would be even less profitable, particularly for coal and for new hard-to-reach oil and gas reserves.
8Directing public resources towards these sectors with rising emissions and falling returns represents, therefore, a double folly, the paper concludes.
8Heavy investments were made by the fossil fuel industry in last one decade.In 2014 investments had reached over $1 trillion per year
8Meeting the internationally agreed climate target of 2°C would mean that the fossil fuel industry will lose $28 trillion in revenue by 2035, compared with business-as-usual, the paper claims
8These estimates do not take into account current subsidies doled out by the government. If governments were to remove these, while implementing other climate regulation, the effects could be greater still.
8Then again, globally, big financial institutions are getting out of oil and gas assets.
8This has begun increasing the cost of capital of these companies.
8Groups ranging from the Rockefeller Brothers Fund (whose wealth was made through Standard Oil) to Norway’s sovereign wealth fund (developed through oil revenues) are beginning to divest from fossil fuel companies.
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There is now a mounting global campaign to cut off government support to the E&P industry. A study has identified the following subsidies and support for oil and gas production that votaries of green energy now want withdrawn:
8Access, exploration and appraisal:
Government-funded R&D for exploration technologies and processes, and for field development
Concessional loans from national development banks to exploration companies
Spending by State Owned Enterprises (SOEs) and government agencies on seismic surveys and exploratory drilling
8Development:
Tax deductions for investment in drilling and mining equipment
Tax deductions for the field development phase
Government spending and SOE investment on infrastructure (ports, roads, railways and pipelines) that specifically benefits the fossil fuel industry
8Extraction and preparation:
Price supports (i.e. direct payments to producers linked to the market price of fossil fuels)
Tax and royalty exemptions linked to amount of fuel produced
Tax deductions for investment in drilling and mining equipment
Investment by SOEs in field operation and maintenance (domestic and international)
Government-provided insurance and indemnification for risks and damages such as oil spills and other pollution
Tax and royalty exemptions linked to the inputs required to produce the fuels (including property, land, water, pollution etc.)
8Decommissioning:
Government-funded R&D for field and mine decommissioning
Government assumption of liabilities or spending on field and mine decommissioning
Tax deductions or SOE responsibility for costs associated with oil and gas well abandonment
Government loans to fossil fuel extracting companies (domestic and international) to cover liabilities of mine and field decommissioning.
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8Access, exploration and appraisal:
Government-funded R&D for exploration technologies and processes, and for field development
Concessional loans from national development banks to exploration companies
Spending by State Owned Enterprises (SOEs) and government agencies on seismic surveys and exploratory drilling
8Development:
Tax deductions for investment in drilling and mining equipment
Tax deductions for the field development phase
Government spending and SOE investment on infrastructure (ports, roads, railways and pipelines) that specifically benefits the fossil fuel industry
8Extraction and preparation:
Price supports (i.e. direct payments to producers linked to the market price of fossil fuels)
Tax and royalty exemptions linked to amount of fuel produced
Tax deductions for investment in drilling and mining equipment
Investment by SOEs in field operation and maintenance (domestic and international)
Government-provided insurance and indemnification for risks and damages such as oil spills and other pollution
Tax and royalty exemptions linked to the inputs required to produce the fuels (including property, land, water, pollution etc.)
8Decommissioning:
Government-funded R&D for field and mine decommissioning
Government assumption of liabilities or spending on field and mine decommissioning
Tax deductions or SOE responsibility for costs associated with oil and gas well abandonment
Government loans to fossil fuel extracting companies (domestic and international) to cover liabilities of mine and field decommissioning.
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A recent paper has also targeted government spending and subsidies to the mid-stream and downstream segments of the oil and gas industry, including:
8Transport (to refineries):
Tax exemptions related to the transport, import and export of fossil fuels
Government spending on infrastructure (ports, roads, railways and pipelines) that specifically benefits fossil fuel transport (to refineries)
Investment by SOEs in infrastructure (ports, roads, railways and pipelines) that specifically benefits fossil fuel transport (to refineries)
8Plant construction and operation (refineries)
Grants and tax breaks for the construction of refineries
Relief on property taxes and charges for land, water use and pollution for processing facilities and power plants
Tax breaks, exemptions from charges, to inputs during operation phase
Government-regulated price of feedstock (oil, gas and coal) for refining, processing, and electricity and Investment by SOEs in plant operation and modernisation (domestically and internationally)
Public finance to refineries and plants generating heat and electricity
Investment in R&D that benefits continued and future operation of plants, including for carbon capture and storage
8Distribution (to end-users):
Government spending on infrastructure (ports, roads, railways, pipelines and power networks) that specifically benefits fossil fuel distribution
Investment by SOEs in infrastructure (ports, roads, railways, pipelines and power networks) that specifically benefits fossil fuel distribution
Investment by SOEs in the marketing of fossil fuels domestically and internationally.
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8Transport (to refineries):
Tax exemptions related to the transport, import and export of fossil fuels
Government spending on infrastructure (ports, roads, railways and pipelines) that specifically benefits fossil fuel transport (to refineries)
Investment by SOEs in infrastructure (ports, roads, railways and pipelines) that specifically benefits fossil fuel transport (to refineries)
8Plant construction and operation (refineries)
Grants and tax breaks for the construction of refineries
Relief on property taxes and charges for land, water use and pollution for processing facilities and power plants
Tax breaks, exemptions from charges, to inputs during operation phase
Government-regulated price of feedstock (oil, gas and coal) for refining, processing, and electricity and Investment by SOEs in plant operation and modernisation (domestically and internationally)
Public finance to refineries and plants generating heat and electricity
Investment in R&D that benefits continued and future operation of plants, including for carbon capture and storage
8Distribution (to end-users):
Government spending on infrastructure (ports, roads, railways, pipelines and power networks) that specifically benefits fossil fuel distribution
Investment by SOEs in infrastructure (ports, roads, railways, pipelines and power networks) that specifically benefits fossil fuel distribution
Investment by SOEs in the marketing of fossil fuels domestically and internationally.
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How is the Indian government likely to react to the increasing demand to curb the growth of the fossil fuel industry?
8If the trend towards capacity building in the renewable energy sector gains momentum, there will be some kind of cooling off of support to the fossil fuel industry.
8How exactly is it all going to manifest itself will depend on the kind of promises the government makes in international forums.
8Domestic dynamics -- of growing demand for transportation fuels -- will definitely have to be taken into account but as of now, the mindset still seems to be to extend all possible encouragement to the oil and gas industry.
8But once concessions, subsidies and tax sops are linked to climate change in the government's mindset, it is likely that policy parameters may turn from positive just now to neutral if not negative.
8The change however will not happen swiftly but companies can expect mid-term policy changes if pressures continue to mount from the climate lobby.
8Any which way, fresh investments in the oil and gas sector in India will be subjected to a fair amount of policy uncertainty going forward.
8It won't be business as usual any more for the oil and gas industry in India.
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8If the trend towards capacity building in the renewable energy sector gains momentum, there will be some kind of cooling off of support to the fossil fuel industry.
8How exactly is it all going to manifest itself will depend on the kind of promises the government makes in international forums.
8Domestic dynamics -- of growing demand for transportation fuels -- will definitely have to be taken into account but as of now, the mindset still seems to be to extend all possible encouragement to the oil and gas industry.
8But once concessions, subsidies and tax sops are linked to climate change in the government's mindset, it is likely that policy parameters may turn from positive just now to neutral if not negative.
8The change however will not happen swiftly but companies can expect mid-term policy changes if pressures continue to mount from the climate lobby.
8Any which way, fresh investments in the oil and gas sector in India will be subjected to a fair amount of policy uncertainty going forward.
8It won't be business as usual any more for the oil and gas industry in India.
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The pressure on the Indian government to reduce emissions is going to be intense from now on.
8One intentional study that looks at efforts made by governments to ensure sustainability of energy use ranked India poorly at 107, just above Pakistan and Zambia, while Sweden and Norway occupied the top two slots.
8There is now a war cry among the climate lobby to stop India from polluting the world.
8Another study says that India's rapid growth will push its emission levels to 9 billion megatons by the end of the next decade.
8This is about one-fifth of the total annual emissions that scientists calculate the world can emit in 2030 and still have a more than a 50 percent chance of avoiding the global temperature rising more than two degrees Celsius, considered a dangerous threshold.
8India’s rapid growth is at the heart of ongoing tension between rich and poor nations, with developing and emerging economies arguing that countries that have already become rich on fossil fuel energy should make deeper cuts in emissions rather than curb poorer countries’ growth.
8India’s emissions per person are 1.7 metric tons a year, compared with nearly 17 metric tons in the US and more than 7 metric tons in both China and the European Union.
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8One intentional study that looks at efforts made by governments to ensure sustainability of energy use ranked India poorly at 107, just above Pakistan and Zambia, while Sweden and Norway occupied the top two slots.
8There is now a war cry among the climate lobby to stop India from polluting the world.
8Another study says that India's rapid growth will push its emission levels to 9 billion megatons by the end of the next decade.
8This is about one-fifth of the total annual emissions that scientists calculate the world can emit in 2030 and still have a more than a 50 percent chance of avoiding the global temperature rising more than two degrees Celsius, considered a dangerous threshold.
8India’s rapid growth is at the heart of ongoing tension between rich and poor nations, with developing and emerging economies arguing that countries that have already become rich on fossil fuel energy should make deeper cuts in emissions rather than curb poorer countries’ growth.
8India’s emissions per person are 1.7 metric tons a year, compared with nearly 17 metric tons in the US and more than 7 metric tons in both China and the European Union.
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IOC is planning to conduct a third party technical audit of its Dadari-Panipat pipeline (DPPL) along with its associated spur lines.
8The Dadri-Panipat Re-gassified LNG pipelines (DPPL) is 132 Km long with six sectionalising valves of which two are repeater cum sectionalising valves (RSV).
8There are two spur lines, one terminates at the NFL plant in Panipat and the other spur line ends up at Mycro Polymer Ltd, Karnal.
8The proposed technical audit will be done as per notified PNGRB regulations.
8The contract period for the works envisaged will be two months from the date of site clearances.
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8The Dadri-Panipat Re-gassified LNG pipelines (DPPL) is 132 Km long with six sectionalising valves of which two are repeater cum sectionalising valves (RSV).
8There are two spur lines, one terminates at the NFL plant in Panipat and the other spur line ends up at Mycro Polymer Ltd, Karnal.
8The proposed technical audit will be done as per notified PNGRB regulations.
8The contract period for the works envisaged will be two months from the date of site clearances.
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Numaligarh Refinery Limited (NRL) is planning to carry out an on-stream inspection check of its pipelines using Advanced Non Destructive Testing (NDT).
8The proposed inspection will be carried out while the refinery is running.
8The main objective for considering the advance NDT method is to ensure the integrity of pipelines as a whole by minimizing insulation and scaffolding jobs without disturbing the running plant, thereby completing inspection activity in a fast and efficient way.
8The pipelines under inspection includes the lighter end hydrocarbon lines, run down lines and two phase lines.
8The refinery units which will be considered under this work order are CDU/VDU/NSU, DCU, HCU, H2U, SRB, MSP, Wax, OM&S, NRMT and P&U.
8The pipeline's material of construction is mainly carbon steel, alloy steel and stainless steel which include both un-insulated piping as well as insulated, with operating condition going upto 550degree centigrade
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8The proposed inspection will be carried out while the refinery is running.
8The main objective for considering the advance NDT method is to ensure the integrity of pipelines as a whole by minimizing insulation and scaffolding jobs without disturbing the running plant, thereby completing inspection activity in a fast and efficient way.
8The pipelines under inspection includes the lighter end hydrocarbon lines, run down lines and two phase lines.
8The refinery units which will be considered under this work order are CDU/VDU/NSU, DCU, HCU, H2U, SRB, MSP, Wax, OM&S, NRMT and P&U.
8The pipeline's material of construction is mainly carbon steel, alloy steel and stainless steel which include both un-insulated piping as well as insulated, with operating condition going upto 550degree centigrade
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If the future is uncertain in the oil and gas industry, where do those companies who have known just this business and nothing else go from here? How do they hedge for the future? Should it be by transiting to holding more ecological friendly fossil fuels like gas instead of oil, or should they look for new business opportunities altogether?
8Where should an ONGC or an IOC or GAIL or a Cairn India be headed from here? Buying more oil and gas assets not longer makes sense, not until there is more clarity all around.
8All these companies are very badly equipped to handle disruptive change.
8The thinking process is just not right and internal processes do not allow for innovation.
8They would rather take the risk of sinking another few billion dollar in hydrocarbon reserves than spend the same money investing in cutting edge Carbon Capture and Storage technology firms.
8It is unlikely that the ONGC chairman will ever think of putting some of his surplus money in a battery start-up firm -- that promises to come up with a disruptive yet low cost, low weight and quickly chargeable energy storage technology. He will be happier picking up a stake in a remote Siberian gas field where the reserves are high and the acquisition cost is attractive.
8It is equally unthinkable that Oil India will ever pick up a small stake in an electric vehicle manufacturing start-up somewhere in California.
8GAIL would know no better than to invest in one more LNG terminal with the ostensible aim of supplying gas to India even though there is now such a glut of new LNG terminals all over the world that it is impossible for many of them to make money for a long time to come.
8IOC cannot ever think of planning how to use their massive network of retail outlets should they become redundant when battery powered cars become cost competitive within the next 10 years. Should IOC then start a food business in strategic collaboration with chef Gordon Ramsay, or tie up with McDonalds or buy out Haldiram? For all you know the company can make more money converting their COCO outlets in big cities into fine dining restaurants and selling burgers and samosas in thousands of other outlets across the country than it ever did dispensing petrol and diesel.
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8Where should an ONGC or an IOC or GAIL or a Cairn India be headed from here? Buying more oil and gas assets not longer makes sense, not until there is more clarity all around.
8All these companies are very badly equipped to handle disruptive change.
8The thinking process is just not right and internal processes do not allow for innovation.
8They would rather take the risk of sinking another few billion dollar in hydrocarbon reserves than spend the same money investing in cutting edge Carbon Capture and Storage technology firms.
8It is unlikely that the ONGC chairman will ever think of putting some of his surplus money in a battery start-up firm -- that promises to come up with a disruptive yet low cost, low weight and quickly chargeable energy storage technology. He will be happier picking up a stake in a remote Siberian gas field where the reserves are high and the acquisition cost is attractive.
8It is equally unthinkable that Oil India will ever pick up a small stake in an electric vehicle manufacturing start-up somewhere in California.
8GAIL would know no better than to invest in one more LNG terminal with the ostensible aim of supplying gas to India even though there is now such a glut of new LNG terminals all over the world that it is impossible for many of them to make money for a long time to come.
8IOC cannot ever think of planning how to use their massive network of retail outlets should they become redundant when battery powered cars become cost competitive within the next 10 years. Should IOC then start a food business in strategic collaboration with chef Gordon Ramsay, or tie up with McDonalds or buy out Haldiram? For all you know the company can make more money converting their COCO outlets in big cities into fine dining restaurants and selling burgers and samosas in thousands of other outlets across the country than it ever did dispensing petrol and diesel.
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The following break-up of investments has been worked out in carbon friendly technologies and assets till 2030:
8Renewables: $ 1.5 to 4 trillion
8Carbon Capture and Storage: $0.6 to 1.3 trilliomn
8Energy Efficiency in buildings: $3 to 6 billion
8Low Carbon Transport fuels: $0.03 to 0.04 trillion
8Cement: $0.04 to 0.05 trillion
8The annual average investment will be a massive $350 to 750 billion.
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8Renewables: $ 1.5 to 4 trillion
8Carbon Capture and Storage: $0.6 to 1.3 trilliomn
8Energy Efficiency in buildings: $3 to 6 billion
8Low Carbon Transport fuels: $0.03 to 0.04 trillion
8Cement: $0.04 to 0.05 trillion
8The annual average investment will be a massive $350 to 750 billion.
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The following action plan has been worked out till 2030 by the report:
8Scale up CO2 emissions reduction by 20% through energy efficiency
8Reduce projected energy use in buildings by 50% by 2030
8Use sustainably produced biofuels for 27% of transport fuel by 2050 to avoid around 2.1 giga tonnes of COs emissions
8Achieve CO2 neutral freight transport within a given time frame
8Produce 50% more available and nutritious food (compared to today) and strengthen the climate resilience and incomes of farming communities. Reduce agricultural and land-use change emissions from commercial agriculture by at least 3.7 Gt CO2year by 2030 (50%). Achieve a 65% emissions reduction by 2050.
8Increase forest carbon stocks by 3 GtCO2/year.
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8Scale up CO2 emissions reduction by 20% through energy efficiency
8Reduce projected energy use in buildings by 50% by 2030
8Use sustainably produced biofuels for 27% of transport fuel by 2050 to avoid around 2.1 giga tonnes of COs emissions
8Achieve CO2 neutral freight transport within a given time frame
8Produce 50% more available and nutritious food (compared to today) and strengthen the climate resilience and incomes of farming communities. Reduce agricultural and land-use change emissions from commercial agriculture by at least 3.7 Gt CO2year by 2030 (50%). Achieve a 65% emissions reduction by 2050.
8Increase forest carbon stocks by 3 GtCO2/year.
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So coming back to the basic question, where should a company like ONGC or OIL put its money now that the E&P business faces an uncertain future?
8The website carries here a report that says that the transition to a low carbon economy can provide $5-10 trillion of business opportunities between today and 2030.
Among the areas where opportunities an come up are:
8Energy efficient buildings
8Chemicals
8Renewables
8Forests and forest products as carbon sinks
8Water and sanitation
8Low carbon transport fuels
8Low carbon freight transport
8Climate smart agriculture
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8The website carries here a report that says that the transition to a low carbon economy can provide $5-10 trillion of business opportunities between today and 2030.
Among the areas where opportunities an come up are:
8Energy efficient buildings
8Chemicals
8Renewables
8Forests and forest products as carbon sinks
8Water and sanitation
8Low carbon transport fuels
8Low carbon freight transport
8Climate smart agriculture
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A clear case of why there should be a ban on fresh E&P investments abroad is made out by the very high risk levels now associated with the multi billion dollar investments made by the Indian public sector trio -- made up of ONGC, Bharat Petro Resoures Ltd (BPRL) and Oil India Ltd (OIL) -- in the $20 billion LNG trains that are being developed in Mozambique by the operator Anadarko Petroleum in the face of falling gas prices.
8Anadarko has a 26% participating interest in the Rovuma Area 1 Offshore block -- which may contain as much as 50 to 70 TCF of gas -- while the stakes of ONGC, BPRL (a subsidiary of Bharat Petroleum Corporation Ltd) and OIL are 16%, 10% and 4% respectively, among others.
8The plans were to invest in two onshore LNG trains of 6 MMTPA each.
8Anadarko is now in serious financial trouble and it is unlikely that it will be able to mobilize the resources required to invest in the project.
8The problem is simple, the FOB price of LNG has crashed dramatically over the last one year whereas the project was built on what may now seem like an impossibly high FOB price of $12/mmbtu. The LNG from the project was sought to be sold at a mix of Japanese Custom cleared Crude (JCC) and Henry Hub/NBP prices, both of which have gone down dramatically over the year.
8The cost of building LNG trains have not fallen as much as the price of gas, making the IRRs go all awry. There has been a significant fall in E&P costs (for taking the gas out) but that does not really make up for the overall negative IRRs now seen in the entire project.
8Firming up funding is going to be that much more difficult as banks, given the looming uncertainty over how energy prices are going to behave, are unlikely to pump in money unless long term supply contracts are firmed up.
8Given the glut of LNG projects around the world, it is unlikely that long term buyers will line up. The LNG market has become fragmented and spot purchases are what buyers are looking for, and not for contracts that tie them up for a decade.
8According to officials from some of the Indian companies who spoke to this website but did not want to be named, the project IRR has gone down dramatically below the hurdle rate with the drop in the FOB price of gas, after factoring in the high acquisition cost of their stakes.
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8Anadarko has a 26% participating interest in the Rovuma Area 1 Offshore block -- which may contain as much as 50 to 70 TCF of gas -- while the stakes of ONGC, BPRL (a subsidiary of Bharat Petroleum Corporation Ltd) and OIL are 16%, 10% and 4% respectively, among others.
8The plans were to invest in two onshore LNG trains of 6 MMTPA each.
8Anadarko is now in serious financial trouble and it is unlikely that it will be able to mobilize the resources required to invest in the project.
8The problem is simple, the FOB price of LNG has crashed dramatically over the last one year whereas the project was built on what may now seem like an impossibly high FOB price of $12/mmbtu. The LNG from the project was sought to be sold at a mix of Japanese Custom cleared Crude (JCC) and Henry Hub/NBP prices, both of which have gone down dramatically over the year.
8The cost of building LNG trains have not fallen as much as the price of gas, making the IRRs go all awry. There has been a significant fall in E&P costs (for taking the gas out) but that does not really make up for the overall negative IRRs now seen in the entire project.
8Firming up funding is going to be that much more difficult as banks, given the looming uncertainty over how energy prices are going to behave, are unlikely to pump in money unless long term supply contracts are firmed up.
8Given the glut of LNG projects around the world, it is unlikely that long term buyers will line up. The LNG market has become fragmented and spot purchases are what buyers are looking for, and not for contracts that tie them up for a decade.
8According to officials from some of the Indian companies who spoke to this website but did not want to be named, the project IRR has gone down dramatically below the hurdle rate with the drop in the FOB price of gas, after factoring in the high acquisition cost of their stakes.
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To begin with, given the dramatic changes in the energy business, there should be a standing direction to ONGC and OIL to stop buying new E&P assets.
8This is because even the foremost oil and gas experts and analysts in the world do not know how fossil fuel assets should be valued given the changes taking place in the energy sector.
8Valuations will vary depending upon the price tag that is levied on emissions.
8And no one knows what that tax is going to be? Should it be $40 per tonne of CO2 emission or will the tax be cranked up to $100?
8Then again, the cost economics of Carbon Capture and Storage will have to be taken into account to any production out of a reservoir to be economically viable.
8CCS is an expensive technology and the price of oil or gas will have to be high enough -- and that cannot be guaranteed any longer -- for its usage to be economically justified.
8These are all parameters outside the control of ONGC and OIL.
8So really, any buyout of an E&P asset now will be like landing a plane at the Palam airport on a January night when the visibility is zero as the air is thick with fog and smog (bulk of it contributed by the fossil fuel industry), and when the Instrument Landing System is not really all that reliable.
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8This is because even the foremost oil and gas experts and analysts in the world do not know how fossil fuel assets should be valued given the changes taking place in the energy sector.
8Valuations will vary depending upon the price tag that is levied on emissions.
8And no one knows what that tax is going to be? Should it be $40 per tonne of CO2 emission or will the tax be cranked up to $100?
8Then again, the cost economics of Carbon Capture and Storage will have to be taken into account to any production out of a reservoir to be economically viable.
8CCS is an expensive technology and the price of oil or gas will have to be high enough -- and that cannot be guaranteed any longer -- for its usage to be economically justified.
8These are all parameters outside the control of ONGC and OIL.
8So really, any buyout of an E&P asset now will be like landing a plane at the Palam airport on a January night when the visibility is zero as the air is thick with fog and smog (bulk of it contributed by the fossil fuel industry), and when the Instrument Landing System is not really all that reliable.
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Anadarko Petroleum have been scouting long and hard to sell its stake in the Mozambique asset but there are no takers for it yet.
8Its share price fell last week after the company squashed rumors that it is engaged in talks to sell its multi-billion stake in Mozambique's gas reserves.
8The company reported a first quarter net loss of 72 cents per share on revenue of $2.32 billion. Analysts on average were expecting the company to lose 65 cents per share on revenue of $2.45 billion.
8The loss is the company's largest in over 10 years.
8No doubt the company has some strong assets but analysts find the weaknesses, including disappointing return on equity, weak operating cash flow and a generally disappointing performance in the stock itself, outweigh its strengths.
8Right now, it will be difficult for Anandarko to shell out the money needed to develop the Mozambique project.
8At one point Anandarko did award a non-binding contract to a consortium consisting of CB&I, Chiyoda Corporation and Saipem (known as the CCS JV) to build the Mozambique project but the deal is now in trouble as the promoter is finding it tough to generate the requisite funds
8The more there is delay, the worse off are the Indian public sector stakeholders as their premium buyout of the asset is just sitting there without earning any money.
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8Its share price fell last week after the company squashed rumors that it is engaged in talks to sell its multi-billion stake in Mozambique's gas reserves.
8The company reported a first quarter net loss of 72 cents per share on revenue of $2.32 billion. Analysts on average were expecting the company to lose 65 cents per share on revenue of $2.45 billion.
8The loss is the company's largest in over 10 years.
8No doubt the company has some strong assets but analysts find the weaknesses, including disappointing return on equity, weak operating cash flow and a generally disappointing performance in the stock itself, outweigh its strengths.
8Right now, it will be difficult for Anandarko to shell out the money needed to develop the Mozambique project.
8At one point Anandarko did award a non-binding contract to a consortium consisting of CB&I, Chiyoda Corporation and Saipem (known as the CCS JV) to build the Mozambique project but the deal is now in trouble as the promoter is finding it tough to generate the requisite funds
8The more there is delay, the worse off are the Indian public sector stakeholders as their premium buyout of the asset is just sitting there without earning any money.
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Rovuma Area 1 Offshore block of which Anadarko is the operator is one of the two adjacent blocks that are being jointly developed to produce a massive 22 MMTPA of LNG in Mozambique.
8The other block -- dubbed block A --is operated by ENI.
8Both the blocks run into each other, so there is a Heads of Agreement between the two sides for unitization.
8In Rovuma Area 1 the plan was drill 10 wells and that was meant to be over by mid 2015 but that has not happened yet
8The recoverable reserves have been pegged at anywhere between 50 to 70 TCF by Anadarko.
8Between ENI and Anadarko, they plan to put up four trains of 5 MMTPA each, but Anadarko then decided to go for two trains of 6 MMTPA each.
8According to an estimate made by PriceWaterhouseCoopers the capex needed to build a two-train LNG project in Mozambique was a massive US$2.14 million per bcf of net gas volume. That’s a total investment of US$26.1 billion whereas Anadarko had last year pegged the cost lower at around $20 billion.
8But costs have fallen since the PWC estimate but not by enough to get the project off the ground.
8ENI too, with much stronger financials than Anandarko, have not yet taken a decision to go ahead with its own project in Block A, based on an offshore LNG terminal model.
8There are indications that the Anadarko led consortium may have to delay the project till 2017, as ENI, who is also a part investor in the Block A onshore LNG terminal, said recently that an investment decision on it will have to wait two more years.
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8The other block -- dubbed block A --is operated by ENI.
8Both the blocks run into each other, so there is a Heads of Agreement between the two sides for unitization.
8In Rovuma Area 1 the plan was drill 10 wells and that was meant to be over by mid 2015 but that has not happened yet
8The recoverable reserves have been pegged at anywhere between 50 to 70 TCF by Anadarko.
8Between ENI and Anadarko, they plan to put up four trains of 5 MMTPA each, but Anadarko then decided to go for two trains of 6 MMTPA each.
8According to an estimate made by PriceWaterhouseCoopers the capex needed to build a two-train LNG project in Mozambique was a massive US$2.14 million per bcf of net gas volume. That’s a total investment of US$26.1 billion whereas Anadarko had last year pegged the cost lower at around $20 billion.
8But costs have fallen since the PWC estimate but not by enough to get the project off the ground.
8ENI too, with much stronger financials than Anandarko, have not yet taken a decision to go ahead with its own project in Block A, based on an offshore LNG terminal model.
8There are indications that the Anadarko led consortium may have to delay the project till 2017, as ENI, who is also a part investor in the Block A onshore LNG terminal, said recently that an investment decision on it will have to wait two more years.
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At one level the Indian public sector companies cannot really be faulted for trying to pick up a big stake in what was until now one of the biggest gas development projects in the world, in Mozambique.
8But that was true before the dramatic fall in the price of gas and the massive changes that the oil and gas industry is currently undergoing.
8In this context it is relevant to point out that both ONGC and OIL are E&P companies who understand the risks involved in the E&P business though even for them it is clearly a case of biting off more than what they can chew.
8But fingers are now pointing towards Bharat Petro Resources Ltd (BPRL), a BPCL subsidiary, for exposing itself to such a high level of risk in the project.
8BPCL neither has the understanding nor the staying power to handle a 10% exposure in the project of such dimension. The exposure levels are too high and the risks and the danger is that such risks are directly leveraged to BPCL`s balance sheet.
8"At best BPCL is a middle level downstream company operating under a controlled environment and for the management to expose itself to the violent gyrations of the international E&P and gas markets, both of which are fraught with so much risk that only the strongest of companies in the world can survive such large vulnerabilities, may not have been appropriate," an industry observer said.
8The ability to move from a completely controlled downstream environment in India to picking up a stake in wild Africa is too much of a leap of faith for BPCL.
8BPRL`s IRR was at 11.75% at a FOB price of $12 but now that the gas price has plunged, the IRR has gone below the 10% level and is now in fact in negative territory.
8There is merit perhaps in the argument that a downstream company should stay confined to its own business -- particularly when the landscape has become more competitive with the advent of private players -- and not go up the value chain unless it has the financial muscle to do so. In this case BPCL is punching far above its weight.
8Going up the value chain is a concept that is no longer in vogue.
8Does BPCL have the staying power or the financial muscle power in Mozambique is a question that needs a straight forward answer
8It may even be appropriate for the Modi government to open the files once again to see what prompted BPRL to take that leap straight into Mozambique.
8Some skeletons may come tumbling out of the closet in the process.
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8But that was true before the dramatic fall in the price of gas and the massive changes that the oil and gas industry is currently undergoing.
8In this context it is relevant to point out that both ONGC and OIL are E&P companies who understand the risks involved in the E&P business though even for them it is clearly a case of biting off more than what they can chew.
8But fingers are now pointing towards Bharat Petro Resources Ltd (BPRL), a BPCL subsidiary, for exposing itself to such a high level of risk in the project.
8BPCL neither has the understanding nor the staying power to handle a 10% exposure in the project of such dimension. The exposure levels are too high and the risks and the danger is that such risks are directly leveraged to BPCL`s balance sheet.
8"At best BPCL is a middle level downstream company operating under a controlled environment and for the management to expose itself to the violent gyrations of the international E&P and gas markets, both of which are fraught with so much risk that only the strongest of companies in the world can survive such large vulnerabilities, may not have been appropriate," an industry observer said.
8The ability to move from a completely controlled downstream environment in India to picking up a stake in wild Africa is too much of a leap of faith for BPCL.
8BPRL`s IRR was at 11.75% at a FOB price of $12 but now that the gas price has plunged, the IRR has gone below the 10% level and is now in fact in negative territory.
8There is merit perhaps in the argument that a downstream company should stay confined to its own business -- particularly when the landscape has become more competitive with the advent of private players -- and not go up the value chain unless it has the financial muscle to do so. In this case BPCL is punching far above its weight.
8Going up the value chain is a concept that is no longer in vogue.
8Does BPCL have the staying power or the financial muscle power in Mozambique is a question that needs a straight forward answer
8It may even be appropriate for the Modi government to open the files once again to see what prompted BPRL to take that leap straight into Mozambique.
8Some skeletons may come tumbling out of the closet in the process.
Click on Reports for more Details
The first meeting of the Russian-Indian Joint Working Group to study the possibility of building a hydrocarbon pipeline system connecting Russia and India took place on November 6, 2015.
8A second meeting will be held in the first quarter of 2016.
8It is not known why this exercise is being undertaken when the project is patently unfeasible.
8Is it a Russian sop to India -- of keeping the idea alive -- after it signed a deal to build a 1,100-kilometre gas pipeline from Lahore to Karachi at an estimated cost of $2 billion that will help ferry LNG from the Pakistani coast.
8A Russia-India pipeline network was mooted last year too but at that point in time, the idea was rejected by the Russians as not feasible.
8As of now the pipeline is really a pipe dream.
8One route is envisaged through the Himalayas, most likely through the Xinjiang province of China.
8And the other one is linking the pipeline to the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline
8The pipeline from Russia to India will cost about $40 billion, making it the costliest pipeline so far.
8And it is doubtful whether the cost economics are ever going to work out.
8Mani Shankar Aiyer as petroleum minister had once dreamt of building a trunk line connecting Russia, Turkmenistan, Afghanistan, Pakistan, India, Bangladesh, Myanmar and Thailand through a gas network.
8But clearly politics of the day and the changing energy dynamics do not allow such a pipeline to go beyond the drawing boards.
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8A second meeting will be held in the first quarter of 2016.
8It is not known why this exercise is being undertaken when the project is patently unfeasible.
8Is it a Russian sop to India -- of keeping the idea alive -- after it signed a deal to build a 1,100-kilometre gas pipeline from Lahore to Karachi at an estimated cost of $2 billion that will help ferry LNG from the Pakistani coast.
8A Russia-India pipeline network was mooted last year too but at that point in time, the idea was rejected by the Russians as not feasible.
8As of now the pipeline is really a pipe dream.
8One route is envisaged through the Himalayas, most likely through the Xinjiang province of China.
8And the other one is linking the pipeline to the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline
8The pipeline from Russia to India will cost about $40 billion, making it the costliest pipeline so far.
8And it is doubtful whether the cost economics are ever going to work out.
8Mani Shankar Aiyer as petroleum minister had once dreamt of building a trunk line connecting Russia, Turkmenistan, Afghanistan, Pakistan, India, Bangladesh, Myanmar and Thailand through a gas network.
8But clearly politics of the day and the changing energy dynamics do not allow such a pipeline to go beyond the drawing boards.
Click on Details for more Details
Turkmenistan has fired the starting pistol on the ambitious TAPI natural gas pipeline
8President Gurbanguly Berdymukhamedov announced he had ordered the beginning of the construction oft his end of the pipeline on November 6 during a weekly Cabinet meeting.
8The work on the Turkmen section will be done by state-run gas company Turkmengaz, which was named project consortium leader for TAPI Pipeline Company Limited in August.
8The other three countries -- Afghanistan, Pakistan and India -- had promised start of the construction too by December, 2015.
8But it is still anybody's guess on whether the pipeline -- that will have to traverse what is arguably some of the most dangerous territories in the world -- will eventually go through.
8Turkmenistan has a reason to look for another avenue to sell its gas as it has found itself in a situation where China maintains a stranglehold on its gas exports, effectively keeping Ashagabat as a client state. And with gas prices going down, China is twisting the gas rich neighbour's tail quite a bit. Similarly, Russia's Gazprom has been accused too of not paying up past dues.
8To escape the dragon's grip and Russia's intransigence, Ashagabat is building a pipeline to Azerbaijan for onward transportation of its gas to the EU. But this is a move that is implicitly opposed by Russia whose own exports of gas to the EU will then stand threatened.
8For Turkmenistan, the TAPI line is both a political and economic imperative.
Comment: It is unlikely that the TAPI pipeline will ever be built this way. Turkmengaz does not have the technology or the muscle power to build the pipeline and there is too much of distrust between India and Pakistan for the pipeline to run through. Then there is the Taliban to handle in Afghanistan as an insolated pipeline -- even if running underground -- is not very difficult to sabotage. The oil and gas dynamics have changed too, so much so that even if Turkmenistan were to offer a stake in its gas field -- a demand put forward by some multinational consortiums in the past as a prerequisite to build the pipeline -- there will be no one coming forward at this point in time. The game has changed. So have the price economics. And even if the pipeline is viable, the risks far outweigh the benefits. Details
8President Gurbanguly Berdymukhamedov announced he had ordered the beginning of the construction oft his end of the pipeline on November 6 during a weekly Cabinet meeting.
8The work on the Turkmen section will be done by state-run gas company Turkmengaz, which was named project consortium leader for TAPI Pipeline Company Limited in August.
8The other three countries -- Afghanistan, Pakistan and India -- had promised start of the construction too by December, 2015.
8But it is still anybody's guess on whether the pipeline -- that will have to traverse what is arguably some of the most dangerous territories in the world -- will eventually go through.
8Turkmenistan has a reason to look for another avenue to sell its gas as it has found itself in a situation where China maintains a stranglehold on its gas exports, effectively keeping Ashagabat as a client state. And with gas prices going down, China is twisting the gas rich neighbour's tail quite a bit. Similarly, Russia's Gazprom has been accused too of not paying up past dues.
8To escape the dragon's grip and Russia's intransigence, Ashagabat is building a pipeline to Azerbaijan for onward transportation of its gas to the EU. But this is a move that is implicitly opposed by Russia whose own exports of gas to the EU will then stand threatened.
8For Turkmenistan, the TAPI line is both a political and economic imperative.
Comment: It is unlikely that the TAPI pipeline will ever be built this way. Turkmengaz does not have the technology or the muscle power to build the pipeline and there is too much of distrust between India and Pakistan for the pipeline to run through. Then there is the Taliban to handle in Afghanistan as an insolated pipeline -- even if running underground -- is not very difficult to sabotage. The oil and gas dynamics have changed too, so much so that even if Turkmenistan were to offer a stake in its gas field -- a demand put forward by some multinational consortiums in the past as a prerequisite to build the pipeline -- there will be no one coming forward at this point in time. The game has changed. So have the price economics. And even if the pipeline is viable, the risks far outweigh the benefits. Details
The crisis in the oil and gas industry does not seem to have troubled Great Eastern Shipping Company Ltd. At least not for now.
8On a standalone basis, EBITA margins are higher than in the same quarter last year, and other parameters such as ROE, ROCE and EPS have posted a strong increase.
8This goes to prove that the oil and gas related freight industry seems to be going strong.
8The company's crude and product carrier incomes continue to be strong as are revenues from its tankers.
8The dry bulk cargo rates have however plunged and performance would have been better but for this drag.
8The performance of its subsidiary Greatship (India) Ltd, with its fleet of PSVs, AHTSVs, MPSSVs and ROVSVs seems to be holding up too, though it remains a moot point till how long, given that the E&P business is in deep recession, both within and outside India.
8Both heavy competition, deep discounting and over capacity will run its course in the future as the E&P industry sinks into deeper recession in the months ahead. This will have an impact on the subsidiary company.
8Overall, Great Eastern on a consolidated basis seems to be on a strong footing. The carrier business will continue to be hopefully robust -- as long as POL demand continues to grow -- whereas the E&P supply vessels business and its dry cargo segments will face strong headwinds going ahead. Details
8On a standalone basis, EBITA margins are higher than in the same quarter last year, and other parameters such as ROE, ROCE and EPS have posted a strong increase.
8This goes to prove that the oil and gas related freight industry seems to be going strong.
8The company's crude and product carrier incomes continue to be strong as are revenues from its tankers.
8The dry bulk cargo rates have however plunged and performance would have been better but for this drag.
8The performance of its subsidiary Greatship (India) Ltd, with its fleet of PSVs, AHTSVs, MPSSVs and ROVSVs seems to be holding up too, though it remains a moot point till how long, given that the E&P business is in deep recession, both within and outside India.
8Both heavy competition, deep discounting and over capacity will run its course in the future as the E&P industry sinks into deeper recession in the months ahead. This will have an impact on the subsidiary company.
8Overall, Great Eastern on a consolidated basis seems to be on a strong footing. The carrier business will continue to be hopefully robust -- as long as POL demand continues to grow -- whereas the E&P supply vessels business and its dry cargo segments will face strong headwinds going ahead. Details
India has made a massive commitment for raising its non fossil fuel based energy base on the eve of Paris Conference of Parties.
8Achieving the targets will be a huge challenge in itself and calls for an extraordinary amount of background work.
8But the challenges are massive with its vast number of poor but aspiring people who yet to have full access to energy resources.
8The website carries here a detailed template on the work done so far and what is to be done going ahead to get to a total renewable grid capacity of 175 GW.
8Know more about all that the government plans to do for the renewal sector.
8Also if you want a detailed 200 page report on the latest development in the solar sector, click on our Research Report segment and call our sales people. They will send you the Table of Contents.
8If you are in the oil and gas sector, you cannot ignore the solar segment any longer. Even if you are not an investor in the segment, you need to stay abreast for developments here as they will have far reaching implications for the oil and gas sector.
Click on Reports section too for more Details
8Achieving the targets will be a huge challenge in itself and calls for an extraordinary amount of background work.
8But the challenges are massive with its vast number of poor but aspiring people who yet to have full access to energy resources.
8The website carries here a detailed template on the work done so far and what is to be done going ahead to get to a total renewable grid capacity of 175 GW.
8Know more about all that the government plans to do for the renewal sector.
8Also if you want a detailed 200 page report on the latest development in the solar sector, click on our Research Report segment and call our sales people. They will send you the Table of Contents.
8If you are in the oil and gas sector, you cannot ignore the solar segment any longer. Even if you are not an investor in the segment, you need to stay abreast for developments here as they will have far reaching implications for the oil and gas sector.
Click on Reports section too for more Details
The depression in the core oil & gas sector continues unabated as is evident from Punj Lloyd's Q-2 performance in 2015-16.
8Gross income at Rs 1,071 crore continue to trail figures posted for the same quarter last year.
8The half year performance is lower too at Rs 1,756 crore as against Rs 2,409 crore for the same period last year.
8The company however managed to score a positive EBDITA of Rs 5 crore in Q-2 against a loss of Rs 298 crore in Q-1 and Rs 89 crore for the same quarter last year.
8Loss before taxes stood at Rs 279 crore in Q-2, down from Rs 598 crore in Q-1 and Rs 391 crore in the same quarter last year.
8The silver lining is that there is a strong order backlog of Rs 19,800 crore that will work itself into the company's income and the bottom line over a period of time.
8The backlog was boosted by orders from IOC's Haldia and Paradip refineries and an LOI for tankages in Ennore. The company has expertise in these areas and the margins are expected to be good.
8A diversification into the power transmission and distribution area has paid off, with multiple orders under the government's rural electrification scheme.
8The defence sector has opened up and the company has developed capabilities in this segment but it will be sometime before significant movement is seen in his sector.
8But continued heavy looses indicate that all is not well in the oil and gas contracting industry. Margins are under severe pressure as competition has intensified and prices have plunged.
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8Gross income at Rs 1,071 crore continue to trail figures posted for the same quarter last year.
8The half year performance is lower too at Rs 1,756 crore as against Rs 2,409 crore for the same period last year.
8The company however managed to score a positive EBDITA of Rs 5 crore in Q-2 against a loss of Rs 298 crore in Q-1 and Rs 89 crore for the same quarter last year.
8Loss before taxes stood at Rs 279 crore in Q-2, down from Rs 598 crore in Q-1 and Rs 391 crore in the same quarter last year.
8The silver lining is that there is a strong order backlog of Rs 19,800 crore that will work itself into the company's income and the bottom line over a period of time.
8The backlog was boosted by orders from IOC's Haldia and Paradip refineries and an LOI for tankages in Ennore. The company has expertise in these areas and the margins are expected to be good.
8A diversification into the power transmission and distribution area has paid off, with multiple orders under the government's rural electrification scheme.
8The defence sector has opened up and the company has developed capabilities in this segment but it will be sometime before significant movement is seen in his sector.
8But continued heavy looses indicate that all is not well in the oil and gas contracting industry. Margins are under severe pressure as competition has intensified and prices have plunged.
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Nov 10 : Dolphin bags 3D seismic tender: Two high end survey vessels will stay deployed for 9 months
Dolphin has accepted an LOI for a major 3D seismic contract in India from what it called a "repeat client".
8The contracts were previously announced by Dolphin in press release dated 15 October 2015, where Dolphin was the preferred contractor in a public bid opening ceremony.
8The company will utilize two 3D seismic vessels for a total of approximately 9 months to complete the two projects.
8Dolphin high-end vessels will start work in the fourth quarter of 2015.
8Dolphin Group ASA is the Parent company of Dolphin Geophysical AS, a global full-range, asset light supplier of marine geophysical services. Dolphin operates a fleet of new generation, high-capacity seismic vessels.
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8The contracts were previously announced by Dolphin in press release dated 15 October 2015, where Dolphin was the preferred contractor in a public bid opening ceremony.
8The company will utilize two 3D seismic vessels for a total of approximately 9 months to complete the two projects.
8Dolphin high-end vessels will start work in the fourth quarter of 2015.
8Dolphin Group ASA is the Parent company of Dolphin Geophysical AS, a global full-range, asset light supplier of marine geophysical services. Dolphin operates a fleet of new generation, high-capacity seismic vessels.
Click on Details for more Details
The Americans are quick to come out with a book on every occasion. One such book, dubbed Price of Oil, says that advancements in horizontal drilling and fracking can also be applied to conventional oil extraction. If the rest of the world applies these techniques to conventional oil, as the United State has done, this would yield a further addition of conventional oil amounting to 19.7 million barrels per day by 2035.
8The oil output increases are bound to put downward pressure on prices, either by preventing price rises from the first-half 2015 levels, averaging some US$57 per barrel (Brent spot), or by pushing them back to these levels if an early upward reaction takes place.
8An optimistic scenario, which appears increasingly likely, sees a price of US$40 by 2035.
8The abundance caused by the revolutions will lead to hard to fathom changes in international political relations. Much of the oil importers' urge for political intervention and control will dissipate as access to oil becomes less urgent.
8For instance, the heavy diplomatic and military presence of the United States in the Middle East is likely to be questioned when the country's dependence on oil from the region is further reduced..
8The growth and geographical diversification of supply would not only suppress prices, but would also promote competition among suppliers and make it more difficult for producers to use energy sales in pursuit of political ends.
Click on Reports for more Details
8The oil output increases are bound to put downward pressure on prices, either by preventing price rises from the first-half 2015 levels, averaging some US$57 per barrel (Brent spot), or by pushing them back to these levels if an early upward reaction takes place.
8An optimistic scenario, which appears increasingly likely, sees a price of US$40 by 2035.
8The abundance caused by the revolutions will lead to hard to fathom changes in international political relations. Much of the oil importers' urge for political intervention and control will dissipate as access to oil becomes less urgent.
8For instance, the heavy diplomatic and military presence of the United States in the Middle East is likely to be questioned when the country's dependence on oil from the region is further reduced..
8The growth and geographical diversification of supply would not only suppress prices, but would also promote competition among suppliers and make it more difficult for producers to use energy sales in pursuit of political ends.
Click on Reports for more Details
A technical analysis shows that crude prices will in fact never ever move beyond the $60/B mark.
There are several reasons for this, and among them are:
8Tight oil production in the United States is on way to a 65% cost reduction. The average break-even price for US independent producers is now estimated to be around $42/B, while it is as low as just $24/B for some parts of the Bakken Shale. That is why many American shale companies say they can now be as successful at $65 a barrel as they had been at $100 a barrel.
8Fracking technology can easily be exported and implemented for exploiting tight oil reservoirs around the world.
8Electric vehicles are getting to be cost competitive and their usage will severely limit the demand for crude.
8Utility scale solar generation can be delivered at a price lower than gas fired power in parts of the US already. This is relevant because the price of gas is already low in the US. The rest of the world will also reach these levels soon. This level has already been reached in India as cost of LNG based power is higher.
8Power storage technology is moving at a rapid pace. New startups are coming up with even more disruptive technology, beyond what Tesla is doing in its giga factory, than can dramatically change the game.
Over time this trend will weaken the link between energy demand and crude oil demand, meaning less and less of the growth in the energy market will translate into growth in crude oil demand, until eventually the link breaks entirely and overall crude oil demand starts to go down.
Click on Reports for more Details
There are several reasons for this, and among them are:
8Tight oil production in the United States is on way to a 65% cost reduction. The average break-even price for US independent producers is now estimated to be around $42/B, while it is as low as just $24/B for some parts of the Bakken Shale. That is why many American shale companies say they can now be as successful at $65 a barrel as they had been at $100 a barrel.
8Fracking technology can easily be exported and implemented for exploiting tight oil reservoirs around the world.
8Electric vehicles are getting to be cost competitive and their usage will severely limit the demand for crude.
8Utility scale solar generation can be delivered at a price lower than gas fired power in parts of the US already. This is relevant because the price of gas is already low in the US. The rest of the world will also reach these levels soon. This level has already been reached in India as cost of LNG based power is higher.
8Power storage technology is moving at a rapid pace. New startups are coming up with even more disruptive technology, beyond what Tesla is doing in its giga factory, than can dramatically change the game.
Over time this trend will weaken the link between energy demand and crude oil demand, meaning less and less of the growth in the energy market will translate into growth in crude oil demand, until eventually the link breaks entirely and overall crude oil demand starts to go down.
Click on Reports for more Details
Huge LNG capacities are coming on stream even as LNG prices hit new lows worldwide.
8Projects that have reached capital approval stage represent over 100 million tonnes per annum of new LNG capacity.
8The current Henry Hub is below $3 per million British Thermal Units, and suppliers are targeting countries that are now trying to diversify away from dirtier fossil fuels such as oil and
coal in a race to comply with newly introduced carbon emission targets.
8In the US, those projects that have taken final investment decision (“FID”) continue to make positive progress with Sabine Pass, the first US LNG export project, expected to start up by the end of 2015.
8There is also news of the new $11 billion “G2” project in Louisiana in the US, which is intending to file for Federal EnergyRegulatory Commission approval, having already received Department of Environment approval to export gas to countries with free-trade agreements with the US. The project will have a nameplate capacity of 14 million tonnes per annum.
8In Australia, the the Santos-backed Gladstone facility shipped its first gas cargo earlier this month with Korean Gas taking the first commissioning cargo.
8BG’s Curtis Train 2 also started up during the period following the successful launch of its first train at the end of 2014.T
8The Australia Pacific project, backed by Origin, ConocoPhillips and Sinopec, is also expected to come online by the end of 2015.
8Chevron however indicated first LNG from its Gorgon project may be delayed to early 2016 due to non-market related issues.
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8Projects that have reached capital approval stage represent over 100 million tonnes per annum of new LNG capacity.
8The current Henry Hub is below $3 per million British Thermal Units, and suppliers are targeting countries that are now trying to diversify away from dirtier fossil fuels such as oil and
coal in a race to comply with newly introduced carbon emission targets.
8In the US, those projects that have taken final investment decision (“FID”) continue to make positive progress with Sabine Pass, the first US LNG export project, expected to start up by the end of 2015.
8There is also news of the new $11 billion “G2” project in Louisiana in the US, which is intending to file for Federal EnergyRegulatory Commission approval, having already received Department of Environment approval to export gas to countries with free-trade agreements with the US. The project will have a nameplate capacity of 14 million tonnes per annum.
8In Australia, the the Santos-backed Gladstone facility shipped its first gas cargo earlier this month with Korean Gas taking the first commissioning cargo.
8BG’s Curtis Train 2 also started up during the period following the successful launch of its first train at the end of 2014.T
8The Australia Pacific project, backed by Origin, ConocoPhillips and Sinopec, is also expected to come online by the end of 2015.
8Chevron however indicated first LNG from its Gorgon project may be delayed to early 2016 due to non-market related issues.
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Fearful that disruptive technology may make fossil fuels redundant, the worldwide gas lobby continues to push hard to ensure its relevance.
8The Gas Exporting Countries Forum (GECF) -- claiming to represent 70 per cent of world's proven gas reserves -- is working hard ahead of the COP 21 meet in Paris on keeping gas if not oil in circulation well into the future.
8GRCF says that gas will not only meet power generation and heating needs of the world, but also raw material and energy requirements in the chemical and industrial sectors.
8In the transportation sector too, the argument goes, the future of natural gas looks promising – it is a much cheaper and cleaner fuel than petrol or diesel, and at the same time it does not require subsidies, like renewables, which also lack infrastructure – for CNG refuel facilities are available in many regions, and their feasibility is not an issue.
8Indeed, supported by the world’s abundant natural gas resources, from both conventional and unconventional sources, the “Golden Age of Gas” is still to come, the GRCF feels.
8The risks are there of course.
8Uncertainties are there over how future gas demand will play out, and over the amount that they will eventually be required to be supplied.
8The big worry is a carbon tax. If levied, will create a heavy burden on the industry, making it highly risky as well.
8There is concern that a plethora of effective, low-carbon, environmentally friendly energy policies of governments around the world may stymie the progress of gas.
8The golden age of gas may never arrive is the other worry.
Click on Reports for more Details
8The Gas Exporting Countries Forum (GECF) -- claiming to represent 70 per cent of world's proven gas reserves -- is working hard ahead of the COP 21 meet in Paris on keeping gas if not oil in circulation well into the future.
8GRCF says that gas will not only meet power generation and heating needs of the world, but also raw material and energy requirements in the chemical and industrial sectors.
8In the transportation sector too, the argument goes, the future of natural gas looks promising – it is a much cheaper and cleaner fuel than petrol or diesel, and at the same time it does not require subsidies, like renewables, which also lack infrastructure – for CNG refuel facilities are available in many regions, and their feasibility is not an issue.
8Indeed, supported by the world’s abundant natural gas resources, from both conventional and unconventional sources, the “Golden Age of Gas” is still to come, the GRCF feels.
8The risks are there of course.
8Uncertainties are there over how future gas demand will play out, and over the amount that they will eventually be required to be supplied.
8The big worry is a carbon tax. If levied, will create a heavy burden on the industry, making it highly risky as well.
8There is concern that a plethora of effective, low-carbon, environmentally friendly energy policies of governments around the world may stymie the progress of gas.
8The golden age of gas may never arrive is the other worry.
Click on Reports for more Details
