What is going wrong with ONGC's Daman field: Is first gas by March, 2018 a realistic target?

How late is ONGC's Daman development plan running?
ONGC believes that it can deliver 2-3 mmscmd of gas by May, 2018 and peak gas of 8 mmscmd possibly by 2020. But is that a realistic target given that the company has not finished awarding the contracts for the project after EPC contractor Swiber Offshore Construction, Singapore declared bankruptcy.

Could the company have acted faster?

It is true that the bankruptcy of Swiber Offshore Construction delayed the commissioning of the crucial Daman project. But could ONGC RIL tenders contracts have acted faster after the bankruptcy was declared?
The subcontracts were already awarded by Swiber before it went down. So what took so long to revive those contracts?

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GAIL to pay more for LNG vessel hire: Global demand for vessels going up

The latest reassessment shows that a total of  over 110 MMTPA of new supply will be coming online between 2017 - 2020. For reference purposes, the website carries here an estimate of new LNG supply by project start date spread over the next three years. Projects are expected to use both new built and existing vessels to utilize the extra capacity coming on stream.

So far, increased demand seems to be absorbing supplies. There has been demand de-growth in some countries but made up by growth elsewhere. There are new supply flows being created now by buyers of US LNG. US volumes are expanding both vessel tonne miles and tonne time. Cheniere reported over 100 cargoes shipped to 20 countries (Q1 2017 results). Sabine Pass trains have been running consistently, save for maintenance outages. Applying the 1.77x multiplier to yet-to-deliver US FID exports (50+mtpa) would require around additional 90 LNG ships.

New projects are coming online: Despite the massive additions to LNG supply between 2017 - 2020, there are now signs of more projects coming on stream beyond 2020.

The website carries here an assessment of fresh long term supplies coming in beyond 2020.
Clearly therefore, supplies will be built well beyond the next three years
This could mean LNG prices are likely to stay down for longer than what was earlier projected.

Demand-supply gap emerging in LNG vessels: GAIL seems to have missed the bus when it comes to contracting for LNG vessels to ship its US LNG commitments to India at reasonable charter hire rates.

The website carries here a projection of how future LNG vessel demand exceeds the current order book
The website also carries here a vessel-wise delivery schedule against vessel requirement
Average sailing distances are now growing rapidly. Detailed vessel utilization and shipping rates are carried here.

Spot fixtures over the last few months are carried here in relation to the same period over the last three years, and they show a rising trend. There are now indications that vessel rates are going to tighten and this will raise the delivery cost of GAIL's Indian LNG projects. This website also has its own daily LNG vessel charter hire rate data collected from global sources and contacts.

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Shipping Corporation of India: Scripting a different story

The Shipping Corporation of India has not added any ship in the last one year primarily due to weak shipping markets. Many vessels are currently placed in the spot market and are competing with other shipping companies for the same business. These vessels are working at less than 50% utilization. Long term contracts are limited under the current environment.

But a shrinking global shipping order book, bottoming asset prices, lower crude prices (lower bunker) and stable shipping freight rates bode well for shipping companies including the SCI. The current focus seems to be on a strategic sale by the government of the company. Under a new ownership, the company is likely to fare much better.

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Low oil prices for a long time to come: The world has changed in the last two years

A new argument claims that oil prices are going to stay low for a long time to come because the world has recalibrated the cost of production of oil in the last two years.

This trend first became evident in the U.S. The collapse in revenues, along with heavy debt burdens, led to multiple bankruptcies and the expectation that prices would be “lower for longer.” Shale producers had no choice but to slash costs if they wanted to survive. In the process, they became more efficient, focused and innovative. A new well that might have cost $14 million in 2014 now costs $7 million. The gain in efficiency is so great that a dollar invested in U.S. shale today will produce about 2.5 times as much oil as a dollar invested in 2014 .

n 2014, many thought a drop in price to $70 a barrel from $100 would shut down U.S. production. It didn’t. Today, new shale oil wells can be profitable at $40 to $50 a barrel, and some companies claim even lower. That makes possible a new surge in U.S. production—as much as 900,000 additional barrels a day over the course of this year. By next year, the U.S. is likely to hit the highest level of oil production in its entire history.

This cost recalibration is happening everywhere. Canada’s oil sands have always been among the highest-cost, yet some new projects can produce near $50 a barrel. In Russia, costs have come down more than 50%. Even deep waters offshore can now produce at less than $50. In March the CEO of the Norwegian company Statoil said that owing to a wholesale redesign, a project in the North Sea that had originally required $75 a barrel to be economical now needs just $27 a barrel.
This recalibration will push up supply more than had been anticipated, at least in the next few years. And if price of oil goes up, more output will kick in at much lower prices than before.

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RIL-BP's KG Basin gamble: Output will continue to decline till 2020

Gas production from the RIL-BP's D-6 block continues to slow down. In 2016-17, the average production was just 8.4 mmscmd, down from 11.61 mmscmd in 2015-16. Efforts to keep production up by sidetracking activities is showing minimal results so far. Two sidetrack wells in the MA field brought on-stream in October 2016 and January 2017, respectively, contributed only marginally to production, with the decline in production continuing.

Average output in the fourth quarter was 8.2 mmscmd. Since fresh gas from the recently announced new investments are likely in 2020, the decline in output from the RIL-BP combine's block is likely to continue till then. Meanwhile the duo has been burning cash on development drilling for sometime now, albeit quietly. Of the total capex of $ 119 million in 2016-17, bulk of it is elated to the development drilling programme in the D-6 block. Expect a sharp spike in capex from now on, as the $ 6 billion investment plan in the R-series gas fields beings to roll off the ground.

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Qatar crisis: Spot LNG spot rates to go down as European cargoes get diverted

The diplomatic split between Qatar and other major middle eastern countries continues to simmer and uncertainty still lingers in the market regarding Qatar’s Indian LNG projects volumes.  Since last week other changes have been afoot. Mauritius, Mauritania and the Maldives have now joined the list of countries severing diplomatic ties with Qatar. 

The UAE has upped tensions by banning any airline destined to Qatar using its airspace, plus enforcing rules that it will jail anyone who sympathises with Qatar. Late last week however two Qatari gas ships appear to have diverted their original path through the Suez Canal, to now going the long way around the Cape of Good Hope to get into Europe, fuelling speculation they may have received deterrence from the Egyptian-controlled Suez Canal.

This can well mean more Qatari spot cargoes into Asia and India, putting pressure on prices
The other main question that remains unanswered is what effect the LNG shipping market will see on Fujairah, an UAE port, prohibiting Qatari ships; Qatari flagged ships; and/or ships coming to or from Qatar from bunkering and anchoring there. Will other Arab ports adopt a similar approach?

Blockade beginning to bite: The effects of the diplomatic crisis in the Middle East are still being assessed.  Now, with the UAE blocking all vessels which have previously called at Qatar from docking at its own ports, freight rates for those vessels calling at Qatar are now expected to rise, while buyers are splitting cargoes on Suezmaxes, rather than VLCCs, in order to load separately at both Qatar and the UAE. Qatar currently produces around 619,000 bpd of crude oil

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Naphtha-spot LNG differential: Suppliers can push more gas to industrial clients

LNG spot price and naphtha price differentials have widened in India ever since January on accounting of increasing oil prices and falling prices LNG projects in India. According to data carried here by this website, the differential was non-existent in January but has widened in April and there is still a reasonable gap of late even though oil prices are on the decline.

Spot LNG prices were above the $9/mmbtu level in January but has fallen rapidly since, thereby ensuring that the differential between the two competing fuels remain high. This is a good time for suppliers to push through gas supplies to industrial users with dual-use furnaces.

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Shipping: After four years, new orders flood in

The list of new building shipping orders surfacing in ship building yards across the world during the past days has been overwhelming and is reminiscent of busier periods the industry was enjoying about four years ago. 

Yet the price levels are not seeing a big increase as competition among shipbuilders remains fierce, thus not allowing newbuilding values to move accordingly.

In terms of recently reported deals, Estonian owner, Platano Eesti, placed an order for two firm and one optional mini-Capes (108,000 dwt) at Shanghai Shipyard, in China for a price in the region of $35 million each.

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Poor Indian E&P performance in 2016-17: No respite in sight either

The 2016-17 oil and gas production data shows crude output is lower by 2.53%. All major segments -- ONGC, OIL and the private sector -- under performed. Clearly new developments have not been able to stem the natural decline from ageing fields.

Crude output will continue to stagnate or decline over the foreseeable future.  Cumulative gas production is lower too for the year.  The Daman development of ONGC -- that was meant to bring in 8 mmscmd of peak gas -- now stands put off by about two years because of the company's inability to get new contractors to quickly plug the gap after the primary contractor declared bankruptcy. The output from here would have countered the natural decline from the Bassein, ONGC RIL tenders contracts and largest gas field.

With RIL's D-6 output in permanent decline, subsequent to the closure of two wells due to water and sand ingress and lackluster results from side tracking activities, it does not look like India's gas output will see a significant upswing in 2017-18 or 2018-19.

The real effect of the incremental output from Daman and KG-DWN-98/2 will only be felt by the end of 2019 and 2020. The country therefore has not option but to fall back on expensive Indian LNG projects to plug the demand-supply gap. Given the price sensitivity of the Indian market, gas demand, but of the uptake in the CGD sector, may remain tepid too in the intervening years if LNG prices continue to stay high.

Source: Indian PetroPlus

LNG in India: Is there arbitrage potential?

The website also carries here answers to the following queries:
Will the high Asian spot prices of winter 2016–2017 be sustained?
Will there be more liquefaction FIDs despite loose market conditions?
What trends could emerge for new LNG contracts?
Will there be more LNG-related asset ownership changes?
How will existing LNG contracts come under pressure in 2017?
Can LNG in shipping bunkers be transformative for LNG demand?
How will individual country (regional) dynamics impact the LNG balance?
Will price relationship shifts slow India’s spot import momentum? 
For the last two years, India has provided an important destination for spot cargoes and it is expected that this will continue into 2017 and 2018. Additional regasification capacity is coming up during the year. A key factor in India’s current  procurement will be the oil price and arbitrage potential between oil-indexed LNG contracts and spot volumes. If spot prices increase relative to oil, this could yield a much milder appetite for spot LNG. 

Source: Indian PetroPlus

Is Saudi Arabia sabotaging the OPEC price deal?

Crude prices are going down as OPEC finds it increasingly difficult to keeps its rebellious members from violating the output cut deal. Saudi Arabia’s February production actually rose by over 250,000 bpd.  

There are concerns now that OPEC’s more rebellious members may abandon the cut deal and return to pumping as much oil as possible for the purposes of market share. Such a move by the likes of Iraq, the UAE, or even Saudi Arabia would be disastrous. 

Saudi’s apparent move to up output last month was supposedly to fire a warning shot at its rivals, to make them aware that, should they fail to comply with the cuts, Saudi can do the same. The US has emerged as the key swing producer in the oil market and a wave of positive production data is predominantly responsible for the sudden slump in prices. Looks like oil prices are going to stay low for now.

Source: Indian PetroPlus

LPG storage and distribution: Big business opportunity

There is business opportunity avaiable for providing LPG storage and distribution infrastucture in India.
The website carries here data to show that there is a big LNG import terminal capacity shortage going up to th year 2025.

The LPG demand supply gap is highlighted as well
Details of how the gas logistics business work is documented
A case study of how an existing private gas logistics provider is riding high on this business opportunity is also highlighted.

Source: Indian PetroPlus

Find out how ONGC saved $ 25 million each in 265 production and drilling platforms

Oil & Natural Gas Corp. Ltd. (ONGC) produces oil from the Western Offshore fields off the coast of Mumbai, India. Rather than decommission its fixed, jacket-type platforms dating back to the 1970s, ONGC opted to requalify the structures as fit for extended use.

The $150-million project involved the structural assessment of more than 265 platforms, the majority of which had exceeded their 25-year design life. A foremost priority included the identification and delivery of strengthening and mitigation measures for 90% of these platforms, as well as the subsequent recertification necessary to meet industry safety requirements.

The aim was to add 10-15 years to the structures’ lifespan. Studies conducted during the analyses included dent modeling, member-joint component strengthening, and additional pile modeling.

Each requalification not only ensured uninterrupted oil production, but also avoided installation of a replacement platform at a net cost of $25 million. Find out more on what was done.

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