INDIA: HPCL to start up new 2.8-million kilolitre storage terminal at Ennore

(EnergyAsia, October 22 2012, Monday) — Hindustan Petroleum Corporation Ltd (HPCL) has completed the 30-month-long construction of a Rs3.3 billion oil storage terminal at Ennore port on the east coat of India’s Tamil Nadu state. (US$1=56 rupees). Due to start up soon, the 2.8-million kilolitre terminal is linked by pipelines to the port and will…

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MARKETS: Weak economic environment to constrain world oil demand for rest of 2012, said Ernst & Young

(EnergyAsia, October 22 2012, Monday) — With the global economy stalling and oil demand growth curtailed, oil prices will become “somewhat disconnected” from market fundamentals for the remainder of 2012, said consultant Ernst & Young.

Fears of demand destruction were underscored when Saudi Arabia, the world’s largest exporter of oil, expressed concern about the impact of rising oil prices on demand. The onset of winter in the northern hemisphere should provide a seasonal upswing in oil and gas demand. However, it will take an unusually cold winter to trigger a sustained rally in oil and gas prices.

Concerns over the health of the global economy have prevented oil prices from reaching the highs achieved in the first quarter of the year, said Ernst & Young in its 4th quarter outlook on the oil markets.

Early optimism over economic growth has evaporated as the year has progressed and any slowdown in economic activity in China could result in global oil demand projections in the future being revised downwards again. China is expected to account for almost one-third of the gain in global oil demand in 2013 as forecast by the International Energy Agency.

But firmer prices in the third quarter will underpin investment by oil and gas companies despite the wider economic uncertainty, said.

“Healthy cash balances among the better capitalised companies and the need to replace reserves will drive increased investment activity in Q4 continuing into 2013,” it said.

“Macro-economic indicators and geopolitical tensions are likely to be the main factors driving oil price sentiment in the final quarter of the year. Geopolitical events have the potential to rattle oil markets even if there is no discernible disruption to supplies.”

Dale Nijoka, the company’s Global Oil & Gas Leader, said:

“This year, we’ve seen supply disruptions arising from political unrest in Libya, Yemen and Sudan. Tougher sanctions against Iran have also reduced supplies available to the market. Meanwhile, the conflict in Syria continues unabated with no promise of a resolution anytime soon. These tensions will help keep geopolitical concerns to the fore in the remainder of the year and will be supportive to oil prices.”

Meanwhile, unconventional plays will continue to attract investment, with Asia’s national oil companies (NOCs) particularly active acquirers in 2012, said Ernst & Young.

The Japanese government has announced a new long-term energy policy that will aim to phase out the use of nuclear power in the country by 2040. The policy change follows the March 2011 Fukushima Daiichi nuclear power plant disaster and is likely to serve to deepen Japan’s dependence on imported supplies of oil and gas.

“A policy shift means we may see Japanese energy companies engage in further deals or partnerships to secure access to supplies. While deals to date have focused on shale and oil sands assets, proposed North American LNG export projects are also likely to be prime future targets for Asian investors,” said Mr Nijoka.

Beyond North America, development of unconventional resources is progressing at a slower pace but is gaining momentum.

According to Ernst & Young, China is hoping to attract investment to kick-start development of its shale gas resources. Its government has launched a tender for 20 shale gas blocks and foreign-funded joint ventures that are controlled by Chinese investors will also be allowed to participate.

Argentine company YPF and Chevron have signed an accord to consider jointly exploring for shale oil and natural gas in the country’s Vaca Muerta field.

In contrast, progress in Europe has slowed in the face of public opposition and poor initial exploration results. The Czech government has imposed a ban on shale gas exploration licenses until June 2014. In Poland, exploration results to date have been disappointing and companies are relinquishing licences.

Mr Nijoka said: “Shale gas resources have the potential to play an important role in the world’s future energy mix. However, the reality of the challenges involved in developing these resources in many countries means that the global potential may not be fully realized for another decade. Beyond North America, the shale gas development story is going to be one of evolution rather than revolution.”

 

CHINA: Caution and uncertainty as international firms prepare to take on shale projects

(EnergyAsia, October 22 2012, Monday) — International companies are preparing to take on a key role in exploring and developing China’s enormous shale gas reserves as they approach the October 25 deadline for the country’s second auction on at least 17 blocks. It will be the first time that international companies have been invited to…

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MARKETS: Lloyd’s Register says pricing, stakeholder collaboration vital to developing LNG as bunker fuel

(EnergyAsia, October 19 2012, Friday) — A globally acceptable pricing system and support from key stakeholders must be in place for liquefied natural gas (LNG) to be developed into a viable bunker fuel source, said Lloyd’s Register.

The inspection and classification company released these and other findings in a detailed study, “LNG fuelled deep-sea shipping – Outlook for LNG bunker and fuelled newbuilding demand up to 2025” in response to growing interest over the suitability and viability of using LNG as shipping fuel.

Shipping and energy experts have begun focusing on this possibility in response to emerging long-term global trends including the massive availability of new gas reserves, tightening environmental regulations for cleaner-burning fuels, new efficient gas-burning technologies, and the growing prospect of persistently high oil prices.

The organisation’s marine experts released the full report of their findings in time for the recent Gastech 2012 conference in London, and elaborated on it at this week’s Singapore Bunkering Conference (SIBCON).

Its UK-based marine market analyst, Latifat Ajala, who built the dynamic demand model for the study, said the vast disparity between natural gas prices across the three main regions of Asia, Europe and North America presents a huge hurdle for its use as a fuel for long-distance shipping. In Asia, spot LNG prices regularly trade at US$15 to US$18 per million BTU, while in North America, it slumped to 10-year lows below US$2 early this year, recovering to above US$3 in recent weeks. European prices are somewhere in the middle.

In contrast, crude oil along with bunker fuel oil and diesel are more uniformly represented, enabling traders to do deals across regions.

Apart from pricing, the study found that the adoption of LNG-as-bunker fuel will depend also on the growth of alternative fuel sources and the degree of global collaboration between ship owners, gas producers, technology companies and regulators, among others.

Nevertheless, Lloyd’s Register holds a positive view of LNG as a shipping fuel of the future.

According to its base-case scenario for the period to 2025, there could be 653 deep-sea, LNG-fuelled ships in service, consuming 24 million tonnes of LNG annually. These ships are most likely to be containerships, cruise vessels or oil tankers.

When the study modelled relatively cheap LNG — for example, priced at 25% below current prices — the projected number of LNG-fuelled ships tripled to approximately 1,960 units in 2025. If the cost of LNG increased 25% against current prices, there would hardly be any new LNG-powered tonnage.

“LNG is unlikely to simply replace heavy fuel oil. We will see specific niches – such as in Norway – embrace LNG in small scale applications,” said Hector Sewell, Head of Marine Business Development for Lloyd’s Register.

“Adoption in the deep-sea trades is a different affair; there are different drivers, and we are also likely to see other fuels and technologies emerge as options.

“Despite the excitement [about LNG as fuel], there has yet to be an order for deep-sea, large-engined, LNG-fuelled ships.

“The most likely first movers could be the big containership operators who are able to bunker at two ports at either end of a liner trade route, such as in Rotterdam and Singapore or Shanghai. This might take years. Or it may happen tomorrow.”

He said Lloyd’s Register undertook the study to clarify the issues, reasons and direction as to what LNG-as-fuel might mean for its clients.

“We have the in-depth capability to handle the technology and the risk issues associated with gas, but we wanted to be able to help our clients understand what will be driving industry adoption. We were most interested in the deep-sea trades as these are responsible for most of the world’s tonnage, emissions and fuel bills,” he said.

Ms Ajala said:

“Yes, price is a key. But it’s going to be all about collaboration. There has to be a group of stakeholders who want it to happen.

“Political will and commercial ambition combined with environmental objectives and regulations have driven the modest take-up so far. There is no global market for LNG bunkers, so local or regional initiatives, investment, environmental and fiscal policy all have a part to play.

“Ship-owners who are serious about using LNG as bunker fuel may need to cut their own supply deals and lock in prices for years ahead. It’s going to be really interesting to see what happens.”

 

A summary of Lloyd’s Register key findings on the development of LNG as a bunker fuel

 

Marine bunker fuels and regulation of sulphur content

– Heavy fuel oils (HFO) with high-sulphur content accounted for 76% of marine bunker fuel demand in 2010.

– To limit emissions of the harmful pollutant sulphur dioxide (SOx) from ships, strict limits on sulphur content in marine bunker fuel oils are being implemented in coastal areas known as Emission Control Areas (ECAs). A strict global sulphur content limit of 0.5% could also be implemented in 2020.

– As the schedule for the sulphur limits approaches, LNG as bunker fuel is being considered as one alternative to conventional marine bunker fuel oils because it produces emissions with almost no SOx content.

 

LNG bunker demand assessment – shipowners’ survey

From a survey of shipowners on deep sea trades:

– Low-sulphur fuel oil is seen as a short-term option for compliance with SOx emission regulations.

– Abatement technologies are seen as a medium term option.

– LNG-fuelled engines are a viable option in the long term, particularly for ships on liner trades.

 

LNG bunker supply assessment – port survey

From a survey of bunkering ports:

– LNG bunkering is expected for short sea shipping in ECAs.

– LNG bunkering may eventually cascade into deepsea trade facilitated by regulations.

– LNG bunker demand is highly dependent on LNG pricing and its comparable price difference with competing fuels, for example HFO and marine gas oil (MGO).

 

Forecasts of LNG-fuelled newbuild and bunker demand

Using the LNG bunker demand model, three scenarios have been developed and examined based on assumptions for:

– wider implementation of ECAs

– the date of the strict global sulphur limit implementation

– the propensity of shipowners to adopt LNG as a fuel for newbuilds

– bunker fuel oil and LNG bunker price forecasts.

The three forecast scenarios for LNG-fuelled newbuild and LNG bunker demand are:

 

Base case scenario – current ECAs and a 0.5% global sulphur limit in bunker fuel implemented from 2020:

– 653 LNG-fuelled newbuilds forecasted for the period up to 2025, equal to 4.2% of global deliveries from 2012 to 2025.

– LNG bunker demand is expected to reach 24 million tonnes (MnT) by 2025 for deepsea trades, equal to 1.5% of global LNG production and 3.2% of global HFO bunker consumption.

 

High case scenario – a 25% decrease on the forecast LNG bunker prices used in the base case model and a 75% increase in propensity for newbuilds to convert to LNG-fuelled designs from 2020-2025:

– 1,963 LNG-fuelled newbuilds forecasted for the period up to 2025, equal to 12.6% of global deliveries from 2012 to 2025.

– LNG bunker demand is expected to reach 66 million tonnes by 2025 for deep sea trades. This will equal 4.2% of global LNG production and 8% of global HFO bunker consumption.

Low case scenario – a 25% increase in forecast LNG bunker prices used in the base case model and implementation of global sulphur limits shifting to 2023. Sensitivity testing indicates that shifting implementation to 2025 for the low case would generate a zero demand for LNG-fuelled newbuilds:

– 13 LNG-fuelled newbuilds forecasted for the period up to 2025 (0.1% of global deliveries from 2012 to 2025) LNG bunker demand is expected to reach 0.7 million tonnes by 2025 for deep sea trades. This will equal 0.001% of global LNG production and 0.002% of global HFO bunker consumption.

 

 

 

INDONESIA: Sinopec Kantons, Oiltanking to build oil storage terminals near Singapore

(EnergyAsia, October 19 2012, Friday) — Sinopec, Asia’s largest refiner, said it will be investing US$850 million to build Southeast Asia’s largest oil storage terminal on Indonesia’s Batam Island, while Oiltanking will develop a smaller project on Karimun Island. Both are located near Singapore, home to Asia’s largest independent oil storage capacity. Sinopec will own…

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SINGAPORE: Transport minister announced new initiatives to improve bunker trade and supply

(EnergyAsia, October 19 2012, Friday) — Singapore has announced a slew of measures to improve the quality of bunker fuel supply and trade in the world’s largest market for shipping fuels.

In opening the 17th Singapore International Bunkering Conference and Exhibition (SIBCON), transport minister Lui Tuck Yew announced the introduction of an information sheet on licensed suppliers, an industry guide for the use of mass flow metering system, the launch of a study on frothed bunkers and the establishment of a hotline to help companies manage fuel disputes.

The event’s opening ceremony was attended by a record turnout of over 1,500 delegates at the Resorts World Sentosa.

Mr Lui said the Maritime and Port Authority (MPA) will publish information on licensed bunker suppliers operating in Singapore to help shipowners make better decisions on who they should deal with.

“The information sheet will enhance transparency across the bunkering supply chain by providing details on sales performance, technical performance and other value-added propositions,” said the MPA. It will be published on MPA’s website at www.mpa.gov.sg/sites/pdf/infomation_sheet-licensed_bunkering_suppliers.pdf and updated every six months.

Mr Lui also announced that MPA has developed an industry guide for the use of mass flow metering system during bunker deliveries in Singapore.

With this guide, MPA hopes to encourage more bunker players to adopt mass flow meters that will lead to the development of a Singapore Standard for Mass Flow Metering System. The guide is available at www.mpa.gov.sg/sites/pdf/mass-flow-metering-guide.pdf.

The MPA will also launch a study on frothed bunkers as well as establish a hotline at 1800-BUNKERS (1800-2865377) from November 1 to help manage bunker disputes.

MPA and the Singapore Maritime Institute have appointed the National Metrology Centre to conduct an in-depth study on frothed bunkers to tackle recent allegations of frothed bunkers being delivered in Singapore.

Due to be completed next year, the study aims to verify the presence of frothed bunkers and the impact of such frothing, if present, during the custody transfer of bunker fuel.

At the same event, MPA announced that another 13 companies have signed on to advance Singapore’s Green Pledge campaign to promote clean and green shipping launched in 2011. With the latest batch, a total of 40 key organisations have joined the campaign, said Lam Yi Young, MPA’s chief executive.

According to the MPA, the Green Ship programme encourages Singapore-flagged ships to use efficient ship designs to reduce fuel consumption and carbon dioxide emissions. Owners whose ships exceed the requirements of the International Maritime Organisation’s (IMO) Energy Efficiency Design Index will be given a 50% discount on Initial Registration Fees (IRF) and a 20% rebate on annual tonnage tax (ATT) payable. To-date, 28 ships have qualified for the Green Ship Programme.

 

Also, owners of ships that use type-approved abatement/ scrubber technology or clean fuels with sulphur content of less than 1% during their port stay of five days or less can enjoy a 15% concession in port dues.

Up to September 30 2012, the MPA said that it had registered 369 vessels in the programme and given the owners of 742 vessels the 15% concession in port dues.

The MPA has set aside an initial $25 million from the Maritime Innovation and Technology (MINT) Fund to co-finance projects through the green programme. To-date, it has given a total of S$7.7 million in funding to 10 projects undertaken by nine maritime companies.

 

ASIA: World Bank predicts slower economic growth in 2012, with domestic demand leading rebound next year

(EnergyAsia, October 19 2012, Friday) — Led by China, economic growth in the East Asia and Pacific region may slow down by a full percentage point from 8.2% in 2011 to 7.2% this year, before recovering to 7.6% in 2013, said the World Bank. While growth in the western economies will remain modest, Asia’s recovery…

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PAPUA NEW GUINEA: IOC secures US$100 million loan facility against refinery

(EnergyAsia, October 18 2012, Thursday) — InterOil Corporation said it and its subsidiaries, EP InterOil and InterOil Limited, have secured a five-year US$100 million term loan facility with BNP Paribas Singapore (BNP), Bank South Pacific Limited (BSP), and Australia and New Zealand Banking Group (PNG) Limited (ANZ).

Borrowings under the facility will be used for repayment of an outstanding net US$25.4 million term loan granted by Overseas Private Investment Corporation (OPIC) in June 2001, and general corporate purposes.

InterOil secured the loan against its right, title and interest in the fixed assets of the Napa Napa Refinery in Papua New Guinea at LIBOR plus 6.5%.

The company said the Bank of Papua New Guinea has approved the deal, while funding is subject to release by OPIC of all securities under the existing loan agreement, and other standard closing conditions.

Collin Visaggio, InterOil’s CFO, said:

“We are delighted to have extended our banking relationship with BNP which has led our existing US$240 million working capital facility since 2005, and strengthened our existing relationship with BSP, Papua New Guinea’s largest bank, and ANZ, one of the region’s largest lenders.

“This financing should allow us to maintain our accelerated pace of upstream activity while we complete our negotiations with the PNG state and conclude our LNG partnering process. At this stage, we are pleased by the constructive dialogue with the state and the increased interest in investment in Papua New Guinea following the successful election and formation of the strongest coalition government in the country’s history.”

Ian Clyne, BSP Group CEO, said:

“We are proud as a Papua New Guinea bank to be involved as co-lead arranger of this international syndication, and being able to strengthen our partnership with InterOil, one of PNGs leading organisations. InterOil and BSP, are committed to this emerging nation and its local communities.”

Mark Baker, ANZ CEO PNG said: “InterOil has been a long and valued relationship of ANZ. As an international bank with a 100-year presence in PNG and an extensive network across Asia Pacific, we are focused on providing international financial expertise and regional specialists to support the development of key industries in PNG for the benefit of our clients and the wider community.”

Pierre Joseph Costa, BNP Paribas’ Regional Head for Structured Finance APAC and Japan, said:

“We are proud to be part of the changing landscape in PNG, and this loan marks a further commitment of the Bank’s relationship with InterOil, whom we have been partnering with since 2005.”

InterOil Corporation is developing a vertically integrated energy business whose primary focus is Papua New Guinea and the surrounding region. InterOil’s assets consist of petroleum licenses covering about 3.9 million acres, an oil refinery, and retail and commercial distribution facilities, all located in Papua New Guinea.

The company is also a shareholder in a joint venture established to construct an LNG plant in Papua New Guinea.

 

 

SOUTH KOREA: KOGAS boosts LNG order from Russia’s Gazprom

(EnergyAsia, October 18 2012, Thursday) — Russia’s Gazprom said it has secured a new order to sell up to one million tonnes of liquefied natural gas (LNG) to Korea Gas Corporation (KOGAS) adding to an existing agreement for the supply of 1.6 million tonnes.

The Russian gas monopoly’s wholly-owned subsidiary Gazprom Marketing & Trading Singapore (GMTS), said it will supply up to eight cargoes of LNG a year to KOGAS in 2013 and 2014.

The new supply will come from GM&T’s diversified portfolio, supplementing the existing flows from Gazpom’s Sakhalin-2 plant which produces 10 million tonnes of LNG annually.

Frédéric Barnaud, Gazprom’s executive director for LNG and shipping, said:

“This agreement provides a good basis for further expansion of our commercial portfolio and realising our ambition to be the leading LNG marketer in Asia Pacific. We look forward to partnering with other major energy players in the region willing to build and maintain a secure supply of energy, and meeting the growing demand for LNG in Asia Pacific.”

Established in 2009, GMTS is taking on an increasingly important role to expand Russia’s gas exports to Asia to reduce its dependence on its main markets in Europe. GMT recently concluded a 20-year deal to supply LNG to India’s GAIL.

 

UPSTREAM: Global expenditure in floating production to double in 2013-2017 period, says consultant

(EnergyAsia, October 18 2012, Thursday) — Thanks to growing investments in deepwater oil and gas projects, global expenditure in floating production facilities is expected to double to US$91 billion in the 2013-2017 period, with 29% of that taking place in Latin America, said UK upstream consultant Douglas Westwood (DW).

In its latest World Floating Production Market report, DW predicts that oil and gas companies will build a total of 121 floating production units, up 37% from the previous five-year period.

Floating production storage and offloading (FPSO) units will form the largest segment both in numbers (94 installations) and capital expenditure (80%) over the 2013-2017 period. FPSSs account for the second largest segment of Capex (10%), followed by TLPs, then spars.

Latin America accounts for 29% of the forecast installations and 37% of the projected capital expenditure. Most installations to date have been in Petrobras-operated fields off Brazil and this is likely to continue, albeit substantial delays are expected for Petrobras’ offshore E&P investment.

Asia is the next most important region in numerical terms (24), but Africa is so in terms of forecast capex (US$18.2 billion).

DW said the growth will be driven by newbuilds and conversions, the emphasis on local content resulting in increased costs and general offshore industry cost inflation.

The report’s author, Hannah Lewendon, said:

“Floating production is firmly established as a cost-effective method of developing oil and gas fields around the world. In water depths beyond 500-metre floating production systems becomes one of the few options open to operators, an increasingly important factor as production moves into these areas. DW forecast that 63% of global FPS market spend will be in deep waters.

“Latin America accounts for 29% of the 121 installations forecast and 37% of the projected Capex. Most installations to date have been in Petrobras-operated fields off Brazil and this trend is likely to continue, although substantial delays are expected for Petrobras’ offshore E&P investment. Asia, then Africa and Western Europe make up much of the remaining forecast Capex.

“FPSOs represent by far the largest segment of the market both in numbers (94 installations) and forecast Capex (80%) over the 2013-2017 period. FPSSs account for the second largest segment of Capex, followed by TLPs, then spars.”

Steve Robertson, DW’s director, said: “Overall, the outlook is considered positive and the value of annual installations is projected to grow from US$10.2 billion in 2013 to US$26.2 billion in 2017.

“Three main factors will affect the supply of units in the FPS sector; financing, local content and leasing. The FPSO leasing sector remains weak with 85% utilisation at present compared to 89% at the time of the 2011 edition of the report. Contractors are reporting poor returns on existing projects and write-downs on new projects due to cost over-runs.

“Financing remains a challenge for leasing contractors and smaller E&P companies as a result of the debt crisis in Europe. At the same time local content requirements are pushing up prices and extending lead times, particularly in Brazil.”

 

 

MARKETS: Brent’s premium over WTI at new one-year high of over US$24 a barrel

(EnergyAsia, October 18 2012, Thursday) — Supply uncertainties out of the Middle East and the North Sea coupled with the build-up of oil stockpile in the US have pushed the price gap between Brent crude and US WTI benchmark to more than US$24 a barrel for its highest level in a year. Brent received a…

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TURKMENISTAN: Wood Mackenzie on the long-term importance of the South Iolotan natural gas project

(EnergyAsia, October 17 2012, Wednesday) — The proposed costly multi-phase development of Turkmenistan’s giant South Iolotan (Galkynysh) project will be key to Central Asia’s emergence as a major natural gas supplier with the potential to export more than 120 billion cubic metres (bcm) by 2020, said consultant Wood Mackenzie. While regional energy powerhouses Turkmenistan, Kazakhstan…

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QATAR: Separate LNG deals secured with Japan’s Chubu Electric and ExxonMobil

(EnergyAsia, October 17 2012, Wednesday) — Qatar has secured a long-term deal to supply liquefied natural gas (LNG) to Japan’s Chubu Electric Power Company and advanced on an export project in the US with Exxon Mobil. Qatargas 3, a joint-venture firm between Qatar Petroleum, ConocoPhillips and Mitsui & Co, has agreed to supply Chubu Electric…

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CHINA: Longwei Petroleum starts up 100,000-metric ton Huajie fuel storage depot

(EnergyAsia, October 17 2012, Wednesday) — Longwei Petroleum Investment Holding Ltd, a NYSE-listed company engaged in the storage and distribution of oil products in China, said it has started operations at its recently acquired Huajie fuel storage depot in northern Shanxi province.

The company began delivering fuel to customers on October 11 after receiving its first products cargo at the new terminal in Xingyuan town located in a growing industrial and mining region some 200 km north of Taiyuan.

Longwei completed the RMB700 million purchase of the 100,000-metric-ton fuel storage depot and other assets of Huajie Petroleum Co Ltd on September 26. (US$1=RMB6.26). The assets include delivery and distribution platforms, a dedicated rail spur, a vehicle loading and unloading station, a 3,000-sq-m office building and the right to use 98 acres of land adjacent to the main regional rail line.

Cai Yongjun, Longwei’s chairman and CEO, said:

“The Huajie facility nearly doubles our storage capacity to a total of 220,000 metric tons and extends our reach into the fast-growing industrial region of northern Shanxi Province. We are pleased to have closed on the Huajie asset purchase using our own cash resources without dilution to our shareholders.”

Michael Toups, Longwei’s chief financial officer, said:

“We are confident we can quickly ramp up sales at the Huajie facility based on regional demand and relationships we have established. Closing on the Huajie facility has allowed us to increase our regional presence and attract new customers.

“With the addition of the Huajie facility, we have strengthened our lead as the largest non-state-owned fuel storage and distribution business in the province.”

Longwei earned net income of US $65.1 million on revenues of US $510.6 million for the year ended June 30 2012. It had assets valued at US$342.3 million and a book value per share of $3.31.

 

MARKETS: IEA slashed world oil demand growth forecast for 2012, kept 2013 unchanged

(EnergyAsia, October 17 2012, Wednesday) — The International Energy Agency (IEA) has reduced its forecast for world oil demand growth for 2012 by 100,000 b/d to 700,000 b/d. It kept unchanged its forecast from last month for world oil demand to grow by 800,000 b/d in 2013. In its latest monthly oil report, the Paris-based…

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INDIA: Indian Oil Corp raised S$400 million through first Singapore dollar bonds

(EnergyAsia, October 16 2012, Tuesday) — Indian Oil Corporation (IOC) said it has raised S$400 million from a very successful first-ever sale of 10-year bonds denominated in Singapore dollars. (US$1=S$1.23).

With a coupon rate of 4.1%, the bond was among the lowest paying long-tenor issue by a foreign public company, but was quickly snapped up by Asian investors, 75% of them based in Singapore.

In announcing that it had become the first Indian company to successfully price long term bonds denominated in Singapore dollars to add to US dollar bonds, IOC said the landmark issue has added diversity to its debt portfolio.

P.K. Goyal, IOC’s finance director, said the company had raised the issue size to S$400 million from the originally planned S$300 million offer in view of strong investor demand.

The book building was announced on October 4 following of “a highly successful one-day road show in Singapore, which was attended by over 50 prospective investors,” said the company.

The final book consisted of orders from over 100 investors comprising fund managers (22%), banks (18%) and private banks (60%).

IOC said the overwhelming response to its Singapore dollar bonds has not only confirmed the confidence of international investors in its credit worthiness but has also paved the way for other Indian companies to tap Singapore market for their long term financing needs.

 

AFRICA: IMF urges Central African states to wisely use oil revenues to improve social conditions

(EnergyAsia, October 16 2012, Tuesday) — The International Monetary Fund (IMF) has urged oil-rich Central African countries to use their wealth wisely to avoid the resource curse so that they can bring real progress and development to their people and societies. Sharmini Coorey, the director of the IMF’s Institute of Capacity Development, said they could…

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SINGAPORE: SIEW 2012 interviews John Ng, CEO of Power Seraya.

(EnergyAsia, October 16 2012, Tuesday) — The following article features a Singapore International Energy Week (SIEW) 2012 interview with John Ng, CEO of YTL Power Seraya, the Singapore subsidiary of Malaysia’s YTL group.
Q1: How and to what extend has the power generation sector been affected by the economic crises of recent years? What insights and lessons have you gained which have wide implications for Singapore’s energy security?

John Ng: The unprecedented global financial and economic crisis of 2008 and 2009 had engulfed many Asian countries, including Singapore. In turn, it had impacted domestic electricity demand and supply. The cyclical economic cycle of 2008/2009 with an abrupt economic downturn followed by a sharp recovery had made it imperative for the energy industry to place greater emphasis on the timing of investment in capital projects as well as commitment to long-term fuel resources.

While Singapore’s energy security should be pursued with caution, one must also seek to appreciate the high cost of placing such a high emphasis on it.

Energy policies that seek to address the concerns of rising energy prices and climate change will seek to enhance the nation’s energy security. Yet, tradeoffs on competitive electricity prices to the consumers and consequently the social impact to the country must also be taken into account.
Q2: Your business operations, while largely Singapore-focused, are exposed to the variances of the global energy landscape. How has your businesses evolved in tandem with the changes taking place regionally and globally?

Ng: YTL PowerSeraya has always sought to move in tandem with the changes of the energy industry and has since grown from a pure generation company to an integrated energy with a multi-utilities offering, physical oil trading and fuel oil storage services.

As fuel cost is a significant portion of business cost, our trading arm PetroSeraya was set up to complement and grow our existing energy business. Its successful establishment has been one of YTL PowerSeraya’s key moves towards completing the value chain from sourcing to end-user.

The policy of reducing exposure to volatile world oil prices, and utilising our every asset such as tanks and jetties, has continued to grow the company’s whole value chain, with good success.

With the rise of global climate change issues, along with a global need for fuel diversification, we have over the years switched largely from the use of heavy fuel oil to natural gas. At the same time, we have voluntarily invested in cogeneration technologies that are deriving greater energy efficiencies.

We are also primed to be an active participant of the LNG market when the LNG terminal is ready in Singapore by 2013.

On a regional level, our parent company YTL Power also has operations in Malaysia and Indonesia. With our complementary expertise as a group, we will continue to explore the opportunities available in the region to enhance our energy portfolio.
Q3: As a genco, how are you working with your customers to increase the sustainability of their operations? At a broader level, what role do you see power generation firms playing in shaping a more sustainable future globally?

Ng: We believe efficient use of energy is key, with conservation of energy being the cornerstone to energy sustainability in Singapore. Through our retail arm, Seraya Energy, we have been working with customers on an ongoing basis to help them achieve energy efficiency and savings. This includes relevant energy solutions such as our Greenplus energy package which is bundled with energy management services to help customers improve their energy efficiency.

Our customer portal also provides real-time online access to bills and consumption reports and easy retrieval of customised reports so customers can better access and monitor their energy consumption. As part of our efforts to raise awareness and action on energy conservation, we also seek to educate customers on energy saving tips and to involve in them in our various environmental initiatives such as Earth Hour.

Power generation firms can seek to continuously place a strong emphasis on energy efficiency by taking a close look at energy sources, technologies, waste management and emission control, as well as resource conservation in their business operations.

In addition, power generation firms can work with their local government to support the growth of sustainable energy. Enhancing the company’s position by building a strong association to sustainable operations can also help influence customers to think of sustainability in their own operations.
Q4: The energy landscape is evolving in many different directions. From your perspective as a genco, how do you think the Singapore energy landscape will look like 20 years from today?

Ng: In the next 20 years, the local energy landscape will be dominated by the use of natural gas in highly efficient cogeneration plants, which is currently the lowest carbon-emitting fossil that the industry can use to generate electricity.

An ASEAN framework for electricity import may already be in place by then, which can help enhance Southeast Asia’s energy security through diversification of sources–allowing us even to tap on energy sources such as geothermal energy, which is not locally available.

To meet the region’s demand for energy, the focus will still be geared towards exploring more efficient use of fossil fuels and renewable energy, energy conservation and wider spread adoption of newer technologies such as electric cars, smart grids and microgrids.
Q5: In your opinion, what is the likely scenario that the US will export shale gas to the rest of the world? How do you expect that to impact your business?

Ng: While there is a high possibility, this will still depend largely on the US Administration that is looking to strike a balance between the economics of expanding gas exports and meeting internal shale gas demand such as in power generation and chemical producing industries.

With the completion of the LNG terminal, Singapore can seek to receive more gas supply from other sources. Coupled with the nation’s connectivity and infrastructure, the price of natural gas arriving into Singapore is also likely to fall, which can have a positive impact on business and the domestic consumers.

AUSTRALIA: Shell to upgrade retail sites in northwestern part of Western Australia

(EnergyAsia, October 16 2012, Tuesday) — Shell Australia said it will invest A$6 million in upgrading four key retail sites in the northwestern part of Western Australia state. (US$1=A$0.96). The company will build new storage tanks, pumps, canopies and upgraded signage at sites in Tom Price, Paraburdoo, Halls Creek and Fitzroy Crossing. Shell’s general manager…

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CHINA: Chevron Oronite announces laboratory agreement with Intertek

(EnergyAsia, October 15 2012, Monday) — Chevron Oronite Company said it will significantly enhance its analytical testing capabilities in China following an agreement with Intertek Group for the use of its testing services and laboratory in Shanghai.

“The addition of the Shanghai testing facility is part of a longer term strategy for China that supplements Chevron Oronite’s other technical support and research network around the world, including our technology center in Japan, which has a full range of laboratory and engine test facilities” said Jirong Xiao, Chevron Oronite’s vice president, products & technology.

“This is another step in our continuous effort to improve processes and meet the ever-increasing technological needs of our customers.”

The facility is already in use and will have an initial focus on enhancing Oronite’s customer service while also significantly improving the company’s ongoing in-country field testing efforts.

Stacey Tylka, Intertek’s vice president for South East Asia, said:

“After completing a rigorous process to prove that our laboratory fully meets the Chevron Oronite standard for a testing facility, we are proud to say that Intertek in Shanghai was given an ‘Oronite Qualification Certificate’.

“For more than a century, companies around the world have depended on us to ensure the quality and safety of their products, processes and systems. We are proud to begin assisting Chevron Oronite with their additive testing needs.”

Chevron Oronite operates several research and technology facilities around the world, including Omaezaki in Japan, Richmond, California in the US, Gonfreville in France, and Rotterdam in The Netherlands.

A certified research and testing facility in San Antonio, Texas is managed under a similar agreement between Chevron Oronite and Intertek.

“With a lab in China, Chevron Oronite will offer analytical services that will immediately enhance the turnaround time and service to our customers” said Jeff Waite, Chevron Oronite’s general manager for Asia-Pacific sales.

Chevron Oronite Company LLC, an indirect, wholly owned subsidiary of US major Chevron Corporation, is a leading developer, manufacturer and marketer of fuel and lubricant additives, providing solutions to customers globally. Headquartered in San Ramon, California, Chevron Oronite maintains three regional offices in Houston (Americas Region), Paris (Europe-Africa-Middle East Region), and Singapore (Asia-Pacific Region); manufacturing sites in Belle Chasse, Louisiana (USA), Gonfreville (France), Singapore, and Mauá (Brazil); an affiliated blending and shipping plant in Omaezaki, Japan; and affiliated sales and manufacturing operations in India and Mexico.

 

INDONESIA: Medco to sell 63.88% stake in fuel storage unit to Puma Energy, form JV company

(EnergyAsia, October 15 2012, Monday) — Indonesia’s biggest listed oil company, PT Medco Energi Internasional, will sell a 63.88% stake in its fuel storage and distribution unit, PT Medco Sarana Kalibaru (MSK), to Switzerland’s Puma Energy LLC, the two companies have announced.

Neither company revealed the value of the transaction that will include the formation of a new joint venture firm, PT Puma Medco Petroleum. The deal is expected to complete in early December subject to review by the Indonesian regulatory authority.

The principal assets in the venture include a 22,700-cubic metre fuel storage terminal in Tanjung Priok International Port in northern Jakarta that includes a dedicated jetty, truck loading bays, and a distribution network in Kalimantan and Sumatra to serve the mining industry.

Puma Energy, a subsidiary of trader Trafigura Beheer BV, said the new company will continue to deliver quality fuels including high speed diesel (HSD) to clients throughout Indonesia.

Lukman Mahfoedz, President and CEO of MedcoEnergi, said:

“We have entered into this strategic alliance designed to bring together the strengths and expertise of both companies to create the best fuel trading and distribution business in Indonesia and the surrounding region for the benefit of our customers, employees, as well as other stakeholders in the country.”

Pierre Eladari, Puma Energy’s CEO, said:

“MSK provides Puma Energy with an existing footprint from which to invest and grow. Of particular relevance for the region is our experience in providing large volumes of high quality fuel to industry within countries with strong economic growth, but challenging infrastructures.”

With operations in 34 countries, Puma Energy has grown rapidly in recent years through organic growth and acquiring downstream assets from ExxonMobil, BP and Chevron. Its most recent acquisition announced three months ago, Puma Energy moved to acquire Chevron Kuo Pte Ltd, which owns 70% of Chevron Bitumen Vietnam Ltd.

Jakarta-listed MedcoEnergi focuses on oil and gas exploration and production in Indonesia, Oman, Yemen, Libya and the Gulf of Mexico in the US. It also operates gas-fired, coal power plants and supplies electricity to Indonesia’s state utility PLN.

 

 

MARKETS: Wood Mackenzie sees growing signs of “interconnected global gas market” as regional price disparities shrink

(EnergyAsia, October 15 2012, Monday) — Events over the last two years have enabled the world’s disparate regional natural gas markets to become more “interconnected”, with implications for price, said consultant Wood Mackenzie.

In a presentation on the gas market outlook to 2020, Noel Tomnay, Wood Mackenzie’s Head of Global Gas Research, predicts increased competition will reduce the Asia contract price premium while rising cost will likely require spot prices in North America and Europe to rise to encourage new gas supplies.

Speaking at the Gastech conference in London last week, he said:

“Remote supply options have grown dramatically. There is potential for significant exports from North America, but we have also witnessed enormous reserve additions through exploration. Exploration success in East Africa and the East Mediterranean in particular – success which has dwarfed that recently seen in Australia – have meant that the last two years have been the most successful for gas exploration for a generation.

“We are seeing more infrastructure development and greater liquidity which will enable greater connectivity within regions and between regions.”

He cites examples: spare regas capacity in coastal China; FID on the first US LNG export project since Kenai, linking Lower 48 States gas to global markets; the Panama Canal expansion which could route US LNG to Asian markets less expensively; and the emergence of gas from East Africa which could link Asia and Europe better.

Long term, he said market liquidity will only arise if suppliers are prepared to sell at market prices.

“The reality is that some key suppliers have restricted the volume of gas they are prepared to sell at such prices. Pipe suppliers including Russia and Norway have limited volumes into Europe, and some LNG suppliers have restricted spot LNG volumes to Asian buyers, holding out for long term contracts instead.”

But increased competition, driven by remote supply options, is impacting the market.

“New entrants not part of the existing supply club, companies without a legacy of existing supply contracts such as those from East Africa and North America, are more likely to be willing to offer more innovative pricing arrangements to secure market,” he said.

Mr Tomnay said natural gas prices will be pressured higher by two factors.

Firstly, local cheap gas, primarily from unconventionals, is not panning out as quickly as many had hoped.

“In many cases, environmental, political and regulatory factors have been the greatest obstacles. A number of European governments have gone further and imposed moratoriums on fracking. As a result, it’s possible that within the next five to ten years European gas demand could be served by more shale gas from the US than Europe.

“The geology has also proven to be harder in many areas. So much so that in China we expect the biggest non-conventional gas growth story in the next five years will be coal-to-gas rather than shale or coal bed methane.”

Secondly, the increased reliance on remote supply options to meet gas demand will contribute to rising cost.

“Costs are increasing, not only due to a higher cost environment, but also reflective of more challenging technical environments, more infrastructure requirements and greater transport distances,” he said.

Wood Mackenzie has studied the cost of gas in the supply mix over the last five years against gas projects in the five years from 2016.

Mr Tomnay said:

“Costs for projects supplying gas to Europe could rise from a break even average of between US$1.50 and 7.00 per million British Thermal Unit (mmbtu), to a range around US$8-12/mmbtu. Similarly in Asia, LNG projects before 2012 had break evens of under US$5, but these are likely to ramp up to between US$11 and US$14. Even the North American market will need to start calling on more expensive gas if it is to meet the demand growth of some 150 billion cubic meters between 2015 and 2020.”

He concludes that regional gas prices will have to adjust significantly. Spot prices in North America and Europe will need to be higher than current levels if new gas supply is to be encouraged while Asian contract prices will have to weaken.

 

 

ASIA: Japan and India to undertake joint study of LNG pricing

(EnergyAsia, October 15 2012, Monday) — India and Japan, two of Asia’s largest natural gas consumers and importers, said they will jointly undertake research into liquefied natural gas (LNG) pricing with the view to making them more affordable and equitable. The global natural gas markets are significantly skewed along regional lines, with Asia paying as…

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CHINA: Coal markets set for more volatility with completion of dedicated railway lines from mid-2013

(EnergyAsia, October 12 2012, Friday) — Already hit by weak demand, Asia’s coking coal markets will face more uncertainty from mid-2013 when China starts up major rail infrastructure to transport the fuel from mines in the northern and interior regions to markets along the coast. According to Goldman Sachs’ commodities analyst Julian Zhu, the Erdos-Caofeidian…

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INDONESIA: Coal miner Bumi plc held board meeting in Singapore amid growing crisis

(EnergyAsia, October 12 2012, Friday) — Wrecked by infighting amid fraud allegations and slumping coal prices, Indonesia’s coal mining giant Bumi Plc held its board meeting in Singapore this week to try sought out differences between its three main powerful partners. The meeting was attended by British-born financier Nat Rothschild, who owns a 12% stake…

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