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Viewpoint: India eyes strategic gas storage reserve

  • : Natural gas
  • 24/01/08

The Indian government is mulling building a strategic gas reserve to combat the volatility of natural gas prices and reduce its import dependence, given rising natural gas demand.

The government has appointed a committee to work on a feasibility study on the need to build a strategic gas reserve. The study will enable the government to assess the technical and cost parameters of such a project by early 2024.

Delhi is planning to use old, depleted hydrocarbon wells to build a strategic gas reserve that would cushion the volatile gas price rise witnessed in 2022 after the Russia-Ukraine war, an official from state-controlled gas distributor Gail told Argus.

India's efforts to build a strategic natural gas reserves complement its plans to build LNG storage capacity, which is part of its larger aim to expand its LNG imports and avoid a repeat of the supply shortage experienced in 2022.

The strategic gas reserve is likely to be built in phases in India's western and northeastern regions, with an initial capacity to store as much as 4bn m³ (11mn m³/d) gas. The first such facility is likely to take three to four years to build after the government's approval. The estimated cost to build such a facility is around $1bn-2bn.

Indian state-controlled companies currently hold 2bn m³ (5.4mn m³/d) of gas in pipelines and LNG storage tanks for commercial use.

India already has a strategic crude oil storage of over 5mn t, located in Vishakhapatnam in Andhra Pradesh state (1.33mn t), Mangaluru in Karnataka state (1.5mn t) and Padur (2.5 mn t) in Karnataka. Delhi has been struggling for years to build the second phase of its strategic petroleum reserves (SPR), comprising 6.5mn t at Chandikhol, 4mn t in Odisha and 2.5mn t in Padur, on a public-private partnership model.

Increasing imports

The gas storage reserve is most likely to be used for imported LNG as importers have been signing term deals, most of which are set to commence from 2026.

Imports will likely help achieve Delhi's aim to more than double the share of natural gas in its energy mix to 15pc by 2030 from 6pc currently, unless domestic production rises significantly.

India's LNG imports rose by over 11pc on the year to 20.09bn m³ during April-November 2023, while overall output was at 22.9bn m³, up by 3pc on the year, according to oil ministry data.

The rise is likely the effect of faster economic growth after the pandemic years, while much of the imports are also the result of lower LNG prices this year. India paid $0.43/m³ per cubic metre of LNG during the April-September period, compared to $0.70/m³ a year earlier, oil ministry data show.

India bought the most LNG in the April 2019-March 2020 and April 2020-March 2021 fiscal years, at 32.35bn m³ and 33.2bn m³ respectively, when prices were at $4.46/mn Btu and $5.74/mn Btu, Argus data show.

Spot LNG prices rose to an average of $26.16/mn Btu during April 2022-March 2023, resulting in a fall in imports to 26.3bn m³, when India relied almost totally on term cargoes, with little appetite for spot cargoes being offered at record high rates.

Output growth

India's rising natural gas demand has also compelled a push to increase domestic output.

A consortium of private-sector Reliance Industries (RIL) and BP is likely to produce around 30mn m³/d of gas, while the MJ field in the Krishna-Godavari basin in Andhra Pradesh will account for a third of India's current output once it reaches peak production. This is likely to meet approximately 15pc of India's gas demand, RIL has said.

ONGC, the country's biggest state-controlled producer of oil and natural gas, also aims to produce 2mn m³/d of gas at peak from the KG-D5 field over April 2023- March 2024, company officials said, adding that daily production also could reach 10mn m³/d by 2025.

But prices of domestically produced gas continued to be lower than international prices, as the government's new natural gas pricing norms have fixed the deepwater gas price at $9.96/mn Btu till March, lower by 9pc compared to current global prices. Meanwhile, domestic gas sourced from older ONGC and state-controlled Oil India-operated areas is priced at $6.50/mn Btu.

India's LNG imports and natural gas productionbn m³
Fiscal year (April-March)LNG importsNet production
2015-1619.031.1
2016-1723.630.8
2017-1826.731.7
2018-1928.532.1
2019-2032.430.3
2020-2133.227.8
2022-2326.333.1
2023-24*20.122.9
*April-November

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24/12/09

Shale M&A to pick up pace in 2025 after hitting pause

Shale M&A to pick up pace in 2025 after hitting pause

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Atlantic LNG: US fob prices edge lower


24/12/06
24/12/06

Atlantic LNG: US fob prices edge lower

London, 6 December (Argus) — Fob LNG prices for loadings in the US Gulf coast slipped on Friday, adding to losses posted over Wednesday-Thursday to end the week lower. The Argus Gulf Coast (AGC) January fob price fell to $13.81/mn Btu, from $13.90/mn Btu a day earlier, and $14.16/mn Btu at the end of last week, following similar losses in European delivered markets. But the price continued to track European des prices, as the inter-basin arbitrage for US January loadings held shut with European markets holding at a discount to Asia that was too tight to cover the additional spot freight costs — which have been buoyed by a recent small rise in prompt spot charter rates over this week. The ARV3 prompt rate for US-northeast Asia by tri-fuel diesel-electric (TFDE) carriers was assessed at $14,000/d on Friday, up from $12,000/d a week earlier, while the corresponding ARV6 two-stroke rate rose to $28,500/d on Friday from $24,000/d. US LNG production this week has been steady at six of the country's operational liquefaction terminals. But Texas' 17.3mn t/yr Freeport LNG export terminal experienced a trip at its first of three liquefaction trains on 4 December, because of an unspecified issue at a compressor system, according to a state regulatory filing by the facility. That said, the terminal's feedgas receipts quickly rebounded a day later to reach 2.02bn ft³ over the day — the most received by the terminal since 13 November. Freeport was nominated to take 2.12bn ft³ on Friday, though the terminal has historically taken less at times than it has initially nominated to receive. Even with one day of downtime at a single train this week, Freeport's gas receipts were still greater than during the previous week, when deliveries over the opening three days of the week were also at levels suggesting one train of off line. Deliveries to the planned 27.2mn t/yr Plaquemines terminal — set to be the US' eighth liquefaction terminal — have held at low levels, suggesting that the facility may still be only receiving enough gas to meet its on-site needs rather than fully starting liquefaction operations. The 174,000m³ Venture Bayou remained at the facility on Friday, where it has been since mid-November. Plaquemines received a cool-down cargo in late September, for which it has regulatory approval to re-export, as well as a further two cool-down cargoes that have not been delivered to the facility. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Republicans weigh two-step plan on energy, taxes


24/12/06
24/12/06

Republicans weigh two-step plan on energy, taxes

Washington, 6 December (Argus) — Republicans in the US Congress are considering trying to pass president-elect Donald Trump's legislative agenda by voting first on a filibuster-proof budget package that revises energy policy, then taking up a separate tax cut bill later in 2025. The two-part strategy, floated by incoming US Senate majority leader John Thune (R-South Dakota), could deliver Trump an early win by putting immigration, border security and energy policy changes into a single budget bill that could pass early next year without Democratic support. Republicans would then have more time to debate a separate — and likely more complex — budget package that would focus on extending a tax package expected to cost more than $4 trillion over 10 years. The legislative strategy is a "possibility" floated among Senate Republicans for achieving Trump's legislative goals on "energy dominance," the border, national security and extending tax cuts, Thune said in an interview with Fox News this week. Thune said he was still having conversations with House Republicans and Trump's team on what strategy to pursue. Republicans plan to use a process called budget reconciliation to advance most of Trump's legislative goals, which would avoid a Democratic filibuster but restrict the scope of policy changes to those that directly affect the budget. But some Republicans worry the potential two-part strategy could fracture the caucus and cause some key policies getting dropped, spurring a debate among Republicans over how to move forward. "We have a menu of options in front of us," US House speaker Mike Johnson (R-Louisiana) said this week in an interview with Fox News. "Leader Thune and I were talking as recently as within the last hour about the priority of how we do it and in what sequence." Republicans have yet to decide what changes they will make to the Inflation Reduction Act, which includes hundreds of billions of dollars of tax credits for wind, solar, electric vehicles, battery manufacturing, carbon capture and clean hydrogen. A group of 18 House Republicans in August said they opposed a "full repeal" of the 2022 law. Republicans next year will start with only a 220-215 majority in the House, which will then drop to 217-215 once two Republicans join the Trump administration and representative Matt Gaetz (R-Florida) resigns. By Chris Knight Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Shell, Equinor to create biggest UK producer: Update


24/12/05
24/12/05

Shell, Equinor to create biggest UK producer: Update

adds details throughout London, 5 December (Argus) — Shell and Norway's state-controlled Equinor plan to combine their UK upstream businesses into a joint venture to create the UK North Sea's largest oil and gas producer. The new business will produce more than 140,000 b/d of oil equivalent (boe/d) from 2025, the companies said. Bank analysts reckon growth projects will enable production to eventually increase beyond 200,000 boe/d. It marks the latest deal in a wave of consolidation in the the UK sector of the North Sea, including Italian firm Eni's deal earlier this year to merge its UK upstream assets with those of independent producer Ithaca Energy and UK company Harbour Energy's tie-up with Germany's Wintershall Dea last year . Shell and Equinor are following a similar 50:50 ownership structure and self-financing model that BP and Italy's Eni employed in Angola when they combined their offshore assets there to create Azule Energy in 2022 . The Shell-Equinor joint venture's assets will include Equinor's stakes in the Mariner and Buzzard fields, alongside Shell's interests in Shearwater, Penguins, Gannet, Nelson, Pierce, Jackdaw, Victory, Clair and Schiehallion projects. A consequence of the deal is that Shell, having walked away from Ithaca's contentious Cambo oil project in the UK's west of Shetlands area last year, will now be exposed to Equinor's equally controversial 300mn bl Rosebank project , which is currently under judicial review . If Rosebank goes ahead, it is likely to be the largest growth driver of the new company with around 70,000 boe/d of production from 2027. Although Shell's assets will contribute a greater share of the joint venture's production to begin with, Equinor's assets have greater growth potential. Through the new entity, Shell will also benefit from Equinor UK's £6bn ($7.6bn) of tax losses. "Equinor's higher UK tax loss position and growth potential offsets the higher current production in Shell's UK portfolio, hence the 50:50 split in ownership of the new company," Barclays analysts wrote in a note. The deal does not include Equinor's assets that straddle the UK's maritime border with Norway — Utgard, Barnacle and Statfjord. Equinor will also retain ownership of its UK offshore wind portfolio, as well as other low-carbon and gas storage assets. Shell will retain ownership of its interests in Scotland's Fife NGL plant and St Fergus Gas Terminal, as well as floating wind projects under development. It will also remain the technical developer of the Acorn carbon capture and storage (CCS) project in Scotland. By Jon Mainwaring Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Australia’s Woodside inks Bechtel EPC for Louisiana LNG


24/12/05
24/12/05

Australia’s Woodside inks Bechtel EPC for Louisiana LNG

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