NGS’ NG/LNG SNAPSHOT – May16-31, 2023
City Gas Distribution & Auto LPG
NBSTC to introduce 36 CNG buses in June
Jalpaiguri: The North Bengal State Transport Corporation (NBSTC) is all set to introduce 36 CNG buses. The State Transport Department has provided an amount of Rs. 12 crore for this purpose.
A tender has already been conducted for these buses. Parthapratim Roy, the Chairman of NBSTC, has announced that the green buses will be operational within the next month. NBSTC consists of four divisions: Cooch Behar, Siliguri, Raiganj, and Baharampur. Through these divisions, NBSTC provides transportation services to the public using approximately 700 buses. According to sources from the corporation, the daily increase in petrol and diesel prices has compelled the corporation to raise bus fares.
Moreover, the pollution caused by petrol and diesel is a growing concern. The decision to run buses that use compressed natural gas (CNG) has been made considering these. Parthapratim Roy, the Chairman of NBSTC stated: “If the Baharampur division is excluded, the remaining divisions do not have infrastructure for CNG refilling. Hence, the buses will initially operate from the Baharampur division. Efforts will be made to establish refilling infrastructure in the remaining divisions as well.” For this a total of seven depots, including Falakata, Cooch Behar, Jalpaiguri, and Siliguri, have been selected. An amount of Rs 6 crore has been earmarked in the Detailed Project Report (DPR) for the construction of depots. Work will commence promptly once the allocation is received. The Chairman also added: “Once these buses are operational, fuel expenses will significantly reduce, providing convenience to the general public and potentially increasing revenue.”
Have commenced dispensing CNG and PNG connections to households: IndianOil
State-owned IndianOil commenced dispensing of CNG and PNG (piped natural gas) connections to residential units and the company has set a target of providing 1.50 crore connections across the country, a top official has said.
A CNG (compressed natural gas) cylinder testing unit, claimed to be the first-of-its-kind to be set up in Tamil Nadu by AIRVIO Technologies, was inaugurated by IndianOil Corporation Ltd Director-Pipelines S Nanaware near Coimbatore.
CNG and PNG are almost 30 percent cheaper than alternate fuels and considered “very safe”, he said.
“It does not have any problem as compared with LPG and MS (motor spirit). This is very safe. In particular, households wherever they are using it as a fuel are safe. Because this is lighter than air and (even) if any leakage is there, it will go into the air without causing any harm to anybody and it is also cheaper,” he told reporters.
Responding to a query, he said for IndianOil Corporation, the target is to provide 1.50 crore in the country with around nine lakh connections in Coimbatore. “But this (target) is not final. It may reduce or it may increase also because it all depends on individuals,” he said.
The plan was to lay the pipelines across the country except Jammu and Kashmir and the northeast.
“Even in Jammu and Kashmir, a plan is there, but it is difficult to lay pipeline in (such a) terrain. It is entirely in a hilly area. But the government is trying for that (to lay pipeline) and already have initiated EoI (expression of interest),” he said.
Observing that the Centre was trying to increase the sale of gas in their ‘fuel basket’ from the present 6.5 percent to 15 percent by 2030, he said: “Almost 98 percent of the population of this country is being targeted for CNG and PNG connections.”
The supply of LPG to serve domestic consumption was met by importing it while whatever LPG and CNG gas required was available within the country itself, he said.
He pointed out that with the Centre’s plan of achieving net zero emissions by 2070, the use of crude oil would be reduced gradually from 2040 onwards, and by 2070 it would be hardly be 10 percent and natural gas consumption would increase to 15 percent from the current 6.5 percent.
Replying to a query about apprehensions raised by a section of farmers over laying pipelines in agricultural land, the senior official said: “IndianOil is the only company to lay the pipelines and it was taking the farmers on board. Once they (farmers) give their consent, we (will) lay the pipelines…as of now, we have laid almost 3,000 kilometres of pipeline in Tamil Nadu.”
MGL & BEST come together for ‘Tez’ way to refuel CNG
MUMBAI: Now, an app-based dedicated CNG dispenser will allow four-wheeler CNG vehicle owners to book time slots for refuelling at BEST bus depot’s CNG facility. Mahanagar Gas Limited (MGL), one of India’s largest gas distribution companies, launched ‘MGL Tez’ at Ghatkopar BEST bus depot on Thursday, in partnership with Brihanmumbai Electric Supply and Transport (BEST).
‘MGL-Tez’, which will help shorten long queues by pre-booking a time slot, is available on Google Play Store. The depots will have a dedicated CNG dispenser for bookings made through ‘MGL Tez’. The facility was launched by BEST general manager Lokesh Chandra and MGL’s board director Syed Shahnawaz Hussain. Sanjay Shende, deputy MD, MGL, and senior officials of MGL and BEST were present on the occasion.
Users can book time slots between 9am and 7pm, on any day of the week, get the CNG filled and make payment digitally. Currently, this service is available at Goregaon-Oshiwara and Ghatkopar bus depots, with plans to have similar facilities in other 13 bus depots across Mumbai that are managed by BEST. Commenting on the partnership, Chandra said, “BEST is pleased to partner with MGL for furthering the green initiative of providing environment-friendly fuel. This initiative will not only make CNG filling convenient for Mumbaikars but will also enable us to further utilise our resources for the benefit of the society.”
Commenting on the association, Shende said, “We’re happy to introduce ‘MGL Tez’, and launch a dedicated CNG dispensing facility in association with BEST. We aim to make CNG filling more convenient for our customers and intend to roll out this facility at 13 other BEST bus depots to facilitate more customers to join us in our endeavour towards a cleaner and greener future.”
Policy Matters/ Gas Pricing/ Others
New gas pipeline tariff is flawed
Under the zone-wise unified tariff for natural gas (NG) pipelines effective from April 1, 2023, and announced by the downstream regulator Petroleum and Natural Gas Regulatory Board (PNGRB), consumers will pay a uniform charge for transportation of NG within a tariff zone irrespective of their location. There are three tariff zones defined as per the distance from the gas source — up to 300 km, 300-1,200 km and greater than 1,200 km.
This is a drastic shift from the extant system of tariff determination under which they pay different tariffs depending on the pipeline operator with whom they have contracted for the supply as also the distance from the source. At present, there are nine pipeline operators including public sector majors IOCL, ONGC and GAIL.
The new regime is flawed. It doesn’t follow a rational pricing principle. Instead, it is dictated solely by the government’s intent to help users located in the north, northeast and eastern parts of the country which are far off from the gas supply source. The bulk of the domestic gas comes from the Bombay High and South Bassein region in the west and the KG basin off the Andhra Pradesh coast in the south. Even imported LNG lands at shores at three major terminals — Hazira, Dahej on the west coast and Kochi on the south.
There is no harm in helping areas at a locational disadvantage. But the problem arises when it is done using the tariff mechanism.The operators have different cost structures due to variations in capital cost, overheads, operating expenses etc. Even the same operator having multiple pipeline networks incurs widely varying costs depending on the pipeline from which it supplies NG. For instance, the cost of moving gas through GAIL’s Jagdishpur-Haldia-Bokaro- Dhamra pipeline (JHBDPL) is Rs 173 per million British thermal units (mBtu), which is much higher than the cost for its other pipelines.
Against this backdrop, setting tariffs at a unified level (the weighted average of the cost of supply from all pipelines/operators) will result in a fortuitous gain for some, whose costs are lower, and a loss for those whose costs are higher. But the regulator says “the difference between the same will be settled between the pipeline entities” thereby ensuring that “they will get the tariff as per their entitlement”.
Put simply, the entities whose cost is less than the weighted average will deposit the surplus amount with a pool whereas others whose cost is more will get compensated for the shortfall from the pool. If every operator has to be paid on the basis of what it costs them, why go for a unified tariff in the first place?
From the users’ perspective also, a unified tariff irrespective of the distance is totally unjustified. It is tantamount to taking money from consumers located near the source and giving it to those who are away. An argument that the latter is handicapped is specious. To illustrate, let us compare two urea units (gas is used for making urea), one located near the gas source, say in Gujarat, and the other away in Uttar Pradesh (UP). The unit in UP has to pay more for transporting gas (albeit on cost plus principle), but being near major fertiliser consumption areas, it saves on the outward movement of the end product, namely urea. On the other hand, a Gujarat-based unit may save on gas costs, but being away from major consuming areas it has to spend more on the movement of urea. On balance, the playing field is automatically levelled.
The very idea of a uniform transport tariff for gas is erroneous. It is neither fair to the pipeline operators nor to the users. In September 2020, the regulator mooted a single zone/tariff for all users. Then, it shifted to two zones, and now three. This shows that even the government is not comfortable.
There can only be two rational approaches for setting the tariff: (i) the cost-plus principle; (ii) letting the market decide the tariff.
The cost-plus method might work well if the regulator strictly goes by the prescribed norms in regard to factors such as the pipeline-carrying capacity, volume of gas actually transported, capacity utilisation, etc. But that rarely happens as we have seen in the case of the retention price scheme (RPS) for urea which follows the cost-plus principle. Therein, better-performing units are not rewarded just as there is no disincentive for bad performers. The best way to go is to leave tariff determination entirely to the forces of demand and supply. But this will require hiving off the infrastructure for handling and transportation including the pipeline network from the current owners and vesting it in an independent entity. That entity should make it accessible to all suppliers in a ‘transparent’ and ‘non-discriminatory’ manner.
For areas like the northeast which merit special attention, the government may give area-specific assistance directly.
Adani Total Gas challenges PNGRB’s authorisation orders for Faridabad-1 GA
These orders pertain to the authorisation for the Noida, Faridabad, and Gurugram Geographical Areas (GAs), the company said in a regulatory filing, PNGRB allowed IGL to supply gas to one part of the area, while for the remaining area, Adani Total was appointed as the supplier. The company said it has challenged the PNGRB’s decision to award or grant authorisation for the ‘Faridabad-1’ area within the Faridabad District GA. However, it has accepted the authorisation for the Faridabad 2 GA, without any prejudice.
Adani Total Gas Limited has filed an appeal with the Appellate Tribunal for Electricity (APTEL) against the ‘impugned’ orders issued by the Petroleum and Natural Gas Regulatory Board (PNGRB) on April 25 and April 26, the company said in a regulatory filing on Tuesday.
These orders pertain to the authorisation for the Noida, Faridabad, and Gurugram Geographical Areas (GAs), the company said in a regulatory filing on Tuesday. On April 26, PNGRB allowed IGL to supply gas to one part of the area, while for the remaining area, Adani Total was appointed as the supplier.
The company said it has challenged the PNGRB’s decision to award or grant authorisation for the ‘Faridabad-1’ area within the Faridabad District GA. However, it has accepted the authorisation for the Faridabad 2 GA, without any prejudice. “In this regard, we would like to inform that the Company has filed an Appeal against the Impugned Orders dated 25th April 2023 and 26th April 2023 of PNGRB before Hon’ble Appellate Tribunal for Electricity (APTEL), in so far as they relate to the PNGRB’s decision(s) of awarding/granting authorisation for ‘Faridabad-1’ area of Faridabad District GA. The Company has accepted the authorisation of Faridabad 2, without prejudice,” the company said.
Adani Total Gas scrip ended at Rs 757.40, up 5% on the BSE Tuesday. Benchmark Sensex ended 0.03% higher.
A K Jain appointed as new PNGRB Chairman
THE Government has appointed seasoned bureaucrat and gas sector expert Anil Kumar Jain as the new Chairman of the oil and gas sector regulatory body, PNGRB, an official order said. The Appointments Committee of the Cabinet (ACC) approved the appointment of Jain, who retired as coal secretary in October last year, as the new chairman of the Petroleum & Natural Gas Regulatory Board (PNGRB).
The ACC has approved the proposal of the Ministry of Petroleum and Natural Gas, based on the recommendations of Search Committee, for the appointment of Anil Kumar Jain. Jain has been appointed as the Chairperson PNGRB “for a period of five years from the date assumption of charge of the post or till attaining the age of 65 years, or until further orders, whichever is the earliest, on a consolidated pay package of Rs 4.50 lakhs/month (without house and car) or as revised by Finance Ministry from time to time,” theACCorderofMay15said.
Electric Mobility/ Hydrogen/Bio-Methane
GAIL aims to raise Hydrogen blend with natural gas from 5%; expects to offset shortfall from Gazprom
GAIL is looking to commission a Green Hydrogen electrolyser plant with a capacity of 4.3 tonnes per day, at its Vijaypur facility in the current calendar year. While GAIL is blending Hydrogen with natural gas on an experimental basis in Indore in its CGD (city gas distribution) network to test its success, it aims to escalate blending ratios with due permission based on the test results. Currently, permission for only 5 percent blending of Hydrogen with natural gas has been accorded, with GAIL conducting joint studies with EIL (Engineers India Limited) and IIT Kanpur to further blend Hydrogen with natural gas.
Commenting on the losses from the previous quarter, GAIL’s CMD Sandeep Kumar Gupta told CNBC TV18 that the quarterly results were impacted due to high prices and disruption in long term supply contracts, as no vertical was spared from transmission for natural gas & LPG to marketing to petrochemicals. However, he hopes that the price softness and growth in natural gas consumption in India will continue with the softening of natural gas prices & the availability of gas stocks at a comfortable level in Europe.
GAIL’s petrochemical plant’s planned shutdown for a month had extended for one more month due to a bad pricing situation, with the plant operating at 50 percent capacity for a good part of the previous financial year. Despite the plant running at its full capacity since March 2023, Gupta stated that petrochemical prices haven’t recovered despite softening of natural gas prices, though he hopes that petrochemical prices will resume to their normal levels and GAIL will be able to operate its plants on a sustained basis at full capacity. Pointing to a shortfall of 30 cargoes which Gazprom didn’t supply citing force majeure, he added that for May and June Gazprom has given full quantities of 4 cargoes per month while he hopes for the trend to continue to help the supply situation in India.
Terming the softening of prices as a great help to the natural gas sector & CGD companies, he described the lowering of PNG and CNG prices from their previous highs as beneficial to expansion of the business scenario.
From April 1, 2023, PNGRB had notified unified tariffs which Gupta terms as helpful for distant customers as now there are 3 slabs of rates based on unification of tariffs across entities, which he feels doesn’t lead to any profit or loss for any individual entity, gas entity or transporting entity per se. With a tariff revision for GAIL, he hopes that the company will add Rs. 1400 crores to Rs. 1500 crores in EBITDA for the next fiscal and envisages a volume growth potential of 7 percent to 8 percent in fertiliser plants, with natural gas consumption coming back to normal.
Kabira Mobility unveils electric motorcycle KM5000
Goa-based electric two-wheeler startup Kabira Mobility has unveiled itsflagship electric motorcycle in India, i.e. the KM5000. The motorcycle ispriced at INR 3.15 lakh (ex-showroom, Goa), with a launch set to takeplace later this year, and deliveries starting in 2024.Kabira Mobility claims that the KM5000 is India’s fastest electricmotorcycle, and also has the longest range for any electric bike.
TheKM5000 features a cruiser design, and incorporates a single-sided swingarm with a mid-drive powertrain developed in collaboration withDeltaEV. The motorcycle boasts a top speed of 188 kmph – the highestfor any electric bike in the country.
The KM5000 is equipped with an 11.6 kWh water-cooled LFP batterypack that provides a range of 344 km on a single charge. The chargingoptions include a high-speed charger that can charge the motorcyclefrom 0 to 80% in under two hours, and a standard charger for overnightcharging. The suspension setup consists of Showa upside down frontforks, coupled with a Nitrox unit at the back.On the equipment front, the KM5000 gets a seven-inch touch screendigital dashboard with 4G connectivity, turn-by-turn navigation, musiccontrol, in-depth vehicle information, and more. The digital display alsoshows battery health, and has a smart diagnostics feature to keep thevehicle health in check. The electric motorcycle gets twin disc brakes atthe front and a single rear disc, with dual channel ABS.
Other features on offer include a tyre pressure monitoring system (TPMS), a side step, fast charging capability, park assist (reverse mode), fall sensors, elevation stabilizer, LED projector headlamp with ring-shaped DRL and LED tail light. The motorcycle seems to feature a bobber-like styling with a single-seat setup. Kabira Mobility will offer the KM5000 in three colour options, namely Midnight Grey, Deep Khaki, and Aquamarine.
Natural Gas / Transnational Pipelines/ Others
US: Oneok to Buy Magellan in $19 Billion Energy Pipeline Deal
Oneok Inc. agreed to buy Magellan Midstream Partners LP in a $18.8 billion cash-and-stock transaction that would create one of the US’s largest oil and natural gas pipeline operators.
(Bloomberg) — Oneok Inc. agreed to buy Magellan Midstream Partners LP in a $18.8 billion cash-and-stock transaction that would create one of the US’s largest oil and natural gas pipeline operators.
The deal will see each Magellan stakeholder receive $25 in cash and 0.6670 shares of Oneok stock per unit, representing a 22% premium to closing prices on May 12, the companies said Sunday in a joint statement. The transaction includes $8.8 billion in new equity and the assumption of $5 billion of existing net debt.
Pipeline operators are increasingly turning to mergers and acquisitions for growth as the transition to renewable energy pares the need for new links and threatens to make some of their existing assets redundant. The acquisition will give Oneok, which currently transports only natural gas and its byproducts, access to a network of crude oil and refined products conduits and terminals sprawling from Texas to Minnesota.
The combined company will have a total enterprise value of $60 billion, according to the statement. That would put it among the five largest US pipeline operators by that criteria, according to data compiled by Bloomberg.
“We see this as a bold move to redirect the long-term strategy of both companies, propelling the pro forma entity closer to the top of the class from a scale and diversification perspective,” Raymond James Financial Inc. analysts J.R. Weston and Justin Jenkins said in a note to clients. While the “surprising deal” comes at a high price for Oneok shareholders, it could still make sense, they said. “We are fans of consolidation in midstream.”
The transaction is expected to close in the third quarter, subject to shareholders and regulatory approvals. Oneok has secured $5.25 billion in fully committed bridge financing for the proposed cash consideration.
Oneok expects the transaction to have a positive impact both on an earnings per share and a free cash flow per share basis, with scale gains of at least $200 million a year.
Both Oneok and Magellan are based in Tulsa, Oklahoma.
Israel, Cyprus working on deal to build natural gas processing plant, pipeline in Cyprus
Cyprus and Israel are working on a deal to build a pipeline that will convey natural gas from both countries to the east Mediterranean island nation, where it will be liquefied for export by ship to Europe and potentially elsewhere, the Cypriot energy minister said Monday.
Minister Giorgos Papanastasiou said Monday he would soon visit Israel to hammer out a formal agreement. Once the deal is signed, the pipeline could be completed in 18 months.
It will take 2 ½ years to build a liquefaction plant on Cyprus once investors are secured.
So far, five sizeable gas deposits have been discovered off Cyprus’ southern coastline. Israel has 11 such fields: the biggest, named Leviathan, contains an estimated 22 trillion cubic feet of gas.
Papanastasiou said he would meet later this month with energy companies licensed to explore for oil and gas inside Cyprus’ exclusive economic zone – include French Total, Italy’s Eni, ExxonMobil and Chevron – to scope out ways of collaborating on projects that would expedite getting their gas discoveries to market.
The minister said Israel agreed to the proposal pitched by the Cypriot government for the pipeline and liquefaction plant, which Israeli Prime Minister Benjamin Netanyahu disclosed on Sunday.
“The eastern Mediterranean has enough (gas) deposits. Most are inside Israel’s exclusive economic zone, but Cyprus has sufficient quantities as well for this project to materialize,” Papanastasiou told reporters.
The minister explained that this project was a truncated version of the EastMed pipeline idea. That proposal – for a 1,300-mile, $6 billion pipeline designed to convey regional gas directly to Europe – has in recent years fallen out of favor.
Instead of a direct pipeline connection to Europe, processed gas from Cyprus could reach international markets by ship.
“When you have liquefied natural gas, it can go in any direction … Europe now needs it more, but markets can also be found in Asia,” said Papanastasiou.
In December, the previous Cypriot government said it was weighing a proposal for a similar plan as Russia’s war in Ukraine compounded an energy crisis, the AP reported.
Papanastasiou said Cypriot and Israeli authorities would need a few more months to negotiate a separate agreement on how much gas from the Cypriot Aphrodite gas field fell within neighboring Israeli waters.
A proposal for a pipeline to convey Cypriot and Egyptian gas to liquefaction plans in Egypt for export remains separate from the Israeli-Cypriot plan, the minister said.
US: Rahm Emanuel’s Gas Pipeline
The Biden administration is promoting a new liquefied natural gas complex on the Pacific Coast, with expanded subsidies from the bipartisan infrastructure bill and Inflation Reduction Act.
The Biden administration is going to bat for a new pipeline and liquefied natural gas (LNG) export infrastructure complex that has long been seen as commercially nonviable.
The Alaska LNG Project, which would help the U.S. sell more gas to Asia, has struggled for years to raise capital, despite billions of dollars in federal loan guarantees. Oil companies ExxonMobil, ConocoPhillips, and BP pulled out of the project in 2014, after a natural gas supply glut caused prices to collapse.
Alaska LNG would include multiple interlocking pieces of infrastructure: a gas processing facility with carbon capture and an export terminal, connected by 800 miles of pipeline across melting permafrost.
Officials have fought to persuade investors that demand for LNG will remain tight for years to come. A raft of new LNG projects being built along the Gulf Coast, in the Middle East and Australia, as well as projected decline in global demand for the fuel, makes the Alaska project a tough sell.
But the White House has stepped into the gap to provide certainty, putting up more subsidies and dispatching officials to hawk the $44 billion facility. That includes one unlikely ally: Rahm Emanuel, the former Chicago mayor and Obama alum turned unusually enterprising U.S. ambassador to Japan, who has become a top crusader.
Japan, which is this year’s leader of the Group of Seven (G7) industrialized nations, has struggled to meet gas import targets amid the global supply crunch. Emanuel is using his post to gin up support for the Alaska project, writing in a December op-ed that an export terminal on the West Coast of the U.S. could help make Japan “the energy export hub for the Indo-Pacific.”
Emanuel hosted a summit last October on Alaska LNG with investors including Goldman Sachs and BlackRock, and is expected to continue his promo tour with next week’s keynote address at the Alaska Sustainable Energy Conference.
State Department energy envoy Amos Hochstein has joined Emanuel in attempting to restore confidence in the flagging gas market. Hochstein’s former chief of staff Samantha Carl-Yoder is now lobbying the State Department, the Department of Energy, and the National Security Council on Alaska LNG, filings show.
Investors remain wary of LNG. Prices for the fuel soared last year after Russia’s invasion of Ukraine, prompting Europe to import more gas short-term but also to accelerate its transition off fossil fuels.
If built, Alaska LNG would have a potential carbon footprint of 2.7 billion metric tons of CO2, or roughly ten times the pollution of the recently approved Willow Project. The prospect that it would incentivize more dependence on fossil fuels has enraged activists.
“Rahm Emanuel did more than any single individual to sabotage Barack Obama’s climate agenda at a time when there were congressional majorities,” said Lukas Ross of Friends of the Earth, a climate group. “It comes as no surprise to find him 13 years later trying to light the fuse of a massive carbon bomb.”
THE PACIFIC HAS LONG BEEN CONSIDERED a massive growth market for LNG. Most export terminals in the market-leading U.S. are on the Atlantic side, raising costs for exports to Asia by forcing ships to travel across the continent and through the Panama Canal.
Last year, Europe bid up LNG prices as it replaced missing Russian pipeline gas, pricing Asian countries out of the market and leading many emerging markets to sour on LNG. In countries like Pakistan and Bangladesh, rising gas prices stoked social unrest.
“In Asia, LNG has now earned a reputation as an expensive and unreliable fuel source, clouding future demand,” the Institute for Energy Economics and Financial Analysis (IEEFA), an energy think tank, finds in its LNG outlook.
IEEFA analysts predict another supply glut and falling prices about five years from now. Others remain bullish on a Chinese demand rebound, but given the new sources of supply being built now, that may not be enough to sustain profits.
“There’s tremendous pressure in the consulting industry to create rosy forecasts of endless growth in demand for LNG,” IEEFA analyst Clark Williams-Derry told the Prospect.
Yet given strategic interests in sending more gas to Asia, the Biden administration has expanded existing guarantees to move risks associated with Alaska LNG onto the public balance sheet.
In 2004, the Natural Gas Pipeline Act authorized up to $18 billion in loan guarantees for the Alaska project, meaning the government would act as a backstop to assure lenders that they would be repaid. That commitment, which was indexed to inflation, is worth nearly $30 billion in guaranteed debt today.
Alaska Gasline Development Corporation (AGDC), the state-owned corporation now developing the project, estimated that federal guarantees could reduce interest rates on the debt by as much as 2.5 percent. And because AGDC is a state entity, it gets to issue tax-free debt and does not pay taxes on equity.
The bipartisan Infrastructure Investment and Jobs Act passed in 2021 sweetened the deal. The 2004 law would have required that the Alaska project send gas to the continental United States to be eligible for subsidies. But an IIJA amendment allowed any project that exports natural gas from Alaska’s North Slope, including outside the U.S., to qualify.
Alaska LNG also stands to gain from last year’s Inflation Reduction Act. The IRA dialed up federal subsidies for carbon capture in the Section 45Q tax credit. Alaska LNG could collect between $4.2 and $6 billion in subsidies under 45Q alone, according to an IEEFA estimate.
Underscoring the Biden administration’s support for Alaska LNG, the Department of Energy last month approved the project’s export license, giving it permission to sell gas to countries with which the U.S. has no free-trade agreement for a term of 30 years (the standard is 20 years).
MORE PUBLIC SUPPORT COULD COME SOON. The Export-Import (EXIM) Bank, a federal credit agency for large industrial projects, is dialing up its support for domestic fossil fuel infrastructure.
In 2021, EXIM announced its first deal for the U.S. LNG industry with a loan guarantee for Houston export plant Freeport LNG, touting the deal as “groundbreaking.” What made the agreement innovative was that EXIM had worked with a pioneer in a new field of banking called “supply chain finance.” EXIM guaranteed 90 percent of a $50 million loan from Greensill Capital, a SoftBank-backed lender, to Freeport. Two months later, Greensill collapsed.
Despite that hiccup, EXIM is forging ahead with its sponsorship of U.S. LNG. Last year, it launched its “Make More in America Initiative,” aimed at subsidizing domestic production. Kate DeAngelis, an attorney who tracks the deals for Friends of the Earth, says Freeport was merely a “token” deal meant to appease the domestic LNG industry.
“I would expect to see way bigger numbers if they were to support Alaska LNG,” DeAngelis said.
This week, with G7 meetings under way in Hiroshima, Japan, Emanuel has focused his pitch on confronting China. “G7 members are developing the tools to deter and defend against China’s economic intimidation and retaliation,” he wrote on Twitter on Monday. “Trade and investment should be used as paths to economic prosperity, not political weapons.”
Yet Emanuel is selling the Alaska gas complex as a blunt political instrument. “If America, Australia and other friends can supply the majority of Japan’s LNG needs, why would Japan need to rely on its adversaries?” he wrote in the December op-ed.
Emanuel is also working on behalf of senators from fossil fuel states, including Joe Manchin (D-WV), Ted Cruz (R-TX), and Dan Sullivan (R-AK), who in March wrote a letter complaining of “excessive restrictions on public financing of gas projects and unnecessary delays in approving privately-financed projects.”
As one consultancy for the refining sector put it, “incredible growth in U.S. LNG export capacity over the past few years has been facilitated by a mostly predictable federal permitting process.”
The Department of Energy, which manages LNG export terminal approvals, is trying to bring projects online faster or get them to move out of the way. Once terminals are granted an export license, they must begin exporting cargoes within seven years.
Williams-Derry said the Alaska LNG project could still get built, despite inferior financials, because incentives are about getting the deal financed, not getting it to ship commercially viable cargoes.
The same was true of the fracking boom. Investors lost billions, but executives designed deals shrewdly, for example by tying their incentive packages to production targets that were easy to hit. “The incentive is to get the deal done,” Williams-Derry said. “It’s not to build a successful project over the long haul.”
Global LNG Development
Shipping: France: MSC Cruises completes first LNG bunkering operation in Marseille
The refuelling operation allows guest services to continue as normal through the use of a bunker barge. MSC Cruises and Totalenergies Marine Fuels have completed the first liquefied natural gas (LNG) refuelling bunkering operation in Marseille allowing guest operations to continue as normal during the process.
The best-performing large cruise ship in the world for CO₂ emissions per passenger, the MSC World Europa was refuelled by Totalenergies’ Gas Vitality LNG bunker barge during the operation on 22 April at the Port of Marseille Fos in southern France.
MSC Cruises managing director Patrick Pourbaix described the success as an important milestone for the company.
He said: “Featuring a range of unprecedented innovations in terms of environmental and marine technologies MSC World Europa represents a major step forward on our journey towards meeting our target of net-zero emissions by 2050.”
LNG has received increased attention as a transitional fuel for the marine industry as one of the cleanest options currently available at the scale needed for large ships such as MSC World Europa, its use reduces sulphur and fine particle emissions by 99%, nitrogen oxide emissions by up to 85% and greenhouse gas emissions by 20%.
This operation is the start of a previously announced LNG bunker supply contract between MSC and Totalenergies, which will see the fuel supply company deliver approximately 45,000 tons of LNG to the MSC vessels in Marseille every year.
Totalenergies’ lubricants and specialities senior vice-president Phillipe Charleux said: “We are excited to support the Cruise Division of MSC Group in their decarbonisation journey and to help the Port of Marseille Fos become an LNG bunker hub for the Mediterranean region.
“This operation also expands our LNG bunkering capabilities to the cruise ship segment, demonstrating our ability to serve a broader range of shipping clients, as the industry strives to reduce emissions.”
There are currently 21 LNG-powered cruise ships in use or construction around the world including MSC Cruises’ next ship Euribia which will launch this year and MSC World America, which is set to launch in early 2025.
MSC World Europa’s environmentally focussed features also include a solid oxide fuel cell demonstrator that can use LNG to produce electricity and heat, an advanced wastewater treatment system that can treat onboard wastewater to near tap water standards, and an underwater noise management system to reduce disturbance to marine life.
Trinidad and Tobago : NGC signs MOU to explore small-scale LNG projects
The National Gas Company of Trinidad and Tobago Limited (NGC) has signed a Memorandum of Understanding (MOU) with a consortium comprising Globus Energy Group Trinidad Limited (Globus Energy), Corban Energy Group (Corban Energy) and Chester LNG LLC (Chester LNG), to identify and screen technologies for micro and small-scale LNG development projects in the Caribbean.
In a statement, the NGC said MOU signing signals the commitment of all the companies involved to explore viable solutions to effectively manage energy security and low-carbon energy transition, and potentially expand the use of LNG across the region.
According to the NGC here is a pragmatic case for incorporating LNG as part of the energy transition in the Caribbean.
It explained that while sustainable energy has well-defined financial, social, environmental and economic benefits, the region faces significant challenges in making a transition to renewables, noting that small Caribbean islands cannot adopt wholesale, a standardised model of transition to renewables, as they all have different geographical characteristics and economic circumstances.
The NGC further noted that as the world transitions towards low-carbon energy, harnessing natural gas – the cleanest burning fossil fuel, this provides an opportunity to reduce carbon output during the energy transition.
As such, it added, micro and small-scale LNG projects can positively contribute to creating a cleaner energy mix for the region, as well as support climate change action within the Caribbean.
“The MOU provides an opportunity to explore the feasibility of small-scale LNG projects as well as the possibility of sourcing the LNG supply from gas reserves locally and across the region, to deepen and expand the value chain.
Beyond a focus on small-scale LNG projects, the MOU will also look at any new opportunities and initiatives where NGC and the consortium may deepen their collaboration,” the NGC said.
NGC’s President Mark Loquan further explained that the partnership and its potential outcomes fit seamlessly within NGC’s Green Agenda and its sustainability thrust.
“Micro and small-scale LNG solutions can enable our region to meet its energy needs today in a more sustainable way than currently obtains. As a future-minded energy company, NGC and the wider NGC Group are actively investing in such solutions, which also include renewable energy projects and energy efficiency initiatives. Through this MOU, we are pleased to take yet another step on the journey towards sustainable energy leadership,” Loquan further explained.
Angela Lee Loy, authorised representative for Globus Energy and the consortium said the consortium also looks forward to collaborating with the NGC based on the impressive history and track record of this outstanding organisation.
She said the objective is to provide modern, efficient, and affordable energy solutions across the region.
“We are confident that this relationship could be a catalyst for low carbon energy, as we work together on energy security across the Caribbean Basin,” Lee Loy added.
The partnership and MOU between NGC, and the consortium of Globus Energy, Corban Energy and Chester LNG represent an unwavering commitment to support and pursue a cleaner, more sustainable energy future, the NGC added.
US: JAXPORT continues to grow LNG as a clean marine fuel
The Jacksonville Port Authority (JAXPORT) has facilitated the move of dozens of specialty liquefied natural gas (LNG) storage tanks through the port’s Blount Island Marine Terminal.
Owned by LNG supplier Eagle LNG Partners LLC, half of the tanks will be used to temporarily increase storage at its Jacksonville LNG bunker facility near the Talleyrand Marine Terminal, and the other half will be used for exporting LNG to the Caribbean and elsewhere.
The tanks bound for the Caribbean mark the company’s progression toward replacing petroleum with natural gas for power generation to several islands, including Aruba.
It also marks progress following a Memorandum of Understanding (MoU) between Aruban leaders and JAXPORT to grow business connections.
“Eagle LNG is proud to be working closely with JAXPORT to increase LNG bunkering capacity at JAXPORT while also working to introduce new lower greenhouse gas emission solutions such as bio-LNG into the fuelling mix,” said Eagle LNG Director of Operations, Tim Robertson.
“Given recent world events, Eagle LNG is building upon shipments of ISO containers of LNG that we have already transferred from JAXPORT to Europe.
“The addition of these new ISO containers enables Eagle LNG to continue to deliver on its promise of replacing dirty petroleum fuels for power generation in the Caribbean, including in Aruba, while supporting new container delivery routes from JAXPORT to points in the Caribbean and Europe,” Robertson added.
The ISO tanks’ move to JAXPORT was coordinated by logistics and freight forwarding company JF Moran, with stevedoring services provided by terminal operator SSA Atlantic.
Local tank trucking provider, Patriot Logistics, transported the tanks to Eagle LNG’s Maxville LNG Facility in North Jacksonville.
Oman among top LNG exporters in the world
The Sultanate of Oman has emerged as among the top ten liquefied natural gas (LNG) exporters in the world, driven by a surge in demand for clean energy sources. The country’s LNG exports reached a record high of 1.16 million metric tonnes (MT) in April 2023, an increase of 0.08 million metric tonnes in the previous month.
According to the monthly gas report of GEFC (Gas Exporting Countries Forum), the top ten LNG exporters in the world include the US, Qatar, Australia, Russia, Malaysia, Indonesia, Algeria, Nigeria, Oman and Trinidad and Tobago.
The report said that in April 2023, global LNG exports increased sharply by 6% (1.95 MT) y-o-y to 35.58 MT. Non-GECF countries were the largest LNG exporter in April 2023, with a market share of 50.2%, representing an increase from 47.5% in April 2022. Oman is not a member of GECF.
Oman’s rise as a major LNG exporter can be attributed to the country’s strategic location, abundant natural gas reserves and modern infrastructure. The country has invested heavily in developing its LNG industry over the past few years, with the aim of capitalising on the growing demand for clean energy in Asia and Europe.
One of the key factors that have contributed to Oman’s success as an LNG exporter is its proximity to major markets such as China, Japan and South Korea. These countries are among the world’s largest consumers of LNG, and Oman’s location allows it to supply LNG to these markets at a competitive price. China remains the leading market of Oman crude exports. China remains the top destination of Oman crude.
In recent years, Oman has also made significant investments in expanding its natural gas production capacity. The country has discovered several new gas fields, including the Mabrouk field, which is estimated to hold around 4 trillion cubic feet of gas. In January, Oman’s Ministry of Energy and Minerals has announced the start of the gas and condensate production from the Mabrouk field in Concession 10, in which production is expected to reach more than 0.5 billion cubic feet per day (bcf/d) of gas by mid-2024. New developments such as BP’s Khazzan and Ghazeer tight gas projects have also boosted production by more than 1 billion cubic feet per day since the start of their operation in 2017 and 2020 respectively.
Oman has also undertaken several projects to enhance its LNG export infrastructure, including the planned construction of a new LNG terminal at Sohar Port.
The surge in LNG exports from Oman is also being driven by the growing demand for clean energy sources in Asia and Europe. Several countries in these regions are looking to reduce their dependence on fossil fuels and shift towards cleaner sources of energy, such as natural gas. As a result, demand for LNG has been increasing rapidly in recent years, and Oman is well-positioned to capitalize on this trend.
Amid record production, the Sultanate of Oman now exports liquefied natural gas to more than 20 countries globally, with Croatia’s Krk LNG terminal set to receive its first LNG cargo later this month.
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Hong Kong: World’s largest offshore LNG terminal starts trial operation in HKSAR
The world’s largest offshore liquefied natural gas (LNG) terminal began trial operation on Sunday, which will increase the use of clean energy in the Hong Kong Special Administrative Region and optimize the energy structure of the Guangdong-Hong Kong-Macao Greater Bay Area.
The LNG terminal is equipped with world’s first full-steel offshore dock available for two LNG carriers at same time, which has a designed duration of 50 years and stronger supportive structure than ordinary offshore LNG terminals, according to a statement China National Offshore Oil Corporation (CNOOC), the builder of the terminal, sent to the Global Times on Monday.
Since construction of the terminal started in 2020, the construction team has achieved nearly 30 breakthroughs in construction technologies. They have installed 28 individual parts weighing 3.5 tons each and laid 63 kilometers of undersea pipeline.
The LNG terminal was built under the development structure of Hong Kong’s Climate Action Plan 2050 unveiled in October 2021, which pledged to achieve carbon neutrality before 2025 in Hong Kong. The plan also includes another inland LNG terminal and two undersea pipelines.
CNOOC now has comprehensive construction ability across the LNG industry, and is at the leading level for building LNG storage facilities, said the company in the statement. https://www.globaltimes.cn/page/202305/1290775.shtml
US: Montenegro signs memorandum for LNG terminal, gas-fired power plant
Montenegro has signed a memorandum of understanding with companies Enerflex Energy Systems and Wethington Energy Innovation from the United States on the construction of a liquefied natural gas (LNG) terminal and a gas-fired power plant.
The gas-fired power plant could have a capacity of 240 MW to 440 MW, while total investments are estimated at EUR 330 million to EUR 750 million. Of note, Montenegrin state-owned companies have already signed a similar memorandum with Singapore-based LNG Alliance.
The Government of Montenegro said it signed a memorandum on supporting the improvement of the energy infrastructure in Montenegro.
The document is an expression of the determination of the signatories to start discussions and actions on the implementation of two energy infrastructure projects: the construction and installation of a fixed terminal for the import of LNG in Montenegro and its storage, regasification and transport, and a greenfield investment for the installation of a gas-fired power plant.
Prime Minister Abazović expressed satisfaction with what he called his country’s clear geopolitical positioning
The memorandum was signed by Prime Minister of Montenegro Dritan Abazović, Phil Pyle, representative of Enerflex Energy Systems, and Olin Wethington, president and chief executive officer of Wethington Energy Innovation. The ceremony was attended by US Ambassador to Montenegro Judy Rising Reinke.
Prime Minister Dritan Abazović expressed satisfaction with the arrival of large American energy companies in Montenegro. He also said the memorandum demonstrates the country’s clear geopolitical positioning and the possibility of job creation.
The cost of the terminal is estimated at EUR 130 million to EUR 250 million
The LNG terminal project would consist of an unloading dock for LNG imports, LNG storage and a regasification unit connected with the short pipeline to a planned thermal power plant.
Based on preliminary information, Enerflex anticipates the terminal would be able to receive 25,000 bbl per hour and that the storage facility would have an approximate capacity of 250,000 bbl, but that it would be subsequently specified.
Enerflex estimates the cost of the terminal at EUR 130 million to EUR 250 million, the document reads.
The Montenegrin government and the two companies are considering the installation of a gas-fired combined cycle power plant with a capacity of at least 240 MW and a maximum of 440 MW. It would be located close to the LNG terminal, and use General Electric’s technology.
The LNG terminal and power plant should start operating by the end of 2025
The total investment in the power plant is estimated at EUR 200 million to EUR 500 million, depending on the capacity.
The two projects should be located in or near the Port of Bar, and the Government of Montenegro intends to assess the possibility of providing land for the investments.
The US firms plan to conduct prefeasibility and feasibility studies to define the next steps for the projects.
The government and the two companies are considering the schedule for the development of the LNG terminal and cogeneration power plant that would allow facilities to start operating by the end of 2025, according to the memorandum.
Technological Development for Cleaner and Greener Environment Hydrogen & Bio-Methane
Argentina : How Argentina can unleash its LNG, green hydrogen potential
Argentina holds abundant potential as an exporter of LNG and low-emission hydrogen – and unlocking this will require more than legislation, a local energy lawyer told BNamericas.
Argentina, where energy sector development tends to enjoy bipartisan support because of its economic importance, sits over vast amounts of natural gas and boasts a wealth of renewables resources, a key requisite in the manufacture of green hydrogen and its derivatives.
Bespoke regulations that help ease access to financing and establish ironclad investor guarantee mechanisms, along with a federal development roadmap particularly in the case of hydrogen, as well as long-term contracts are among pieces of the jigsaw that will need slotting into place.
Areas such as transport and storage and – in the case of hydrogen – certification, would also need addressing.
“Argentina has a wealth of resources to become, quite quickly, an exporting force, starting with LNG and then, later, blue and green hydrogen,” said Francisco J. Romano, a partner at Pérez Alati, Grondona, Benites & Arntsen law firm and co-director of the Universidad Austral Energy Institute.
“But for this to happen, it’s not just laws that are necessary; we need a roadmap to determine where we’re heading, tailor-made benefits that permit firms to address the high cost of financing these projects, and long-term contracts, because without offtakers there are no projects. Demand is king,” he told BNamericas.
Government officials have said LNG and hydrogen bills are being drafted to spur sector development. Texts could be presented this half but would unlikely be approved before October’s presidential elections.
Romano is also a director-at-large of the Houston-headquartered Association of International Energy Negotiators (AIEN) – formerly known as AIPN – and is participating on the AIEN committee working on model offtake contracts for hydrogen, having already drawn up drafts for LNG purchases. Long-term contracts based on international models without government interference are key to develop these markets, Romano said.
Meanwhile in Argentina, in terms of an overall energy sector roadmap, attempts have been made but no definitive document has yet been published.
“There’ve been some bills, drafts, but the strategy is not very clear, and if the strategy is not clear, an eventual law would be missing something, so to speak – these two things should go hand in hand,” Romano said.
Romano, a panelist alongside energy experts Roberto Carnicer and Gonzalo Cabrera at an energy seminar hosted by the institute last week, also underscored the importance of incentives such as US-style tax breaks for hydrogen produced using carbon-capture technology.
Several LNG and green hydrogen projects have been announced publicly, targeting Buenos Aires, Río Negro and Tierra del Fuego provinces. Projects are at the early stages, with one developer – gas transporter TGS, which is planning a modular LNG plant – saying engineers were conducting economic feasibility studies.
A steadying of the macroeconomic ship, freedom to repatriate profits, and rebuilding trust after the country halted contracted gas exports to Chile amid domestic woes in 2007, are also seen as vital to get investment flowing into the country.
Argentina is working to restore confidence among gas offtakers. Companies were recently given the green light by Buenos Aires to commit to export gas to Chile on a firm basis during months when only interruptible supply contracts have typically been authorized.
Romano said: “You need, for confidence, not just forex freedom but also assurances over supply over the long term without curtailment.”
Chilean generators Enel Generación, GM Holdings and Colbún are among those that typically buy Argentine gas.
Argentina is working partly to secure offtakers for surplus production during warmer months when domestic demand drops. Producer appetites are also being whetted by the prices fetched for their exported gas – typically higher than that obtained under local gas production incentive program Plan Gas.
Drillers in the Vaca Muerta unconventionals formation are driving growth. Nationally, gas production was 130Mm3/d (million cubic meters per day) in February, up 2.0% year-on-year, according to data from the General Mosconi energy institute think tank. Shale and tight accounted for 71.7Mm3/d, a production rate 8.8% higher than a year earlier.
Working with Neighbors
Because Latin America has a wealth of energy resources, low domestic energy demand compared with US and Europe and abundant land for building projects, the region is seen as well placed to ride the energy transition wave as a supplier to Europe and Asia of LNG and low-emission hydrogen and its derivatives.
Romano underscored the importance of collaboration between Argentina and its neighbors.
“You don’t see this in bills that have been circulating, but it must be remembered that Argentina is part of a region, with Brazil, Chile, Uruguay, Paraguay,” Romano said during Friday’s conference.
“What role do we want to play? Do we want to compete – I’d say no. What we want to do is position the Southern Cone as a relevant global provider and find a joint regional agenda where there is complementarity.”
China: World’s largest green hydrogen project — China’s 260MW Kuqa facility — to be commissioned at the end of May
The world’s largest green hydrogen project — the 260MW Kuqa facility in Xinjiang, northwest China — is to be commissioned at the end of May, with commercial operation scheduled to begin on 30 June, according to its developer, Chinese state-owned oil giant Sinopec.
It will overtake the current world leader, a 150MW project in northern China owned by Ningxia Baofeng Energy, although Kuqa’s reign as the largest green hydrogen system in operation will not last long.
Another Sinopec project that is about a third larger is already under construction in Ordos, Inner Mongolia, China, but it is not known when that will be completed (see below), and the company has also announced a ¥20bn ($2.8bn) green hydrogen project in Inner Mongolia that will pump 100,000 tonnes of H2 a year through a new 400km pipeline to Beijing.
The green hydrogen produced at the ¥3bn ($425m) facility in the city of Kuqa will be sent by a pipeline to a nearby oil refinery operated by subsidiary Sinopec Tahe Refining and Chemical Company, where it will replace grey hydrogen made from unabated natural gas. H2 is used in oil refineries to remove sulphur from crude oil and to produce petrochemicals.
A storage tank able to store 210,000 cubic metres of hydrogen will be used at Kuqa to ensure a steady stream of H2 along the pipeline, which is able to transport 28,000 cubic metres per hour, while the project’s 13 electrolysers have been supplied by three local manufacturers — Longi, Peric and Cockerill Jingli Hydrogen, which is now 100%-owned by Belgium’s John Cockerill.
But questions remain over how green the hydrogen produced at Kuqa will truly be.
The original proposal for the project, unveiled in 2021, declared that it would be powered by a 1GW solar farm, and last June the array was said to have been downsized to 361MW, according to research house BloombergNEF.
In a private report to its subscribers last summer, BNEF said that a 361MW plant would only provide 58% of the electricity needed to meet the electrolysers’ 1,060GWh annual power requirements, with the rest needing to be sourced from the local coal-reliant grid.
BNEF said at the time that Sinopec was then planning to negotiate with the local grid operator for the remaining 42%, but that its commitments thus far had been “vaguely described by Sinopec to be from nearby wind farms or other clean power sources”. If any fossil-fuel-fired power is used to produce hydrogen at Kuqa, the output cannot be said to be “green” or “renewable”.
A general rule of thumb is that green hydrogen projects require roughly 2MW of renewable energy for every 1MW of electrolysers to account for the variability in wind and solar output.
Sinopec plans to produce more than two million tonnes of green hydrogen annually by 2025, its executives have previously stated, with gigawatt-scale projects in the pipeline.
The Ordos project
Sinopec has not revealed the electrolyser capacity of the Ordos project, only that it will produce about 30,000 tonnes of hydrogen per year.
The Kuqa project will produce roughly 20,000 tonnes annually, which suggests Ordos will have a capacity of about 390MW, although the latter project will apparently be powered by 450MW of wind and 270MW of solar, according to Chinese media.
But as wind tends to blow more strongly at night than during the day, such hybrid projects are expected to produce more electricity over a 24-hour period than those relying on solar power alone, which could mean that a smaller capacity of electrolysers would be required.
The Ordos project will include 288,000 cubic metres of hydrogen storage, as well as a pipeline to deliver the H2 to its main customer, the Zhongtian Hechuang Ordos Coal Deep Processing plant, which currently uses the dirtiest form of hydrogen (made from unabated coal) to produce synthetic chemicals, Sinopec said in February when construction began.