NGS’ NG/LNG SNAPSHOT – JULY 2020, VOLUME 2
City Gas Distribution & Auto LPG
Monopoly in city gas sales to end
The Centre is planning to open up the city gas distribution business to competition, which will end the monopoly of Mahanagar Gas Ltd in Mumbai
and Indraprastha Gas Ltd in Delhi as consumers get to pick the operators of their choice. Sources said the Petroleum and Natural Gas Regulatory Board (PNGRB) could notify the regulations before the end of this month. The regulator has already sought the views of the existing distributors on the tariff a new entrant would pay to use their network and infrastructure. Officials said the city gas distribution entities were given marketing exclusivity for a certain period. The marketing exclusivity of the existing operators such as Mahanagar Gas Ltd and Indraprastha Gas Ltd has ended in most of the regions. However, they continue to have exclusivity on infrastructure for 20 years with further extensions in a block of 10 years. For consumers, competition could help them lower their gas bill. They would also have a choice of natural gas suppliers and can select one that offers them the best service and price. Competition may also force the incumbent players to lower their tariffs. According to a report by ICICI Securities based on a recent webinar of equity investors and analysts with the Petroleum and Natural Gas Regulatory Board (PNGRB), the incumbents will have to provide at least 20 per cent of their capacity to the new players. The incumbents may have to offer more if they have more than 20 per cent spare capacity. The PNGRB has data on the spare capacity on the networks of all the city gas players and it may make that data public at some stage in the future, the report said. The proposed PNGRB regulation on competition would allow the incumbent to calculate the tariff on the basis of the guidelines for such computations. The incumbents would be required to display on its website its calculation of the tariff, which can be contested by the new operators if the older operators fail to adhere to the guidelines. The PNGRB would only intervene in the case of disputes. The regulator also expects the government to supply gas to the new entrants at the same price as the incumbents. This would be a prerequisite for the new entrants to foray into the business as otherwise they would not be able to compete with incumbents, who get cheap domestic gas, the brokerage reports said. The move is part of the government’s effort to increase the use of clean energy in the country. At present, natural gas accounts for 6% in the country’s primary energy mix against the world average of 24%.
City gas distribution companies under pressure; MGL, IGL decline up to 5%
Shares of city gas distribution (CGD) companies such as Mahanagar Gas (MGL) and Indraprastha Gas (IGL) were under pressure on Tuesday.
The shares slipped up to 5% in the intra-day trade on the BSE on Tuesday after Petroleum and Natural Gas Regulatory Board (PNGRB) said the regulation for allowing competition in CGD areas will be notified in the next one to one and a half months. The stock of MGL slipped 5 per cent to Rs 1,025, while IGL was down nearly 5 per cent at Rs 421 in intra-day trade on the BSE. At 10:31 am, the two stocks were trading 4 per cent lower, as compared to a 0.06 per cent decline in the S&P BSE Sensex.
“No timeline has been given for allowing new competition in various areas. However, in our opinion, Mumbai and Delhi will be the first two cities where the competition will be allowed, which may have some impact on the growth of Mahanagar Gas and Indraprastha Gas,” ICICI Securities said in a note. “While MGL continues to expand in existing areas in Mumbai Metropolitan Region (MMR) as well as in Raigadh, the disruption in volumes due to Covid-19-induced lockdown has severely impacted the growth prospects for FY21E with management also cautioning towards a lower capex (from Rs 400-500 crore levels) which will see a deferment in company’s expansion plans,” analysts at Centrum Broking said in Q4FY20 result update.
GAIL committed to supply 10000 new household PNG connections in Kota
Together with Hon’ble Speaker of Lok Sabha Shri Om Birla ji reviewed the progress of City Gas Distribution projects being implemented by PSUs
of Ministry of Petroleum and Natural Gas, Government of India in Kota.
RSGL, a JV of RSPCL and Gail Gas Ltd. has committed to supply 10,000 new household PNG connections and also complete work on 3 new CNG stations by December 2020 in Kota. Exhorted officials of RSGL to also provide natural gas to local industries for a clean fuel led development. I am happy to learn that work on expansion of CGD network and gas infrastructure projects is going on in full swing despite the Covid19 challenges. We are committed to provide CNG & PNG for transportation, industries and households for a cleaner and greener Kota and Rajasthan.
For IGL, the future is digital: Jana
For Indraprastha Gas Ltd (IGL), India’s largest compressed natural gas distribution company, being under lockdown not only meant a nearly 80%
impact on its trading volumes, but also a change in consumer pattern. In an interview for Mint’s Pivot or Perish series, A.K. Jana, managing director, IGL, said that in sync with consumer behaviour, the company is looking at a future with 100% digital payments and processes. Edited excerpts:
In what way is IGL pivoting its business model due to covid-19?
Demand for natural gas was impacted on all four fronts: domestic, industrial, commercial and transportation. While we saw good traction from domestic customers even during the lockdown, demand from industry, commercial sector and transportation suffered due to low business activity. With the unlocking, though demand for the industry is picking up, the commercial sector, which includes hotels and restaurants, is still subdued. Transport, however, is back to 65-70% of what it was last June. We are expecting it to pick up fast. However, consumer behaviour has changed and we are taking note of that. The customer is very cautious and does not want to transact in cash. So, we are now planning to make our payment methods completely digital, even for customers. So far, around 50% of our transactions were in cash. We are trying to convince people to get our smart cards for digital payments. We will also be taking our tendering process digital, by implementing 100% e-tendering.
What are the lessons from the coronavirus crisis for IGL, and how will you incorporate that in your working?
The biggest learning during the lockdown was that we do not pay attention to migrant labourers. The execution of our projects depends on migrant labourers, and it is stalled now. So, we are working with our contractors to understand how we can make things better for them. First, we are thinking of how to bring them back. Since the situation in Delhi is still not conducive, it’s a challenge. Second, once they are back, we need to provide better facilities. We are also working on providing them with shelter, putting them up in one location, educating them on how to work while maintaining social distancing, and with personal protective gear on.
Has covid-19 forced your company to extend timelines for any project?
Yes, of course. For this fiscal year, the first quarter is gone. Work in the second quarter has slowed down due to the monsoon. So, we are left with only two quarters where work can progress on the ground. Though work on compressed natural gas (CNG) stations is on, as it is in an isolated location, work on laying of the pipelines is impacted due to shortage of labourers. On the domestic customers front, earlier we used to get 1,000 connection requests per day, today it is down to 200. People are not allowing us to enter their homes for the fear of contracting corona. Though work timelines will get pushed, we are planning to hire more hands (when they are available) and complete the work.
The Petroleum and Natural Gas Regulatory Board (PNGRB) has allowed setting up of LNG stations. Will that impact IGL’s business?
It will not impact our business immediately because there is no transport available which will run on liquefied natural gas (LNG) as of date. Also, it will take time to pick up as infrastructure needs to be created. Besides, all city gas companies can think of investing in their own locations. Currently, our focus is on how to reduce the queue at our CNG stations. We are planning to add 100 CNG stations this fiscal year, as well as enhancing capacity of our existing stations. We already have 555 CNG stations.
Gujarat Gas gains after PNGRB transfers two GAs
Gujarat Gas rose 3.25% to Rs 319.50 after the oil regulator sanctioned the transfer of two geographical areas (GAs) from Gujarat State Petronet to the company.
The Petroleum and Natural Gas Regulatory Board (PNGRB) had accepted proposal for transfer of authorization of Amritsar District GA and Bhatinda District GA from Gujarat State Petronet (GSPL) to Gujarat Gas (GGL). The company is required to submit revised financial closure, gas supply agreement and PBG (performance bank guarantee) to PNGRB to complete the process of transfer. Accordingly, PNGRB has permitted the company to take over activities of laying, building, operating or expanding CGD (city gas distribution) network of Amritsar District GA and Bhatinda District GA, GGL said. Gujarat Gas operates in the segment of natural gas business and is India’s largest city gas distribution company. Its consolidated net profit surged 114.80% to Rs 250.46 crore on 39.8% jump in net sales to Rs 2,666.63 crore in Q4 March 2020 over Q4 March 2019.
Share of CNG cars likely to increase in next 2-3 years as customers expected to shift from diesel: ICRA
Share of diesel passenger vehicles will decline to 15%-18% of the whole segment in the next two to three years, from the existing 29%
at the end of the FY 20 due to increased cost of ownership and reduction in price differential with petrol, according to the rating agency ICRA. During the same period, sales of compressed natural gas (CNG) driven vehicles is likely to outperform since they are considered eco-friendly and commands and lower operating cost. Sales of diesel vehicles have been on a continuous decline since the union government decided to de-regulate the price of diesel in 2014. In FY 13, share of diesel vehicles in the domestic passenger vehicle segment stood at 58% but declined to 29% in FY 20. “Diesel Passenger vehicle’s share is expected to decline to 15%-18% in FY2022e from 29% in FY2020. Within this, the share of diesel vehicle in car segment will stabilize around 5%-7% (from 11%) whereas UV segment’s share will gradually reduce to sub 40% (from 65%) over the next 2-3 years, the ratings agency said in a note on Wednesday (July 8). CNG vehicles will mainly benefit from the shift due to reasons like lower upfront cost and better cost economics than diesel vehicle. The share of such vehicles, currently, is below 5% in overall passenger vehicle sales and is expected to outperform other fuel segment in the medium term. In line with the emerging trend, vehicle manufacturers are re-aligning their business strategy and some have exited from diesel powertrain offerings and are focusing only on hybrids and CNG, the note further mentioned. Companies like Maruti Suzuki, Renault India Pvt Ltd and Nissan Motor India Pvt Ltd decided stop manufacturing diesel vehicles from April 1, 2020, as consumers are expected to move away from diesel engine vehicles at least in the hatchback and affordable sedan segments due increase in cost of Bharat Stage 6 norm compliant diesel vehicles.
E S Ranganathan joins GAIL as marketing chief
E S Ranganathan on Wednesday (July 1) took over charge as director (marketing) of GAIL, the country’s largest gas utility.
An instrumentation and control engineer from NSS College of Engineering, Palghat in Kerala, Ranganathan is an MBA with specialization in marketing. He has close to 35 years experience in oil and gas sector. He takes charge of GAIL’s marketing operation at a time when the government is considering a proposal to split the company into infrastructure and marketing entities to usher in competition.
Before joining the GAIL board, Ranganathan served as managing director of Indraprashtha Gas Ltd. Before that, as executive director in the parent company, he was instrumental in commissioning the Dahej–Vijaipur, Vijaipur-Dadri and Bawana-Nangal pipelines. Ranganathan, has an acumen for leveraging technology for business solutions and played a pioneering role in using technology in project management. At IGL, he spearheaded the company’s expansion in Haryana, UP and Rajasthan as well as entered the international foray into New Yangon Project in Myanmar. He was also a consultant to ADB in revamping of gas pipeline system in Afghanistan and has also represented the country in pipeline operators forum based in the Netherlands.
Independence of gas trading exchanges – A regulatory conundrum
In a recent development, India has established its first Gas Trading Exchange (Gas Exchange) or the Indian Gas Exchange (IGX) to enable the trade
and supply of natural gas through a market-based mechanism instead of multiple formula driven prices,  thereby establishing a transparent pricing mechanism for the trade and supply of natural gas. It is a digital online platform where no physical delivery happens between the buyer and seller. The Gas Exchange is expected to work on the lines of power exchanges, which determines the price based on supply and demand and market forces. The newly established platform will allow trading of imported natural gas across imported natural gas, excluding domestic gas , across hubs in Dahej and Hazira in Gujarat, and Kakinada in Andhra Pradesh. In India, the Petroleum and Natural Gas Regulatory Board (PNGRB) regulates access to trunk pipelines, distribution infrastructure, storage, transport, and physical delivery of gas such as pipelines, etc. It is set to take up the role of the market regulator for the natural gas trading platform. The establishment of a Gas Exchange in India will be a big step in aiding India’s vision of an efficient, wider and transparent gas trading system. Trade of several types of gas will increase liquidity, and shorter contracts for delivery will also provide sellers and buyers with greater flexibility. At the same time, there are concerns regarding government set prices of these projects which involve expensive Exploration and Production stages, which may require reconsideration.
Since the launch of IGX’s AI-enabled online natural gas trading platform, several giants such as GAIL and Petronet LNG  have shown interest in this first-of-its-kind novel venture, including other major industry players like Manikaran Power, Torrent Power and Adani Gas, thus exposing the sector to substantial opportunities.  More recently, there was news of GAIL floating an Expression of Interest (EOI) to possibly acquire approximately 26% in the new exchange, thereby raising a few eyebrows regarding the independence of IGX.
In 2019, PNGRB had stated that “gas pipeline company will not be allowed to take majority stake in these new exchanges” . It is therefore essential to assess what would consist of a ‘majority’. From a Companies Law perspective, acquisitions resulting in entitlement of 25% or more of voting rights trigger open offer obligations . Further, the definition of ‘Control’  under the Takeover Code includes a vast variety of rights which would entitle it to exercise control over the acquired entity. A similar definition is present under the Companies Act, 2013.  The nature of control spanning over several kinds of rights is discussed in several cases . Further, the majority typically decides how the affairs of the company shall be conducted . The acquisition of GAIL and several other large entities may also lead to cartel concerns in the IGX, thereby creating unfair market practices for other players. Presently, access to the requisite infrastructure for the storage, and supply of natural gas is exercised largely by the dominant players of the sector which have developed it after incurring significant costs. The authorized entities should have transportation and storage of natural gas as their sole business activity and not have any business interests in the gas marketing or gas distribution networks to avoid a conflict of interest in the gas storage and transportation business which is likely to affect competitive pricing.
Further, Section 21 of the PNGRB Act, 2006 also states that marketing and transmission functions should not be performed by the same entity, which further indicates the unlikelihood of allowing GAIL to acquire a significant stake in the IGX. In a press release, Mr Dharmendra Pradhan has also stated that “the government has no business to be in business and the consumer is the king in a free market” . By this logic, it may still be possible for GAIL to acquire a minority stake in IGX. Historically, the Courts in India have observed that the independent directors must not have a fiduciary relationship with any shareholder of Power Exchange . Similar provisions could be applicable to GAIL vis-a-vis the IGX. The rules of IEX mandate an extensive committee overlooking its management, which can be adopted for IGX as well, subject to the legal requirements laid down by PNGRB.
While this acquisition may be undesirable for such reasons, GAIL continues to have the largest network of pipelines and considerable LNG terminals in India, which could be a big contribution in success of the exchange, thereby indicating the government’s commitment to increasing the share of natural gas in the country’s energy mix. Further, a government entity directly acquiring and therefore financially backing the gas exchange may instill confidence in the investor community. Incidentally, the transparent gas price discovery and trading of gas on the newly established gas exchange has already commenced at a time where the market rules and bylaws have been notified without the regulations and procedures  being in place. This in itself is a conundrum as it appears that a regulatory framework for operationalization of the gas exchanges is still incomplete. Since the PNGRB regulations governing the gas exchanges are not yet notified in the official gazette, the precise implication of this move continues to remain unclear. It will also be interesting to see how the proposed regulations will deal with comingling of gas from various suppliers and issues related to that.
India to simplify gas pipeline tariff to boost demand
India is simplifying its gas pipeline tariff structure to make the fuel more affordable and to attract investment for building gas infrastructure in the country,
oil minister Dharmendra Pradhan said on Wednesday (July 1). Prime Minister Narendra Modi has set a target to raise the share of gas in India’s energy mix to 15% from the current level of about 6.3% to cut its carbon footprint. Use of gas is also set to rise as India wants to push local manufacturing to cut costly imports and lift its battered economy. Pradhan said the new tariff structure would help to create a single gas market in the country by attracting investment to complete the gas grid and make it more easily accessible. He did not provide more details of the new pricing structure.
The oil minister said India’s current “zonal” tariff rates for gas pipelines resulted in higher transportation charges and had hindered development of gas markets and demand centres in remote areas. India, the world’s fourth biggest importer of liquefied natural gas (LNG), is spending $60 billion to strengthen its gas infrastructure that includes expanding the pipeline network and building gas import terminals. “A level playing field (for tariffs) among the industries across the country will help in minimising their input cost and improve their competitiveness in global production,” Pradhan, speaking at a joint webinar with International Energy Agency chief Fatih Birol, said. He said new rationalised tariff would help to promote faster development of city gas project to connect households, industries and transport sectors with gas network.
Source: LNG Global/Reuters
Covid-19, gas price crash may push back PLL’s $2.5-bn deal with Tellurian
In what may be a big casualty of Covid-19 related market disruptions, India’s Petronet LNG Ltd. may push back its $2.5 billion investment plan in US LNG developer Tellurian’s upcoming Driftwood LNG terminal in Louisiana.
Government sources said that with spot LNG prices now crashing to about $2 per MMBtu and gas widely available in the market, it would make little sense to sign an agreement committing to pay on sea price of $3.5 to $4.5 per MMBtu for 40 years for the gas. The delivered price of gas would be even higher. The deal would have to be renegotiated given the current market prices, sources said. In September last year a non-binding memorandum of understanding (MoU) was signed between PLL and Tellurian that gave the Indian entity PLL the option to buy 5 MMTPA LNG from Tellurian’s Driftwood project on the banks of the Calcasieu river in Louisiana. In return, Petronet was to spend $2.5 billion for an 18% equity stake in the $28 billion Driftwood LNG terminal.
The term of the MoU was to expire on March 31, 2020, which was extended to May 31 in February. But with the expiry of the second deadline for converting the MoU into a definitive agreement, doubts have surfaced whether the deal, that also saw the involvement of top government functionaries for both India and the US, will go through.
“The Tellurian deal is still under board consideration and cannot comment now. MoU has expired but may be extended. Status will be known this year,” PLL said during an analyst call last month. But government sources said that neither PLL or Tellurian have had talks on extending the terms of the MoU or signing an agreement on earlier agreed terms so far and if the deal is salvaged it would be based on renegotiation of the gas price and investment terms.
The Tellurian deal, if concluded, will be the first long-term LNG deal under the Modi government since 2014. Under the Tellurian deal, the first set of gas from the Driftwood project would reach Indian shores only by FY24. Sources said of the 5 MMTPA proposed contracted quantity, Petronet may not get even full capacity from the first phase 11 MMTPA Driftwood project to be ready for delivery by 2023. For Petronet, another issue of concern would be mobilising the huge investment commitment of $ 2.5 billion for Driftwood. With cash and reserves of just over Rs 8,500 crore, it would have to look at other means of funding its US investment commitment. Tellurian is selling 51 per cent holding in Driftwood to third parties while it itself would retain 49% stake or control over 13.6 MMTPA of LNG. Tellurian expects to generate $8 per share cash flow from the project.
Petronet to set up 1,350 LNG dispensing stations across major highways
Petronet LNG Ltd, the country’s biggest liquefied natural gas infrastructure company, will adopt a three-pronged strategy to expand its business in the country
after the government last month allowed marketing and distribution of LNG by any entity. As part of this strategy, the company will set up 1,350 LNG dispensing stations across major national highways. Petronet seeks to boost LNG infrastructure on highways where LNG is largely unavailable for heavy vehicles. “There is a level playing field now for setting up of LNG dispensing station. So we have planned in three phases our LNG corridor development,” Vinod K Mishra, director finance, Petronet LNG told analysts. In the first phase, the company would put up 50 stations on five major highways, which include Western Corridor and Southern Corridor, by 2021. In the second phase, it plans to set up around 300 LNG dispensing stations on all highways and in the third phase it will set up 1,000 stations. India has a total of 87 national highways which interconnect the country’s capital and state capitals through important cities. The total length of national highways are 1,31,000 km. Petronet LNG expects that considering 25% of highways will have major medium and heavy commercial vehicles playing on them, traffic from various ports, mines, petrochemical complexes, FMCG industries and logistics hubs, 35,000 km of highways will be covered. “In most cases, we shall be tying up either with city gas distribution companies, oil market companies and other players because our intention is not to go too much in retail but enhance the usage of LNG in the automotive sector, especially in the long-haul trucks and interstate buses,” added Mishra.”We have already told the oil marketing companies that whosoever want they can put it up. If they are doing it’s fine. If they are not able to do it, then we are ready to partner with anybody and we will help them put up the stations,” said Mishra. The company has also signed an agreement with Gujarat Gas under which it is putting up five stations in Gujarat.
Cheaper, assured long-term natural gas supply for India: Petronet to soon sign unique LNG deal
India’s biggest LNG importer Petronet may soon sign a long-term LNG deal, benchmarked to daily or spot prices, which are often less than normal rates.
India had bought LNG under long-term contracts at an average price of USD 3.5-4.5 per MMBtu in the current quarter while the spot prices of LNG are in the range of USD 2. In an effort to produce natural gas at cheap prices, India’s biggest LNG importer Petronet may soon sign a long-term LNG deal, benchmarked to daily or spot prices, which are often less than normal rates. However, the CEO and Managing Director of Petronet LNG, Prabhat Singh refused to give details of the supplier, PTI reported. Prabhat Singh added that the company was initially looking to buy 1 MMT of LNG under such a contract and aimed to further increase the capacity depending on the customer’s response. He further said that nearly 13 suppliers have showed interest in providing LNG to Petronet.
At present, Petronet buys around 10 MMTPA of LNG through contracts with ExxonMobil and Qatar Petroleum. However, these contracts are priced at an average of benchmark crude oil rates, which the company wants to get rid of. The PSU firm GAIL India has also contracted 5.8 MMTPA of LNG from the US-benchmark rates. India had earlier bought liquefied natural gas (LNG) under long-term contracts from Qatar and Australia at an average price of USD 3.5-4.5 per MMBtu in the current quarter while the spot prices of LNG are in the range of USD 2. Petronet had also sought bids for 1 MMT of LNG per year for 10 years, starting 2024, from suppliers. The Petronet CEO also underlined that the company plans to set up 50 LNG dispensing stations along five highways in FY21 and expand it to 1,000 stations across India in later years. Meanwhile, Petroleum Minister Dharmendra Pradhan had recently said that India will gradually end central controls on gas pricing as it seeks to attract foreign investment and technology to lift local output. The minister called it an incentive for investors to come to India and take advantage of pricing and marketing freedom to produce and invest more.
Petronet says Qatargas, Exxon objected to force majeure on LNG imports
India’s top gas importer Petronet LNG said on Tuesday (June 30) suppliers Qatargas and Exxon Mobil Corp objected to the force majeure it invoked in March
after local demand slumped because of lockdowns to stem the spread of COVID-19. Petronet has a deal to buy 7.5 MMTPA of LNG from Qatar and 1.44 MMTPA from Exxon’s Gorgon project in Australia. Petronet invoked the force majeure on eight LNG cargoes of Qatar and one from Exxon for loading from March to May, its head of finance V.K. Mishra told an analyst conference. Force majeure is a clause in commercial contracts allowing companies to not fulfill contracts because of event outside their control. “They have objected to this force majeure, we are trying to convince them and hopefully we will work out a solution because as per contract this is admissible,” Mishra said. “They have objected to it but they have not given any reason why this is not a force majeure.” Exxon Mobil and Qatargas did not immediately reply to emails from Reuters requesting comment on their objections to the force majeure.
Mishra also said Petronet is in talks with Qatargas to renegotiate gas pricing under its long-term deals as spot prices have declined. Indian gas demand has recovered now and the company’s Dahej LNG terminal, which can bring in 17.5 MMTPA, is now operating at about 100% capacity, Mishra said. He hoped the Dahej terminal will continue to fully operate for the remainder of the fiscal year to March 2021, while capacity use at the 5 MMTPA Kochi terminal will improve after a key pipeline linking customers is ready this year. Petronet’s non-binding memorandum of understanding to buy a stake in Tellurian Inc’s Driftwood LNG project expired in May, Mishra said, adding his firm may renew the pact.
Source: LNG Global
Natural Gas / Transnational Pipelines/ Others
BP completes sale of Alaskan oil and gas producing properties to Hilcorp Energy
and other oil majors have reduced their production roles in the northernmost US state as output slid and lower-cost fields emerged elsewhere. Hilcorp, known for buying up oil castoffs, acquired half of another BP Alaska project in 2014. The $5.6 billion deal, including BP’s stake in the Trans Alaska Pipeline System which carries crude oil from Prudhoe Bay to Alaska’s southern coast, should wrap up this quarter, both companies said in statements. “We look forward to continuing to drive economic growth, create Alaskan jobs and contribute to local economies for decades to come,” said Greg Lalicker, chief executive of Hilcorp Energy. The agreement calls for Hilcorp to pay $4 billion to BP over an unspecified time, with the remaining $1.6 billion based on future earnings from the properties. Terms were revised and pushed back as Hilcorp sought to raise financing. With Wednesday’s purchase, Texas-based Hilcorp becomes the state’s second largest oil producer and reserves holder, behind ConocoPhillips. Hilcorp will nearly triple its workforce in Alaska, to 1,450 employees with the acquisition, said Luke Miller, Hilcorp spokesman.
Dominion Energy gas assets for $4 bln
The transaction announced on Sunday (July 5) includes more than 7,700 miles (12,390 km) of natural gas transmission lines and 900 billion cubic feet of gas storage.
Berkshire Hathaway Inc said its energy unit will buy Dominion Energy Inc’s natural gas transmission and storage network for $4 billion, helping billionaire Chairman Warren Buffett reduce his conglomerate’s cash pile while letting Dominion focus on utilities operations. The transaction announced on Sunday includes more than 7,700 miles (12,390 km) of natural gas transmission lines and 900 billion cubic feet of gas storage. Berkshire Hathaway Energy is buying Dominion Energy Transmission, Questar Pipeline, Carolina Gas Transmission, 50% of the Iroquois Gas Transmission System, and 25% of the Cove Point liquefied natural gas facility in Maryland. Dominion will retain 50% of Cove Point. Brookfield Asset Management Inc owns 25%. The Berkshire unit will also assume $5.7 billion of debt, giving the transaction a $9.7 billion enterprise value. It expects a fourth-quarter closing, pending regulatory approvals.
“We are very proud to be adding such a great portfolio of natural gas assets to our already strong energy business,” Buffett said in a statement. Dominion expects up to 90% of future operating earnings to come from utilities. The company and Duke Energy Inc separately announced on Sunday they would abandon their $8 billion Atlantic Coast Pipeline, running under the Appalachian Trail and through West Virginia, Virginia and North Carolina. Dominion and Duke cited delays and uncertain costs, despite a favorable U.S. Supreme Court decision last month. Berkshire controls 91.1% of Berkshire Hathaway Energy, which owns the MidAmerican Energy,
NV Energy and PacifiCorp utilities, natural gas pipelines, wind power assets and electricity businesses in Britain and Canada. The unit accounted for 12% of Berkshire’s $23.97 billion of operating profit in 2019. Its chairman, Greg Abel, is also a Berkshire vice chairman. Berkshire ended March with $137.2 billion of cash, reflecting Buffett’s four-year inability to find major acquisitions, even as the coronavirus pandemic took hold and stock prices plunged.
European 2020 gas trading volume may surpass 2019 record: research
European gas trading volumes this year may beat the record 63,038 terawatt hours (TWh) seen in 2019, as trading hubs expand due to more commercial and financial demand for gas price hedging, research firm Prospex said on Thursday (July 9).
Last year’s wholesale trading volumes across 11 European markets rose by 20 per cent, and also increased by the same percentage again in January-June 2020, the consultancy said in an annual gas report. “As European gas trading seems to have not only survived but prospered during the COVID pandemic so far, it will continue to grow through 2020,” said author Nigel Harris. “Prices are low but volatility is high,” he added. There are industry-specific reasons why the traded gas market – worth 925 billion euros ($1.05 trillion) in 2019 – is an exception in the economic gloom brought by COVID-19, the report showed.
Trading strategies are driven by the need to bring more gas into the region as domestic production in the Netherlands is falling. Also, price spreads are changing to encourage fuel switching to gas from coal, as coal’s profitability is hurt by high carbon emissions rights prices, cheap gas, and stricter climate targets. Harris said other risk scenarios would also keep traders busy – the Brexit transition in Britain, oil price impact on index-linked gas contracts, which will be hit by coronavirus-related volatility with a time lag, and the prospect that Russia may complete the Nord Stream 2 gas pipeline.
Prospex also noted that in 2019, Dutch gas exchange Title Transfer Facility (TTF) traded 45 per cent more volume than in 2018 while Britain’s National Balancing Point (NBP) lost 18 per cent. The TTF has become Europe’s main venue for spot and forward delivery gas, for price risk management by traders of physical volumes and for financial hedges by institutional investors.
EU supports construction of 16 new alternative fuel stations in Spain
Spanish corridors of the Trans-European Transport Network: it includes 15 LNG stations in the provinces of Castellón, Madrid (4 facilities), Guipúzcoa, Zamora, Girona, Jaén,
Álava, Navarra, La Rioja, Burgos, Cáceres and Badajoz; and one hydrogen station in Madrid. The European Commission will support the development of 15 refueling stations for LNG vehicles and one for hydrogen as part of the “ECO-net” Project, coordinated by Enagás and which aims to contribute to transport decarbonisation by introducing LNG, biogas and green hydrogen as fuels. Scale Gas, a start-up established through Enagás Emprende, the Enagás corporate venturing programme, will develop the projects.
The project has an overall budget of approximately 13 million euros and includes the construction of 16 supply points for fuel alternatives to traditional fuels for heavy vehicles and cars within a period of up to three years. These supply points, 15 LNG and one hydrogen – the first in Spain at 700 bar pressure – will be distributed along the Spanish corridors of the Trans-European Transport Network. The ECO-net Project, Spanish Network of Alternative Fuels Refuelling Stations, is part of the Connecting Europe Facility (CEF European Funds), which promotes more sustainable and efficient transport. This initiative is in line with Directive 2014/94/EU for the development of infrastructures for alternative fuels and with the Spanish National Action Framework for alternative energies in transport.
In addition to financial support from the European Commission, the project has a loan from the Instituto de Crédito Oficial (ICO) covering approximately 50% of the project, with Enagás contributing the remaining amount from its own resources. The ECO-net Project has won the support of different companies such as Toyota, a pioneer in introducing hydrogen-powered vehicles to the market, and institutions such as GASNAM and the European ECO-GATE project, a global action plan co-financed by the EU and promoted by a consortium of more than 20 companies for the development of CNG and LNG mobility in Europe. Spain is the European country with most LNG terminals for supply to ships thanks to its geostrategic position and the strength of its infrastructure. With the ECO-net Project, Enagás is seeking to move in the same direction in the area of vehicle mobility, especially in the heavy transport sector.
Peruvian government reactivates CNG conversions in seven regions
The Ministry of Energy and Mines (Minem), through the Energy Social Inclusion Fund (FISE), has reactivated the BonoGas Vehicle program allowing users
in seven regions of the country to access financing for the conversion of their vehicles to CNG, with an attractive interest rate to promote the use of natural gas in transportation. Those drivers interested in the conversions should initiate the corresponding process in the branches of the credit entities that participate in the BonoGas Vehicle program, located in Piura, Lambayeque, La Libertad, Junín, Ica, Lima and Callao, where there are currently natural gas refueling stations. Through BonoGas, the user accesses financing of up to 5 years, with a low interest rate and flexible payment of installments, through credit entities or during the refueling of CNG at the service station.
The conversion of vehicles to natural gas will be carried out in strict compliance with health and safety protocols to prevent the spread of the coronavirus among users and workers in authorized workshops that carry out these activities. Currently, FISE is working to strengthen, in the short term, the BonoGas Vehicle program in order to optimize the financing process for the conversion of vehicles of different categories through strategic alliances.
Argentina creates new commission for CNG filling stations
Through Resolution 143/2020, the National Gas Regulatory Entity (ENARGAS) announced the creation of the CNG Vending Users Commission that will operate within the Agency.
The members that make it up must be CNG filling stations, to the extent that they accredit this character, without prejudice to the grouping modality that they adopt. The new commission will consist of a representative by group, association and/or chamber that groups the CNG stations and by the representatives of ENARGAS that are necessary in order to the subject matter to be dealt with.
With the support of the provisions of Law No. 24,076 and Decree No. 278/20 ENARGAS creates the CNG Vending Users Commission to generate a communication link where issues related to the interests and rights of nucleated users will be channeled in said commission. The proposals that arise there will not be binding for ENARGAS. In turn, the Commission will select, for each ENARGAS Delegation and before the Subdelegations to be created, a representative to act before them. These designations will be notified to ENARGAS, as well as any changes that may be resolved in this regard. It should be noted that all the members of the Commission will work in an honorary capacity. The launch of the new Commission is the consolidation of an initiative that was born in May, when Bernal proposed to the representatives of the entities that bring together CNG vending users, to create a joint workspace.
The proposal was subsequently taken up within the SME Commission, in whose scope various CNG stations expressed the advisability of creating a separate commission to meet the specificities of the sector. Also, the National Congress, through the proposals formulated by their respective Chambers, may attend the meetings of the commission, by appointing a representative. Likewise, the Gas Distributors Association (ADIGAS) may be present at the meetings of the Commission as an observer, through a representative who acts as a vehicle for immediate communication with the members of its Association, regarding those questions or decisions that are raised at the work table. Finally, one of the powers of the new commission will be dictating its own operating regulations, which will be brought to the attention of ENARGAS for approval.
Redexis and Cepsa’s first service station now also offers CNG-Spain
Redexis and Cepsa have expanded their first natural gas filling station to light vehicles. The facility, opened earlier this year and located at exit 649 of the Autovía del Mediterráneo (A-7)
passing through Puerto Lumbreras, already allowed LNG refueling to all types of heavy vehicles. The station now has a dispenser capable of supplying CNG to light vehicles in a refueling time of 3-6 minutes. The use of CNG is an alternative that is being incorporated in short and medium distance transport vehicles, light commercial vehicles and passenger cars. This natural gas station is located in a strategic point for the transport of goods, where between 5,000 and 8,000 heavy vehicles circulate every day, since it is the main communication route between Barcelona and Algeciras.
It is also an important hub for light vehicles between Andalusia and Levante. Redexis has made an investment of nearly one million euros to carry out its construction.Moreover, Javier Migoya, Director of Tertiary and Industrial Expansion (B2B) of Redexis, said: “We celebrate the expansion for refueling of light vehicles from this first natural gas station together with Cepsa, which means continuing to promote the energy infrastructures necessary so that professionals and citizens have more economical, sustainable and environmentally friendly mobility solutions. From Redexis we continue to advance in our firm commitment to promote natural gas as a real alternative for sustainable mobility.” In June 2019, Redexis and Cepsa agreed to create the largest network of LNG and CNG refueling stations in Spain, with the aim of expanding the supply of energy solutions and promoting sustainable mobility.
Technological Development for Cleaner and Greener Environment Hydrogen & Bio-Methane
First biomethane-powered buses being tested in Estonia’s capital city
The first two biomethane-powered city buses arrived in Tallinn, which, upon the successful completion of a test period, will begin serving public transport routes in the Estonian capital. Another approximately dozen buses of the 100 planned to enter service
before the end of the year are expected to arrive by the end of July. Tallinna Linnatranspordi AS (TLT) board member Otto Popel said that the entry of the new biomethane-powered buses into service marks the biggest environmentally-friendly upgrade to public transport in Tallinn in recent years. “The first two biomethane-powered buses — an articulated bus and a normal bus — will first be conducting test drives in the capital city so that we can assess their compliance with our order and assess their technical readiness for daily route service,” Popel explained, adding that if the new vehicles meet all requirements and procurement contract criteria, they will remain in Tallinn upon the conclusion of the test period already. According to the board member, at least a dozen new environmentally-friendly natural gas-powered buses are to arrive in the capital in the next weeks, and by November the city will replace 100 of its oldest vehicles with new CNG buses. Popel added that in the next few years, only the otherwise newest, Euro 6 emission standard-compliant buses will remain in use alongside the new buses. He also stressed that the greatest benefit of the new public transport vehicles is their environmental friendliness, but also the fact that a younger fleet will also mean savings on renovations and maintenance of old and worn out infrastructure. The new biomethane-powered buses were manufactured by Polish company Solaris Bus & Coach, which submitted the winning, €26.96 million bid to a public procurement, reported ERR (English-language online portal of Estonian Public Broadcasting).
Ireland: BWG Foods puts into operation bio-CNG delivery trucks
Owners and operators of the Spar, Eurospar, Londis, Mace and XL brands, BWG has launched an initial fleet of two HGVs fueled with biogas in place of traditional diesel fuel,
with ambitions to further increase the use of biogas as part of their increasingly environmentally-friendly fuel mix. The vehicles will deliver a 90% reduction in transport-related carbon emissions and less noise pollution, which makes them ideal for towns and city centers. Each of the 26-ton trucks – with electric fridge units – cost €180,000. The launch follows a partnership between BWG and two Irish startups – VisionGreen and Generation Green. BWG will also contribute food waste from their 240,000 sq ft distribution center at Kilcarbery to the biogas production site at Nurney, County Kildare, making this a circular solution. “We at BWG are very passionate about finding new solutions that can reduce our environmental impact,” said Joanne Mellon, logistics director at BWG Foods. “It is critically important that we invest in new technologies that allow us to pioneer less carbon intensive methods of delivery.” In the last 12 months, the Group has invested in sustainability measures to lower the carbon footprint of its delivery operations and currently has the largest fleet of CNG powered trucks in operation in Ireland, with plans to increase this from 18 to 50 by 2025.
Fleet of 40 biomethane buses begin operations in eastern Sweden
Solaris Sweden AB signed a contract for the supply of low- and zero-emission buses to transport operator Vy Buss AB in March 2019.
Today the Swedish agency has started operation with a total of 40 new Solaris Urbino CNG buses in Gävle. All the vehicles are fueled with biomethane from local sources. This Swedish town located at the Gulf of Bothnia has received 24 standard CNG buses and 16 articulated CNG buses. The new vehicles meet the rigorous European emission norm Euro 6. The Solaris Urbino 12 CNG buses offer 31 seats, whereas the 18-meter buses hold 45 seats (including four folding ones). “We are very happy to deliver our newest vehicles to Vy Buss. Today 40 environmentally-friendly, safe and comfortable CNG buses started running in Gävle.
Eight more Urbino electric buses will follow in 2021. Vy Buss is investing in emission free drives and we are delighted to be part of it, sharing our experience and knowledge,” said Klaus Hansen, Managing Director of Solaris Sweden AB. Cooperation between Solaris and the Swedish operators dates back to 2003. Since then, Solaris has supplied customers in Sweden with over 600 vehicles the vast majority of which are low or zero-emission vehicles.
Biomethane refueling for heavy duty trucks expands in southern Sweden
Gasum has opened its 11th natural gas station in Sweden. The Ljungby facility is the first LNG station in Kronoberg County. It offers LNG and bio-LNG for heavy duty vehicles, and located in a logistic hub area, which means
that the area already has a large existing customer base. This opening is part of Gasum’s plan to build a network of 50 natural gas stations by the early 2020s in the Nordics. As Ljungby lies at the intersection of roads E4 and R25, the station serves Gasum’s customers on both roads. The E4 passes along the Gulf of Bothnia from Haparanda on the Finnish border to Gävle and onwards across Sweden to Helsingborg across the sea from Denmark. Moreover, national road R25 is a link between the east and the west as it travels through Sweden between Kalmar and Halmstad. “We are very happy to be in Ljungby. Enabling clean road cargo transport in the Nordics by replacing diesel with low emission fuel solutions such as LNG is becoming more important. As most of our customers have operations throughout Sweden, this station is a welcomed addition to the refueling network for them as well. Interest towards natural gas as a fuel solution is steadily increasing and, thanks to governmental climate subsidy programs such as Klimatklivet, more than 800 gas trucks are now operating on Swedish roads,” said Mikael Antonsson, Director of Traffic at Gasum in Sweden.
The Ljungby station is the latest addition to Gasum’s network in southern Sweden, where biogas production is already widely established. In February, Gasum opened a natural gas station in Kalmar which is located east of Ljungby. In an area 100 km south of Ljungby, Gasum is also building a biogas plant in conjunction with Stora Enso’s Nymölla pulp and paper mill in Kristianstad, where Gasum already has a filling station. Småländska bränslen in Ljungby offers CNG to distribution and passenger vehicles on the site where Gasum has now built the LNG station for heavy duty vehicles. “We value our cooperation with Gasum to enable the first station for LNG in Kronoberg County on our site. By adding Gasum’s LNG capacity, the site will be an important refueling point in the area. We have a good connection with local haulers, which is beneficial for all parties,” commented Stefan Hermansson, CEO at Småländska bränslen
Renewable energy’s share of German power mix at 55.8 per cent in H1
and development service showed on Wednesday (July 1). Out of total power production of 243.8 terawatt hours (TWh), solar, wind, biomass and hydroelectric generation together produced 136.1 TWh in that six months, according to data from the Fraunhofer organisation of applied science. Overall production in the period was down by 11% year-on-year due to sharp falls in demand, especially from industry, during the coronavirus pandemic. Generators responded by throttling back output at fossil fuels plants, which cannot be stored at meaningful scale. By contrast, green power output was up 8.4 per cent on the year, benefiting from favourable weather conditions, priority dispatch on power networks, and continuously expanding capacity.
High wind speeds and high solar intensity more than overrode a decline in hydroelectric output. Europe’s biggest economy is aiming for renewables to provide 65% of its power mix by 2030. It plans to abandon nuclear energy by 2022, and has just confirmed an orderly long-term exit from hard coal by 2033 and brown coal by 2038. Coal burning was the big loser in the first half. Output from brown coal plants dropped 36.3% to 33.6 TWh and hard coal plants by 46% to 14.4 TWh in Jan-June, Fraunhofer said. As carbon emissions price also increased and gas prices declined, more electricity producers switched to generating from gas-to-power plants. Their supply to public grids rose 13.9% to 28 TWh in the six months to June. The cost of mandatory carbon emissions allowances covering coal and gas-fired power output on Wednesday hit 11-month highs of over 28 euros a tonne.
Shell secures biogas supply as part low-carbon shift
Royal Dutch Shell said on Tuesday (June 30) it has agreed to buy renewable gas, known as biomethane, from Denmark’s Nature Energy, in what the smaller company termed the largest deal of its kind.
The gas will be supplied to Europe’s pipeline network from July 1. The size and financial details of the contract were not disclosed. In April, Shell laid out the oil and gas sector’s most extensive strategy yet to reduce greenhouse gas emissions to net zero by 2050. Biogas, produced from methanisation of agricultural and other biological waste, could play a key role in Europe’s ambitions to become a low-carbon society. “Biomethane has an important role to play in the energy transition,” said Jonathan McCloy, head of gas at Shell Energy Europe.
“This purchase is an important part of our work to provide a range of lower-carbon energy choices for our customers across Europe.” Denmark and Germany are pioneers in the nascent biomethane industry, which still depends on government support and has yet to see the breakthroughs in technology and scale seen in wind and solar power. Biogas competes in Europe with cheaper natural gas imports from countries like Russia and Algeria. Depending on continued political support, biogas has the potential to supply Denmark’s entire gas consumption by 2035, up from one-fifth now, according to Nature Energy Chief Executive Ole Hvelplund. Nature Energy plans to produce 170 million cubic metres of gas from its ten plants this year, a tiny fraction of Europe’s total consumption.
European Commission launches hydrogen strategy and alliance
To become climate-neutral by 2050, Europe needs to transform its energy system, which accounts for 75% of the EU’s greenhouse gas emissions.
The EU strategies for energy system integration and hydrogen, adopted today, will pave the way towards a more efficient and interconnected energy sector, driven by the twin goals of a cleaner planet and a stronger economy. The two strategies present a new clean energy investment agenda, in line with the Commission’s Next Generation EU recovery package and the European Green Deal. The planned investments have the potential to stimulate the economic recovery from the coronavirus crisis. They create European jobs and boost leadership and competitiveness in strategic industries, which are crucial to Europe’s resilience.
In an integrated energy system, hydrogen can support the decarbonization of industry, transport, power generation and buildings across Europe. The EU Hydrogen Strategy addresses how to transform this potential into reality, through investments, regulation, market creation and research and innovation. Hydrogen can power sectors that are not suitable for electrification and provide storage to balance variable renewable energy flows, but this can only be achieved with coordinated action between the public and private sector, at EU level. The priority is to develop renewable hydrogen, produced using mainly wind and solar energy. However, in the short and medium term other forms of low-carbon hydrogen are needed to rapidly reduce emissions and support the development of a viable market. To help deliver on this Strategy, the Commission is launching the European Clean Hydrogen Alliance with industry leaders, civil society, national and regional ministers and the European Investment Bank. The Alliance will build up an investment pipeline for scaled-up production and will support demand for clean hydrogen in the EU.
The European Clean Hydrogen Alliance aims at an ambitious deployment of hydrogen technologies by 2030, bringing together renewable and low-carbon hydrogen production, demand in industry, mobility and other sectors, and hydrogen transmission and distribution. With the alliance, the EU wants to build its global leadership in this domain, to support the EU’s commitment to reach carbon neutrality by 2050. Commissioner for Internal Market, Thierry Breton, added: “The European Clean Hydrogen Alliance launched will channel investments into hydrogen production. It will develop a pipeline of concrete projects to support the decarbonization efforts of European energy intensive industries such as steel and chemicals. The Alliance is strategically important for our Green Deal ambitions and the resilience of our industry.”