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“Super Critical” Coal Shortage Sends India Scrambling For NatGas

September 14, 2017

“Super Critical” Coal Shortage Sends India Scrambling For NatGas

Coal

Big disappointment in the global natural gas industry this week, with majors Total and Eni coming up largely dry in a much-anticipated well offshore Cyprus.

But elsewhere things are turning extremely bullish for natgas. With one of the world’s fastest-emerging energy consumers scrambling to get all the supply it can.

India.

Local media reported this week that India’s power generators are seeing a sudden surge in natgas buying because of an “acute” shortage in the country’s go-to energy fuel: coal.

After enjoying years of ample coal supply, India’s power sector has seen inventories slip drastically into the red in recent months. With ten major power plants classified as “critical”, with less than seven days of coal stocks — and five of those being “super critical” with less than four days of coal supply.
And that drastic shortage has reportedly turned these generators to natural gas in a major way.

Sources said India’s generators have purchased 10 million cubic meters (350 million cubic feet) during “the last couple days”. Indicating energy producers are getting desperate in keeping their operations in business amid the coal shortage.

This potentially has long-term implications for global natural gas. Because of a peculiar feature of India’s energy landscape: a fleet of unused gas-fired plants.

India in fact has over 25 GW of installed gas-driven generating capacity. But here’s the thing: 55 percent of that capacity usually never runs. Because it’s “technically stranded” — having no access to natgas feed at commercially-competitive prices.

But the coal crisis is changing the economics here. Power operators are so desperate to keep the lights on, they’re willing to pay the higher prices required to deliver gas to the stranded power plants — causing this week’s major surge in natgas buying.

If the coal shortage persists, that demand could become permanent. Watch for weekly data on coal stocks at India’s power plants, and stats on natural gas usage across India — which could have knock-on effects on imports.

Here’s to un-stranding,

Unknown Oil & Gas Deal Just Changed The Global Energy Balance

September 13, 2017

Unknown Oil & Gas Deal Just Changed The Global Energy Balance

Doha

One of the biggest energy stories this year has been Russia’s Rosneft buying India’s Essar Oil — giving the Russian company a firm grip on one of the world’s biggest emerging oil and gas markets.

And this past week, that story got more complex. With Rosneft striking another big deal — drawing in another heavyweight energy nation.

China.

Rosneft announced Friday it is selling a significant chunk of its equity to Chinese investors. In this case, little-know exploration and production firm CEFC China Energy.

Although few investors know CEFC, the company is bringing significant capital to the deal. With the firm agreeing to pay $9 billion to acquire a 14.16 percent stake in Rosneft.

The deal is historic in being the first major buy-in by China into the Russian oil and gas sector (although Chinese firms have been involved in financing LNG export projects in the Russian Arctic). Showing the strength of the ever-growing ties between Russia and China in the energy space.

Rosneft and CEFC have been at the center of that burgeoning relationship. With the two companies having signed a deal this past September for long-term supply of Russian crude into China.

This week’s equity purchase further cements those business ties. And shows that China sees Russia as a critical ally in the energy game going forward.

But there are implications well beyond these two countries. With China now having backdoor access into markets like India — through Rosneft’s recently-acquired holdings in that country.

That’s a critical development for the world energy picture. Given that Chinese companies haven’t directly gained much access into India — despite the nation being one of the most important emerging players on the energy stage.

…click on the above link to read the rest of the article…

This Six-Year Running Oil And Gas Trend Just Reversed Itself

April 22, 2016

This Six-Year Running Oil And Gas Trend Just Reversed Itself

The U.S. Senate this week approved a bill to speed permitting of new liquefied natural gas (LNG) export facilities. Just as news from one of the world’s most important LNG consumers shows the market isn’t what it used to be.

The place is Japan. Where statistics released Wednesday showed that annual Japanese LNG demand fell for one of the first times in recent memory.

Trade data showed that Japan’s total LNG imports for the fiscal year ended March 31 were down 6.2 percent as compared to the previous fiscal. With the country bringing in a total of 83.571 million tonnes of LNG for the 12-month period.

Here’s the most critical point. This was the first time in six years that Japanese LNG demand has fallen year-on-year.

That’s a crucial data point for the global LNG market. With rampant Japanese demand having been one of the major drivers of positive sentiment — and resulting business expansions — in the industry during recent years.

As the chart below shows, much of that ramp up in LNG demand came following the Fukushima incident in 2011. We can see how nuclear power generation (yellow bars) went to zero after 2011 — and natural gas use (red bars) jumped, along with coal (black).

Japan’s use of natural gas (red) spiked after the Fukushima incident in 2011

But with Japanese nuclear plants now coming back online, it appears that Japan’s rush for natural gas is over. A fact that had been strongly suggested by LNG prices such as the Platts Japan-Korea Marker — which has fallen to as low as $4.25/MMBtu recently, from as high as $20 back in 2012/13 when Japanese imports were surging.

…click on the above link to read the rest of the article…

 

U.S. Oil Supply To Fall Faster Than Expected

April 14, 2016

U.S. Oil Supply To Fall Faster Than Expected

Key package of statistics released on U.S. oil and gas activity this week, from the national Bureau of Land Management (BLM).

And one number in particular stood out. Showing how drilling activity in key U.S. plays is declining at an unprecedented pace.

That figure is the number of unused drilling permits on federal and tribal lands across America. Which the BLM said hit a record high during the fiscal year 2015.

According to BLM statistics, there are now 7,500 inactive drilling permits issued to oil and gas operators (6,100 permits on federal lands and another 1,400 on tribal lands under BLM purview). With these licenses currently sitting idle while operators wait to see if they want to indeed take up their rights to explore and develop.

Related: The Halliburton-Baker Hughes Merger is Falling Apart. What Happens Next?

BLM officials noted that’s the highest total ever seen for inactive drilling permits. With the current 7,500 unused permits equating to about four years’ worth of drilling activity, at current average drilling rates across the country.

One interesting point is that the negative turn in drilling appears to have happened quite recently. With the BLM noting that new permits issued during fiscal 2015 actually increased as compared to 2014 — with 4,228 permits being issued in the past year alone, up 10 percent from the previous year.

That suggests E&Ps were still relatively bullish in 2015 — pursuing new lands for lease in order to grow their inventory of drilling opportunities.

But the reality on the ground has obviously proven much different than expectations. With the big jump in unused permits showing that few oil and gas firms have been willing to actually set aside budgets for drilling new lands.

Of course, this has big implications for production. Which is now falling at almost all major plays across the U.S. It also suggests that things could ramp up relatively quickly if oil and gas prices recover, spurring E&Ps to drill down on their inventory.

Here’s to bullets in the chamber

Court Decision Could Accelerate Oil And Gas Bankruptcies

March 12, 2016

Court Decision Could Accelerate Oil And Gas Bankruptcies

Oil and gas data experts Evaluate Energy showed yesterday that U.S. E&Ps took a huge hit in 2015. With the value of total proved reserves in the sector declining by an astounding $515 billion dollars.

The chart below shows just how great the damage is, compared to reserves valuations the last few years.

Factors like that have caused an increasing number of high-profile E&Ps to file for bankruptcy in America. And a critical court decision this week could mean even more coming.

That ruling came Tuesday in the bankruptcy proceedings of Sabine Oil & Gas, detailed by Energy Law360. Where a New York judge ruled that bankruptcy allows Sabine to cancel contracts it holds with midstream firms on the company’s petroleum licenses in Texas.

Here’s why this is a sea change for oil and gas law.

Sabine held three separate contracts with pipeline firms in Texas, for the transport and sale of oil and gas that the company produced. These contracts came with clauses like “deliver or pay” features — where Sabine was obligated to send minimum volumes of production through the pipeline, or pay financial penalties to the pipeline operators.

Such contracts could have been a stumbling block in bankruptcy — requiring the company to deliver production or cash at a time when its operations have slowed or stopped. And so Sabine had challenged in bankruptcy court to have the agreements nixed.

And the judge in the case agreed. Ruling that the midstream contracts are not “running with the land” — in essence, saying that the contracts are not inextricably tied to the land assets that underlie Sabine.

The decision opens the door for Sabine to sever the contracts as it restructures in bankruptcy. A strategy that other E&Ps immediately jumped on — with bankrupt producer Magnum Hunter Resources yesterday striking a deal to cancel four midstream contracts as it restructures.

…click on the above link to read the rest of the article…

Does This “Panic Index” Show A Major Crisis Coming In Oil And Gas?

March 3, 2016

Does This “Panic Index” Show A Major Crisis Coming In Oil And Gas?

Little-reported but extremely critical data point for the oil and gas industry emerged yesterday. With insiders in the debt business saying that risk levels in the sector have risen to unprecedented levels.

That came from major ratings service Moody’s. With the firm saying that one of its proprietary indexes of credit problems in the oil and gas sector has hit the highest mark ever seen.

That’s the so-called “Oil and Gas Liquidity Stress Index”. A measure of the number of energy companies that are facing looming credit problems because of overextended debt.

Moody’s said that its Stress Index rose to 27.2 percent as of this week. Marking the highest level ever seen in this key indicator.

In fact, that level is now considerably worse than seen during the last recession. When the Stress Index topped out at 24.5 percent.

Moody’s said that the big jump in the index comes after a significant number of downgrades to energy company credit during February. With the firm having its biggest month ever for lowered credit scores — with a total of 25 firms seeing downgrades to their debt.

Those downgrades are largely affecting the exploration and production space. With 17 of the affected firms coming from the E&P sector. But Moody’s also said that oilfield services firms have been hit with lowered credit ratings.

Critically, the firm said that 10 E&P companies saw ratings on their corporate liquidity cut to the lowest level possible during February. Suggesting that these companies are facing serious issues when it comes to maintaining operating capital.

And Moody’s didn’t mince words when it came to forecasts for the rest of 2016. With Senior Vice President John Puchalla saying, “The composite LSI has been increasing since November 2014 and has moved above its long-term average. This progression signals that the default rate will continue to rise as the year progresses.”

…click on the above link to read the rest of the article…

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