LNG price internationally dropped to $4 but Pakistan lodged in a 15yr contract.

[Path-Finder]

That the best you can write.

and lota is all you have.

 

[ejaz007]

and lota is all you have.

You have all the lotas in PTI. Rest of the parties garbage now in PTI.

PTI has become Public Toilet Inc.

 

[Path-Finder]

You have all the lotas in PTI. Rest of the parties garbage now in PTI.

PTI has become Public Toilet Inc.

I remember that s#it faced drug pimp rana saying that lota's are washed in raiwinds holy water and they become flower pots. so if lota is not in tooi party then its public toilet! but in tooi party mian's excrement is parshad.

 

[niaz]

Niaz sb, based on your work in the industry can you recommend some books w.r.t Oil & Gas especially financial aspect of Oil & Gas.

There is no single book or a short cut, it takes years of experience. However, I shall look up the notes that I used for training the new employees and try to suggest something, but it might take a day or two. Don't know if that will be any good but I shall make an attempt.

 

[third eye]

PAKISTAN IS PAYING EXACTLY DOUBLE FOR EVERY MEGAWATT

OF COAL THERMAL ADDITION UNDER CPEC COMPARED TO INTERNATIONAL BUILD PRICE FROM OTHER VENDORS.

In other words Pakistan is paying twice the standard construction charge to China for what are clearly obsolete coal powered stations.
We are talking billions here and this has to be repaid with interest on top

Can it not be re negotiated ?

 

[Haris Ali2140]

PAKISTAN IS PAYING EXACTLY DOUBLE FOR EVERY MEGAWATT OF COAL THERMAL ADDITION UNDER CPEC COMPARED TO INTERNATIONAL BUILD PRICE FROM OTHER VENDORS.

In other words Pakistan is paying twice the standard construction charge to China for what are clearly obsolete coal powered stations.
We are talking billions here and this has to be repaid with interest on top

Any article???

 

[Zulfiqar]

There is no single book or a short cut, it takes years of experience. However, I shall look up the notes that I used for training the new employees and try to suggest something, but it might take a day or two. Don't know if that will be any good but I shall make an attempt.

A summary of sub-topics will suffice as well. Will read up them on my own after compiling the relevant details under each sub-topics.

I am in commercial banking. However, I saw a few jobs here and there in oil & gas companies so I want to have a better understanding. Alternatively I can use the same to understand the business model of any prospective client.

I have one who is in LPG filling business ( not a big setup but has potential). He needs financing to expand his procurement operations. However, I need to understand the basics of his operations before elevating the credit package. Hence, the query.

Another is in oil marketing (petrol/diesel e.t.c) who needs import lines as well as financing.

 

[niaz]

"On February 5, Reuters reported: “India’s Reliance Industries purchased an LNG cargo via tender on Wednesday at $2.80 per mmBtu.” On February 11, The News reported: “The new price of RLNG for SSGC system has been fixed at $11.1943 per mmBtu, which was $10.4602 during the last month.” I really do not understand the huge price differential."

https://www.thenews.com.pk/print/614589-the-real-disease

I was unable to read the report in Reuters as the link to Reuters is not there. I find it hard to believe as Henry Hub Price for natural gas is about $1.9 per mm Btu, it would take at least $1/- per mm Btu to liquify it than the freight.

No other Industry publication has reported this deal. Daily news of Pakistan is only quoting Dr Farrukh Saleem. I need to read it in a credible Industry publication to believe it. If true the only possibility is that it is a FOB Price probably from Australia. Ex-ship price to India would still cost close $4/- per mmBTU.

 

[Nilgiri]

Dear Sir,

LNG prices do not follow crude prices closely. This is because these are two different markets and LNG is not produced from crude but from natural gas.

I am now retired and since most of the industry data, such as Platt's LNG Price Assessment are not accessible unless paid for. (All these were available to me when I was working). Only relevant literature I could find was:

"Prices for LNG in Japan hit $10.069 per million Btu (MMBtu) on December 15, having fallen from around $16 at the start of 2014. As LNG contract prices are typically based on the average of the preceding six to nine months, it will be mid-2015 before suppliers feel the full effects of lower oil prices on their cash flow.

The LNG price decline came in two stages. Prices dropped in the summer, as new supply from ExxonMobil’s Papua New Guinea (PNG LNG) project hit the market. Prices then fell further as Brent oil dropped from $110/bbl in August, to below $60/bbl in December.

When Brent crude sells for $100, oil-linked natural gas contracts typically translate to around $14 MMBtu, giving U.S. LNG a big price advantage. This advantage disappears as crude prices fall, with crude at $60 LNG indexes to $8.40 per MMBtu. U.S. LNG producers have been targeting prices of $11 or $12 per MMBtu to be profitable after absorbing the costs of buying the gas, liquefying it, shipping it around the globe and regasifying it."

Full articl at:
https://breakingenergy.com/2015/01/21/impact-of-falling-oil-prices-on-lng/


For period 2016 /2017 :

"Asia spot LNG prices have continued to slide lower in recent weeks, falling below the levels seen in December 2016 and 2017 despite most of the current year having been stronger than the two before.

The ICIS front-month East Asia Index plummeted from $10.850/MMBtu on 16 November by more than two dollars to $8.525/MMBtu on 14 December. It’s now down almost four dollars from the year-high of $12.25/MMBtu seen in mid-September. The EAX represents the value of deliveries to Japan, South Korea, China and Taiwan.

High temperatures had brought a price spike in June 2018 as they boosted air-conditioning demand in Japan. Prices were again strong in September/October as China prepared early for winter, filling up its storage tanks in an attempt to avoid a repeat of the strong prices brought about by the country’s unexpected surge in demand the previous winter. But those high inventory levels have been met by an unusually mild start to winter in the east Asia region, sending prices tumbling lower.

Full article link:

https://www.icis.com/energy-connections/2018/12/asia-spot-lng-drops-below-2017-and-2016-levels/


You would note that LNG prices in the Asian region were hovering around $8 to 9 per mm Btu during that period. Both Pakistan's & Indian term prices are generally in line. Traditionally the Industry relates the LNG term prices to crudes prices because the total volume of trade in crude oil is far greater than the LNG volume, which to my knowledge is less than 140-million tons per annum, hence less vulnerable to manipulation.

I think this topic has now been discussed to the nth degree. I repeat my assertion that I do not believe that any 'Hanky panky' was involved. I have never met the guy nor have had any relations with him ever. However. those who continue to believe that Shahid Khaqan Abbasi skimmed off billions of rupees in this contract, they are welcome to go on doing so. No skin off my back.

I have nothing else to say on this subject.

Great quality post. Thank you.

 

[niaz]

I was unable to read the report in Reuters as the link to Reuters is not there. I find it hard to believe as Henry Hub Price for natural gas is about $1.9 per mm Btu, it would take at least $1/- per mm Btu to liquify it than the freight.

No other Industry publication has reported this deal. Daily news of Pakistan is only quoting Dr Farrukh Saleem. I need to read it in a credible Industry publication to believe it. If true the only possibility is that it is a FOB Price probably from Australia. Ex-ship price to India would still cost close $4/- per mmBTU.

Since yesterday I have been seeking the truth behind this report of Reliance purchasing a cargo below $3/-per mm BTU. This morning Henry Hub's natural gas price in the US was still $1.95 per mm Btu which makes this Reliance price not economically viable.

Cashing in my 'Browny Points'; this morning I rang up an old acquaintance in Singapore who is still business as an LNG Trader. He advised me that due to the industry shut down because of Coronavirus, China National Offshore Oil Corp (CNOOC), the country’s top LNG importer, has suspended contracts with at least three suppliers. This leaves a number of "Distress" LNG cargoes already on water or about to load but without a " Home". A financially strong company like Reliance could, therefore, buy these cheap cargoes and reap the windfall profits. Therefore, while he would not confirm it, the report is probably true.

 

[niaz]

A summary of sub-topics will suffice as well. Will read up them on my own after compiling the relevant details under each sub-topics.

I am in commercial banking. However, I saw a few jobs here and there in oil & gas companies so I want to have a better understanding. Alternatively I can use the same to understand the business model of any prospective client.

I have one who is in LPG filling business ( not a big setup but has potential). He needs financing to expand his procurement operations. However, I need to understand the basics of his operations before elevating the credit package. Hence, the query.
Another is in oil marketing (petrol/diesel e.t.c) who needs import lines as well as financing.

I am a shirt sleeve engineer and was never a good teacher. Since you asked for it. Here it is; I hope that if nothing else, it should give you some rudimentary information about LPG.

Petroleum Industry which includes both Oil & Gas can be subdivided into three distinct sectors.

A. Upstream
This involves exploration & drilling/fracking for hydrocarbons as well as the production of Oil & Gas.

B. Midstream
Transportation by shipping, pipelines, barges, rail cars, tank trucks, etc of hydrocarbons from the oil/gas fields to the refineries & the products from the refinery to the demand centers and/ or consumers fall in this category.

C. Downstream
This sector includes the refining of crude, purification of gas as well as bulk storage (Terminalling) and marketing of petroleum products & its by-products.

Most oil majors such as Exxon, Shell, BP, ENI, etc produce their own crude, transport it in their own vessels, refine it in their own refineries & terminals and market the products through their own retail outlets thus these are ‘Vertically integrated’ and making huge profits. Since it is virtually impossible for one person to be an expert in all of the above sectors, major oil companies arrange training courses, seminars & visits for their staff so that upper echelons of management, in addition to their fields of expertise, acquire a rudimentary knowledge of all aspects of the industry. My experience has been in the downstream sector only.

My suggestion in your case would be first to get some product knowledge by reading about properties & uses of petroleum products in general. Additionally subscribe to the Platt’s Asia Pacific/Arab Gulf Marketscan & Platt’s LPG Gaswire. By regularly glancing through these publications, you would be able to keep abreast of the changing market conditions and better monitor your bank's interest in the petroleum business. Just keep in mind that Arab Gulf quoted prices are in $/MT for Naphtha & fuel oil, for other products the quotations are a in $/bbl.

Gas oil quality is normally determined by ‘Cetane’ (refers to its suitability as automotive fuel- usually 50), sulfur percentage, color & pour point (refers to its use at lower temperatures). Gasoil of lower Cetane is commonly used for heating in Europe & the USA.

Marketing & economics of gas oil/auto diesel involving bulk importation, storage & distributing company is not Rocket Science. Since in case of FOB (Free on board ship) as well as C& F (Cost & freight) purchases the Risk & Title passes on to the Buyer upon loading, one has to ensure that the cargo is fully insured and that the cargo meets the required quality Specifications at load port. In the case of ‘Ex-ship’ deals, you only pay for the quantity received in your shore tanks. Additionally, remember that the Price is related to the B/L (bill of lading) date.
In Pakistan, cheap smuggled diesel from Iran can occasionally affect the profitability of diesel retail business.

One would know the daily market price & market trend from the APAG Marketscan and you being a Banker, know about the importance of Cash Flow / Cash Liquidity better than anyone else, hence any additional contribution from my side would do little to add to your knowledge. LPG importation, storage & bottling is a bit more sophisticated. For your basic knowledge, I have noted the fundamentals of LPG storage in the text below.

Unlike natural gas & LNG which is primarily methane (CH4); LPG is the name given to liquefied propane (C3H8) & Butane (C4 H10). These gases are straight-chain hydrocarbons and though heavier than methane or ethane, are in the gaseous state at ambient temperatures but would readily liquefy under pressure or when chilled.

Propane turns to liquid when cooled to -43 C or at a pressure of about 205 psi. Butane would liquefy at -1C or under a pressure of about 38 psi.

Liquefied Propane & Butane are often marketed separately. But the LPG that one buys in the cylinder is usually a mixture of 80% Butane & 20% Propane. Because LPG is highly inflammable, mercaptans (sulfur compounds with a nasty odor) are added to the commercial LPG at about 4 parts per million (4 ppm) by law so that leaks can be detected by the smell alone and the necessary precautions are taken.

LPG density varies between 0.525 to 0.580 at 15 deg C. LPG, as sold in the cylinders has a conversion factor of about 11.6 bbls to a metric ton. There are about 6.1 bbls in one cubic meter of space.

In addition to being the household cooking & heating fuel, LPG is also an alternative to petrol & diesel. As a Process Engineer, I have often blended Butane in motor gasoline as an octane improver in winter times. In summer it is less common because Butane would increase the vapor pressure of gasoline.

LPG is produced associated with natural gas and is a by-product gas purification process. Additionally, both propane & butane are also produced during petroleum refining. Naturally, the Arab Gulf region which has a large number of petroleum refineries as well as produces huge quantities of gas also exports large quantities of LPG.

Small to medium quantities of LPG are exported in pressured LPG carriers but large quantities are normally transported in refrigerated form. LPG is usually stored in round-shaped pressurized storage tanks and transported in bulk in tank trucks or rail cars within the country or in cylinders in tank trucks. On expansion, one ml of LPG would generate 270 cubic centimeters of gas when the pressure is released.

Pressurized LPG carriers can be as small as about 2,500 tons but this would make freight too expensive; a decent size import would be about 10 to 20 KT. One would expect 35 KT or larger parcels to be refrigerated.

The fully filled LPG cylinder which we buy from the shops has 85% liquid and the rest vapor. A standard size LPG cylinder in the UK normally has between 14.2 Kg to 14.5 Kg of LPG. The empty weight of the cylinder is normally stamped on the cylinder is also about 15 Kg and the inside pressure is between 78.5 psi to 92.5 psi. Smaller size cylinders are also available.

Outwardly, the cylinder becomes empty when LPG inside the cylinder is at the atmospheric pressure and the temperature inside the cylinder is the same or lower than the outside temperature. The important thing to remember that an LPG cylinder is never really empty. There would be always some residual gas and an empty cylinder is a serious fire hazard if stored near a fire or at high temperature. The resulting explosion could be catastrophic. Therefore, like all petroleum establishments, good housekeeping and strict safety controls are essential at the LPG bottling plant.

To completely empty the cylinder it has to be purged either by vacuum or by filling it water. All cylinders must be checked for leaks before delivery to the market. A simple soap solution normally does the job.

Arabian Gulf is the largest hub for LPG export and Asia is the world's largest importing hub for LPG; China is one of the largest LPG importers. UAE, Qatar, Kuwait, Saudi Arabia & Iran are the main exporters of LPG in our region.

LPG prices are seasonal and can easily fluctuate to 15% higher during wintertime. Understand Saudi Aramco has introduced flexible monthly LPG contract pricing; allowing term buyers to choose the current or next month's.

Because the price of a new empty LPG cylinder can be in the $50 range, Cylinder inventory is often the largest single category of investment across the entire LP Gas supply chain in any market.

LPG marketing in Pakistan has with doubt a lot of growth potential, evident by the fact that Pakistan LPG imports during Dec 2018 were nearly 40 KT. However, since the cost of any decent size LPG import, storage & bottling plant would run into millions of dollars, if your bank is seriously interesting in financing the expansion of the plant in question, you should ideally spend about a week at the Client’s terminal and observe what is really going on. Under the right conditions, LPG can be a win-win business for the Bank as well as the Client and this would also make you better at financing future LPC bottling projects.

By the way, Dec 2019 Saudi Aramco export FOB price for propane was $440/MT and for butane $455/MT.

 

[Zulfiqar]

I am a shirt sleeve engineer and was never a good teacher. Since you asked for it. Here it is; I hope that if nothing else, it should give you some rudimentary information about LPG.

Petroleum Industry which includes both Oil & Gas can be subdivided into three distinct sectors.

A. Upstream
This involves exploration & drilling/frocking for hydrocarbons as well as the production of Oil & Gas.

B. Midstream
Transportation by shipping, pipelines, barges, rail cars, tank trucks, etc of hydrocarbons from the oil/gas fields to the refineries & the products from the refinery to the demand centers and/ or consumers fall in this category.

C. Downstream
This sector includes the refining of crude, purification of gas as well as bulk storage (Terminalling) and marketing of petroleum products & its by-products.

Most oil majors such as Exxon, Shell, BP, ENI, etc produce their own crude, transport it in their own vessels, refine it in their won refineries & terminals and market the products through their own retail outlets thus these are ‘Vertically integrated’ and making huge profits. Since it is virtually impossible for one person to be an expert in all of the above sectors, major oil companies arrange training courses, seminars & visits for their staff so that upper echelons of management, in addition to their fields of expertise, acquire a rudimentary knowledge of all aspects of the industry. My experience has been in the downstream sector only.

My suggestion in your case would be first to get some product knowledge by reading about properties & uses of petroleum products in general. Additionally subscribe to the Platt’s Asia Pacific/Arab Gulf Marketscan & Platt’s LPG Gaswire. By regularly glancing through these publications, you would be able to keep abreast of the changing market conditions and better monitor your bank's interest in the petroleum business. Just keep in mind that Arab Gulf quoted prices are in $/MT for Naphtha & fuel oil, for other products the quotations are all others in $/bbl.

Gas oil quality is normally determined by ‘Cetane’ (refers to its suitability as automotive fuel- usually 50), sulfur percentage, color & pour point (refers to its use at lower temperatures). Gasoil of lower Cetane is commonly used for heating in Europe & the USA.

Marketing & economics of gas oil/auto diesel involving bulk importation, storage & distributing company is not Rocket Science. Since in case of FOB (Free on board ship) as well as C& F (Cost & freight) purchases the Risk & Title passes on to the Buyer upon loading, one has to ensure that the cargo is fully insured and that the cargo meets the required quality Specifications at load port. In the case of ‘Ex-ship’ deals, you only pay for the quantity received in your shore tanks. Additionally, remember that the Price is related to the B/L (bill of lading) date.
In Pakistan, cheap smuggled diesel from Iran can occasionally affect the profitability of diesel retail business.

One would know the daily market price & market trend from the APAG Marketscan and you being a Banker, know about the importance of Cash Flow / Cash Liquidity better than anyone else, hence any additional contribution from my side would do little to add to your knowledge. LPG importation, storage & bottling is a bit more sophisticated. For your basic knowledge, I have noted the fundamentals of LPG storage in the text below.

Unlike natural gas & LNG which is primarily methane (CH4); LPG is the name given to liquefied propane (C3H8) & Butane (C4 H10). These gases are straight-chain hydrocarbons and though heavier than methane or ethane, are in the gaseous state at ambient temperatures but would readily liquefy under pressure or when chilled.

Propane turns to liquid when cooled to -43 C or at a pressure of about 205 psi. Butane would liquefy at -1C or under a pressure of about 38 psi.

Liquefied Propane & Butane are often marketed separately. But the LPG that one buys in the cylinder is usually a mixture of 80% Butane & 20% Propane. Because LPG is highly inflammable, mercaptans (sulfur compounds with a nasty odor) are added to the commercial LPG at about 4 parts per million (4 ppm) by law so that leaks can be detected by the smell alone and the necessary precautions are taken.

LPG density varies between 0.525 to 0.580 at 15 deg C. LPG, as sold in the cylinders has a conversion factor of about 11.6 bbls to a metric ton. There are about 6.1 bbls in one cubic meter of space.

In addition to being the household cooking & heating fuel, LPG is also an alternative to petrol & diesel. As a Process Engineer, I have often blended Butane in motor gasoline as an octane improver in winter times. In summer it is less common because Butane would increase the vapor pressure of gasoline.

LPG is produced associated with natural gas and is a by-product gas purification process. Additionally, both propane & butane are also produced during petroleum refining. Naturally, the Arab Gulf region which has a large number of petroleum refineries as well as produces huge quantities of gas also exports large quantities of LPG.

Small to medium quantities of LPG are exported in pressured LPG carriers but large quantities are normally transported in refrigerated form. LPG is usually stored in round-shaped pressurized storage tanks and transported in bulk in tank trucks or rail cars within the country or in cylinders in tank trucks. On expansion, one ml of LPG would generate 270 cubic centimeters of gas when the pressure is released.

Pressurized LPG carriers can be as small as about 2,500 tons but this would make freight too expensive; a decent size import would be about 10 to 20 KT. One would expect 35 KT or larger parcels to be refrigerated.

The fully filled LPG cylinder which we buy from the shops has 85% liquid and the rest vapor. A standard size LPG cylinder in the UK normally has between 14.2 Kg to 14.5 Kg of LPG. The empty weight of the cylinder is normally stamped on the cylinder is also about 15 Kg and the inside pressure is between 78.5 psi to 92.5 psi. Smaller size cylinders are also available.

Outwardly, the cylinder becomes empty when LPG inside the cylinder is at the atmospheric pressure and the temperature inside the cylinder is the same or lower than the outside temperature. The important thing to remember that an LPG cylinder is never really empty. There would be always some residual gas and an empty cylinder is a serious fire hazard if stored near a fire or at high temperature. The resulting explosion could be catastrophic. Therefore, like all petroleum establishments, good housekeeping and strict safety controls are essential at the LPG bottling plant.

To completely empty the cylinder it has to be purged either by vacuum or by filling it water. All cylinders must be checked for leaks before delivery to the market. A simple soap solution normally does the job.

Arabian Gulf is the largest hub for LPG export and Asia is the world's largest importing hub for LPG; China is one of the largest LPG importers. UAE, Qatar, Kuwait, Saudi Arabia & Iran are the main exporters of LPG in our region.

LPG prices are seasonal and can easily fluctuate to 15% higher during wintertime. Understand Saudi Aramco has introduced flexible monthly LPG contract pricing; allowing term buyers to choose the current or next month's.

Because the price of a new empty LPG cylinder can be in the $50 range, Cylinder inventory is often the largest single category of investment across the entire LP Gas supply chain in any market.

LPG marketing in Pakistan has with doubt a lot of growth potential, evident by the fact that Pakistan LPG imports during Dec 2018 were nearly 40 KT. However, since the cost of any decent size LPG import & bottling plant would run into millions of dollars, if your bank is seriously interesting in financing the expansion of the plant in question, you should ideally spend about a week at the Client’s terminal and observe what is really going on. Under the right conditions, LPG can be a win-win business for the Bank as well as the Client and this would also make you better at financing future LPC bottling projects.

By the way, Dec 2019 Saudi Aramco export FOB price for propane was $440/MT and for butane $455/MT.

Thank You Niaz sb. This was the perfect summarization. I will use this post as base to dig deeper in this area.

 

[nahtanbob]

https://twitter.com/x/status/1228009884886740992

i think the quom deserves it! how can this contract be resolved ?

This is Monday morning quarterbacking. No one has a crystal ball on energy prices anymore

 

[niaz]

This week the Institute of Petroleum Conference is going on in London. (https://www.ipweek.co.uk/) As curtsey, my ex-colleagues & friends often invite me for lunch or tea.

TOTAL have a stake in Qatar LNG (https://www.reuters.com/article/us-...wn-jewels-in-race-for-lng-prize-idUSKCN1VJ0S4)

Head of TOTAL Middle East marketing is well known to me and during an informal chat advised that Pakistan has threatened to cancel the 15 year LNG deal due to 'Disorientation' of the LNG market and want to renegotiate the buying price.

 

[niaz]

A price war between Saudi Arabia & Russia has caused the international oil price to collapse. This collapse occurred because the Saudis unilaterally reduced their OSP (official selling price) for April. This would have two effects; one to punish Russia for not agreeing to a production cut and the second the shutting down of many USA shale oil fields. This morning Brent price was below $37/- per bbl. If this continues, it would make Qatar LNG price to Pakistan less than $5/- per mm Btu.

https://www.spglobal.com/platts/en/...shes-april-osps-after-breakdown-of-opec-talks