Page 5 - AsianOil Week 13

AsianOil
SOUTH ASIA AsianOil
New Delhi sets domestic gas prices every six months using the weighted average price of gas in hubs in the US, Canada, the UK and Russia. These prices are also set at a three-month lag to prevailing market rates in those hubs and come with a built-in $0.50 per mmBtu ($13.83 per 1,000 cubic metres) discount to the international average, which Shanker described as illogical.
He added: “In the US, producers just put unprocessed gas in the trunk pipeline, while we process it, incurring additional cost. But we get no reward for that.”
The executive said ONGC would lose money on conventional gas sold below $3.75 per mmBtu ($103.73 per 1,000 cubic metres) and that with oil trading at two-decade lows, ONGC could not afford to absorb such losses from its
gas division. Moreover, he said projects that broke even at $5-$9 per mmBtu ($138.3-248.94 per 1,000 cubic metres) were now commercially unviable and the board would be hard pressed to approve them.
He also complained that the system for cal- culating the price premium for challenging gas fields also failed to reflect certain market reali- ties. The government calculates the premium for difficult fields using a price linked to alternative fuels such as coal, fuel oil and LNG.
Shanker said: “[The] LNG price used to cal- culate ceiling includes just the spot LNG rate plus freight. This is not a fair comparison, as a domestic customer would need to pay customs duty, regasification and transport charges and other domestic duties before using the gas.”™
SOUTHEAST ASIA
PetroVietnam cuts salaries
FINANCE & INVESTMENT
STATE-OWNED PetroVietnam has said it will cut employee salaries as it reduces costs in response to the international oil price crash.
The company said on April 1 that it was aim- ing to reduce costs by 15-30% as it manages the combined fallout out from the coronavirus (COVID-19) pandemic and the Russia-Saudi Arabia oil price war.
“The combined impact of the disease and low oil prices has hurt PetroVietnam’s perfor- mance in March, and the difficult situation is expected to continue into the second quarter and through[out] the entire year,” it said.
Domestic oil product demand has fallen sharply owing to the government’s containment measures, which include travel, tourism and transportation restrictions as well as school and business closures.
The state company said on March 25 it would implement across-the-board cost-cut- ting measures after revealing that group reve- nue had already shrunk by a record 20% year on year. It proposed three business scenarios based upon the duration of the pandemic’s economic impact.
In its best-case scenario, the company expects the outbreak to be resolved by the end of the second quarter, which would result in a 10% slide in revenue. The other two scenarios, which see either containment measures being extended into the third quarter or the pan- demic having a material impact on the global economy, would result in group revenue fall- ing by 20% and 30% respectively.
The projections came after PetroVietnam said on March 23 that its revenue was set to halve to
$2.36bn this year after international benchmark Brent crude slid to the $20-30 per barrel range. The company added that it expected to record losses from some ongoing projects.
The director of the Ministry of Industry and Trade’s energy department, Nguyen Viet Son, said: “Oil production and sales have been hit by plummeting crude oil prices and demand falling 30% due to COVID-19.”
Reuters quoted Fitch Solutions this week as saying that “capital spending cuts and FID delays appear inevitable” for PetroVietnam.™
Week 13 02•April•2020 w w w . N E W S B A S E . c o m P5