Page 5 - AsianOil Week 47

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week, down roughly 45% year on year. And European storage is unusually full, preventing traders from shipping excess cargoes to Europe like they have tended to do in an oversupplied market previously.
The situation is exacerbated by forecasts of mild – and even unusually warm – winter weather across Asia, including for leading LNG importers Japan and China.
“Clearly there is no buying demand on the market. All inventories across the world are high, production is strong and the weather seems to be very mild,” an LNG trader told Reuters last week.
What next
LNG trade is still taking place, but there are concerns that Pavilion’s move to cancel the loading of a cargo could be the first of several such decisions. And this does not bode well for new supply due to enter the market in the coming months as yet more trains start up in the US and elsewhere.
And longer-term trends are contributing to bearish sentiments about the LNG mar- ket’s potential. Both Europe and China are due to receive more gas via pipeline, even
though China is still set to become the big- gest LNG importer in the world in the coming years. Meanwhile, Japanese efforts to restart nuclear reactors are also anticipated to lead to the country’s LNG imports being displaced, though the plans have been beset by delays on safety concerns and local opposition.
Nonetheless, these trends suggest that LNG sellers will increasingly have to look beyond East Asia to sell additional cargoes. South and South- East Asia are expected to buy more LNG, and this is where sellers could turn at least some of their attention, even as East Asia continues to absorb the bulk of supply.
A cold winter could also provide a boost to the industry – though this is currently not forecast.
And for those buyers opting to cancel the loading of certain cargoes, especially if they are still obliged to pay for them – such moves could contribute to a shift away from long-term contracts underpinned by take-or-pay require- ments. Buyers are already pushing for more flexibility in how they purchase LNG. Having to cancel cargoes in an oversupplied market could spur this further.™
SOUTH ASIA
ONGC reportedly mulls HPCL stake sale
FINANCE & INVESTMENT
INDIA’S state-owned Oil and Natural Gas Corp. (ONGC) is reportedly preparing to sell a por- tion of its controlling stake in refiner Hindustan Petroleum Corporation Ltd (HPCL).
ONGC bought the government’s 51.11% stake in January 2018 for INR369.15bn ($5.17bn). However, local news agency PTI quoted unnamed sources this week as saying that the company’s debt had risen following the purchase while its investments in upstream pro- jects had fallen off.
“The call on selling stake in HPCL has to be taken by ONGC,” an unnamed source with the Ministry of Petroleum and Natural Gas told PTI. This echoed Minister of Petroleum and Natural Gas Dharmendra Pradhan’s repeated comments that the decision to divest would lie with the oil company.
ONGC’s acquisition of HPCL plunged the company into debt, with the developer owing INR215.93bn ($3.02bn) at the end of financial year 2018-2019.
The purpose the acquisition was supposed to allow both companies to benefit from integra- tion of upstream and downstream assets, which would allow them to ride out international oil price volatility. Local media have reported for
months, however, that ONGC has struggled to integrate the company. After almost two years of majority ownership, ONGC has only been able to appoint one member to HPCL’s board.
The government repealed 187 laws in 2016, including the acts relating TO HPCL and Bharat Petroleum Corporation Ltd’s (BPCL) nationali- zation in the 1970s. After a group of secretaries greenlit the government’s plan to privatise its 53.29% stake in Bharat Petroleum Corporation Ltd (BPCL) on September 30, the prospect of an HPCL sale has appeared ever more than likely.
More so, when considering that ONGC’s oil production continues to decline despite gov- ernment directives to do more to boost domes- tic production. ONGC’s crude oil production declined by 2.97% year on year in October to 1.71mn tonnes (404,000 barrels per day), while natural gas output slid 7.39% on the year to 1.95bn cubic metres.™
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