Singapore — Indonesian oil and gas group Medco Energi is in talks to buy UK-based Ophir Energy to create one of the biggest private upstream producers in Southeast Asia, the two companies said separately.
Shares in London-listed Ophir — an oil and gas company with upstream assets in Thailand, Vietnam, Indonesia, Malaysia, Equatorial Guinea and Tanzania — jumped in trading Wednesday, valuing it at GBP325 million ($414 million). The possible deal was announced Monday.
Medco Energi, with a market capitalization of around $900 million, has oil and gas exploration and production assets mainly in Indonesia, but has been expanding into Oman, Yemen and the US.
Combined with Medco’s 2018 target production 85,000 boe/d, Ophir’s output of 25,000 b/d of oil equivalent would take an enlarged Medco’s production to 110,000 boe/d, more the 90% of which would be within Southeast Asia, energy consultancy Wood Mackenzie estimated Wednesday.
“This is a bold move by Medco, and if successful would create a Southeast Asian upstream powerhouse,” Wood Mackenzie research director Angus Rodger said in a note. “This would catapult the firm into being the seventh largest non-NOC upstream producer in Southeast Asia, above Hess and BP, and just behind Repsol and Total.”
PIVOT TO ASIA
Rodger said the deal would also bulk up Medco’s non-Asian exposure by adding growth options in Tanzania and Equatorial Guinea to existing positions in Libya, Oman, Yemen, Tunisia and the US.
“It would also offer exposure to the global upstream hotspot that is offshore Mexico, where Ophir recently secured participation in three blocks,” Rodger said.
He said after Ophir’s acquisition of Santos’s Asian assets last year, the explorer appeared to have pivoted its portfolio towards Asian growth, given its troubled Fortuna FLNG project in Equatorial Guinea was struggling to attract finance.
Medco Energi is also operational in the natural resources and power sectors, with gas, geothermal and hydro power plants in Indonesia through its 88% stake in Medco Power and a 39% interest in an Indonesian copper and gold mine.
Medco Energi said the purpose of the deal was “business development…there [is] no offer price determined, the amount of funds to be made for the cash offer, (or) the number of securities to be purchased.”
Under UK takeover rules, Medco Energi must announce a firm intention to make an offer for Ophir by January 28 or announce that it does not intend to make an offer.
PTT Group’s Global Power Synergy has secured the approval to acquire a 69.11 per cent interest in Glow Energy, the Thai unit of French energy major Engie while Thanachart Bank and TMB Bank are in talks for a merger.
PTT’s $4b acquisition of Glow Energy approved
The Thai energy watchdog has approved the $4-billion takeover of Glow Energy Plc by state-owned PTT Group’s Global Power Synergy (GPSC), on the new condition that the deal would not result in an electricity monopoly in the country.
The Energy Regulatory Commission had rejected the acquisition proposal twice earlier. However, it has granted permission last week, given that Glow must sell Glow SPP1 to a third party before or at the same time as the merger between Glow and GPSC materialises.
Glow’s major shareholder, French power firm Engie, has entered into an agreement with GPSC for that amendment to the 69.11 per cent share sale, SET-listed Glow said in a filing.
“Any adjustment of GPSC’s tender price of Glow’s shares will be disclosed by GPSC to investors,” it added.
Glow SPP 1 provides 110 MW of electricity to the Electricity Generating Authority of Thailand under the Small Power Producer programme. The Glow demineralised water plant, starting commercial operation since 1999, is capable of producing a total of 120 cubic metres per hour of demineralised water.
The initial merger proposal had been submitted in June 2018, with estimation of the transaction amounting to $4 billion. It was then dismissed two times in October and December.
Glow said it recorded a net profit of 6.52 billion baht in the first nine months of 2018.
Thanachart Bank, TMB in talks for merger
In a consolidation move in the financial services space, Thanachart Bank and TMB Bankare examining the options of a merger, local media reported.
The local finance ministry might also put fresh funding in TMB following the merger, to retain its 25.9 per cent stake, the Bangkok Post cited Prapas Kong-Ied, general director of the State Enterprise Policy Office (Sepo).
The finance ministry is currently the largest shareholder in TMB. The lender also counts Dutch bank ING as a significant shareholder with a 25 per cent interest. Meanwhile, Thanachart Capital has 51 per cent in Thanachart Bank, and Canada’s Bank of Nova Scotia owns the rest.
Thanachart Bank and TMB are sixth and seventh largest banks in terms of total assets in Thailand, home to around 2,000 banks. Thailand has been encouraging local bank consolidation in a bid to create strong banking institutions in competition with global banks. In April 2018, the cabinet approved policies on tax deduction and exemption for merged banks. Krung Thai Bank was also said to be keen on acquiring TMB.
The merger talks between TMB and Thanachart Bank is expected to conclude in January.
AsianScientist (Jan. 2, 2018) – Singapore households from different socioeconomic groups vary significantly in their use of water and electricity for heat relief, according to a study by researchers from the National University of Singapore (NUS). They published their findings in the journal Nature Communications.
In Southeast Asia, climate models project annual temperature to increase by 1–4 degree Celsius, and winter rainfall to decrease by 20 to 30 percent by 2070. Currently, only eight percent of the three billion people living in the tropics have access to air-conditioning, compared to over 90 percent in the US and Japan.
To better understand how socioeconomic status affects resource consumption for heat relief, scientists led by Associate Professor Alberto Salvo of NUS examined the demand for water and energy among Singapore households across the socioeconomic distribution.
The researchers obtained data on the water and electricity bills of about 130,000 households in Singapore from 2012 to 2015, examining each household’s consumption of water and electricity over time. They observed that when ambient temperatures rise, water demand increases among lower-income Singapore households.
For instance, with a one-degree Celsius increase in temperature, the average household living in a two-room apartment (about 50m2) raises water use by nine liters per day, amounting to an additional daily shower for every 2.3 households. At the time of the study, less than 20 percent of two-room apartments had an air conditioner.
In sharp contrast, heat induces larger shifts in electricity demand and no significant change in water consumption among higher-income households, such as those staying in five- or six-room apartments (110m2 or more). These households frequently have air conditioners, and the average increase in electricity demand was two kilowatt hours per day with every one-degree Celsius increase in temperature. This is equivalent to operating an air-conditioning unit for two more hours each day.
To complement the observational evidence from the study, a 300-person survey on heat relief behaviors by Singapore households was also conducted. Thirty-nine percent of respondents stated that on a very hot day, they would shower more often and longer. This is comparable to the 36 percent who indicated that they would turn on the air conditioner.
“As we face shifting temperature extremes and rainfall variability, the study can contribute towards improving demand forecasting for water and electricity in water-stressed cities in tropical Asia, where incomes are rising. This can facilitate better design and allocation of water and electricity grids,” said Salvo.
“Air conditioners powered by electricity generated from burning fossil fuels come at an environmental cost, but one added benefit is that they may reduce a household’s water demand when seeking relief from heat.”
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Source: National University of Singapore; Photo: Pixabay.
Disclaimer: This article does not necessarily reflect the views of AsianScientist or its staff.
An advocacy group is planning to ask the Energy Ministry to revise its Power Development Plan draft, which it says has failed to raise people’s awareness on energy saving and may ultimately burden consumers with high electricity charges.
The call for a revision comes as Thailand gears up to launch its national Power Development Plan (PDP) for 2019-2037, which was put up for public hearings in Bangkok and four other regions last month.
The final hearing on the PDP draft took place in Bangkok on Dec 24, after similar hearings were held in Chiang Mai, Khon Kaen, Surat Thani and Chon Buri.
Suphakit Nuntavorkarn, a researcher at the Healthy Public Policy Foundation and a sustainable energy advocate, voiced his concerns over the erroneous load forecast assumptions contained in the draft.
He said the new PDP does not take into account the fact that the county’s actual average peak load has been declining since 1998, thus paving the way for the construction of more power plants to meet the forecast demand, which is far higher than real demand.
As a result, Mr Suphakit said, customers will lose out because the cost of constructing new power plants will ultimately be passed on to them.
Thailand’s average peak load decreased from 6.4% in 1998-2006 to 1.45% between 2013-2018 because of the global economic downturn and numerous energy savings campaigns.
The new PDP draft assumes the peak load for 2019-2037 to be 73,211 megawatts — higher than the peak load of 40,879 mW in 2018.
“The real victims of the government’s new PDP are the consumers,” he said.
“We will send a letter to ask the ministry to revise the draft for the benefit of the people.”
“The plan was created to justify the construction of megapower plants — such as the two 700-mW plants planned for the Western region, the bidding processes for which are expected next year,” he said.
TOKYO — Japan will help build “smart cities” across Southeast Asia, using artificial intelligence and networked devices to tackle problems like road congestion and energy conservation. […]
new draft of the petroleum law has been tabled. After the bill is amended, Hluttaw will enact in. However, before in comes into force, it can be amended if the people provide suggestions.
Will the new law be effective in the case of the oil block tenders that will be called soon and for the tenders called before the law is passed? These are questions that must be asked. Traditionally, the old law is overshadowed by the new.
It is important that the amendments make the landscape attractive to investors. If the government wants to encourage investments, it needs to think more about the benefits for both the country and investors. Restrictions need to be eased as it is important for the country to receive taxes from investors while streamlining the process for investors to bring money into the economy.
The question of whether there will there be interest in new oil and gas blocks should also be looked into.
It is expected that new blocks and blocks from previous tenders which did not see any interest will be offered to investors. A degree of interest in the offerings is anticipated as it is believed that some of the blocks offer potential.
However, the oil exploration business is risky by nature and no one can say with certainty whether efforts will pay off.
Some 18 inland blocks and 12 offshore blocks may be included in new tender. It will also include permissions to redevelop old oil fields. As some inland blocks hold potential to produce oil, they will be the focus of attention.
Who will compete in the tender?
It will be interesting to see which oil companies will participate in the international oil site tender expected to be made in beginning of next year. In 2014, many big oil companies participated and entered production sharing contracts with the country. The government also negotiated with companies that needed more time before entering the country’s oil and gas sector.
Companies that won tenders in 2014 carried out seismic studies only in offshore blocks and started exploration and drilling. As soon as the companies initiated exploration, they were required to pay a bonus to the government and commit to drilling a well under the conditions of their contracts.
If no one explores, no discoveries will be made – no risk, no success. Oil companies actually doing good work must be encouraged.
The coming year will be an important one as it is necessary to attract capable international oil companies. Myanmar will not benefit if the tender attracts only small players.
This year, an exploration well was dug in the AD-1 Block by China National Petroleum Corporation, resulting in the discovery of a potential natural gas source. Australia’s Woodside Energy Ltd dug a well in the A-7 Block which came up dry. Meanwhile, a MPRL-Woodside-Total appraisal well in Shwe Yee Htun 2 tested natural gas production.
One success for Myanma Oil and Gas Enterprise (MOGE) was the Myanaung Well 172 which produced over 100 barrels of oil. It is a record for Myanaung which has seen declining production for many years. MOGE is using exploration wells to see if there is gas in the old field. PTTEP from Thailand and Petronas from Malaysia are also drilling development wells in old oil fields.
There were few exploration wells drilled this year. If no one explores, no discoveries will be made – no risk, no success. Despite discoveries offshore, production is not certain. It takes time. Oil companies actually doing good work must be encouraged.
It’s important to note that the new petroleum law should provide more benefits for investors. Only by doing so will foreign investments flow into the country. If the conditions are difficult for them, they will be reluctant to invest. It’s crucial to find more new oil and gas fields. Money should not to be spent on uncertain fields.
Tendering for new work sites should be welcomed. Reputable and capable petroleum enterprises are needed to do business in the country. It’s important to take care not to select corporations with low budgets and poor track records.
Oil and natural gas production should be boosted up by effectively conducting inland quests for oil and gas by the Myanmar Oil and Gas Enterprise (MOGE). It is our responsibility to provide as much supply as possible to meet growing demand. It’s necessary to have dependable amount of oil and gas in hand. The coming year is expected to see as a year of remarkable success.
U Than Tun is former Director of Myanma Oil and Gas Enterprise and is now Advisor for Arc and Partners Co.
The Ministry of Electricity and Energy has announced the signing of a power purchase agreement (PPA) for the Upper Baluchaung hydropower project with Neo Energy Oasis Co Ltd, the builder of the project.
The PPA was signed between Electric Power Generation Enterprise (EPGE), a unit of the ministry and Neo Energy Oasis on December 28.
Within three years of the signing of the PPA, the project will be able to feed power to the national grid, said Union Minister for Electricity and Energy U Win Khaing.
The Upper Baluchaung project, which started in 2011, is being implemented under a build, operate and transfer (BOT) deal and is now 45.5 pc completed.
The hydropower project features two power plants with a total capacity is 30.4megawatts. The installed capacity of the first power plant is 20.4mw and 10mw for the second.
Under the design, annual power generation is projected to be 134.482 million kilowatt-hours and once completed, it is expected to supply electricity to villages in southern Shan State’s Nyaungshwe Township and its surroundings, and U Win Khaing said, adding the project is expected to be finished on time.
The project will support the economic development as well as the country’s development as it will provide job opportunities for about 500 people during construction period and for about 30 local engineers when power plants start to operate, and support economic development. Some 2 pc of annual net profit will be used for environmental conservation programme and corporate social responsibility projects the minister said.
THE country’s power supply remained stable for the past 12 months despite a crippled Energy Regulatory Commission (ERC) that left the agency “powerless in making decisions critical to the energy sector.”
“We were able to surpass all challenges. There were difficult times but we just kept on going,” commented Alfonso G. Cusi, secretary of the Department of Energy (DOE).
Ramon Ang, Agnes Devanadera, Eric Francia and Joseph Nocos
Industry players also view 2018 as challenging, given the country’s power sector regulatory crisis, but are grateful nonetheless that they all hurdled the rough patches.
“As expected, we had enough supply reserves. There was no major power outage incident, as far as I can recall. There was a delay in some of the power projects that were supposed to come online so that resulted a little bit elevated spot market rates,” AC Energy President Eric Francia noted.
The power arm of Ayala Corp. wants to achieve 5 gigawatts (GW) from a balanced mix of renewables and thermal assets by 2025. Francia said the company is currently “in a nice position, close to 50-50.”
Conglomerate San Miguel Corp. (SMC), which has 3,000 megawatts (MW) of power generating capacity, representing 22 percent of the Luzon grid and 17 percent of the national grid, is “grateful for the year that was.”
“It’s been a good 2018. While our country faced some challenges on the economic front, the Philippines remains strong. I believe there’s more than enough reason to be optimistic and bullish about the coming year,” said SMC President Ramon Ang in an interview.
2 suspensions
Four ERC commissioners—Josefina Patricia Magpale-Asirit, Geronimo Sta. Ana, Alfredo Non and Gloria Victoria Yap-Taruc—were twice suspended by the Office of the Ombudsman within a seven-month period after they were administratively held liable for allegedly failing to fulfill their duty to protect the interests of consumers.
The suspension resulted in a backlog of crucial paperwork for power supply agreements (PSAs) and projects in an energy-starved country.
As a collegial body, the presence of at least three ERC commissioners is needed to constitute a quorum to enable the commission to adopt any ruling, order, resolution, or decision in the exercise of its quasi-judicial and quasi-legislative functions.
The ERC was able to overcome its problematic situation even as two of the four commissioners reached retirement age. The commission was complete again following the appointment of renewable-energy advocate Catherine Maceda and Davao-based lawyer Alexis Lumbatan. They replaced Non and Yap-Taruc.
With the regulatory body’s membership back at normal levels, ERC Chairman Agnes VST Devanadera said the commission is eager to work on eliminating its backlog of 480 cases, including pending PSAs.
“The important thing is that we have a quorum now. We have to double our efforts,” commented Devanadera.
‘Good 2018’
In looking back on what he considers “a good 2018,” SMC president Ang said in an interview that SMC continues to leverage on the positive trends. And, despite a few challenges, its businesses were able to deliver strong results.
Alsons Power Group, the energy business of the Alcantara family, said the Duterte administration was able to create an environment where investments in power generation can actually take place and prosper.
Alsons Power Vice President for Project Development Joseph Nocos also noted the efforts exerted by the DOE and the ERC to foster renewable-energy projects. “The DOE has been helpful in creating a regulatory environment within which our projects can be expeditiously implemented. We did not experience any problems in securing our permits and as far our RE projects are concerned. This is a concrete way of attesting this administration’s commitment to RE development,” said Nocos.
Alsons Power, Mindanao’s first and most experienced independent power producer, currently operates four power facilities in the island with a total generating capacity of 363 MW, serving key cities such as Cagayan de Oro, Davao, Iligan, General Santos and Zamboanga.
It is also entering the RE sphere through run-of-river hydroelectric power projects with a total hydro capacity potential totaling more than 145 MW in Negros Occidental, Sarangani, Davao Oriental, Zamboanga del Norte, the two Agusan provinces and Surigao del Sur.
‘Key policies matter’
While 2018 was generally favorable for power industry players, AC Energy would like the ERC to immediately implement three policies aiming to lower electricity rates and foster healthy competition.
Top of my mind, said Francia, “is the CSP [competitive selection process]. I believe there are active hearings, at least, on the side of ERC. We hope that this is expedited.”
The DOE and the ERC are working to harmonize their respective CSP rules. While this has yet to be finalized, power firms are having a difficult time in contracting power capacity from suppliers. “I think it’s critical for the CSP rules to be clarified and implemented soon. It should be a top priority,” noted Francia.
The two other key policies are the RPS (Renewable Energy Portfolio Standards) and RCOA (Retail Competition and Open Access).
“On RE, the impact of RPS is really for 2021-2022. So, there is no rush to build RE given oversupply situation. Last, but not least to me, is RCOA. I am still hopeful the TRO [temporary restraining order] gets resolved soon. So, those are the three key policies that will matter a lot in this industry,” said Francia.
RCOA basically allows consumers to select from where and what kind of electricity to purchase. This is expected to drive down electricity costs and promote transparency in the energy sector. It has yet to be fully enforced, mainly on account of the TRO pending before the Supreme Court.
Meanwhile, RPS mandates generators, distribution utilities, and suppliers to source a specified portion of their electricity requirements from eligible RE resources.
Outlook
Just like in 2018, energy officials expect adequate power supply in 2019, given an additional capacity of about 2,375 MW that will come from new power projects across the country.
“The DOE is confident in our projections for 2019, that we will be able to meet the demand considering the incoming capacities in Luzon, the Visayas and, of course, Mindanao,” said DOE Assistant Secretary Redentor Delola.
For Luzon, he said peak power demand is expected to reach 11,200 MW, from the 10,800 MW recorded in May last year. Delola said Luzon could experience tight supply because the 650-MW Malaya thermal plant in Rizal province is no longer designated as a must-run unit.
But with additional capacity coming from the first unit of GN Power Dinginin coal plant—around 300 MW, per Delola—and the 335-MW Masinloc plant, there will be enough supply for the expected growth. Delola said the 2019 forecast peak demand in Luzon is considered a “normal growth.”
The DOE official said, “If we will have problems next year, there won’t be a red alert, only yellow alert.”
A yellow alert notice means operating reserves have dropped below the required 647-MW contingency in Luzon, or equivalent to the largest unit in Luzon, the 647-MW coal-fired power plant in Sual, Pangasinan.
A red alert notice is issued by the grid operator when the power reserve left on the grid is regulating reserve or equivalent to 4 percent of the current demand. Power interruption may occur.
In the Visayas, Delola said peak demand is expected to hit 2,300 MW in 2019 from 2,100 MW this year.
The DOE expects Therma Visayas Inc.’s (TVI) 340-MW power plant in Toledo, Cebu, to become operational within the year, “plus HVDCC [High Voltage DC Coupled Charging].”
In Mindanao, Delola said peak demand could hit 2,200 MW. The department expects some 1,400 MW of excess power.
Luzon is the biggest power user, with a peak demand that is fivefold that of the Visayas and Mindanao.
Of the three major grids, “the biggest growth is happening in Mindanao. But they have a smaller base, so in terms of capacity, [the increase is bigger] in Luzon and in the Visayas,” explained Delola.
“It’s really [the] influx of economic development and we’re looking at the possible effects of the electrification program because if we will be able to serve more areas then consumption will increase, as well.”
Francia agreed with the DOE’s forecast, saying the power sector is expected to “maintain equilibrium” because of the new power plant projects coming in.
“We could experience tightness for summer for the first half of 2019, but then in the second half, once these plants come online, there will be additional capacity that could be worth two years of Luzon’s growth,” said Francia.
Ang expects a better 2019 for SMC. “We are hoping for an even better and more robust business environment for 2019. We look forward to continue doing our part to bring about progress for our nation, and serving our countrymen in many aspects of their lives.”
TRAIN 2’s challenge
There’s a challenge, meanwhile, from the second tranche of this administration’s tax reform program, to be implemented in 2019. It is expected to increase power rates by an estimated P0.1111 per kWh.
Another hike, expected at P0.1311 per kWh, is due in 2020.
The first phase of the Tax Reform for Acceleration and Inclusion law already raised electricity prices by P0.0904 per kWh.
The Independent Electricity Market Operator of the Philippines (Iemop), operator of the wholesale electricity spot market (WESM), said the numbers are based on the assumptions of Manila Electric Co. (Meralco) related to its sourcing power mix.
“This study was done when the TRAIN law was just new, [including] incremental tax that will be imposed under that law, and these are the figures based on certain assumptions. We made use of Meralco assumptions of their supply portfolio and their sourcing between bilateral and WESM,” said Iemop President Francis Saturnino Juan.
“So, these are the incremental amounts, but of course if the price of fuel itself will increase, then that will add to this incremental increase in 2019 and 2020 because of the staggered increase in the implementation of the law,” Juan said.
WESM, he pointed out, is an indication of the capacities needed to meet the country’s growing demand for power. “These projections were taken from DOE for Luzon, which has a 4.9 percent growth rate that is forecasted. If no additional capacity will be put online by 2022, you will see now that supply margin reducing and you can expect that there will be an increase in WESM prices,” he said.
At bottom, the DOE foresees adequate supply in 2019, but consumers and industry players nonetheless would rather not assume that everything will be fine. To them, the Year of the Pig may bring its own surprises for the country’s power sector, and they’d rather be ready for anything.
