NEW DELHI: In what could be a major relief to Vedanta Group firm Cairn India, the ministry of petroleum and natural gas is set to extend the production-sharing contract (PSC) for the country’s largest onshore block at Barmer in Rajasthan by 10 years. This means that the PSC will expire only in May 2030, as against May 2020 as currently scheduled, allowing the firm to tap the resources fully.
A longer PSC tenure will also be in sync with the firm’s plan to augment exploration and raise the output from the block, already India’s largest onshore crude-producing one, to 3 lakh barrels of oil equivalent per day (boepd) from around 2 lakh boepd currently.
Cairn India contributed a gross amount of R24,299 crore ($4 billion) to the exchequer in FY14.
Currently, Cairn shares more than 70% of the revenue generated from crude oil sales with the exchequer.
Cairn had sought the contract extension to petroleum ministry on April 5, 2013, but the ministry seemed inclined to extend the tenure by five years only.
However, the government is set to renegotiate the fiscal terms after the law ministry opined that terms could be redrawn. Now, the Centre would look for a bigger pie of revenues from the Barmer block (RJ-ON-90/1), which contributed 25% of India’s crude oil production in FY14.
“The latest field development plan shows substantial volumes of gas up to 3 trillion cubic feet, which could be commercially drilled. So the Barmer block could be considered as a gas field and hence qualifies for 10 years’ extension,” a senior government official told FE, requesting anonymity.
Cairn India faced a major setback after the previous director general of hydrocarbons Rajiv Narayan Choubey had turned down its request for a 10-year extension of the PSC for the Barmer block. The upstream regulator said that Barmer is primarily oil-producing and hence the contract can be extended only for five years. If it had been a gas field, the PSC could have been extended by another 10 years.
On January 21, the board of PSU explorer and Cairn’s joint venture partner for the Barmer block, ONGC, approved the extension of the PSC without any preconditions. Cairn India is the operator with 70% participating interest. ONGC has the remaining 30% participating interest.
“ONGC said that it would abide by financial terms decided by the government while extended the PSC,” the official added. Now, the petroleum ministry is awaiting a proposal from the DGH on the revised terms before it decide on the issues. Currently, profit petroleum (or the government’s share of revenue) is linked to the investment multiple in the project.
Cairn India and ONGC have put forward a $700-million plan to develop gas reserves at the Raageshwari fields in the block. The gas output from Raageshwari fields is pegged to go up to 2.80 million metric standard cubic metres per day (mmscmd) by 2017 from nearly 0.25 mmscmd now.
At present, five oil fields — Mangala, Bhagyam, Aishwariya, Raageshwari and Saraswati — produce about 180,000 barrels of oil per day. Also in March 2013, Cairn India commenced commercial sale of gas.
The private explorer reported an operational expenditure of $3.90 per barrel in FY14 in the Barmer asset. It believes that the entire oil cannot be taken out before 2030. Cairn has projected Barmer production to grow at 7-10% (CAGR) for the three years starting FY16.
The Rajasthan block marked its peak production of 200,000 boepd in March 2014. So far the block has produced over 250 million barrels of oil equivalent since start of production in 2009. The company received environmental clearance to augment production from the block to 300,000 boepd.
Analysts expect Cairn India’s earnings to be subdued since production is flat or decline marginally, while the government’s profit share keeps going up. Cairn India reported an Ebitda of Rs 13,900 crore on revenues of Rs 18,800 crore in FY14. It reported a net profit of Rs 12,400 in FY14, roughly 3% higher than Rs 12,100 crore in FY13.
(Source: The Financial Express, March 4, 2015)
GOVT READIES STAKE SALE PIPELINE WORTH Rs 30,000 CRORE
NEW DELHI: To meet the disinvestment target of Rs 69,500 crore for 2015-16, the highest ever, the government has in place a pipeline, in various stages of regulatory approval, Disinvestment Secretary Aradhana Johri said on Tuesday. “In terms of the stocks we have initiated approvals for, the pipeline would be more than Rs 30,000 crore,” she told Business Standard in her first post-Budget interview.
The disinvestment target for 2015-16 can be divided into Rs 41,000 crore from minority stake sale in listed public sector undertakings (PSUs) and Rs 28,500 crore from what the Budget termed “strategic sales”.
While Johri declined to name the companies in the pipeline, those in queue for a 5-10 per cent stake sale might include Nalco, NMDC, NHPC, Bhel, Nevyeli Lignite, Indian Oil, Dredging Corp, CONCOR, Rashtriya Chemicals and Fertilizers, Hindustan Copper and ONGC. This is based on the names that have come before the Cabinet in the past few months and the list of companies in which the Centre holds more than 75 per cent stake (which it will have to bring below that threshold by 2017, according to Securities and Exchange Board of India guidelines).
On ONGC, Johri said the exploration and production behemoth wasn’t ready for stake sale yet, adding the government would consider it only after a subsidy-sharing mechanism between upstream companies and the Centre was finalised and oil prices rose. “As far as ONGC is concerned, it is a stock that is not ready for disinvestment today. It is one that has come down considerably in value and there are issues of subsidy sharing. When we met investors during the ONGC road show, they didn’t just ask about what the company would pay in underrecoveries, but also the road map for that.”
As part of its 2014-15 disinvestment road map, the government had planned to sell five per cent stake in ONGC. However, that was shelved due to depressed global crude oil prices and delays in the proposed subsidy-sharing mechanism between the government and upstream companies.
Johri also sounded a word of caution on the other companies in the pipeline. “There is limited elbow room to sell because if you look at the composition of our pipeline, almost half the stocks are mines and metals, for which the markets are down globally. And, about 25 per cent of the stocks are oil stocks, where there are issues of subsidy sharing and market conditions,” she said.
On strategic disinvestment, she said this was a statement of intent by Finance Minister Arun Jaitley, following which the government was considering all options before it.
(Source: Business Standard, March 4, 2015)
DIRECT BENEFITS TRANSFER FOR LPG CONSUMERS SCHEME MET TARGET FOR FEBRUARY: DHARMENDRA PRADHAN
BHUBANESWAR: The Narendra Modi government’s initiative to provide cash subsidy directly to nearly 11.5 crore consumers to allow them to buy cooking gas at market price has been a success, petroleum and natural gas minister Dharmendra Pradhan told ET.
“We had an internal target to get 80% of the customers registered, through their bank accounts or Aadhaar card, before the end of February. I share this with great joy that as of the night of 27th February, 80.1% of the customers had joined,” the minister said on Sunday.
Under the Direct Benefits Transfer for LPG (DBTL) Consumers Scheme, LPG cylinders will be sold at market rates of gas while the subsidy will be deposited directly into the account of legitimate consumers to plug leakages. The exercise is expected to pave the way for other such direct transfers that should significantly reduce subsidy expenditure.
“Finance Minister Arun Jaitley, in his budget speech, had announced that this was possibly the world largest such delivery mechanism of subsidy. In the past two months, more than Rs 6,000 crore has been deposited directly into the bank accounts of customers. It’s a hassle-free, transparent and consumer friendly means of passing on subsidies,” said Pradhan.
The ministry as well as state-run oil marketing firms had reached out to customers with conventional advertising backed by an expansive SMS and digital campaign.
A similar exercise for kerosene subsidies may take a while longer to roll out, though, since the ministry needs the states to get their act together first.
“You must appreciate that when it comes to kerosene, we (the central government) give it lump sum to the state. It is they who decide who they want to give it to. Madhya Pradesh, Gujarat, Rajasthan, Andhra Pradesh and Karnataka are already digitising consumer data base, (linked to biometric Aadhaar cards). Once we have that ready database from the states we can similarly pass on the kerosene subsidy directly to the consumer,” said the minister, who was in Bhubaneswar on Sunday for party related functions.
Even as the government announced an increase in petrol and diesel prices on Saturday in tandem with rebounding international oil prices, it may not be ready to revise excise duty any time soon.
“A substantial amount of government earning out of central tax is going towards the cess announced in the budget. The finance minister said categorically that nearly two-thirds of this would go towards infrastructure projects such as railways and roads, even rural roads – aren’t good roads important to reduce oil consumption?” asked Pradhan.
(Source: The Economic Times, March 4, 2015)
HOW MPs FORCE VIP TREATMENT: NDTV ACCESSES COMPLAINTS TO PARLIAMENT PANEL
NEW DELHI: Aam Aadmi might be a hot trend, but some parliamentarians are clinging hard to their “khaas aadmi” status. Some very upset lawmakers have complained to a Parliament panel about slights that they have had to endure, among them an MP who complains that his phone calls were ignored by a senior official.
Shiv Sena MP Sadashiv Lokande complained in January that the Chairman and Managing Director of public sector oil company HPCL Or Hindustan Petrochemical Limited had ignored his phone calls. After the complaint was forwarded to the panel, the Ministry of Petroleum and Natural Gas was asked for an explanation.
The ministry was reminded yesterday that it was yet to explain.
NDTV has accessed the list of complaints that MPs have registered with the panel that looks into what they call “violation of Protocol Norms and Contemptuous Behaviour of Government Officers with Members of Lok Sabha.” The confidential list records the heightened sense of hurt of various Parliamentarians.
There are at least 13 complaints pending with the panel, which is headed by TDP lawmaker Sambasiva Rao.
The Ministry of Petroleum was sent another reminder on Monday on a complaint by the BJP’s Sharad Tripati. Mr Tripathi put in two complaints because the ministry did not bother to invite him for the inauguration of an LPG plant in Gorakhpur. According to protocol that has been decided by the panel and circulated by DoPT, all MPs should be invited to events in their areas.
The two MPs were not available for comment, but a member of the privileges committee Jagdambika Pal told NDTV, “MPs are answerable to their constituents so if they ask a question, the public wants answers and so that’s why they should get responses too.”
The need for such a Parliament panel, set up only three years ago, shows that lawmakers are not ready yet to make the transition from khaas aadmi (VIPs) to aam aadmi (common man).
Ever since NDTV began the #NoVIP campaign, there has been an outpouring of support from the public. But ministers have ready explanations for why they need to use facilities like VIP lounges. “I use the VIP lounge,” said minister Prakash Javadekar, “It is easy because I carry lots of files and they have a massage chair in it, so I sit there and am able to do my work. But when security offers to let me go first, I say no because plane will leave at the same time for everyone.”
Earlier this year, the Ministry of Civil Aviation sent a reminder to all airlines that MPs should be escorted throughout the airport, should get lounge facilities and then also get priority offloading of baggage on arrival.
(Source: NDTV March 4, 2015)
ONGC’S WESTERN OFFSHORE FIELDS OUTPUT REACHES FIVE-YEAR HIGH
MUMBAI: Production from the western offshore fields of Oil and Natural Gas Corp. Ltd (ONGC) reached a five-year high at nearly 320,000 barrels per day (bpd) at the end of February.
It is a jump of 12% from last year’s 285,000 bpd and the highest since January 2010.
“When we manage to cross 320,000 bpd from western offshore, that will be a major milestone for the company as that would mean we have managed to increase production from fields which are already seeing a natural decline,” said S.K. Moitra, executive director, asset manager, Bassein and satellite assets, ONGC.
This increase in production at India’s biggest explorer gives an indication that the company might finally see an overall increase in total crude oil output in the year to 31 March, a feat not achieved by the company in the past 10 years.
The western offshore is ONGC’s most prolific crude oil reserve and comprises four main assets—the flagship Mumbai High asset, Neelam and Heera assets and the largely natural gas-bearing Bassein asset.
Moitra said the jump in current production has mainly come from the NB Prasad (NBP) field in Bassein and a few marginal fields in the western offshore area.
The B193 cluster, one of the marginal field clusters in western offshore, has also aided the increase in production, he said.
Giving details of the individual production from the various fields, Moitra said that for the first time since its start in 2006, production from the Bassein and satellite assets reached a high of 55,923 bpd by end-February, the biggest till date.
Also, by the end of February, NBP produced 32,000 bpd while Mumbai High produced 204,000 bpd. The remaining production came from its Neelam and Heera assets and the marginal fields in the western offshore.
“The production of Bassein is now one-fourth of the giant Mumbai High asset. This is significant because while Mumbai High is largely a crude oil asset, Bassein produces mainly gas,” Moitra said. This year, the company would actually see a jump in overall annual production backed by the increase in western offshore.
For the last 10 years, ONGC has seen a steady decline in production from a high of 47.15 million tonnes of oil equivalent (mtoe) in 2004-05. In 2013-14, the company’s domestic oil and gas production was 45.03 mtoe, its lowest in a decade. However, based on the anticipation of a higher contribution from its marginal fields, ONGC had pegged the current year’s overall annual production target at above 46 mtoe.
In a meeting with investors and analysts in June 2014, T.K. Sengupta, director of exploration at ONGC, had said that the company might see a jump of 1-1.5 mtoe in production during the current year, coming mainly from its marginal fields.
Till January end, the natural decline in ONGC’s fields has so far managed to offset the impact of any increase in production coming from its marginal fields.
According to the Petroleum Planning and Analysis Cell (PPAC), a statistical body of the oil ministry, for the first 10 months of the current financial year, ONGC’s indigenous crude oil output stood at 15.6 million tonnes (mt) against 16.1 mt in the first 10 months of 2013-14. In January, ONGC recorded a production of 1.6 mt, the same as in January 2014.
“We are hopeful that we will see a jump in crude oil production this year, while natural gas production will still take a year or two to show a net increase,” said Moitra.
But analysts are not giving too much weight to the development.
“A marginal growth in production was expected this year, but we are not expecting any significant jump in volumes for the next three years. ONGC is not a volumes play as of now. The only expected trigger can come from clarity on the subsidy-sharing formula, which can lift the valuations of the company,” said Dhaval Joshi, an analyst with brokerage Emkay Global Financial Services Ltd.
ONGC posted a valuation of $40 per barrel for 2013-14, which was one of the lowest in its history.
In its report on 12 January, international broking firm Goldman Sachs and Co. downgraded ONGC to neutral based on a lack of clarity on the subsidy-sharing mechanism and lower outlook of crude oil price globally. The expected volumes growth is a mere 5% over the next three years, it said.
(Source: Mint, March 4, 2015)
GAIL DROPS PLAN TO SET UP LNG POINT AT PARADIP
NEW DELHI: GAIL India, the nation’s largest natural gas distributor, has dropped plans to set up a Rs 3,108 crore floating LNG import terminal at Paradip in Odisha.
GAIL was looking for a strategic partner for the 4 million tons a year floating liquefied natural gas (LNG) terminal off the Paradip coast. But with a partnership with Royal Dutch Shell and GdF Suez of France coming through for a similar project off Kakinada in Andhra Pradesh, the Paradip project has been axed. GAIL in a notice said it had on October 18, 2014 announced intention to come up with an Expression of Interest (EoI) seeking strategic partner for its FSRU project at Paradip. The publication of the EoI was to happen on March 2.
“Since GAIL is presently not pursuing the project further, this EoI for selection of strategic partner for FSRU project at Paradip Port, Odisha stands withdrawn,” the notice said. The company was seeking an LNG supplier or a major consumer of gas as strategic partner for the Paradip project for which site selection had been completed and market survey commissioned, official sources said.
(Source: Millennium Post, March 4, 2015)
SHARES OF BPCL, HPCL AND IOC GAIN FROM FUEL PRICE HIKE
MUMBAI: The stocks of state-owned oil marketing companies such as Bharat Petroleum Corporation, Hindustan Petroleum Corporation and Indian Oil Corporation rallied on Monday, surging up to 8%, after petrol and diesel prices were increased from Sunday. HPCL shares gained 5.5% to end at Rs 654.15 and BPCL jumped 4.4% to Rs 778.85 on the BSE.
Shares of IOC, too, were up 5.53% at Rs 350.40. But, the BSE oil and gas index ended flat at 9685.68, up 0.21%, as the ONGC stock declined nearly 1.5%. Petrol price was raised by Rs 3.18 a litre and diesel’s by Rs 3.09, the second such increase in a month, on rising international crude rates. After seven months of decline, the international crude market was up 18% in February — the highest monthly rise in almost six years. On Monday, however, the prices fell 1%. “Markets were enthused by the extent of increase in petrol and diesel prices,” said Kush Katakia, CEO, Beanstalk Advisory. “Oil marketing companies were being re-rated following improvement in margins.”
The Budget has proposed to lower corporate tax rate over the next four years, which is also a positive for oil marketing companies, analysts said. “The government’s intention to lower corporate tax rate from 30% to 25% with a corresponding decrease in exemptions should be a positive for oil PSU stocks,” said Vinay Jaising, analyst, Morgan Stanley India.
“We expect earnings of oil PSUs to be impacted positively by 8-9% in the first full year of its implementation.” Chennai Petro (6%), Gujarat Gas (5%), Hindustan Oil Exploration (4%) and Petronet LNG (2.5%) also rallied on Monday. During the quarter ended December 2014, marketing margins improved by 19.3% quarter-onquarter, mainly due to a collection of state-specific charges coupled with additional margins on petrol/diesel and other industrial fuel, as the full benefit of sharp correction in crude oil/product price was not passed on to consumers at the time of a cut in selling prices, said analysts.
“Though results for the quarter ended December 2014 were below estimates, sequentially, marketing margins improved by 19% on additional margins from auto and industrial fuel,” said Daval Joshi, analyst, Emkay Global. “With expected improvement in marketing margin and benefit of implementing DBT, we continue to maintain our positive stance on OMCs,” he said.
(Source: Economic Times March 4, 2015)
RIL MARGINS TO RISE TO SIX-YEAR HIGH: CLSA
The shares of Reliance Industries Limited (RIL) shot up by 4.39 per cent on Tuesday following a global brokerage firm CLSA’s prediction that the company’s refining margins might rise to six-year high in the current quarter. The report, however, has warned about the rising expenditure in the telecom, which is pulling down the company’s valuation.
Driven by improvement in naphtha crackers, petcoke spreads, higher light-heavy crude differentials and shrinkage in internal loss due to the lower Brent price, RIL’s March quarter’s refining margin could rise $3 a barrel on a quarter-to-quarter basis to a six-year high of $10.3 a barrel. “Our quarter to date benchmarks is up $1.5-1.7 a barrel. We estimate that inventory losses from falling crude might have pulled down gross-refining margins (GRMs) in 3Q FY15 by at least $1.5 a barrel. Adjusting for these – and noting the $6 a barrel crude-price rise since January this year, Reliance could report a $3 a barrel QoQ rise in GRMs and 68 per cent QoQ rise in refining earnings before interest and tax (Ebit),” CLSA said in a note on Tuesday.
As a result, RIL’s shares closed at Rs 901 a share, 4.39 per cent, gaining Rs 123 billion of market value in a single day. It said the massive refining expansion could drive Reliance to an all-time high quarterly PAT (profit after tax) of Rs 62.50 billion, up 11 per cent on a year-on-year basis and 23 per cent QoQ in 4Q. CLSA gave a target price of Rs 1,250 a share for Reliance.
CLSA, however, warned that this core business improvement has been completely ignored by the market on fears of a big rise in telecom capital expenditure, as Reliance has shown aggressive intent in the upcoming wireless spectrum auction. RIL has deposited Rs 45 billion as earnest money with the government so that it could bid for at least one block of 5 MHz spectrum nationwide in the 900 MHz band, together with all the air waves up for sale in the 800 MHz band. The auction is starting on Wednesday.
“While every $1 billion in extra Capex (capital expenditure) may be seen as a Rs 20 per share leakage from fair value, it is important to understand whether extra spectrum, if any, improves the business case for Reliance’s telecom venture,” CLSA asked.
Reliance has already spend close to Rs 600 billion in the telecom business and analysts have warned that they do not see any value creation for RIL’s shareholders in the medium-term of three to five years. Some analysts have suggested that RIL should sell 25 per cent to 30 per cent of its stake in Reliance Jio to derisk its telecom business. Reliance sources have said in the past that they might look at selling part of stake in Reliance Jio only after achieving a particular level of scale so that it gets a good valuation.
(Source: Business Standard March 4, 2015)
CAIRN INDIA DECLINES AFTER SLIDE IN CRUDE OIL PRICES
Cairn India declined 1.53% to Rs 250.50 at 11:25 IST on BSE after a sharp slide in crude oil prices yesterday, 2 March 2015.
Meanwhile, the BSE Sensex was down 19.96 points, or 0.09%, to 29,433.36.
On BSE, so far 30,882 shares were traded in the counter, compared with an average volume of 2.58 lakh shares in the past one quarter.
The stock hit a high of Rs 253.40 and a low of Rs 250.30 so far during the day. The stock hit a 52-week high of Rs 385 on 11 June 2014. The stock hit a 52-week low of Rs 228.40 on 17 December 2014.
The stock had outperformed the market over the past one month till 2 March 2015, rising 8.05% compared with 1.16% rise in the Sensex. The scrip had, however, underperformed the market in past one quarter, declining 2.04% as against Sensex’s 3.57% rise.
The large-cap oil and gas exploration and production company has an equity capital of Rs 1874.83 crore. Face value per share is Rs 10.
Brent crude oil futures edged higher after witnessing slump in previous trading session. Brent for April settlement was up 87 cents at $60.41 a barrel. The contract had slumped $3.04 a barrel or 4.85% to settle at $59.54 a barrel during the previous trading session.
Lower crude oil prices would result in lower realizations from crude sales for oil exploration firms like Cairn India.
Cairn India’s consolidated net profit fell 53.2% to Rs 1349.64 crore on 19.8% drop in total income to Rs 4020.57 crore in Q3 December 2014 over Q3 December 2013.
Cairn India is a part of the Vedanta Group, a globally diversified natural resources group with wide ranging interests in aluminium, copper, zinc, lead, silver, iron ore, etc.
(Source: Business Standard March 4, 2015)
GLOBAL CRUDE OIL PRICE OF INDIAN BASKET WAS US$ 59.95 PER BBL ON 2ND MARCH, 2015
The international crude oil price of Indian Basket as computed/published today by Petroleum Planning and Analysis Cell (PPAC) under the Ministry of Petroleum and Natural Gas was US$ 59.95 per barrel (bbl) on 2nd March, 2015. This was higher than the price of US$ 59.85 per bbl on previous publishing day of 27th February, 2015. In rupee terms, the price of Indian Basket increased to Rs 3706.11 per bbl on 2nd March, 2015 as compared to Rs 3698.13 per bbl on 27th February, 2015. Rupee closed weaker at Rs 61.82 per US$ on 2nd March, 2015 as against Rs 61.79 per US$ on 27th February, 2015.
(Source: Indian Oil & Gas March 4, 2015)