NEW DELHI: State-owned ONGC, IOC and OIL are among the five global companies named by the US administration for having energy ties with Iran, for which they can face sanctions by America.
The US government accountability office has named Oil and Natural Gas Corp (ONGC), Indian Oil Corp (IOC) and Oil India Ltd (OIL) along with China’s CNPC and Sinopec as “foreign firms reported to have engaged in commercial activity in Iran’s energy sector between November 8, 2013, and December 1, 2014”.
The US Iran Sanctions Act provides for steps against persons, including foreign firms, investing more than $20 million in Iran’s energy sector in any 12-month period.
The three firms have been named for their stake in the Farsi offshore block in Iran.
US GAO had included only ONGC and OIL in its previous report last year and kept IOC out because of “insufficient information available”.
But in the report this year, it said: “The firm’s (IOC’s) 2013-14 annual report stated that the firm has a 40 per cent participating share in the Farsi Block Project.”
It cites ONGC’s annual report mentioning 40 per cent interest in Farsi block as well as OIL’s annual report stating 20 per cent stake in the block for being included in the report.
All the three firms gave similar response to US GAO saying the “exploration contract (for Farsi block) expired in 2009” and that they had “not carried out any activity after 2007 in the Farsi Block”.
ONGC holds the 40 per cent stake in Farsi through its overseas investment arm, ONGC Videsh Ltd.
After finding its name in on the list of entities engaged with Iran in three consecutive reports between 2010 and 2012, OVL stopped mentioning the Farsi stake in its annual report, resulting in its name being withdrawn in 2014.
Besides OVL, US GAO had also withdrawn Petronet LNG Ltd as well as Hinduja Group firm Ashok Leyland Project Services from the list saying “there were no open-source reports of the firms conducting commercial activity in Iran”.
According to GAO, the US has not imposed sanctions on any firm for their Iran energy ties since 1998.
The US and its allies have pursued the sanctions route to isolate Iran over its alleged nuclear programme.
OVL, IOC and OIL explored for oil and gas in Iran’s Farsi block and proposed investing $5.5 billion to produce gas from the 21.68 trillion cubic foot discovery they made in the offshore area located near the Saudi Arabian border.
They, however, haven’t invested in the development due to differences over the contract with the Iranian government.
(Source: The Times of India, March 9, 2015)
INTERNATIONAL MARITIME CONFERENCE TO BEGIN FROM MAR 20
Strengthening maritime security and trade among Indian Ocean rim countries will be the focus of a 3-day international conference to be inaugurated by External Affairs Minister Sushma Swaraj here on March 20. The conference ‘India and the Indian Ocean: Renewing Maritime Trade & Civilisational Linkages’ would be attended by over 200 delegates from 20 nations and supported by eight Union ministries, Union Petroleum Minister Dharmendra Pradhan, who is chief patron of the event, told reporters today.
USA and China have evinced interest in sending their representatives to the meet as observers, he said. Apart from maritime safety and security, trade and industrial facilitation, the meet would also focus on fisheries management, disaster risk management, academic, science and technology, tourism and culture and gender empowerment, said chairman of the event’s reception committee Haraprasad Das. The conference, being organised by Institute of Social and Cultural Studies jointly with Research and Information System for Developing Countries, is supported by External Affairs, Petroleum and Natural Gas, Power, Shipping, Commerce and Industry, Culture, Tourism and Agriculture ministries, Das and Pradhan said.
(Source: Indian Oil & Gas March 9, 2015)
CHANCE OF GAS PRICE CUT HIGH
New Delhi: The price of natural gas is likely to drop to around $5 per million British thermal unit (mBtu) from $5.61 per mBtu in the half-yearly revision to be announced by the government later this month.
“Steps are being taken to arrive at the gas price based on the approved formula. The final price will be announced in advance for the explorers and consumers to make the necessary changes in the contract,” a senior oil ministry official said.
Analysts expect the price to be lower than the one announced in October because of a fall in global crude and LNG prices at the international hubs, which are taken into account while calculating the domestic price.
“Domestic gas prices would decline to around $5 per mBtu because of subdued global demand and crude prices,” rating agency Crisil said in a research report.
In October, the government had announced that the price of gas would be determined on a half-yearly basis. It had raised the price to $5.61 per mBtu from $4.2.
However, the increase was lower than $8.4 that the industry was expecting.
The government is due to notify the price for April 1 to September 30 in the middle of this month.
The price will be calculated based on a volume-weighted average of the rates prevailing at Henry Hub in the US, Canada’s Alberta Hub, National Balancing Point in the UK and Russia.
While Henry Hub has a weight of 38.1 per cent in the domestic gas pricing formula, National Balancing Point accounts for 42.9 per cent, Alberta Hub Canada has 4.9 per cent and Russian gas has 14.1 per cent.
Europe and Russia jointly account for 57 per cent of the weight in pricing and a steep decline in prices of these two regions would have a significant impact on domestic prices.
Anticipating a lower gas price, Canada’s Niko Resources has put up for sale its stake in Reliance Industries’ KG-D6 gas block.
Niko holds a 10 per cent stake in the block where a total of 20 oil and gas discoveries have been made, with three of them in production.
“The announced price for the period from November 2014 to March 2015 is a 33 per cent increase over the price received previously, but is lower than expected. In addition, there is uncertainty around the long-term natural gas price outlook in India,” Kevin J. Clarke, chairman and interim chief executive officer of Niko Resources, has said.
(Source: Telegraph March 9, 2015)
DoD SEEKS SUBSIDY ROADMAP BEFORE ONGC DISINVESTMENT
ONGC and other oil producers have to bear a part of the losses that fuel retailers incur on selling LPG and kerosene at government-controlled rates. The Department of Disinvestment (DoD) wants the government to lay out a roadmap for fuel subsidy sharing before the Rs 140 billion stake sale in Oil and Natural Gas Corp (ONGC), a top official said.
The government had in 2014 planned to sell its 5 per cent stake in the state-run explorer but met with lukewarm response from foreign investors over lack of clarity on subsidy ONGC has to shell out every quarter. Disinvestment Secretary Aradhana Johri said foreign investors wanted to know the future subsidy sharing roadmap of the government before buying shares in the disinvestment of the oil major.
ONGC and other oil producers have to bear a part of the losses that fuel retailers incur on selling LPG and kerosene at government-controlled rates. There is no formula to decide on their share and it is communicated on an ad-hoc basis every quarter. “When we went for ONGC roadshows they (investors) wanted clarity on subsidy sharing, not just who is going to bear how much burden, but also the roadmap. We have suggested this to the government, they are working on it,” Johri told PTI.
Government was to sell 5 per cent of its stake in the country’s biggest oil and gas producer ONGC to raise about Rs 140 billion in the current fiscal. However, subdued global oil prices and subsidy sharing mechanism came in way of disinvesting stake in the PSU. The double impact of tumbling global oil prices and the rising subsidy burden has left the ONGC stock battered. Its share has slipped from Rs 472 in June last year to Rs 319.80 at close.
Upstream oil producers ONGC and Oil India Ltd made good nearly half of the revenue loss or under-recoveries that fuel retailers incurred on selling cooking fuel at government-controlled rates. This subsidy contribution is by way of discount on crude oil they sold to the downstream firms and it was capped at USD 56 per barrel in 2013.
However, with global oil prices tumbling to multi-year low of around USD 60 per barrel, the continuation of the subsidy-sharing formula for remaining period of this fiscal would mean that ONGC will not be left with much after the subsidy payout. Subsidy burden on upstream oil companies has increased from Rs 320 billion or 30 per cent of the total under- recovery in 2008-09 to Rs 670.21 billion (48 per cent of the total under-recovery) in 2013-14. In 2013-14, ONGC paid a record Rs 563.84 billion subsidy. This fiscal it has paid Rs 363 billion.
(Source: PTI March 9, 2015)
CAIRN INDIA GETS DGH APPROVAL FOR GAS PRODUCTION IN RAJASTHAN BLOCK
Cairn India has obtained the regulator’s nod to commercially produce gas in its prolific Rajasthan block, making it eligible to seek a longer extension after the contract for the block expires in 2020. Under the production sharing contract (PSC), a block is considered for a five-year extension if it produces oil, and for 10 years if it produces natural gas. This norm was earlier used by the regulator to turn down the request of Gurgaon-based subsidiary of London-headquartered diversified metals and mining company Vedanta Resources to extend the contract by 10 years, after the initial agreement to operate the Barmer block ends.
Barmer oil block accounts for nearly a fourth of India’s local oil production. But a gas discovery in the Raageshwari field in the RJ-ON-901 Barmer block will give government the flexibility to consider it a gas block and thus offer a 10-year extension, people familiar with the development said.
Cairn India said on Wednesday last week that it has received the management committee’s approval for the Raageshwari Deep Gas Project. A managing committee comprises representatives of the upstream regulator DGH (Directorate General of Hydrocarbons) and the operator, and its approval is crucial for an operator to start commercial production in a new discovery of oil or gas.
(Source: Economic Times March 9, 2015)
GULF OIL LUBRICANTS IN EXPANSION MODE
Mumbai: Gulf Oil Lubricants, a Hinduja Group company, aims to be a rising player in the lubricants business. The company has undertaken capacity expansion, that includes capex in a new plant and expansion of current allocation.
With 75 per cent of its portfolio serving the automotive sector, Gulf Oil Lubricants’ believes it has not yet tapped India’s 1,200 thousand metric tonnes (tmt) industrial oils market. With many industries coming up near Chennai, the company considers South India the key to growth, in the industrial as well as the automotive sectors.
In order to tap into the industrial lubricant market, Gulf Oil Lubricants’ 50 tmt blending plant near Chennai is expected to commence end FY16. While land has been acquired for the plant in Chennai, sources indicated that the company has invested around Rs. 35 crore on land from internal accruals.
Capacity expansion is also on at its existing Silvassa blending plant, from 75 tmt to 95 tmt, at a cost of Rs. 40 crore. Expansion at Silvassa is likely to be completed by March. At present, analysts added, the Silvassa facility is running close to full capacity, and additional capacities are expected to be unlocked with de-bottlenecking.
India’s lubricant demand, which is expected to grow at 2.5 per cent compounded annual growth rate over the next five years, is set to be propelled by the growth in the domestic auto sector, which caters to 47 per cent of lubricant demand. With annual consumption of less than 2.3 mt, India is the third largest lubricant market after the US and China, contributing over 5.5 per cent of global automotive lubricant demand, and over 4 per cent of industrial lubricant demand.
In the domestic lube market, around 80 per cent market share is held by oil marketing companies and Castrol. Gulf Oil Lubricants has decided to train its focus solely on the domestic lubricant market. The company is intent on capturing incremental market share through innovative original equipment manufacturer tie ups, brand development, strengthening of distribution network, and targeting untapped verticals in the industrial and auto segments.
While capacity expansion is expected to aid growth, the company has been keen to be among the top three lubricant players in the business.
In an earlier interaction with BusinessLine , Sanjay Hinduja, Chairman, Gulf Oil International, had said from its then sixth position, the company wanted to be among the top three players. This, Hinduja had said, would take two-three years.
“The gap (between us and competitors) is not that wide. There is a bunch of us in that range, so we have to leap frog. Castrol has been operating in this country for 100 years. So, they have built a solid brand for themselves. Tide Water is here for many years as well, and they have always had an association with Japanese OEMs (original equipment manufacturers), which gives them an advantage,” he had said, adding that expansions and marketing efforts would propel the company to the third slot in a very short time.
(Source: Business Line March 9, 2015)
OPEC CHIEF AGAINST OUTPUT CUT
The Organisation of the Petroleum Exporting Countries Secretary-General said on Sunday that the group’s exporters should not cut output to “subsidise” higher-cost shale, an energy source whose recent growth is blamed by OPEC for weakening oil markets.
Abdullah al-Badri added in remarks to a conference in Bahrain that tight oil, a term he has used for shale, was “not a challenge for us” but the market should now be left to decide which source of petroleum could survive at current prices.
Oil prices have sunk to near six year lows in recent months as a result of a large supply glut, due mostly to a sharp rise in US shale production as well as weaker global demand. The rapid decline has left several smaller oil producing countries reeling and has forced oil companies to slash budgets.
“We welcome tight oil… but this source of energy costs too much to produce. You cannot produce it at $70-$80 or $90, you need $100 plus to produce, sell it and make income out of it,” Badri said. “OPEC cannot subsidise another source of energy – if we reduce (production) in November we will reduce in January. We will reduce in December. We will reduce maybe for another four to five years,” he said.
“We cannot every time keep reducing our production, it (tight oil) is not a challenge for us … we welcome it, but let the market decide now.”0v
Badri also said that OPEC and non-OPEC producers should work together to stabilise markets, suggesting oversupply could amount to two million barrels per day (bpd).
Since 2008, supplies from non-OPEC producers had risen by almost six million bpd, he said. In contrast, OPEC production had been fairly steady at about 30 million bpd.
Badri said the market’s “true picture” would not be apparent until the end of June, adding he had no doubt markets would return to balance in the second half of 2015.
The market was improving now, he said, and “tremendous opportunity” in oil remained despite recent market volatility and uncertainties. Energy demand would increase by 60 percent by 2040 and oil would remain a central energy source, he said.
(Source: Business Standard March 9, 2015)