NEW DELHI: The oil ministry plans to give local companies a juicy share of the Rs 6-7 lakh crore investment planned in the next five years by helping local equipment makers compete successfully against foreign vendors, and setting up manufacturing clusters with attractive funding with the help of the Rs 10,000-crore collected as oil industry development cess every year.
The ministry hopes to make significant contribution to the NDA government’s Make-in-India programme in which Prime Minister Narendra Modi wants to make the country a manufacturing hub and create jobs. The oil ministry, as part of its initiatives for the programme, plans targeted fiscal measures such as long-term funding and interest subvention for manufacturing clusters. The ministry is likely to modify procurement norms for public sector entities by aggregating their requirements and has set a target of 50% indigenisation for investments in the upstream sector over the next three years.
At a recent review meeting of the Make-in-India drive, the ministry has said in the medium term, it would aim to set up dedicated manufacturing zones and clusters focused on oilfield services such as building ships, offshore platforms and rigs. “The hydrocarbons industry is committed to investingRs 6-7 lakh crore over the next five years, so the ministry has set up a steering committee to identify equipment that can be manufactured locally,” said an official aware of the development.
“Pooling the demand of firms like ONGC and IndianOil could help leverage indigenisation by introducing local content as a procurement criterion,” the official said. Already, it has been decided that three of nine new LNG ships to be chartered by GAIL India in the next five years, would built in Indian shipyards.
Last year, the government had abolished its system of giving a 10% price preference to local companies as state-run firms said the policy had led to high costs for them. Industry bodies like Ficci had urged the government to review its ‘abrupt withdrawal’ of the price preference policy for oil and gas equipment makers (in late 2014) and pointed out that India’s capital goods sector was already shrinking sharply.
“We have got representations from industry to reintroduce some form of purchase preference as it is a tool used around the world to promote local manufacturing. Indian manufacturers already face cost disadvantages as imports of oil equipment are totally duty free,” said an official from the heavy industries ministry. Apart from changes in the procurement norms, the oil ministry has also proposed a new vendor development program that will also aim at improving access to overseas technologies for local manufacturers.
(Source: The Economic Times, February 18, 2015)
GOVT TO DECIDE ON GAS ALLOCATION REJIG SOON
NEW DELHI: The government is set to revise its priorities in allocation of natural gas, by putting city gas distribution at the top, followed by atomic energy, urea plants, power and domestic LPG. It will also make this allocation policy uniform, meaning the order of priorities will be the same irrespective of what source the gas is from.
Currently, top priority in gas allocation is accorded to fertiliser, followed by the power sector, although 100% of the city gas sector’s needs are met by domestic gas as per a Gujarat High Court order issued last year.
The new proposals will have to be approved by the Cabinet committee on economic affairs.
Domestic gas is divided into four categories in terms of sourcing — administered price mechanism (APM) gas, non-APM gas available from nominated blocks of ONGC and Oil India, pre-NELP gas and NELP gas.
“Domestic gas is allocated to various sectors based on guidelines issued by the government from time to time. Though policies broadly have similar order of priority, there are certain ambiguities and anomalies and inconsistencies, which are required to be removed in order to rationalise the gas utilisation policy. The proposal would be sent to the Cabinet shortly,” a government official privy to the development told FE.
In the revised policy, city gas for transport and domestic cooking gas (piped gas) tops the priority list, followed by plants providing inputs to strategic sectors of atomic energy and space research.
The rest of the hierarchy includes: gas-based urea plants, power stations supplying to state-run discoms and gas-based LPG plants.
“Strategic sectors such as atomic energy and space research, where absolute requirement is not very high in quantitative terms, but whose need has to be fulfilled on topmost priority, are not getting non-APM and NELP gas due to lower priority accorded to them,” said the official.
On August 23, 2013, an empowered group of ministers (eGoM) during the previous UPA rule, decided that incremental production of NELP gas will be allocated to the power sector after first ensuring supply of 31.5 mmscmd to the fertiliser sector.
Now, the NDA government under petroleum minister Dharmendra Pradhan wants to ‘remove these anomalies’ and rationalise the gas utilisation policy.
In 2013-14, both government and private sector oil and gas exploration companies produced 76.7 million metric standard cubic metre per day (mmscmd) of gas. This was nearly 70% less than the total allocated volumes of 243 mmscmd.
Last fiscal year, fertilizer plants received 29.79 mmscmd; gas-based power plants got 25.59 mmscmd, while LPG plants received 1.83 mmscmd. Petrochemical plants received 3.32 mmscmd while refineries got 1.89 mmscmd and steel plants 1.32 mmscmd.
(Source: The Financial Express, February 18, 2015)
CRUDE DEMAND TO STAY MUTED, PRICE MAY DIP TO $35-40BBL
MUMBAI: The recent rally in crude prices from $40 lows is not a trend reversal as demand would be muted in 2015 amidst surplus in the market, one of the world’s leading oil experts has said. Oil prices could drop again to $35-$40 per barrel, Fereidun Fesharaki, chairman of the global consultant Facts Global Energy told ET in an exclusive interview.
Crude oil prices have plummeted almost 60% since June due to oversupply but has rallied in recent weeks to touch $60 a barrel for the first time in 2015. Calling the recent rally a “blip“, Fesharaki said he expects prices to remain muted but dismisses the view in some section of the market that crude oil prices could fall up to $20 per barrel.
“I think it can go down to $35-40 a barrel levels. I don’t believe in the $20 theory . Although it is not impossible that it may touch $20 for a few days but it can’t stay there. It can go up to $35-40 and stay there for a few months,“ he said.
The Organization of Petroleum Exporting Countries, primarily Saudi Arabia, is reluctant to cut production and so is Iraq, which is trying to increase revenue after years of neglect, war and destruction. Fesharaki believes that Saudis are primarily motivated by concerns over the potential threat from US Shale gas and very little to do with the geopolitical factors.
“There is more supply than demand. We are storing onshore and offshore and running out of space. In the second quarter, when the seasonal demand is down, we could see another major drop in the price,“ he said. “The idea of looking for stable prices is a false ambition. Stable prices exist only if someone is fixing the prices. So the world will see for the next few years crude in the range of $50-$80. This would be a volatile market,“ he said.
The fall in crude oil prices has benefitted India with its trade deficit hitting an 11-month low in January at $8.3 billion. When asked if he expects the Indian government to cut investment on oil exploration and production activities due to weak crude prices, Fesharaki said “They are not doing it anyway .The key issue in India is the gas pricing of the government is regressive. Nobody is doing anything anyway .“
He said the government’s decision to fix gas prices at $5.6 per mmbtu, even lower than the $8.4 approved by the previous government would discourage investments.
(Source; The Economic Times, February 18, 2015)
OIL MIN CLEARS DEVELOPMENT OF OIL & GAS DISCOVERIES
New Delhi: The ministry has used the flexibility granted by the Cabinet in October 2014 in deciding on timelines for development of oil and gas discoveries to clear as many as 30 pending cases.
This would enable early monetisation of oil and gas discoveries in two blocks each of Gujarat State Petroleum Corp (GPSC) and Oil and Natural Gas Corp (ONGC) and one of Focus Energy, according to a note by upstream regulator DGH.
This is expected to result in exploitation of about 34.06 million barrels of oil and about 0.731 trillion cubic feet of gas reserves valued at about Rs 35,000 crore considering oil price of $50 per barrel and gas price of $5.61 per million British thermal unit.
“This will also help in probing additional reservoir and submission of robust field development plans. The estimated reserves of the discoveries where additional probing has been allowed is to the tune of about 172.34 million barrel of oil and 1.934 Tcf of gas reserves as assessed by the operators valued at more than Rs 116,000 crore,” it said. The Cabinet had provided operational flexibility in enforcing contracts by way of relaxing some of timelines prescribed for discoveries so that exploration and production (E&P) activities do not suffer on account of excessive rigidity in decision making.
The Production Sharing Contract (PSC) between the government and the explorer has rigid timelines for each stage of exploration and actions have been initiated against firms even if deadlines are missed by a day. Three-to-six month extension in the current 18-60 month timeframe for submission of declaration of commerciality (DoC) of discoveries, a prerequisite before investment plans can be finalised, has been approved, the note said. Also, the deadline for submission of investment plan for the discoveries too would be extended by up to six months.
The PSC provides for time period for submission of field development plan (FDP) for hydrocarbon discovery after DOC. There is no provision in the PSC for extension of this time period and non-acceptance of FDP due to late submission results in non-monetisation of discoveries.
Also, upstream regulator DGH has been given flexibility to accept discoveries for which operators had failed to provide prior notification to the government.
(Source: Millennium Post February 18, 2015)
OIL HUNT HURDLES OFF
New Delhi: The oil ministry has cleared the development of oil and gas finds worth about Rs 150,000 crore, ending months of logjam over discoveries mired in contractual disputes.
The move will enable early monetisation of discoveries in two blocks each of Gujarat State Petroleum Corporation and ONGC and one of Focus Energy, according to a note by the Directorate General of Hydrocarbons (DGH).
This is expected to result in the exploitation of about 34.06 million barrels of oil and 0.731 trillion cubic feet (tcf) of gas reserves valued at about Rs 35,000 crore at a price of $50 per barrel of oil and $5.61 per million British thermal unit (mBtu) of gas.
The ministry has used the flexibility granted by the cabinet in October to decide on the timelines for the development of discoveries to clear as many as 30 pending cases.
“This will also help in probing additional reservoir and submission of robust field development plans. The estimated reserves of the discoveries where additional probing has been allowed is to the tune of about 172.34 million barrel of oil and 1.934 tcf of gas reserves as assessed by the operators valued at more than Rs 116,000 crore,” it said.
The cabinet had given operational flexibility in enforcing the contracts by relaxing the timelines for discoveries so that E&P activities do not suffer on account of excessive rigidity in decision-making.
The production-sharing contract between the government and the explorer has rigid timelines for each stage of exploration and actions have been initiated against companies even if deadlines are missed by a day.
The DGH note said a 3-6 month extension in the current 18-60 month time frame for the submission of declaration of commerciality (DoC) of discoveries – a prerequisite before investment plans can be finalised – had been approved.
The deadline for the submission of investment plan, too, will be extended by up to six months.
(Source: Telegraph February 18, 2015)
DELHI MAKES INDO-BANGLA PETROLEUM PIPELINE DETOUR
India has chosen a route different from the one selected by Bangladesh for the onshore pipeline to carry petroleum fuels from India’s Numaligarh refinery, which will hand down to Dhaka huge works, a top official said. Both the sides short-listed the routes from initial four options proposed by the Indian state-run Bharat Petroleum Corporation Ltd (BPCL). Director for Operations and Planning of Bangladesh Petroleum Corporation (BPC) Mosleh Uddin disclosed the latest developments to the FE.
The cross-border pipeline has been planned to carry petroleum products from BPCL’s Numaligarh refinery in Assam into oil- storage tanks of the state-run BPC at Parbatipur in northern Bangladesh. He said the length of the pipeline route that Bangladesh has selected would be of 145.63 kilometres, of which 75 kms would fall in Bangladesh territory and the remainder in India’s. The BPCL-selected pipeline would be of 129 kms in length, of which only 5 kms would be within Indian territory while a long 124-km portion within Bangladesh, said the BPC official.
“We shall select one pipeline route after necessary scrutinising,” Mosleh Uddin said. He said a feasibility study would be carried out on the selected one before initiating construction work on the pipeline. If established, it would be the first cross-country pipeline to carry any sort of energy between these two neighbouring countries in South Asia. The BPCL authorities earlier had proposed four routes to BPC after carrying out a preliminary survey to select a final pipeline route for construction of the cross-country pipeline to facilitate fuel import from India.
Both the state-owned petroleum companies of Bangladesh and India agreed earlier to build together the first trans-border oil pipeline between them that will initially pump 300,000 tons of diesel per year from BPCL’s Numaligarh refinery into Bangladesh. Officials from the two state-owned corporations have held discussions several times over the proposed pipeline and agreed to go ahead with the project for execution. “Both BPC and BPCL have agreed to invest in the project,” said the BPC official. If everything goes according to plan, BPC might start importing refined oils from Bharat Petroleum’s refinery in India’s northeastern Assam state within 2016.
The BPCL has 61.5 per cent stake in the 3.0 million-ton-per-year-capacity Numaligarh refinery located near Bangladesh’s northeastern frontier. Oil India Limited has 26 per cent stakes and the government of Assam has 12.35 per cent with the refinery. Once implemented, the pipeline is expected to reduce Bangladesh’s oil-import cost and time, as well as transportation losses. BPC, Bangladesh’s sole oil importer, is planning to initially import around 300,000 tons of diesel annually from the refinery, which could potentially increase more than threefold to 1.0 million tons a year within three to four years, said the BPC official.
(Source: The Financial Express February 18, 2015)
INDIAN REFINERS SUFFER ON INVENTORIES, BUT OUTLOOK POSITIVE
SINGAPORE: The drop in oil prices led to hefty inventory losses for India’s three state-owned oil refiners for the October-December quarter — the third quarter of fiscal 2014-2015 — which pulled down refining margins and was a drag on profits.
India’s largest state-owned refiner Indian Oil Corp. reported inventory losses of Rupees 115 billion ($1.85 billion) for the period and Bharat Petroleum Corp. Ltd. reported an inventory loss of Rupees 16.6 billion. The third refiner, Hindustan Petroleum Corp. Ltd., did not reveal its inventory loss.
According to Credit Suisse, the three refiners booked a combined inventory loss of Rupees 171 billion for the quarter — eroding a large 17% of book value.
Credit Suisse said that IOC was hurt much more than the other two because 70% of its refining capacity is inland and requires higher inventories.
The refiners, however, benefited from the deregulation of diesel prices.
This not only led to a drop in their under-recoveries — cost incurred from selling oil products at below market prices, but they were also fully compensated for the under-recoveries by the government and state-owned upstream companies.
BPCL’s under-recoveries stood at Rupees 34.1 billion in the quarter, down 65% year on year; IOC’s was Rupees 90 billion, down 56% year on year; and HPCL’s was Rupees 35.9 billion, down 61% year on year.
“For India’s oil marketing companies, we note market concerns on subsidies have not been this low for many years. Oil prices are currently low, diesel is de-regulated, and direct transfer for LPG has begun. More importantly, the government is decisive, and seems intent on introducing more reforms,” Nomura said in a recent note.
Nomura added that though the companies have reported inventory losses for the quarter, it expects the companies to start reporting better numbers once the oil price decline stops, owing to better marketing margins and lower interest costs.
Interest costs have fallen sharply due to overall lower debt levels, it said.
In the past, refiners have had to rely on interest-heavy short-term borrowings to meet their working capital requirements while they waited for the government to compensate them for their under-recoveries. But the new government, which came into power last May, has made an effort to compensate refiners for their under-recoveries on time, thus reducing their need to rely on bank borrowings.
Credit Suisse also said it was positive on India’s state-owned refiners, owing to the decent marketing margins the companies are able to make on their fuels post diesel deregulation.
IOC’s gross refining margin for the April-December period — the first nine months of fiscal 2014-2015 — crashed to a negative $2.66/barrel, from a positive $4.97/b a year ago due to inventory losses, the company said last week when it announced its financial results.
BPCL’s gross refining margin in the same period fell 40.5% year on year to $2.08/b, from $3.50/b in the corresponding nine-month period last year.
HPCL also said its gross refining margin from April-December fell 64% year on year to $1.04/b.
The refiners did not give a quarterly breakdown of their refining margins.
As for sales during the quarter, IOC sold 18.43 million mt of refined products over October-December, up 1.4% year on year. BPCL’s sales fell 1.6% year on year to 8.63 million mt, while HPCL’s sales rose 3.2% year on year to 8.06 million mt.
(Source: Platts.com, February 18, 2015)
IOC, HPCL AND BPCL SEE CRUDE AT $70 PER BARREL IN A YEAR
MUMBAI: The three state-run oil marketing companies expect losses on inventory to narrow or even end in the fourth quarter of 2015-16, pegging crude oil prices for the period at $65-70 a barrel, senior company executives said.
Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation together reported an inventory loss of over Rs 17,000 crore in the quarter ended December as crude oil prices plummeted almost 60% since June due to oversupply .
Benchmark Brent crude touched lows of $45 per barrel in January against a high of $115 a barrel last summer. Prices have climbed over the past two weeks to more than $62 a barrel, prompting oil refining companies to increase the retail prices of petrol and diesel for the first time in many months. “We don’t think that levels of $45-50 per barrel are sustainable. We feel crude oil could be in the range of $65-70, going ahead.This, coupled with a likely pick-up in demand in the fourth quarter, could help us,” P Balasubramanian, director finance of BPCL, told ET.
Price changes from the time crude oil is purchased and processed until the time it sold as fuel determines the inventory gain or loss for refiners.
KV Rao, HPCL’s director finance, said he sees crude prices “moderately increasing” to about $65 a barrel by March. “Crude oil prices may not have bottomed out at $45 levels, but it may not fall to $20 a barrel,” Rao said.
“CRISIL expects the oil prices to average at around $57-62 per barrel in 2015. In this context, the likelihood of inventory losses for oil refiners as well as downstream processors, manufacturers and traders is low,” said Somasekhar Vemuri, senior director of CRISIL Ratings.
While some industry experts see crude oil prices increasing, others predict prices will decline as supply remains high and demand growth prospects look weak.
Last week, Citigroup reduced its forecast and said oil may fall to $20 a barrel before prices begin to recover. Citigroup said prices may fall to that point by the end of the first quarter or the beginning of the second quarter of calendar year 2015.
(Source: The Economic Times, February 18, 2015)
LOWER SUBSIDY BURDEN TO BOOST OMCs GROWTH
The quarterly results of the three oil marketing companies — Indian Oil, BPCL and HPCL — turned out to be a mixed bag, thanks to inventory losses. BPCL came out unscathed while HPCL managed fairly well, but, the largest of them all, Indian Oil, ended up with hefty losses.
Going by the performance so far, Indian Oil’s net profit is likely to fall below the combined profits of BPCL and HPCL for the first time ever in FY15. In spite of being the industry leader, Indian Oil has consistently under-performed its peers. The 27 per cent growth in IOCL’s share price over the past one year was way below the Sensex return of 44 per cent. During the period, BPCL shares doubled and HPCL share generated 167 per cent returns. Lower subsidy burden to boost OMCs growth The results for the October-December, 2014 quarter reflect the problems that Indian Oil is facing (compared to its peers). Bharat Petroleum emerged as the only profit-making company with net profit of Rs 551 crore for the October-December 2014 quarter while HPCL’s net loss stood at Rs 325 crore. As against this, Indian Oil’s net loss was Rs 2,637 crore. As a result, both BPCL and HPCL have reported profits for the 9-month period April-December 2014 while Indian Oil logged losses. The deregulation and timely subsidy payments have reduced the trio’s interest burden substantially during the October-December 2014 quarter.
But, Indian Oil’s performance lagged with just 26 per cent YoY reduction in interest costs to Rs 929 crore as against 60 per cent reduction achieved by BPCL to Rs 120 crore and 34 per cent reduction achieved by HPCL to Rs 237 crore during the October-December 2014 quarter.
With the oil prices lower and retail auto fuel prices deregulated, the government has cut down part of the subsidy burden, which was down nearly 50 per cent for the December 2014 quarter from the year-ago period. As against this, the discounts extended by upstream companies (like ONGC, Oil India and GAIL) were down 32 per cent to Rs 10,900 crore. This was on expected lines as the government tries to meet its fiscal deficit target for 2014-15.
The road ahead appears bright for the trio with the government’s resolve to end blanket subsidy on fuels. As the share of products that are sold at the market price rises, the companies will have better financial health, which could support modernisation and expansion initiatives.
(Source: The Economic Times, February 18, 2015)
OMCs: FULL BENEFITS OF DIESEL PRICE DEREGULATION LIKELY FROM FY16
MUMBAI: Oil marketing companies namely, Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) have already started reaping the benefits of diesel price deregulation, which led to lower interest burden in the December 2014 quarter.
Interest costs reduced between 26% (IOC) to 61% (BPCL) year-on-year in the quarter, supporting bottom-line of the oil marketing companies (OMCs). Lower under-recoveries and full compensation by both government as well as upstream companies towards subsidy (the loss on selling diesel below cost price) also helped. However, high inventory losses (due to sharp fall in crude oil price) along-with forex losses impacted profits of all the OMCs in the quarter.
BPCL was the only one of the three companies to report net profit in the quarter. While HPCL witnessed a significant 81.2% year-on-year fall in net loss to Rs 325 crore, IOC’s net loss stood at Rs 3,069 crore up 123% over the year ago period.
The bad news though is likely to end here as these companies’ profits will be driven by higher marketing margins. “Weak crude will give OMCs an opportunity to expand their marketing margins. With low competition risk, OMCs’ profits could expand substantially, going ahead”, believe analysts at Axis Capital. The full benefits of diesel price deregulation are likely to kick in over FY16 and FY17. Analysts at Deutsche Bank expect gross under-recoveries of OMCs to fall by 72-75% by FY17 as compared to FY14. In this backdrop, most analysts remain bullish on all the OMCs.
While overall profitability will improve for IOC as interest costs and under-recoveries come down, divestment will remain a key overhang on the stock. Analysts believe, the company’s GRMs are likely to improve post commercialisation of its Paradip refinery which is also the most complex PSU refinery in India. At 1.1 times FY16 estimated book, the IOC stock trades at a 12% discount to its historical average one-year forward price/book value ratio of 1.2 times.
HPCL is highly levered to expanding marketing margins. Notably, every 50 paise/litre expansion in petrol/diesel margins could add 50% to HPCL’s earnings per share as against 20-25% in case of IOC and BPCL, estimate analysts. In addition to the lower subsidy burden, HPCL’s debt is likely to reduce further as large part of its refinery upgradation capex is over. The stock currently trades at 1.1 times FY16 estimated book value, which is slightly higher than its historical average one-year forward price/book value ratio of about one times.
Even though BPCL’s downstream business will benefit from oil reforms, the exploration and production (E&P) business could witness near-term softness on the back of lower crude oil prices. However, announcement around positive developments in the E&P business could act as a key catalyst for the stock. Analysts expect BPCL’s return on equity (RoE) ratio to rise from 16.8% in FY13 to 20% in FY17 on the back of fuel price reforms. The stock though seems to price in most positives and is trading at 2.2 times FY16 estimated book.
(Source: Business Standard, February 18, 2015)
SIC DIRECTS HPCL TO ALLOW INSPECTION OF DUMPING SITES UNDER RTI
SRINAGAR: The State Information Commission (SIC) has directed Hindustan Petroleum Corporation Limited (HPCL) to allow inspection of its LPG dumping sites in Srinagar and Budgam by an information seeker under the provisions of State RTI Act.
The direction came after an RTI application filed by Dr. Raja Muzzafar Bhat who in his appeal had highlighted that most of the dumping sites of oil marketing companies in J&K are located in populated areas.
Bhat had filed application dated 13-05-2014 before Senior Regional Manager who is also the Central Public Information Officer (CPIO), Hindustan Petroleum Corporation Limited, Bari Brahmana Jammu.
Bhat had sought details of retail LPG outlets allotted in various areas of Srinagar and Budgam districts from 2011 to May 2014. The information seeker had asked for permission to inspect LPG dumping sites in Srinagar and Budgam under the provisions of section 2 (i) of J&K RTI Act, 2009.
However, he was denied the permission and was also not provided requisite information. Dr Bhat filed 1st appeal before the First Appellate Authority (FAA) i.e Executive Director LPG , HPCL.
The appeal was not heard by the FAA and the case landed in State Information Commission. Bhat alleged in his 2nd appeal that the Senior Regional Manager cum CPIO of HPCL Jammu did not discharge his statutory obligation to furnish the requisite information within the prescribed period of 30 days and thus committed a willful default within the meaning of the J&K RTI Act.
The main contention of the appellant in his 2nd appeal was that the HPCL is guilty of allowing dumping sites in densely populated areas of Srinagar and Jammu cities and has thus put on risk the life and property of thousands of innocent citizens and as such the information sought for is of utmost public importance and the respondents can no longer absolve themselves from the statutory responsibilities of providing the information.
“The Commission in its wisdom believes that nobody should be condemned unheard and an appellant should be given adequate and reasonable opportunity of being heard before arriving at just conclusion while disposing of a matter. In the given circumstances the CPIO (Sr Regional Manager) and Executive Director LPG of HPCL (First Appellate Authority) are hereby directed to send another set of information to the information seeker free of cost under a registered cover at his residential address given in the RTI application within one week from the date of pronouncement of this order,” SIC said in its order.
“The CPIO is further directed to allow the appellant an opportunity to inspect all the dumping sites of LPG outlets in various areas of Srinagar and Budgam districts. The parties are at liberty to settle the date and time for inspection of the dumping sites,” the SIC said.
(Source: Greater Kashmir, February 18, 2015)
INDIAN OIL TO ROPE IN IDFC AND ICICI AS PARTNERS FOR ENNORE LNG TERMINAL
NEW DELHI: Government-owned refiner and oil marketing company Indian Oil Corporation (IOC) will rope in financial institutions IDFC and ICICI as strategic partners for its proposed Rs 5,151 crore liquified natural gas (LNG) terminal at Ennore in Tamil Nadu, two sources in the know told FE.
“The joint venture company has been set up. The issue to rope in IDFC and ICICI as strategic partners would be placed before the board shortly.
The exact stake of each partner would be finalised in the next few days,” said one of the sources.
B Ashok, chairman of IOC, said the PSU would hold 50% stake in the JV project, while other partners would have the rest. He however, did not divulge the name of the strategic partners IOC is negotiating with. Tamil Nadu Industrial Development Corporation (Tidco), a state government agency, would also have a marginal stake.
In 2014, IOC’s board gave its go-ahead for the 5 million tonne per annum (mtpa) terminal at Ennore in the Kamarajar Port. This is line with the company’s long-tern strategy eyeing bigger business in gas marketing in its endeavour to diversify and grow as an integrated energy company.
The government-owned company is in talks with as many as 12 players including Russia’s Gazprom to tie up long-term LNG supply and offer equity participation too. “We are talking to Gazprom to buy about 2.5 mtpa of LNG on long-term deal. There is also an option to offer equity participation. Both could be a combined deal, as it happens globally. But nothing is finalised till now,” said the second source.
With PM Narendra Modi expanding business ties with Russia and following President Vladimir Putin’s visit to New Delhi, Gazprom, the largest gas company, is aggressively looking for ‘big deals’ in the Asian nation. At present, GAIL (India) has entered into a deal to source 2.5 million tonne a year of LNG from Russia starting 2020.
Reading, UK-based Foster Wheeler has been chosen by IOC as the project consultant for the Ennore terminal. With statutory approvals in place, the terminal is expected to be operational by 2018. For evacuation of gas, the PSU firm is looking at connecting the terminal through pipelines to Tiruchi, Nagapattinam and Madurai in Tamil Nadu and further extending it to Chittoor in Andhra Pradesh and Bangalore in Karnataka.
In FY14, IOC bought about 3.41 million tonne of R-LNG. Of this, 45% was consumed internally, while 55% was marketed. “Our long-term strategy is that we should be marketing about 10 million tonne per annum by 2022. We have many things in plan; we have our eyes focused on 2-3 more LNG terminals,” Debasis Sen, director (planning and business development) of IOC, had said in a recent interview to FE.
In March 2014, IOC announced buying a 10% stake in Petroliam Nasional berhad (Petronas) Canadian gas project, which would offer the Indian firm 1.2 mtpa of LNG for exports for 20 years.
(Source: The Financial Express, February 18, 2015)
NRL, HPCL WIN MATCHES
GUWAHATI: NRL rallied to beat EIL 2-1 while HPCL defeated IOC (AOD) 2-0 in two group league matches of the PSPB Inter Unite Football Tournament at the SAI Regional Centre ground here today.
In the first encounter Tonmoy Sing put the Engineers ahead in the 25th minute and maintained the lead till the break.
But K Kalindi drew parity in the 48th minute and later B Sonowal fired the match winning goal for NRL in the 53rd minute.
Sankadip Sarkar netted the first goal for HPCL in the 41st minute and Binoy Das completed the tally in the 54th minute.
(Source: Assam Tribune, February 18, 2015)
ONGC’S NET REALIZATIONS MAY FALL TO THE LOWEST SINCE 2003-04
MUMBAI: Oil and Natural Gas Corp. (ONGC), India’s biggest state-owned oil and gas explorer, may see its net realizations fall to the lowest since the time it started bearing part of the subsidy burden to compensate the losses made by oil marketing companies (OMCs) in 2003-04.
Gross realisation for ONGC is the market price that it would earn if it sold crude oil in the open market, and net realisation is the price that it earns after the subsidy share is deducted from it.
In the first nine months of the current fiscal, ONGC’s net realization has fallen to $41.36 per barrel, according to a company note released on 14 February. This is close to the net realization of $41 per barrel earned during the last fiscal year— which was the lowest realization ever reported by ONGC.
Realizations fell sharply in the October-December quarter due to low crude prices and a bigger than expected share of the subsidy burden that ONGC had to bear.
As a result, realizations fell to $35.57 per barrel. Global crude oil prices averaged $76 per barrel during the quarter.
ONGC paid `9,458 crore (or $40.43 per barrel) to the government during the quarter as its share of subsidies.
Analysts do not want to hazard a guess on what the full year net realizations will settle at, and say that a lot will depend on how much subsidy ONGC has to pay in the final quarter.
“We believe it is high time clarity on the upstream subsidy mechanism is announced by the centre, as 4Q (fourth quarter) gross realisations average below $60/bbl (per barrel). The 3Q (third quarter) experience clouds both clarity and the government’s intention on subsidy reforms,” said Antique Stock Broking Ltd in a report released on Monday.
According to the Antique report, contrary to expectations of a new formulae-based sharing (with zero subsidy till $60 per barrel crude oil price and a subsidy burden of 85-90% from $61-100 per barrel under implementation from third quarter onwards) the government imposed a burden of `10,900 crore on upstream companies and kept its own share at ` 5,090 crore. The total subsidy for the quarter was at `15,980 crore.
As a result, net realizations fell to an “abysmal” level of $36-38 per barrel for ONGC and Oil India Ltd (OIL), said the report.
To be sure, the subsidy share demanded by the government has been varying from quarter to quarter and there has been no guidance on what the company would be asked to shell out in the final three months of the fiscal.
According to the company’s note, the subsidy burden borne by it in the third quarter shaved off revenues by `9,458 crore and its profit after tax by `5,386 crore. While this was lower than the impact witnessed by the company in the last fiscal, considering the crude price fell to an average of $76 per barrel, the impact of subsidy was more pronounced in the current quarter.
“Upstream contributed nearly 70% (and ONGC: 60%) of Q3FY15 under recoveries, which was a major disappointment given that realisations were strained due to lower oil prices,” said Jal Irani and Yusufi Kapadia from Edelweiss Securities Ltd in a note released on 13 February.
A 16 February note by Nomura Securities International, Inc. on ONGC pointed out the brokerage’s ‘Buy’ rating on the company is primarily based on the government deciding on a remunerative subsidy-sharing formula.
“Although the decision is further delayed, we continue to believe that the government will have to decide soon. Early subsidy-sharing clarity remains the key trigger, apart from further strength in oil prices,” the note said.
The highest realizations reported by ONGC was in the second quarter of fiscal 2012, when it earned $83.71 per barrel. At the time, crude prices averaged $116.94 per barrel and subsidy share per barrel was at $33.24.
(Source: Mint, February 18, 2015)
CONNECTIONS BLOCKED, SAY LPG CONSUMERS
CHENNAI: Several LPG consumers who have not signed for the Pahal scheme say their connections have been blocked. They have been forced to visit the local offices to unblock their accounts.
A resident of Anna Nagar realised his connection was blocked when he tried to book a refill through the IVRS (Interactive Voice Response system). “Only connections that have not been used for over six months are blocked, but I use mine every month,” he said adding that officials said connections were being blocked to avoid last minute rush near the deadline of the Pahal scheme on March 31.
An LPG dealer admitted that connections were being blocked by one of the oil companies.
“Dealers have no hand in this. We have made a list of those who have not joined,” he said.
Agencies have been sending SMS and asking delivery boys to hand out application forms to people who have not yet joined the Pahal scheme.
Oil company sources said connections may have been blocked ‘by mistake’.
“Only connections that remain unused are blocked. We have received instructions from the Central government not to block connections for those who have not joined the scheme,” said a source.
(Source: Hindu February 18, 2015)
OIL TOUCHES $62, BUT SLIDES AGAIN
London: Oil slipped below $61 a barrel on Tuesday, dragged lower by weakness in some other commodity markets, although threats to West Asia crude supplies and expectations lower prices may prompt a slowdown in US output limited the fall.
Silver fell by up to 5 per cent and gold snapped a three-day rally. Investors in those commodities remained cautious after a breakdown of debt talks between Greece and euro zone finance ministers.
“I think it all started in silver with squeezing out of long positions, then spilled over to gold and then to oil,” said Carsten Fritsch, commodities analyst at Commerzbank.
Brent crude was at $62.00 a barrel by 1101 GMT but fell to $60.73 by 1504 GMT. It reached a 2015 high of $62.57 on Monday. US crude was 43 cents higher at $53.21 a barrel, before falling to $51.39.
Lending support to oil earlier, Egypt on Monday bombed Islamic State targets in Libya, where violence has reined in most oil output. Iraq’s semi-autonomous Kurdistan Regional Government threatened to withhold oil exports if Baghdad failed to send its share of the budget.
Oil prices collapsed in the second half of 2014 on oversupply. The Organization of the Petroleum Exporting Countries refused to cut its output, choosing to defend market share against US shale oil and other competing sources.
Brent has still jumped by about 35 per cent in the last four weeks, supported by a sharp fall in US oil drilling. It had reached $45.19 on January 13, the lowest in almost six years, down from $115 in June.
The threat to Iraq’s northern exports from the revenue dispute arises as bad weather has cut Iraq’s southern shipments this month.
With risks to West Asia supply back on the market’s radar, International Energy Agency Chief Economist Fatih Birol warned the rise of Islamic State presented a major challenge for the investment necessary to prevent an oil shortage in the next decade.
Even so, some analysts see the rally as overblown because the market remains oversupplied. Crude inventories in top consumer the US have hit record highs for the last five weeks.
“US refinery outages, through seasonal maintenance and industrial action, will weaken US crude demand, exacerbating the crude stock excess in the near term,” BNP Paribas analysts Gareth Lewis-Davies and Harry Tchilinguirian said in a report.
(Source: Business Standard February 18, 2015)