Centre’s 22.5% ethanol in petrol plan causes alarm
The central government’s plan to increase blending of ethanol with petrol to 22.5% from existing 10% is causing alarm among petroleum dealers and also vehicle users. City’s dry and high temperature weather is said to be not suitable for using ethanol blended petrol. TOI on Saturday had highlighted ethanol in petrol converting into water. Vidarbha Petroleum Dealers Association took up the issue with district administration after oil Companies turned a deaf ear to their complaints. City MP and union minister for road transport and highways Nitin Gadkari had announced many times about the Centre’s plan to take ethanol blending in petrol upto 22.5% soon. President of Vidarbha Petroleum Dealers Association Harvinder Singh Bhatia told TOI doing that will create havoc. “Already petroleum dealers and consumers are facing severe problems with ethanol getting converted into water in underground tanks at petrol pumps. Consumers are alleging that petroleum dealers were mixing water in petrol. Almost all dealers are receiving complaints. Centre should drop the plans of increasing ethanol blending in petrol,” he said. Bhatia added that oil companies should not permit ethanol blending with petrol in Vidarbha due to high humidity here. “Ethanol is hygroscopic (attracts moistureand converts into water. High humidity is common in city. Ethanol blending will cause problems not only during rainy season but throughout the year except one or two winter months,” he said. Bhatia also said the petroleum dealers from other parts of the nation too were facing same problems and complaining to the oil companies. One dealer Amit Gupta said oil companies should not sell ethanol blended with petrol unless infrastructure suitable for it was available in the region. “Infrastructure, right from depots, oil tankers, underground storage tanks at pumps to fuel tanks in vehicles, is totally different for ethanol blended fuel. We do not have it right now,” he said. Gupta claimed ethanol damaged existing vehicles running here. “It is highly corrosive and damaged silencer and rubber material used for joints in engines. Parts in existing vehicles cannot sustain blended petrol. We can see silencers in most vehicles getting corroded sooner these days, especially since blending was increased to 10%,” he said. RTI activist and executive member of Akhil Bhartiya Grahak Panchayat, local chapter TH Naidu said it was a serious issue and citizens needed to fight against the Centre’s move. “I will take up the issue with panchayat office bearers. District administration cannot run away from it. It is the responsibility of the district administration to safeguard consumers and prevent loss to them,” he said.
Higher oil prices key for state-run oil producers
Shares of state-run oil producers Oil and Natural Gas Corp. Ltd (ONGC) and Oil India Ltd (OIL) have risen about 5-6% year-to-date. That falls short of an about 10% increase seen in the benchmark Sensex. Lower crude oil and gas prices, along with unexciting production trends, have kept sentiments low for these stocks. According to some analysts, things may soon get better. Spark Capital Advisors (India) Pvt. Ltd pointed out in a report on ONGC recently that crude oil prices are likely to head towards $60 a barrel over the next 12-18 months, led by ongoing capex (capital expenditure) and production cuts across the E&P (exploration and production) industry, a potential supply freeze by members of the Organization of the Petroleum Exporting Countries over the next 12 months, likely narrowing of excess supplies and stabilization of prices from the latter half of the current fiscal year. Needless to say, higher oil prices are key for investor sentiment to revive in these stocks. The recently announced June quarter results of these companies reflect the impact of lower crude oil prices. Net price realizations of both companies declined year-on-year. ONGC and OIL’s net realizations declined 22% and 25% to $46.1 a barrel and $43.09 a barrel, respectively. But that was on expected lines. The measure was higher sequentially, helped by a recovery in broader crude oil prices after touching lows earlier in 2016. As expected, the drop in realization led to a drop in profits. ONGC’s Ebitda (earnings before interest, tax, depreciation and amortization) declined 23% to Rs 93.90 billion. This excludes exploration costs that were written off. Again, ONGC’s Ebitda was above some analysts’ estimates owing to lower-than-expected other expenses. OIL’s Ebitda declined 29% to Rs 8.63 billion. On the flip side, production performance is far from encouraging. ONGC’s crude oil production declined 2% year-on-year and was flat compared to the March quarter. OIL’s crude oil production declined 4.6% over last year’s June quarter but was 2.8% higher than the March quarter. To be sure, ONGC subsidiary ONGC Videsh Ltd’s (OVL’s) production increased 12% year-on-year but that includes volumes from its stake purchase in Vankor (JSC Vankorneft), Russia. Of course, higher production from Vankor should help to some extent. For fiscal year 2016, OVL reported a net loss of Rs 20.94 billion against a net profit of Rs 19.04 billion in FY15, as low crude oil prices caused tremendous grief. ONGC and OIL both currently trade at about 12 times their estimated earnings for this fiscal year. Even as valuations appear undemanding, as mentioned earlier, higher oil prices are essential for improving sentiments for both stocks. Improving production will be a bonus. Dan Hampton Authentic Jersey
Land acquisition affecting IOC’s pipeline projects
Indian Oil Corp. Ltd’s (IOC) pipeline projects are facing problems due to issues related to land acquisition, according to Anish Aggarwal, director-pipelines at India’s largest refining company. This comes in the backdrop of the public sector unit constructing 20 pipelines at an investment of Rs.200 billion to be operational by 2022. “Land acquisition is causing a problem for our linear projects,” said Aggarwal. The issue assumes importance given the role envisaged for IOC’s pipeline network to improve the energy access for India’s citizens. IOC has a network of 11,746km at present which is expected to go up to around 17,000km, thereby increasing the throughput capacity from 85.5 million ton per annum (mtpa) to 102 mtpa. Of this, 4,867km transports crude oil, 6,739km is used for product transportation and 140km is meant for gas. Newswire agency Reuters reported on 14 September about IOC’s goal to generate 15% of revenue from its gas supply and distribution business by 2021 from the current level of 5%. IOC has a refining capacity of 80.7 mtpa through its 11 refineries and accounts for 35% share of India’s refining capacity. Pipelines will have to play an important role in helping India achieve the target of natural gas contributing 15% to India’s energy mix from the current level of 6.5%. According to petroleum planning and analysis cell, India currently has a gas pipeline network of 16,250km with a capacity of 386.53 million standard cu. metre and a pipeline grid of 12,687km. Experts believe that the land acquisition requires immediate attention. “Land acquisition has been a serious problem. A lot of projects are stalled because of this and these can only be resolved with government intervention,” said Raju Kumar, partner-oil and gas at consultancy firm EY. The National Democratic Alliance government also plans to set up a common hub for India’s gas pipelines for market price discovery of natural gas in the country. A gas hub is a physical point where several gas pipelines come together or intersect. It is a trading place for gas at market determined prices. However, it is an ambitious task given the falling domestic production. India’s domestic gas production fell by 4.7% to 31.14 billion cu. metres (bcm) in financial year 2015-16 from 32.69 bcm a year ago. According to a report by consultancy firm EY, India’s 39 cu. metres per capita of natural gas consumption lags far behind the world average of 469 cu. metres. The country’s share of natural gas in the primary energy mix is also far behind the global average especially due to a sharp drop in domestic production. Nevin Lawson Womens Jersey
IOC’s investment plans not to affect credit profile: Fitch
Indian Oil Corporation’s (IOC) Rs 1800 billion capital investment plan over the next six years will not affect the company’s credit profile, Fitch Ratings said. “The large investment plans announced by IOC are in line with the agency’s expectations that are incorporated in the assessment of its standalone credit profile of ‘BB+’. Fitch equalises IOC’s rating with that of its largest shareholder, the state of India, due to their strong operational and strategic linkages,” it said in a statement here. IOC, on September 15, had said its capex would be Rs 1700-1800 billion over the next six years, including around Rs 150 billion in the current fiscal and around Rs 250 billion each in 2017-18 and 2018-19. Fitch said it has already factored in most of the capex over the next three years and sees no significant change to its current expectations as a result of this announcement. “We continue to expect IOC’s free cash flow to remain negative over the medium term due to the high capex,” it said. “However, we still expect IOC’s financial profile to remain stable due to strong volume growth and relatively robust refining margins.” The rating agency said it expects IOC’s credit metrics to weaken marginally, but to remain within levels commensurate with its stand-alone profile over the medium term. Fitch said it has not factored in IOC’s investment in the proposed mega refinery project in coastal Maharashtra though. This project is planned along with the other state-owned oil-marketing companies -Bharat Petroleum Corporation Ltd and Hindustan Petroleum Corporation Ltd. “We anticipate no major investments associated with this project in the medium term, given the early stages of the proposed project. Fitch will take into account IOC’s investment share in the proposed project once there is more clarity and certainty on time and quantum of the investments,” the statement added. Sean Lee Womens Jersey