India’s Light Combat Aircraft Advances with New Order
India’s Ministry of Defense has cleared an order for 83 Light Combat Aircraft (LCA), designated Mk1A, from government-owned defense manufacturer Hindustan Aeronautics Ltd (HAL) for the Indian Air Force (IAF). HAL currently has in hand an order for 40 GE F404-engined LCAs for the IAF. Of the 20 to be produced with an initial operational clearance, three have been delivered and the fourth is scheduled to be handed over by early next year. Twenty more will be supplied once they receive the final operational clearance (FOC) by end of 2017. HAL says it will increase production from eight to 16 a year “once a formal order is received for the 83 Mk1As.” IAF Air Chief Marshall Arup Raha said last year: “We want the LCA Mk1A with an improved radar [Elta’s ELM-2052 AESA or active electronically scanned array], electronic warfare, in-flight refueling and better missiles.” But a privately owned OEM said: “While there is to be joint work between HAL and Elta, we don’t know how much of the Elta AESA will be indigenous.” Other OEMs are interested. For instance, Saab confirmed recently to AIN that it is offering its Gallium Nitride technology, developed in Gothenberg, Sweden, for the LCA, rather than part of its Gripen proposal to India. The LCA Mk2 version, expected to be re-engined from the GE F404 to the F414, is planned for production by 2025. The Indian Navy has expressed its firm requirement for 46 LCA Mk2s that will require a weight reduction of one ton over the Mk1A. Delays to the naval LCA have been attributed in the past to technical complexities; non-availability of infrastructure and critical components and technology denial regimes; extended user trials; and the failure of some of the components during testing.
OPEC output cut could force government to slash excise duty on fuel, bring relief for upstream firms
The latest decision by the Organization of Petroleum Exporting Countries (OPEC) to cut crude oil output to rein in oversupply and prop up prices may have a significant impact for India, experts say. The announcement to slash output by 1.2 million barrel per day may force the government to cut excise duty on fuel, provide relief to upstream firms and also influence the petroleum subsidy budget for the next fiscal. For consumers, the development translates into higher retail prices for petrol and diesel. “The government may continue with fortnightly adjustment in fuel prices until crude reaches $60 a barrel. Beyond that they may want to use the cushion of excise duty and keep the retail prices at a level that will not hurt consumers and fuel inflation,” said Debasish Mishra, Partner at accounting and consultancy firm Deloitte Touche Tohmatsu India. The 14-member global crude oil cartel on Wednesday agreed for the first output cut since 2008 after a mega global glut pulled down benchmark prices to less than $35 per barrel from a peak of $110 per barrel in mid-June, 2014. During the slump, the Modi government had hiked excise duty on petrol and diesel nine times to mop up additional revenue. In all, it raised excise duty on petrol by Rs 11.77 a litre and that on diesel by Rs 13.47. OPEC output cut could force government to slash excise duty on fuel, bring relief for upstream firmsOPEC output cut could force government to slash excise duty on fuel, bring relief for upstream firms – Image Experts also say the production cut from OPEC and the subsequent hike in crude oil prices will come as a relief for the upstream companies including Oil and Natural Gas Corporation (ONGC) and Oil India (OIL). “The upstream segment was taking a major hit in their margins due to historically low crude oil prices,” said Salil Garg, Director-Corporates at research firm India ratings. He added the development may not translate into good news for the downstream refining and marketing companies. “An upward movement in crude will also impact natural gas prices which will increase the cost of production for the downstream segment as many of the crude derivates are used for their own industrial use,” Garg said. Experts also said in the event of a sharp and sustained increase in crude oil prices, the options before the government to cushion the consumers could include asking upstream firms to bear the burden of Oil Marketing Companies’under-recoveries or relieve the refiners through budgetary support. The three OMCs – Indian Oil (IOC), Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL) — suffered Gross Under-Recoveries (GURs) of Rs 7,826 crore on subsidized sales of LPG and Kerosene in the first half of current fiscal alone. The government had budgeted for a petroleum subsidy outgo of Rs 26,900 crore for the current financial year. According to the oil ministry, every $1 increase in crude oil price leads to additional under-recovery burden to the tune of Rs 1,180 crore for the OMCs. While the production cut will impact the government’s calculation of petroleum subsidy outgo for the next year’s budget, analysts stated the impact may be limited. “There will definitely be a slight increase in subsidy requirement for 2017-18 but it is uncertain whether prices will remain increased for a long time,” said K Ravichandran, Senior Vice President at ratings agency ICRA. He cited two reasons for doubting sustained higher levels of crude prices. The OPEC members’ ability to stick to committed production cuts is still to be tested and US shale producers may jack up output in response to increased crude prices. Dominic Moore Jersey
Greece to decide on gas grid sale next week after talks with SOCAR fail
Greece will decide next week how to proceed with the sale of its natural gas grid operator, a key term of its international bailout, after talks with Azerbaijan’s SOCAR collapsed, a source close to the matter said on Thursday. SOCAR agreed to buy a 66 percent stake in DESFA from Greece and its biggest oil refiner Hellenic Petroleum in 2013. But the 400 million euro deal hit a snag when the European Union, on competition grounds, asked it to reduce the stake. The sale ran into further complications last summer when Athens passed legislation raising DESFA’s gas tariffs by a lower amount than SOCAR had expected, eating into its future profit. Since then, Greece and SOCAR have been struggling to salvage the deal. The energy ministry said on Wednesday that talks were inconclusive. Read More: New LNG buyer Pakistan sees strong interest in giant tender for 240 shipments It said SOCAR’s request for a lower price was not legally feasible and would lead to the cancellation of the tender, while other proposals did not comply with European Union rules. “The decisions will be made next week,” the source told Reuters on condition of anonymity adding that there would be consultations with the country’s official creditors, which will help determine whether Athens will relaunch the sale or change the terms of the current tender. The issue is expected to be discussed at a meeting of euro zone finance ministers on Monday in Brussels, which will take stock of Greece’s bailout progress. Speeding up privatisations, which have reaped only 3.4 billion euros since 2010 due to red tape, union and political resistance has been a key demand. SOCAR confirmed on Thursday that the talks had failed. “The parties could not agree on a mutually acceptable commercial mechanism to address the investors’ and the sellers’ concerns,” it said in a statement. Italian gas grid operator Snam was interested in buying a 17 percent DESFA stake which SOCAR planned to sell, in order to comply with the EU competition rules. Snam declined to comment on the failed talks on Thursday. Greece is set to miss its 2.5 billion euro bailout target for proceeds from state asset divestments this year. It is expected to raise only 500 million euros, according to a budget draft which is being debated in parliament. It expects revenue of 2.6 billion euros from the scheme next year, including 188 million euros from the DESFA sale. Matthew Ioannidis Authentic Jersey
Greece to decide on gas grid sale next week after talks with SOCAR fail
Greece will decide next week how to proceed with the sale of its natural gas grid operator, a key term of its international bailout, after talks with Azerbaijan’s SOCAR collapsed, a source close to the matter said on Thursday. SOCAR agreed to buy a 66 percent stake in DESFA from Greece and its biggest oil refiner Hellenic Petroleum in 2013. But the 400 million euro deal hit a snag when the European Union, on competition grounds, asked it to reduce the stake. The sale ran into further complications last summer when Athens passed legislation raising DESFA’s gas tariffs by a lower amount than SOCAR had expected, eating into its future profit. Since then, Greece and SOCAR have been struggling to salvage the deal. The energy ministry said on Wednesday that talks were inconclusive. Read More: New LNG buyer Pakistan sees strong interest in giant tender for 240 shipments It said SOCAR’s request for a lower price was not legally feasible and would lead to the cancellation of the tender, while other proposals did not comply with European Union rules. “The decisions will be made next week,” the source told Reuters on condition of anonymity adding that there would be consultations with the country’s official creditors, which will help determine whether Athens will relaunch the sale or change the terms of the current tender. The issue is expected to be discussed at a meeting of euro zone finance ministers on Monday in Brussels, which will take stock of Greece’s bailout progress. Speeding up privatisations, which have reaped only 3.4 billion euros since 2010 due to red tape, union and political resistance has been a key demand. SOCAR confirmed on Thursday that the talks had failed. “The parties could not agree on a mutually acceptable commercial mechanism to address the investors’ and the sellers’ concerns,” it said in a statement. Italian gas grid operator Snam was interested in buying a 17 percent DESFA stake which SOCAR planned to sell, in order to comply with the EU competition rules. Snam declined to comment on the failed talks on Thursday. Greece is set to miss its 2.5 billion euro bailout target for proceeds from state asset divestments this year. It is expected to raise only 500 million euros, according to a budget draft which is being debated in parliament. It expects revenue of 2.6 billion euros from the scheme next year, including 188 million euros from the DESFA sale. Brent Suter Jersey
Oil companies profitability to remain weak in 2017: Fitch
Fitch Ratings today said natural gas prices in India remain unattractive towards drawing large investments despite liberal exploration terms and higher rates for difficult discoveries. In a report ‘2017 Outlook: Indian Oil & Gas’, Fitch said India’s petroleum product consumption will remain strong at around 5-6 per cent in 2017 but the profitability in the oil and gas exploration and production segment will remain weak. “We believe gas prices remain unattractive towards drawing large investments despite a new hydrocarbon exploration licensing policy that eases regulations, and the government allowing higher gas prices for deep and ultra-deep water and difficult fields,” it said. Fitch expected the operating environment to remain challenging for Indian upstream companies in 2017 at its oil- price assumption of USD 45 per barrel, and low natural-gas prices. Stating that it did not expect any major improvement in profitability at Oil India Ltd and upstream operations of Reliance Industries Ltd, it said that most domestic gas fields are likely to make losses in 2017. “Without a change to the pricing mechanism, Fitch does not expect a significant improvement in gas prices. At the current gas price of USD 2.50 per million British thermal unit in India, OIL can only recover the cash costs of bringing the gas to the surface, but not the production levies, taxes, and sunk costs,” the report said. Fitch, however, said it expects upstream oil companies to continue investing in their current portfolio to maintain production and improve efficiency. On fuel consumption, it said India will see a strong growth of around 5-6 per cent in 2017. “Consumption increased by 8 per cent during the first half of 2016-17 fiscal (six months ended September 30, 2016), compared with 10.9 per cent in FY16,” Fitch said. Fitch also expects gross refining margins of all Indian oil refiners to narrow in 2017, while remaining stronger than the historical levels prior to FY16. “This, together with higher volumes, is likely to support strong operating cash flows in 2017. Therefore, we expect these entities’ credit metrics to stay in line with their current standalone profiles despite their large capex in the medium term.” It expected no discounts and under-recoveries (the difference between market prices and state-controlled selling prices) on kerosene and liquefied petroleum gas (LPG) to be borne by state-owned upstream oil companies or the three state-owned oil marketing companies (OMCs), in FY17 and FY18. “Fitch believes the gross refining margins (GRM) of all Indian oil refiners will shrink in 2017, from the strong levels in 1H16. However, Fitch expects GRMs to remain stronger than the historical average; investments to expand refining capacity and complexity is enhancing GRMs for most of the rated issuers,” the report said. This, together with higher volumes, is likely to support strong operating cash flows in 2017. Dennis Cholowski Womens Jersey
Get Ready! Petrol, Diesel Prices Could Go Up Sharply
Petrol and diesel prices could go up sharply higher when they are revised by the middle of this month. The reason: a surge in global oil prices following an agreement reached by Organization of the Petroleum Exporting Countries (OPEC) on Wednesday to cut output from January 2017 – its first reduction since 2008. OPEC produces a third of global oil. After the OPEC announcement, Brent crude prices, the international benchmark for oil prices, shot up over 10 per cent to around $52 per barrel. Analysts say that global oil prices could be headed even higher in the short term. Tushar Bansal, director of Ivy Global Energy, said global oil rates could rise to $60 per barrel in the short term. And if there is a supply disruption in Libya or Nigeria, prices could shoot up to $65 per barrel, he adds. Goldman Sachs said in a note after the OPEC agreement that it expects oil prices to average $55 per barrel in the first half of next year. Petrol and diesel prices are deregulated in India, which means they are linked to market rates. Oil marketing companies revise their prices every fortnight, depending on global oil rates and the rupee’s movement against dollar. India imports more than three-fourth of its crude oil requirements. So apart from global oil prices, the value of the rupee as well as the margins of oil marketing companies and the various government levies determine the final price of petrol and diesel price in India. Normally, state-owned fuel retailers Indian Oil Corp (IOC), Bharat Petroleum Corp and Hindustan Petroleum Corp revise rates of the fuel on a fortnightly basis based on the average oil price and foreign exchange rate in the preceding fortnight. The Indian crude basket, which is a benchmark followed by the oil ministry, averaged around $45 in November. Indian crude basket is a weighted average of the prices of Oman and Dubai sour crude. The prognosis for rupee is not encouraging either. Analysts expect the rupee to remain weak against dollar, which has hovered around 14-year highs against a basket of global currencies. Shrikant Chouhan, technical analyst at Kotak Securities, expects the rupee to slide to around 70 against the US dollar over the next few weeks. Leonard Fournette Jersey