Oil exploration spending may drop further next year -WoodMac
Global spending on oil and gas exploration in 2017 could fall below this year’s $40 billion, but lower costs mean profitability will increase, consultancy Wood Mackenzie said in a report on Friday. Faced with a 30-month-long oil price downturn, oil companies including Exxon Mobil and Royal Dutch Shell have slashed spending budgets in recent years, with exploration bearing the brunt. According to Wood Mackenzie, the share of exploration in overall oil and gas production investment will dip to a new low of 8 percent in 2017. “Overall investment will at best match 2016 year’s spend of around $40 billion, and may yet fall further,” said Andrew Latham, vice president of exploration at Wood Mackenzie. That compared with a 2014 peak of $95 billion. Lower costs of drilling rigs, simpler wells designs and cheaper seismic imaging mean well counts may nevertheless hold up close to 2016 numbers while returns improve. “After a decade in the doldrums, the majors’ returns from conventional exploration improved to nearly 10 percent in 2015. The rest of the industry is heading in the same direction. Fewer, better wells promise a brighter future for explorers,” Latham said. The rate of discoveries is not expected to fall next year and to average around 25 million barrels of oil equivalent per well. The world’s top oil companies have struggled to replace natural decline in production through exploration in recent years and will have to rely more on acquiring fields and smaller companies in the future, Latham said. Clark Gillies Womens Jersey
Saudis are trying to figure out how to survive in a post-oil era
Ali Alireza’s family has been trading in Saudi Arabia before it even existed as the kingdom it is today. The 55-year-old managing director of Haji Husein Alireza & Co. Ltd., which sells vehicles from dump trucks to Aston Martin cars, has shared in a boom that turned the desert monarchy into one of the world’s richest countries. He’s been through three oil-price collapses, but the latest has brought the kind of trauma that neither he nor his forebears have ever experienced. This time, the government isn’t waiting for a recovery. Instead, it’s pushing a roadmap that’s shaken the ultra-conservative nation. “It represents a generational shift, not only in the structure of Saudi Arabia but also in the thinking and culture of the Saudi individual,” Alireza said in his 14th-floor office with panoramic views of Jeddah, the Saudi trade hub on the Red Sea. “It’s something that we have to start teaching at kindergarten level. But it’s almost too good to be true, and that’s the scary part.” Called Vision 2030 and unveiled in April, the grand design is to get rid of a business culture tranquilized by oil wealth and stifled by bureaucracy and replace it with a competitive economy driven by private enterprise. The shock therapy to embrace a Saudi version of western-style capitalism risks coming too late, but on paper it’s tantamount to a revolution. Unprecedented There are parallels with eastern Europe’s transition out of communism and Britain’s privatization boom in the 1980s, but in reality the change is unique simply because there’s no other society on earth like Saudi Arabia. It requires a degree of “fundamental adjustment that I can’t find a precedent for,” said Simon Williams, HSBC Holdings Plc’s chief economist for central and eastern Europe, the Middle East and North Africa. He has been going to Saudi Arabia since 1994. “You’re talking about changing the basis of the whole economy, not just of the public sector but of the private sector as well and that’s technically very difficult.” The pressure to change is hitting home, just ask Mohammed Dardeer. The 62-year-old executive at the MSD Management Consultancy said it took a month for Vision 2030 to sink in. Then his phone started ringing. The calls were from companies desperate for advice. System Shock For most, sales already were falling and customers disappearing. The government had said little about the payment delays to contractors. Now, Dardeer said, managers wanted to restructure salaries, create performance assessment programs and set up human resources departments. Companies that had grown too fat in the days of high oil prices wanted to downsize. “People were shocked and now they have to find a way to survive,” Dardeer said at his cramped, unassuming office next to computer stores and a wedding hall in the port city. “None of them had a contingency plan. They didn’t care before.” Now they have little choice, he said: “If you can’t keep up, you will be out.” Survival of Fittest The modernization is Saudi Arabia’s boldest since the creation of the kingdom in 1932. When Deputy Crown Prince Mohammed bin Salman, the king’s powerful 31-year-old son, announced his plan to address the plunge in oil revenue, he acknowledged it was “ambitious,” though said it was achievable and “there are no excuses for us to stand still or move backwards.” Based on a week of interviews with businesspeople and consultants in Jeddah, one message was clear: things will be done differently from now on. Companies can no longer depend on government tenders for the bulk of their business. Out are reliance on foreign workers, cushy jobs and state largess; in are metrics and making the numbers add up. As Dardeer put it, those who remain stuck in the past won’t survive. Critics of the blueprint to transform the world’s largest oil exporter say it still lacks specifics on how to achieve the targets. For example, it includes bringing more women into the workforce, without addressing the constraints on them such as being banned from driving. And while the government is reducing spending to deflate a ballooning budget deficit, non-oil industries, the main engine of job creation, slipped briefly into recession. Kaswara Alkhatib, 48, chairman and chief executive officer of UTURN, an Arabic entertainment network on YouTube, supports Vision 2030, but the government now needs to communicate the details of how it will work. “Nobody’s talking now for the past six months about where we’re going,” he said at his office in Jeddah. “You can’t just tease me with a vision and be quiet about it. Keep on feeding us, where do we stand today, take questions, but don’t just tease us and disappear.” Business Buzzwords The Saudi goal is to increase the contribution of small and medium-sized businesses to 35 percent of the economy from 20 percent and help bring the jobless rate down to 7 percent from almost 12 percent. It will require weaning companies off more efficient foreign labor and training up locals who ordinarily would seek jobs with the state. The government already raised the cost of visas and residency permits for non-Saudis, who make up about a third of the 32 million population, making it more expensive to hire them. Some business owners are holding workshops for staff, others are seeking advice from outside consultants. Many are focusing on revamping or starting HR departments. KPIs — key performance indicators — have become the new buzzword. UTURN, the Internet company, hired consultants about a year ago to help create performance appraisals for its staff of 70 so that if they need to get rid of anyone they have KPIs to go by. “We want people who are actually able to create, not sitting and waiting for us to tell them what to do,” said Alkhatib, the CEO. Shut Off The more immediate issue is the effect of plummeting oil prices on the Saudi economy. Growth is set to slow to 1.4 percent this year, the worst pace since 2009, according to a Bloomberg
Government has infused Rs 23,993 crore funds in Air India: Civil Aviation Minister
The Government said it has already infused funds to the tune of Rs 23,993 crore in the National flag carrier Air India from 2011-12 till November this year. Air India is surviving on a Rs 30,231 crore bailout package extended by the previous UPA government in 2012 for a 10-year period and also equity support for payment of principal/interest of the non-convertible debentures. The financial support approved under the airline’s turn around plan/financial restructuring plan include induction of upfront equity of Rs 6,750 crore, equity for cash deficit support of Rs 4,552 crore from FY 2012-13 to FY 2017-18 as well as equity for already guaranteed aircraft loan of Rs 18,929 crore till Fy 2012. “An amount of Rs 23,993 crore has already been released as equity support to Air India from the period of FY 2011-12 to the end of November, 2016,” Civil Aviation Minister Ashok Gajapathi Raju said in a written reply in Lok Sabha. In reply to another question, the Minister said that the total outstanding loans on Air India were Rs 46,570,35 crore as on September 30 this year. Replying to another question, Raju said that the gross value of the fixed assets (including surplus assets) of the company (Air India ) as on March 31, 2016 stood at Rs 46,074.07 crore, where as the long-term borrowing were Rs 35,806-crore. However, the company has been constantly improving its operational and financial performance under the implementation of TAP, he said in reply to a question. Eric Murray Authentic Jersey
Airlines capacity to jump to 25% over next 3-4 yrs: Icra
The airlines are set to add an additional capacity of 20-25 per cent over the next three to four years, even as mounting competition and price war are eating into their yields impacting the bottomlines, says a report. Despite falling yields, due to increasing competition and the resultant hit on profitability, the airlines’ capacity addition is set to clip at CAGR of 20-25 per cent over the next three-four years, domestic rating agency Icra said in a report . “The industry-wide ASKMs are slated to grow at a strong CAGR of 20-25 per cent over next 2 to 4 years. This will be driven by sizeable order backlog of the market leader Indigo, and also at GoAir, Jet Airways and SpiceJet coupled with the expected fleet expansion of Vistara and AirAsia. “The capacity expansion will also be boosted by the launch of two new airlines, Air Carnival and Zoom Air,” the report said. Domestic air traffic continued its healthy growth this fiscal, with an annual growth of 22.5 per cent in the first half of current financial year, making the domestic market the fastest-growing aviation market in the world. The comparative numbers for the second growth market of Russia is way below half of it at around 10 per cent, while China is at around 6 per cent and the US, the largest market at 3-4 per cent. Capacity addition by new airlines and rapid capacity expansion by existing carriers have resulted in a 20.4 per cent annualised growth in available seat kilometers (ASKM) in the first half, leading to more intensification in competition, the report said. One of the major growth drivers is the steep fall in jet fuel prices in 2015-16 had enabled airlines to reduce fares and the resultant spike in passenger growth numbers to 85 million. The industry is expecting the country to cross the century mark for the first time this financial year. But fuel prices began to climb up again from March 2016 and has since then jumped by a whopping 41 per cent sequentially over the past nine months, which has eroded this cushion. Frederik Andersen Womens Jersey
In 2017, global airline industry sees ‘safe soft landing in profitable territory’
The global airline industry expects to earn $35.6 billion during 2016, a record profit, though it is slightly less than the original expectation, said Alexandre de Juniac, Director General and Chief Executive Officer, International Air Transport Association (IATA), on Thursday. In June this year, IATA had estimated that the global industry will report a profit of $39.4 billion. But despite the dip in profitability, good news for the global industry will continue in the next year, too. de Juniac indicated that the global airline industry expects to report a net profit of $29.8 billion during 2017, being eight years in the black for the industry. “This (2017) will be the third year in a row where the return on invested capital (7.9 per cent) will exceed the cost of capital (6.9 per cent)… This is the best performance in the industry’s history, irrespective of the many uncertainties we face,” de Juniac said in his address at the start of the Global Media Day event here. Brian Pearce, Chief Economist, IATA, pointed out that the conditions are expected to be tougher next year with higher fuel costs and a still relatively weak global economy. “But we still forecast that the industry will generate an above-cost of capital of 7.9 per cent. In net profit terms, that’s just a fraction under-$30 billion,” Pearce said. The forecast for 2017 is based on Brent crude oil prices being at around $55 a barrel, a rise of $10 a barrel since this year. “This (Brent oil price being at around $55 a barrel despite the oil producers freezing production) is because the market is still over supplied,” Pearce said. Another reason for the positive outlook for 2017 is also based on “slightly stronger” economic activity and confidence in many parts of the globe, which will help offset the slight increase in the price of Brent crude next year. “We are expecting to see the global industry carry a little less than 4 billion passengers during 2017 and creating value for investors next year,” Pearce said. The Director General added that the airlines are in better shape to remain profitable while facing the many challenges, pointing that as the reason “we see a safe soft landing in profitable territory for 2017.” During 2017, the strongest financial performance is likely to be delivered by airlines in North America with net post-tax profits at $18.1 billion, slightly down from $20.3 billion expected in 2016; while the carriers in the Asia-Pacific region are expected to generate a net profit of $6.3 billion, down from $7.3 billion in the previous year. The net margin for the North America carriers is expected to be strongest at 8.5 per cent with an average profit of $19.58 per passenger; while for carriers in the Asia-Pacific region, with net margins of 2.9 per cent on a per passenger basis, profits are anticipated to be $4.44. Indian carriers are included in the Asia-Pacific region. Linval Joseph Jersey
Mining Lease in Tiger Reserve to Oil India Deferred in Arunachal
A central committee has deferred a petroleum mining lease in Arunachal Pradesh to Oil India Limited and has sought clarity from the state government relating to compliance of forest protection laws. The Forest Advisory Committee (FAC) of the Ministry of Environment, Forest and Climate change (MoEFCC) held a meeting on November 10 – the minutes of which were released recently- to discuss the prospect of granting a petroleum mining lease in favour of the chief engineer, Oil India Limited, Duliajan in Ningru extension block at Changlang district. The state government had sought the Centre’s permission to provide the lease which would cover over 540 square km of forest land. The proposal had sought the lease without inviting any physical diversion of forest land. However, the FAC noted in the November 10 meeting that the compliance of Scheduled Tribe and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006 was not given. As per the minutes of the November 10 meeting, the proposal was also discussed almost a decade back on 9 August 2007. Back then the FAC had advised the project proponent to consult the principal secretary (forests) and the PCCF, as well as the nodal officer of the state government and to bifurcate the proposal according to the requirement of forest land and to submit separate proposals, one for exploration and another for diversion of forest land for oil well drilling and infrastructure facilities. The committee had also earlier noted that a site inspection report conducted by the regional office of the MoEFCC did not show the reserve forests of Tengapani, Diyun, Honkap, Namgoi and Rima in the Survey of India Toposheet that was submitted. It said that compartment numbers were either depicted in this map with GPS-Coordinate authenticated by the Divisional Forest Officer, which “clearly reflected that proper site identification by the field officers as per the Approved Working Plan of Namsai and Nampong has not been carried out” and that the “entire exercise of survey, demarcation and to determine the forest land illegally occupied by the people” needs to conducted again. In its recommendations, the FAC has sought the comments of the National Tiger Conservation Authority before moving ahead on the proposal. It said that the “proposed area for petroleum mining lease appears to be in Namdapha Tiger reserve”. The Namdapha reserve is the largest protected area in the Eastern Himalaya biodiversity hotspot and is the only park in India to have four big cat species, like leopard, tiger, clouded leopard and snow leopard. The committee has also sought comments from the state government on the site inspection report on the regional office of the MoEF&CC. It also said that the state government shall submit complete compliance on Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006 in accordance with Ministry’s guidelines. Earl Thomas III Authentic Jersey
Petroleum M Petronet LNG receives new LNG carrier
A consortium comprising Nippon Yusen Kabushiki Kaisha (NYK), Mitsui O.S.K. Lines Ltd (MOL), Kawasaki Kisen Kaisha Ltd (‘K’ Line), and the Shipping Corp. of India Ltd (SCI) recently took delivery of a new LNG carrier in South Korea. The PRACHI LNG carrier, which was built to order by Hyundai Heavy Industries Co. Ltd (HHI), has a capacity of 173 000 m3. It is based on a long-term time charter contract with Petronet LNG Ltd. A naming ceremony for the LNG carrier was held on 18 October 2016. SCI has been operating and managing all of the LNG carriers that are under long-term charter with Petronet LNG, and has taken over management of PRACHI since its delivery. The new LNG carrier is expected to contribute to the steady supply of LNG to India as energy demand continues to grow. Andrew Ference Womens Jersey