Saudi Arabia’s oil giant likely to set up crude refinery in Andhra Pradesh
Global giant in the oil sector, Saudi Aramco has hinted at setting up a refinery in Andhra Pradesh. The Saudi Arabian oil major also evinced interest in turning coastal Andhra Pradesh as one of its major bases but this plan will move forward only after the Centre okays the proposal. Chief minister N Chandrababu Naidu, who was in Davos to attend the World Economic Forum (WEF) summit, held negotiations with Aramco president and CEO Amin al-Nasser on Wednesday, and extracted a positive response on making investments in AP. The chief minister promised Naseer to allot land and water without any hassle for the mega refinery. Aramco, officially the Saudi Arabian Oil Company, is a Saudi Arabian national petroleum and natural gas company based in Dhahran. Buoyed by Nasser’s assurance, the chief minister said that a high-level delegation will be sent to Dhahran within a fortnight. Extolling on how Andhra Pradesh is endowed with rich natural resources, Naidu told Nasser that his government is firm on completing the mega petro-chemical corridor along the coast. Articulating elaborately on the oil reserves in the Krishna-Godavari basin, Chandrababu invited Aramco to invest in Andhra Pradesh. He also spoke about the proposed petro-chemical university. In response, Nasser said that Aramco would collaborate with the government in India first and study the possibility of partnering with Andhra Pradesh in setting up the refinery. James Hurst Womens Jersey
Cairn Energy says it has the funds to fuel its projects through to production
The independent oil and gas explorer expects first oil from its Catcher and Kraken developments east of the Shetland Islands this year. The wells are expected to produce 25,000 barrels of oil equivalent per day. Simon Thomson, Chief Executive, Cairn Energy PLC said: “Cairn is fully-funded in respect of all of our capital commitments and we continue to actively assess and pursue new ventures”. The Edinburgh based company will also begin its third drilling program in Senegal later this month. Shannon Sharpe Jersey
Why oil can spoil India’s budget math
One of the biggest drivers of India’s superlative macro-economic performance in the recent past has been a relatively under-appreciated element: oil. Since 2014, the dramatic fall in crude oil prices has helped India contain her twin deficits, and tame inflation. But with oil exporting countries planning to curtail oil supply, raising the possibility of a rise in oil prices, the Indian economy might soon have to deal with another pain point besides demonetisation. The extent of the gains from lower oil prices since mid-2014 is under-appreciated as the benefits have not been evident in the retail prices of petrol or diesel. However, the government did improve its finances, using the opportunity to increase the amount of taxes collected on petroleum products, as the charts below illustrate. The excise duty collected by the Union government on petrol and diesel has been hiked nine times since November 2014. The Union government’s tax collection from petrol and diesel has increased from 0.4% of GDP in 2013-14 to 1.1% in 2015-16, i.e. an increase of 70 basis points (bps) in two years. To put this in perspective, this is more than the 60 bps reduction achieved in gross fiscal deficit (from 4.5% of GDP to 3.9% of GDP) over the same period. One basis point is one-hundredth of a percentage point. In other words, the entire reduction in India’s fiscal deficit could be attributed to the increase in Centre’s tax revenue from petrol and diesel alone. Hence, it is fair to say that falling crude oil prices have driven the improvements in India’s public finances over the past couple of years. Looking at more recent data for the first half of the fiscal year ending March 2017 (April-September 2016), and combining taxes with other oil-linked receipts such as dividends from public sector petroleum companies and states’ VAT collection on petroleum products, we find that the total receipts of the Centre and state governments’ from the petroleum sector have risen by about 50 bps since fiscal 2015 to 3.14%. Even the above-mentioned gains from the petroleum sector might be an underestimate because besides the increase in taxes, the Centre also gained from reduced subsidy burden owing to the fall in crude prices. Diesel prices were deregulated in 2014 and the diesel subsidy was eliminated in the last fiscal year (2015-16) itself. Previously, subsidy on diesel would cost 0.6% of GDP (FY14), jointly borne by the government and the public sector petroleum companies. Besides, subsidies on PDS kerosene and LPG have also reduced; however these reductions could also be attributed to government initiative to reform rather than a fall in petroleum prices per se. The upcoming Union Budget 2017 is likely to assume an average crude oil price of $55-$60 per barrel, as reported by the Hindustan Times. However, there remain risks that oil prices, which are already near $55 per barrel, could shoot up if the Organization of Petroleum Exporting Countries (Opec) and other oil exporters make good on their pledge to cut global oil supply by around 1.8%. Such a scenario, according to the International Energy Agency, would move the global oil market into deficit in the first half of 2017, i.e. demand would outstrip supply, after more than two years of comfortable surplus. In such a scenario, if oil rises above the government’s comfort zone to say around $70 per barrel, then the government could lose tax revenues equivalent to about 0.4% of GDP which would jeopardize the government’s plan to cut the fiscal deficit to 3% of GDP next year. To illustrate, in a hypothetical scenario where the global crude oil price is $70 per barrel in the coming fiscal year (2017-18) and the USD/INR exchange rate remains stable at 68, the government could either allow the petrol price (Delhi) to rise by another Rs10 to over Rs80 per litre, or reduce its excise tax duty from currently Rs21.48 per litre to Rs11.48 (if it wishes to keep prices same). If the government decides to reduce excise duties on petrol and diesel in similar fashion, then the Centre’s revenue from petrol and diesel could shrink to 0.7% of GDP in fiscal year 2018 compared to 1.1% in fiscal year 2016, back-of-the-envelope calculations show (assuming annual growth of 11.4% and 4.1% in demand for petrol and diesel respectively, as has been observed in the year so far). Thus, a spike in oil price to around $70 per barrel is enough to strain our public finances and add 0.4% to the Centre’s fiscal deficit. This would be over and above the increasing expenditure obligations on interest, salaries and pensions, compounded by Seventh Pay Commission recommendations and OROP. If the government wishes to keep petrol and diesel prices unchanged, without sacrificing its tax revenues, then it would have to resort to subsidies (or under-recoveries) as used to be the case in yesteryears. Thus, no matter the recourse adopted, government finances will most likely be hit severely if oil prices rise, unless the government allows the prices of petroleum products to rise. Besides posing risks for the government’s finances and stoking the fires of inflation, a rise in oil prices would also worsen the current account deficit. Assuming crude oil prices at $70/barrel and pencilling a constant pace of rise in volumes in oil imports and exports, as seen in the current fiscal year so far, and keeping all other things constant, India’s current account deficit could widen to 1.7% of GDP in fiscal 2018 compared to 1.1% of GDP in fiscal 2016. India’s net oil and gas import bill, i.e. adjusting for exports of petroleum products, amounts to around 2.5% of GDP, higher than India’s overall current account deficit and hence plays a big role in determining the dynamics related to the balance of payments. Thus, if there is one commodity to watch out for in 2017, it is likely to be oil. 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Cabinet approves MoU between India and the United Arab Emirates on Bilateral Cooperation in the Road Transport and Highways sector
The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has approved the Memorandum of Understanding (MoU) between India and the United Arab Emirates on Bilateral Cooperation in the Road Transport and Highways Sector to be signed between the Ministry of Road Transport and Highways, India and the Federal Transport Authority – Land and Maritime, U.A.E. The proposed MoU envisages increased cooperation, exchange and collaboration between India and the UAE, and will contribute to increased investment in infrastructure development and enhance logistics efficiency. This will help in promoting safe, economical, efficient and environmentally sound road transport in the country and will further help both the countries in creating an institutional mechanism for cooperation in the field. Salient features of the MoU are: Exchange and sharing of knowledge and cooperation in the area of transportation technologies and transport policies, for passenger and freight movement by roads; Planning, administration and management of road infrastructure, technology and standards for roads/highways construction and maintenance; Sharing of information and best practices for developing road safety plans and road safety intervention strategies, and outreach activities aimed at reducing deaths and injuries resulting from road accidents through: Sharing of knowledge and best practices in user-free (toll)-related issues; including modern systems, technologies and methods of levying of user-free and collection including Electronic Toll Collection System; 6.Sharing of information areas of improved technologies and materials in road and bridge construction, including joint research; and Sharing of information and cooperation for mobilizing investments for setting up of Logistics Parks, freight logistics, transportation warehousing and value added services (VAS) as an enabler and as a catalyst of economic growth and seamless freight movement. Robert Nkemdiche Jersey
Big Investment of $1.77 billion Flowed as FDI in India’s Renewable Energy sector: Report
India witnessed a total of $1.77 billion equity investment in the form of foreign direct investment (FDI) in the non-conventional renewable energy (RE) sector between April 2014 and September 2016, the Modi government said in an “Achievement Report” of its flagship Make in India initiative. As per the data available, a majority of the bigger investments have come from Mauritius, Malaysia, Philippines, Singapore, Japan, Germany, Spain, US and Seychelles. Under automatic route for projects of renewable power generation and distribution, 100 per cent FDI is allowed subject to provisions of the Electricity Act, 2003. According to the report, the renewable energy sector has witnessed the highest-ever solar power and wind power capacity addition since April 2014. In the last two years, the world’s largest 648-Megawatt solar power plant was commissioned in Tamil Nadu, a 157 per cent increase in solar power capacity addition was achieved, highest ever wind power capacity addition of 3,300 MW was carried out in 2015-16 and 34 solar parks of aggregate capacity of 20,000 MW were sanctioned for 21 states, the report said. The report also added Rs 356.63 crore were released to Solar Energy Corporation of India for projects and over 31,000 solar water pumps were installed in 2015-16 and 501 MW grid connected solar rooftop projects have been installed in the country. Jake Elliott Authentic Jersey