Petrol, diesel prices to rise sharply again as crude rates flare up
Domestic fuel prices are set to rise sharply again after falling or staying stable for a month as international rates have jumped and the rupee weakened. State-owned oil companies have kept rates of petrol and diesel unchanged for six days although global crude oil prices have increased about $3 a barrel during this period. Since June 21, crude oil has gained more than $6 to reach $79.5 a barrel as the United States is seeking stronger compliance of its sanctions against Iran that traders fear could substantially reduce oil supply from the market. The decision of a cartel of key oil-producing countries to raise output by a million barrels per day is seen as insufficient to meet the rising demand, and has aided the recent surge in prices. Crude oil prices have stayed high this year owing to factors such as robust demand, an artificial supply restriction by key oil-producing countries led by Saudi Arabia and Russia, and a sharp drop in Venezuela’s output. A weaker rupee, along with zooming oil prices, has begun to hurt Indian economy and consumers. The rupee last week fell to a record low of more than 69 to a dollar. India’s import bill is set to balloon as the country imports nearly 83% of its crude oil requirement. Since June 26, the price of petrol has been constant at Rs 75.55 and that of diesel at Rs 67.38 a litre in Delhi. Similarly, in Mumbai, the petrol price has been unchanged at Rs 82.94 and that of diesel at Rs 71.49 per litre. State-owned oil companies determine local prices of petrol and diesel using international fuel rates and the currency movements. International prices of petrol and diesel follow the crude oil trajectory, albeit with some lag. The price of petrol in Delhi has fallen Rs 2.88 per litre since May 29. The price of diesel is down Rs 1.93 per litre since May 29, after which prices started declining. Indian Oil Corporation’s website, a key source of pricing information for petrol and diesel prices, has changed the way it publishes fuel prices, making it slightly difficult for people to know fuel rates. It has also stopped publishing historical price data for all previous years. Dontari Poe Authentic Jersey
Vedanta chairman’s family trust agrees to buy rest of company
Vedanta Resources Plc said on Monday chairman Anil Agarwal’s family trust has agreed to buy the rest of Vedanta in a deal that values the mining conglomerate at 2.3 billion pounds ($3.03 billion). An independent committee, formed to review and evaluate the proposal, has indicated to Volcan Investments that it supports the offer and intends to recommend a firm offer to Vedanta’s shareholders. Volcan currently holds about 66.53 per cent of Vedanta. The offer of 825 pence per share represents a 27.6 per cent premium to London-listed Vedanta’s close on Friday of 646.8 pence. In addition to the offer price, shareholders will also be entitled to receive a previously announced dividend of 41 cents per Vedanta share, the company said, adding that this would boost the offer price to 856 pence per share. Indian industrialist Agarwal said last year he does not intend to keep Vedanta in family hands and would withdraw from the group in the next few years. Agarwal is also Anglo American’s biggest shareholder with a nearly 20 per cent stake through Volcan. Agarwal earlier this year played down speculation that he is seeking a tie-up with Anglo. Vedanta has come under increased scrutiny in India since police opened fire on protesters, killing 13, at a demonstration against a copper smelter in May. The smelter has since been shut down. Tedric Thompson Authentic Jersey
Will getting petrol & diesel under GST lower prices and the options before the government
Petrol and diesel continue to be outside the ambit of GST and the general view is that getting it under the new indirect tax regime can significantly reduce prices. However, MS Mani, Partner, Deloitte India, believes that it may not be as straight forward as that. “Unlike what people might think petroleum products don’t mean diesel and petrol only. It also includes natural gas and aviation turbine fuel, among other things. Each of these products is not taxed at the same rate, either by the Centre or states,” he says. Petroleum products attract an excise duty which is a central tax, and also state specific tax. The Centre taxes petrol, diesel differently from the way it taxes aviation and natural gas. Each state levies a different tax rate. For example, Maharashtra has the highest rate of tax on petrol and diesel in India “When GST was introduced, GST Council felt at point of time, perhaps rightly so, that petroleum products can be taken up in stage two. This was also done to remove the apprehension of the states that feared a significant revenue loss. There was no empirical data to suggest what could be the GST collection. So it wasn’t possible for the government to do any kind of extrapolation to say that under GST, this is the revenue which this particular state would get.And therefore it was felt necessary to run GST with products other than petroleum, and then take it up as a later stage,” he added. Technically there is no link between the international prices of crude and the need for GST on petroleum products. These are two different issues and price of crude also depends to a large extent also on the commercial agreements we have with oil producing nations. “One is a commercial issue, the other is a tax policy issue. But, due to whatever reasons it has been combined,” says Mani. However, as the government explores putting petroleum products under GST, there are a few options that the Finance Ministry can follow: 1. To have Central Excise Duty replaced by GST at the initial phase and include state tax in the next phase. 2. Similarly, products like natural gas and ATF can come under GST. So natural gas and aviation gas can come under GST fold followed by petrol and diesel. Most of the states, tax natural gas at the same rate, so the variation in rates in not too much. But when it comes to petrol and diesel, the variation is huge among states. And therefore many may not want it to be taxed at the initial phase. “Every meeting of the GST Council in the last six months has been unanimous. On this aspect when it comes to inclusion of petroleum products, it would be commendable to see all the states acting in tandem,” says Mani. Gale Sayers Authentic Jersey
Importing LNG to Australia’s southeast faces cost hurdles – government
Plans to import liquefied natural gas (LNG) to Australia, the world’s second-largest LNG exporter, could help cap soaring local gas prices, although the economics might not work, the Australian government said on Monday. Over the past two years, four projects to import LNG have been proposed following the opening of three new LNG export plants on the east coast that have sucked gas out of the southeastern market and nearly tripled wholesale gas prices. The Australian energy market operator recently wound back a forecast for a near-term deficit, saying it no longer expects a gas shortfall in southeastern Australia before 2030 thanks to expected new production and government pressure on LNG exporters to boost local supply. But LNG import plans are advancing and could still be justified as gas produced in Queensland state is expensive, piping it to the south where the gas is needed is costly, and LNG from the Asian spot market could be cheaper, the Department of Industry said in a report released on Monday. “While there are challenges to LNG imports into Australia’s east coast gas market, there are also reasons to think that proposals for an import terminal may go ahead,” it said in its quarterly Resources and Energy report. The report said the main challenges will be to find cheap LNG beyond 2022, when demand is expected to start outstripping supply, and to line up enough gas demand to underpin import projects. The report found that U.S. gas at around current prices could be delivered to Asia for $8.00 per MMbtu, or A$10.10 per gigajoule (GJ), roughly in line with current gas prices for industrial users. However, regasification, including capital costs, would add between A$1.30-A$2.60 per GJ to the cost. The country’s no.2 energy retailer AGL Energy has the most advanced plans, having secured a jetty to park a floating storage and regasification unit (FSRU). It aims to start importing by 2021. ExxonMobil Corp, the dominant supplier into the southeast market, recently confirmed it is considering importing LNG, while a consortium involving Japan’s JERA is looking to start imports from 2020. Glenn Anderson Authentic Jersey
Rig firm Fred. Olsen Energy fails to win waiver extension
The creditors of Oslo-listed Fred. Olsen Energy did not agree to extend a waiver to some of the company’s financial covenants that expired on Saturday, the Norwegian drilling rig contractor said. The company had previously warned that it may require new equity and potential impairment of its bank and bond loans to achieve a long-term solution of its financial situation. The company had $759 million outstanding under the bank loan, and a bond loan worth 1 billion crowns ($122.30 million) maturing in Feb. 2019 at the end of 2017. During the first quarter, the company paid a scheduled repayment of about $95.5 million under the bank facility, and received a waiver, which expired on June 30. Its financial covenants will be tested on July 20. Fred. Olsen Energy said it would continue operations as normal while continuing talks with stakeholders, creditors and their advisors to find solutions to improve its financial situation. The company has seven drilling rigs, of which one was employed under the contract with BP. Charlie McAvoy Authentic Jersey
Saudi economy starts to recover, set to accelerate as oil output rises
Saudi Arabia’s economy began to recover in the first quarter of 2018 after shrinking for the first time in eight years during 2017, official data showed on Sunday, and the recovery looks set to accelerate in coming months with a rise in oil production. Gross domestic product, adjusted for inflation, grew 1.2 percent from a year earlier in the first three months of 2018, the government’s statistics agency said. GDP had dropped from a year earlier in every quarter of 2017 as a global price-supporting agreement among oil exporting countries caused Saudi Arabia to cut back its crude output. For the whole of 2017, GDP shrank 0.7 percent. The impact of the oil deal faded at the start of 2018 after Saudi Arabia completed the required cuts. This allowed the oil sector, which comprises over 40 percent of the economy, to grow 0.6 percent from a year ago in the first quarter — a big contrast to its 4.3 percent decline in the last quarter of 2017. In the next several months, Saudi oil production is set to expand. Global producers agreed last month to boost output by a combined 700,000 to 1 million barrels per day, and as the world’s biggest crude exporter, Riyadh may account for the lion’s share of the increase. U.S. President Donald Trump said in a tweet on Saturday that Saudi Arabia’s King Salman had agreed to boost output by as much as 2 million bpd to offset anticipated losses in production by Iran, which faces U.S. sanctions, and Venezuela. Analysts think such a big jump is very unlikely. But Monica Malik, chief economist at Abu Dhabi Commercial Bank, said she was conservatively assuming a rise in average Saudi output of 500,000 bpd in the second half of 2018, which would be a year-on-year increase of about 5 percent. Supply disruptions elsewhere in the world could cause Riyadh to lift output even more, Malik added, predicting overall Saudi GDP growth of 2.1 percent this year, led by the oil sector. Many non-oil businesses in Saudi Arabia are struggling under the weight of austerity steps designed to cut the government’s big budget deficit. A 5 percent value-added tax was imposed at the start of 2018 and domestic fuel prices were increased. As a result, Malik predicted only modest non-oil GDP growth of 1.8 percent this year, up from 1.0 percent in 2017. “To some degree we’re likely to return to Saudi Arabia’s old model of growth this year, with rising oil exports feeding through into the rest of the economy,” she said. “Structural reforms to create other sources of growth may have an impact in coming years, but don’t look like they’ll be in time to have an effect this year.” The non-oil sector grew just 1.6 percent from a year ago in the first quarter of 2018, only slightly faster than 1.3 percent in the previous quarter. Within that category the private sector, which authorities hope will create new jobs to bring down an unemployment rate of nearly 13 percent among Saudi citizens, inched up just 1.1 percent, faster than 0.4 percent in last year’s fourth quarter. The construction industry shrank 2.4 percent from a year ago in the first quarter, showing builders continued to struggle with state spending curbs and corporate caution that have reduced the number of big new projects in the past few years. The wholesale and retail sectors plus restaurants and hotels shrank 0.5 percent, suggesting Saudi consumers curbed their non-essential spending because of the new tax. An exodus of hundreds of thousands of foreign workers from Saudi Arabia due to the weak economy is also hurting consumer demand. Jay Ajayi Authentic Jersey
Trump Says Saudi King Agreed To Raise Oil Output By Up To 2 Million Barrels
U.S. President Donald Trump said on Saturday that Saudi Arabia’s King Salman had agreed to his request to increase oil production “maybe up to 2,000,000 barrels,” an extraordinary amount not confirmed by the kingdom and which would push the OPEC leader to a level of production never tested before. In an early morning tweet, Trump said Saudi Arabia’s expanded production would help offset a decline in supply from Iran, after the United States pulled out of the Iran nuclear deal in May and moved to reimpose oil sanctions. “Just spoke to King Salman of Saudi Arabia and explained to him that, because of the turmoil & disfunction in Iran and Venezuela, I am asking that Saudi Arabia increase oil production, maybe up to 2,000,000 barrels, to make up the difference … Prices to high! He has agreed!” Trump tweeted. Vincent Rey Jersey
LPG terminal’s relocation to new site not feasible: IOC
With the People’s Combine Against the Puthuvype LPG Terminal deciding to intensify their protest against the terminal, India Oil Corporation (IOC), in a statement, clarified the shifting of the terminal to Ambalamedu is not technically feasible. The total cost of the project is Rs 7.15 billion and the corporation has already spent Rs 3.26 billion on it. The storage terminal was constructed at an expense of Rs 1.56 billion, while the Multi-User Liquid Terminal (MULT) Jetty was completed after spending Rs 1.70 billion. As LPG is colourless and odourless, a sulphur-based chemical, Ethyl Mercaptan, is added to LPG to detect the same in case of leakages. The constituents of LPG – Propane and Butane – will be brought in ship tankers to the MULT Jetty. They need to be stored separately in dedicated storage vessels, blended and then mixed with Ethyl Mercaptan at the storage terminal. It is unsafe to transport the odourless LPG to Ambalamedu, which is far away from the city, it stated. The National Green Tribunal (NGT) had last December granted nod to continue with the project. As per CRZ notification, storage of LPG is permitted in the coastal areas. The NGT had dismissed the allegation the plant will pose threat to life and property. The IOC has taken all safety measures, including steps to prevent sea erosion, said IOC general manager S Dhanapandian. The Supreme Court also upheld the Environmental Clearance granted to the project. At present, there is no hitch to go ahead with the project, he said. The IOCL, BPCL, Petronet LNG and Cochin Port Trust have joined hands with IIT Madras for construction of a series of groynes to protect the shore in the coastal areas of Puthuvype. The IIT has recommended to build ‘short groynes’ and the NGT has endorsed the same. The total cost of the project is Rs 7.15 billion and the corporation has already spent Rs 3.26 billion on it. The storage terminal was constructed at an expense of Rs 1.56 billion, while the Multi-User Liquid Terminal (MULT) Jetty was completed after spending Rs 1.70 billion. Doug Kotar Jersey
ONGC wants $8.3 price for CBM gas from West Bengal
Oil and Natural Gas Corp (ONGC) wants a gas price of at least USD 8.35 to break even on producing coal-seam gas (CBM) from Raniganj block in West Bengal after part of its acreage was taken away for building of an airstrip. ONGC does not want to relinquish the block which holds some 43 billion cubic metres of in-place reserves and is instead looking at alternate options like deviated drilling from outside the airstrip. Of the 350 square kilometer area in North Raniganj coal-bed methane (CBM) block, 7.05 sq km is part of an Airport City Project (BAPL). Top officials said the project BAPL overlaps 7.05 sq km. To compound the problem, Ardhagram coal block falling in assessment area has been allotted to OCL Iron Steel. “This has reduced the scope for ONGC to produce CBM gas from the block,” an official said. Two options are under consideration but none of them would be viable unless a gas price of at least USD 8.35 per million British thermal unit (mmBtu) is paid, he said. In the first option, the entire BAPL overlap area is excluded and 67 wells drilled on the remaining area. But the break-even price of gas for the investment made would come at USD 8.77 per mmBtu. The other option is to consider drilling eight deviated and two vertical wells in the overlap area apart from the 67 vertical wells, officials said adding the break-even price of gas under this option comes to USD 8.35 per mmBtu. “The project is commercially not viable on standalone basis. The break-even price in both the options is significantly higher than the expected realisation price,” an official said. The price it wants is higher than CBM gas sold from similar blocks and more than double of the USD 3.06 per mmBtu price set by the government for most of the domestically produced conventional natural gas. ONGC has stakes in three other CBM blocks in Bokaro, Jharia and North Karanpura in Jharkhand. Of the total nine CBM blocks allocated to ONGC, five have already been relinquished due to poor output potential. It plans to produce first gas from the Bokaro, Jharia and North Karanpura blocks in July. ONGC is the operator of the Raniganj North block with 74 per cent stake, while the remaining 26 per cent is with Coal India Ltd. The firm has partnerships in other blocks, too, with CIL holding 10 per cent stake in Jharia and Indian Oil Corporation holding 20 per cent stake in Bokaro and North Karanpura. ONGC has sold gas from its Bokaro CBM block for USD 5.77 per mmBtu on a gross calorific value basis. State gas utility GAIL India is buying gas found below coal-seams in the North Karanpura block at USD 5.56 per mmBtu while private sector company Positron Energy would offtake gas from Jharia CBM block at USD 6.12 per mmBtu. ONGC expects peak volumes to touch 3 million standard cubic metres per day. Essar Oil and Gas Exploration and Production (EOGEPL) has sold CBM gas from its Raniganj block for USD 7.1 per mmBtu. Reliance Industries’ Sohagpur gas at today’s oil price comes to USD 7.15 per mmBtu on GCV basis. Alexander Wennberg Authentic Jersey
India seeks ways to continue Iran oil imports without triggering sanctions
India hopes to avoid an abrupt end to oil imports from Iran without triggering sanctions even as it readies a rupee payment mechanism for oil imports from the Islamic Republic. The US and India haven’t had any conversation yet on possible exemption but officials believe that the door for negotiations is still open despite strong words from the US recently to eliminate oil import from Iran. Officials see a window of opportunity because a recent update in the US treasury’s website lists circumstances in which the US government can waive sanctions. The tough words from the US are certainly aimed at the better compliance of sanctions by all countries as well as at making it harder for importing countries to negotiate waivers, an official said. The US is probably trying to lower importing countries’ expectations before any negotiation on waivers start, he said. It has been learnt that Nikki Haley, the US envoy to UN and close Trump aide, during her recent visit to Delhi called for cutting import of Iranian oil, but was politely told that it would be extremely difficult for India to make any significant cut. Ties between India and Iran range from the energy trade to connectivity projects, and cutting trade between the two countries could hurt India’s long-term interests, experts said. Indian and US officials are likely to meet this month to figure out the implications of the Iran sanctions for India. There are some hints from the US of possible exemptions to purchase a reduced quantity of oil from Iran, officials said. On June 26, a US state department official said India or China would receive no waiver of sanctions and their companies risk secondary sanctions if they continued importing oil from Iran from November 4. But just the next day, on June 27, the US Treasury Department updated its FAQs on Iran sanctions, leaving scope for the waiver, an Indian official said, citing this as a sign that the US would be amenable to discussing exemptions. The FAQs refer to a provision for waiver of the sanctions if the secretary of the Treasury determines that a waiver is necessary to the national interest of the United States. The document also provides for the secretary of state, in consultation with other secretaries, determining if any country has ‘significantly reduced the volume of Iranian crude oil purchase’. The secretary of state would ‘consider relevant evidence in assessing each country’s efforts to reduce the volume of crude oil imported from Iran’. For Indian officials, these words represent US flexibility in dealing with certain importers like India if the latter were to make efforts towards reducing supplies from Iran over a period of time. RUPEE PAYMENT MECHANISM Meanwhile, India is preparing a rupee payment mechanism for Iranian oil import. “We are coordinating with the central banks of India and Iran to put together this mechanism. More than one Indian banks are available for this,” an official said. During the last sanctions, UCO Bank alone handled rupee payment for oil imports from Iran. Part of the rupee payment was used by Iran for purchasing food, drugs, and chemicals from India but most of it was transferred to the Islamic Republic after the sanctions were lifted in 2016. It wasn’t clear if India would persist with imports from Iran if the US waivers didn’t materialize. During the last Iran sanctions, US had allowed India to import certain quantity for which the payments were made in the rupee. Officials didn’t say if the companies will be able to, or want to, use the rupee payment mechanism without the waiver because that could mean antagonizing the US. Tyreek Hill Jersey