HPCL may use mix of shares, cash & oil bonds to buy MRPL
Hindustan Petroleum Corporation Limited (HPCL) may use a mix of shares, cash and oil bonds to pay for acquiring and merging Mangalore Refinery and Petrochemicals Ltd (MRPL) with itself, according to people familiar with the merger plan that’s in the works. The final nature of the deal and the payment plan will be worked out once the boards of HPCL and MRPL approve the proposal to merge. The board of the two companies, majority-controlled by Oil and Natural Gas Corp, are set to meet in two months to consider the merger. The HPCL-MRPL deal may put off the planned merger of ONGC Mangalore Petrochemicals Ltd (OMPL) with parent MRPL due to some tax benefit consideration, executives with knowledge of the matter said. OMPL is a 51:49 joint venture between MRPL and ONGC. The plan of merging OMPL with MRPL has been approved by the boards of the three companies as well as the government, but may finally get shelved as the tax gain accompanying a merger is not available twice to a group in five years, and ONGC would want to claim the tax gain on an HPCL-MRPL deal rather than OMPL merger, executives said. On Friday, the board of ONGC gave an in-principle approval for exploring options for a restructuring of ONGC group companies. The restructuring proposal would be firmed up after factoring in the synergy of group companies, and MRPL’s obligation to meet the minimum public shareholding requirement, the company said in public filing. ONGC owns 71.63%, and HPCL 16.96% in MRPL, with the balance 11.41% held by the public. ONGC owns 51% in HPCL. MRPL has a market value of Rs 13,700 crore while HPCL is valued nearly thrice of that at Rs 39,600 crore. Both refiners have lost nearly 40% in six months as crude oil prices have surged. At current share prices, HPCL will need about Rs 11,500 crore to buy nearly 83% of MRPL that it doesn’t already own. The acquisition can be funded by new shares in HPCL, cash and oil bonds, in roughly equal proportion, executives said. HPCL owns oil bonds worth about Rs 5,000 crore, which were issued by the government a few years ago to compensate state fuel retailers for selling fuel below market rates. The deal would have less role for cash since HPCL has a limited cash reserve and a heavy CapEx programme lined up, an executive said. HPCL plans to invest Rs 96,000 crore in five years on expanding its refining and marketing capacity. The steps of the deal and the funding plan haven’t been finalized yet although it’s almost certain that ONGC wouldn’t want just more of HPCL shares in the deal since it already owns a majority in the company, executives said. Getting the downstream business of MRPL and HPCL under one roof would trigger several operational advantages to the group, executives said. MRPL owns 15 million tonnes a year refinery in Mangalore while HPCL controls 27 million tonnes of refining capacity spread across the country. While MRPL doesn’t have fuel retailing facility, HPCL operates a network of 15,000 filling stations and 5,000 cooking gas distributors. MRPL has petrochemical facilities while HPCL too has large petrochemicals plans. Bud Dupree Womens Jersey
Oil slips towards $77 as Saudi production, trade tensions weigh
Oil slipped towards $77 a barrel on Friday, under pressure from higher Saudi production and trade tensions between the United States and China, although oil supply disruptions lent support. Top exporter Saudi Arabia told Opecit raised oil output by almost 500,000 barrels per day last month, Opecsources said, a sign Riyadh wants to make up for shortages elsewhere and dampen prices. Brent crude, the global benchmark, was down 19 cents at $77.20 a barrel by 0910 GMT. US crude slipped 2 cents to $72.92. “On the bearish side both Saudi Arabia and Russia are living up to their promise to increase output,” said Tamas Varga of oil broker PVM. “Looming US sanctions on Iran, however, are causing serious concerns amongst market players.” US tariffs on $34 billion in Chinese imports took effect as a deadline passed on Friday and Beijing has vowed to respond immediately in kind, setting the two world’s biggest economies on a path towards a full-blown trade conflict. “The oil market is in the hands of global politics,” said Norbert Ruecker, head of macro and commodity research at Julius Baer. “China’s reciprocation will in a first tranche include agricultural commodities and in a second tranche most likely oil products and crude oil.” A US government report also weighed on prices this week, by crude stockpiles rose 1.3 million barrels and showing unexpectedly ample supplies after analysts had forecast a decline. The potential trade war between the United States and China comes amid a tight oil market. Oil output cuts by the Organization of Petroleum Exporting Countries and allies including Russia since January 2017 have reduced a glut of crude. Involuntary drops in supply in Venezuela, Angola and Libya have made the cutbacks even bigger, although Opechas now started to ease those curbs with Saudi Arabia pumping more. Even so, renewed US sanctions on Iran against its oil exports look set to tighten supply further. South Korea, a major buyer of Iranian oil, will not lift any in July for the first time since August 2012, three sources familiar with the matter said on Friday. Johnthan Banks Jersey
Petroleum products to be brought under GST in stages, says Hasmukh Adhia
Finance Secretary Hasmukh Adhia on Friday said the all powerful GST Council will consider bringing petroleum products under the goods and services tax (GST) and it could happen in phases. Speaking on the issue, Central Board of Indirect Taxes and Customs Chairman S Ramesh said although there is demand for bringing petroleum products under GST, the GST Council will have to finalise modalities. Currently, diesel, petrol, crude oil, natural gas and aviation turbine fuel are outside the purview of goods and services tax, and states have the right to impose value added tax on these items. “One of the demands that is there before us, we will see… everything will happen in stages,” Adhia said at an event here. The civil aviation ministry has time and again voiced its concern on the high rate of taxes on aviation turbine fuel, which accounts for a significant chunk of an airline’s operational costs and also has a bearing on air fares. Earlier, the civil aviation ministry had also written to the finance ministry seeking the inclusion of jet fuel under the indirect tax regime with full input tax credit at the earliest. The finance ministry has expressed its intention to include natural gas and ATF within the purview of the goods and services tax soon. “We have done a lot but that it does not mean that there is no scope for betterment of the existing system. We still believe that we need to do a lot more and we are working in that direction,” Adhia said. On the issue of automation of refund, he said it was meant to be automated right from day one but unfortunately people made so many mistakes in filing return that the income-tax department had to get into manual mode at the last moment. “We are again trying to make it completely automatic, the entire refund process. This is next thing. In terms of simplification of rates, slabs, we do understand need for it but we did what was best in the given scenario. “We could not have done anything other than this because we had to take care of revenue, we had to take care of concern of poor. Certainly we must move in that direction of something better than that,” the secretary said. The GST currently has four slabs –5 per cent, 12 per cent, 18 per cent and 28 per cent. The GST Council, in November, had reduced the tax rate on 178 items from 28 per cent to 18 per cent. Alex Cappa Womens Jersey
LNG, world’s fastest growing fossil fuel, is bracing for a direct hit from US China trade war
The world’s fastest growing fossil fuel is bracing for a direct hit from increasing global trade tensions. U.S. President Donald Trump’s tough talk on trade with China is looming over his country’s efforts to become the world’s largest exporter of liquefied natural gas. In Europe, a potential pipeline project from Russia has been imperiled by possible U.S. sanctions, while the sales practices of Qatar, the world’s biggest LNG seller, are under investigation as being anti-competitive. The friction risks disrupting global trade of gas worth almost $300 billion last year, threatening to distort flows of the commodity just as demand for the cleaner-burning fuel explodes. It’s also casting a shadow over multi-billion dollar export projects in the U.S. while creating opportunities for countries untouched by the wave of protectionism. “Populism has come back and with it a form of economic nationalism, and that’s occurred at the same time as the emergence of global gas,” said Trevor Sikorski, head of natural gas and carbon research at Energy Aspects Ltd. in London. “The former is leading to trade wars, and as soon as that happens everything is on the table.” The complications arising from trade disputes and geopolitical tensions could distort the global gas market, although it’s unlikely to derail its growth, Sikorski said. For instance, if China levies tariffs against U.S. LNG, traders could re-route cargoes to Japan and South Korea while selling Australian gas to China. Or a drop in Qatari shipments to Europe could be replaced by fuel from Nigeria or Angola. The end result will be extra fees for traders and slightly higher costs for end consumers, said Nicholas Browne, an analyst with Wood Mackenzie Ltd. in Tokyo. He pointed to the example of Russia’s gas pipeline to Europe, which just celebrated its 50th anniversary, as how trade can endure despite disputes. True Trade Wins? “Even at the height of Soviet tensions or the worst days of the Ukraine crisis, they continued to export gas to the West,” Browne said. “When it’s in the economic interest of both parties, trade will continue.” That’s being tested anew by Russian efforts to boost European sales. President Vladimir Putin recently claimed U.S. trade interests are at the heart of Trump’s threats of sanctions against the Nord Stream 2 pipeline between Russia and Germany because its success could reduce Europe’s demand for U.S. gas. Meanwhile, Europe is also trying to give its utilities greater flexibility and weaken Qatar’s grip on the market. The European Commission last month said it would check “problematic territorial restriction clauses” in LNG contracts with the Middle East nation that may prevent importers reselling the gas. That probe comes a month after the regulator for the 28-nation bloc settled a 7-year investigation into how Russia’s Gazprom PJSC’s set prices for its pipeline gas supply to Europe. “It’s been a European policy goal for quite a long time to increase market liberalization,” Wood Mackenzie’s Browne said. “They want open access to European gas markets, and that doesn’t work if you have a lot of supplier concentration.” Despite being at the center of trade tensions, the U.S. and China are a natural fit in the global gas market. China’s booming demand pushed it past Japan this year as the world’s biggest importer. Meanwhile, the U.S. is vying with Qatar and Australia to become the largest exporter of LNG, the super-chilled form of the fuel that’s shipped around the world on special tankers. That explains why LNG has been conspicuously absent as a target of China’s retaliatory levies after Trump announced duties on $34 billion worth of Chinese exports, which are scheduled to go into effect Friday. The country’s blazing gas demand growth– part of an effort by President Xi Jinping to cut coal use and smog — means it can’t be picky about where it gets its supply, Browne said. “Security of supply is still paramount for China at the moment,” Browne said. “It’s in the best interest for both countries to continue to trade.” Even though LNG has so far eluded direct tariffs, trade tensions are still having an effect on the market. Greg Vesey, head of the Australian company developing the $4.35 billion Magnolia LNG project in Louisiana, said a number of parties he’s talking to have indicated they want to see how the trade tiff shakes out before signing on the dotted line. Projects to export America’s ample shale gas are vying with developments from Qatar and Russia to East Africa and Papua New Guinea to sign up long-term buyers that underpin billions of dollars in financing. It would be naive to think that competitors weren’t trying to find a way to take advantage of concerns about trading with the U.S., according to Charlie Riedl, head of the Washington-based Center for Liquefied Natural Gas. “They are absolutely, 100 percent trying to figure out how to capitalize on this,” Riedl said. Gilbert Perreault Jersey
Essar Oil’s net drops 4.2% on lower processing at Stanlow
Essar Oil (UK) Ltd, a subsidiary of Essar Energy, which owns and operates the Stanlow refinery has reported a 4.2% year-on-year decline in its net profit during fiscal 2018 to $161 million. The company said the drop was on account of lower processing as the refinery was closed for about two-and-a-half months for upgradation. In a conference call to disclose the financial results, S Thangapandian, company CEO, said the refinery has completed the execution of all project upgrades during the turnaround and he expected the margin improvements will yield an incremental margin of $75 million to $80 million annually in the prevailing market. Essar has invested over $850 million in Stanlow since its acquisition in July 2011. The company’s gross revenue grew 10.2% year on year during the last fiscal. It earned $9.4 on turning every barrel of crude oil into fuel as compared to a GRM of $8.4 in the previous fiscal. “We operated for only nine-and-a-half months of the year as compared to 12 months in the previous fiscal,” he said, adding profits would have been around $275 million if the refinery was operated for full year. Thangapandian said the one of the key priorities was to increase the market share in direct supply of aviation fuel to leading carriers, with agreements now in place with airlines at a number of UK airports. According to Thangapandian, jet fuel is a stream of petroleum that has a longer life in comparison to automobile fuel, whose demand may dwindle with the increasing usage of electric vehicles (EVs). Sampath P, CFO at Essar Oil UK, said, “Despite the significant capex and planned reduction in throughput due to the turnaround, the company still posted an Ebitda of above $300 million for the third consecutive year. The major optimisation improvements implemented during the year will deliver increased margins going forward on the back of higher throughputs, reduced crude costs and enhanced higher value product yields.” Essar Oil UK chairman Prashant Ruia in a statement said that Stanlow has a 16% market share in the UK and a growing presence in the retail and aviation sectors. Lance Alworth Jersey
LNG tender cancelled on high prices
Pakistan LNG, a subsidiary of state-owned Government Holdings, has cancelled a tender seeking six cargoes of liquefied natural gas (LNG) for delivery in July and August, two industry sources said on Wednesday. Pakistan is among major LNG buyers in Asia and the move could weigh on spot Asian LNG prices LNG-AS which have been declining after rising to a 3-1/2-year high in mid-June. Pakistan LNG has decided to cancel the tender due to higher than expected prices offered by sellers, one of the sources said. “(Power) demand is fluctuating,” the source said, adding that there is no urgent need for power plants to seek replacement cargoes. The company is unlikely to re-issue the tender, the source added. Both industry sources declined to be identified as they were not authorised to speak with media. The company still has a separate tender seeking five cargoes of the super-chilled fuel for September to October delivery. Prompt cargoes meant for Pakistan are being offered in the spot market, the second source said, though details were scant. With Indian demand for LNG waning due to its monsoon season and high inventory, and with not all terminals operating in full capacity, the cargoes are unlikely to be diverted to India, the second source said. Jordan Akins Womens Jersey
Formation of China-India oil cartel threatening OPEC
When reports emerged that India and China are in talks about forming an oil buyers’ club, OPEC was probably too busy with its upcoming June 22 meeting to concern itself with that dangerous alliance. Now, it may be time for it to start worrying. “The timing is right. The boom in US oil and gas production gives us greater leverage against OPEC,” the Times of India quoted an Indian official as saying last month after the formal start of said talks. The two countries, after all, account for a combined 17 percent of global oil consumption and they are the ones that would be the hardest hit if prices rise as a result of OPEC’s actions. What’s more, they might not be alone in this attempt to curb OPEC’s clout on the global oil market. According to Bloomberg’s Carl Pope, Europe and Japan, previously reluctant to take part in any anti-OPEC projects, may now join in. The reason they are likely to join in is that unlike in previous oil price cycles, now there are alternatives to fossil fuels. Electrification is where OPEC may have to face off with a future oil buyers’ cartel. India, China, and Europe are all very big on EV adoption. Japan is a leader in battery manufacturing. If they set their minds to it, these four players could upend the oil market and effectively cripple OPEC. Of course, this is a best-case scenario of the kind that rarely unfolds in reality. Let’s take India, for example. A recent survey suggested that as many as 90 percent of Indian drivers were willing to switch to EVs if the government built the necessary charging infrastructure, reduced road taxes, and increased subsidies. Another survey identified price and range as additional roadblocks towards the mass adoption of EVs in India. Because of these challenges, New Delhi recently amended its ambitious goal of having an all-EV fleet on the roads of the country by 2030 to having 30 percent of the fleet electric. China, for its part, is the undisputed leader in global EV adoption: the country accounted for more than 50 percent of global EV sales last year in case you were thinking, “Wait, wasn’t that Norway?” However, this was in large part made possible by generous government subsidies for EV manufacturing. These subsidies are due to be wound down to 0 by 2020, and carmakers are already beginning to brace for a future without the support of the state. It’s safe to say it remains uncertain if the EV boom will continue after 2020. This precarious situation with EVs is reason enough for China and India to seek more clout on international oil markets dominated by OPEC and would justify the formation of a “buyers’ club.” Europe, for its part, is, as a whole, a top performer in EV adoption and it is also very big on environmentalism. At the same time, it still imports crude and quite a lot of it, so it cares about oil prices as a large buyer. India, China look to form ‘Oil Buyers Club’ China and India are facing challenges in EV adoption. Europe could help and benefit from it. After all, taken together, Europe, China, India, and Japan account for the manufacturing of as much as 65 percent of the world’s cars, and a lot of these are manufactured in Europe. These four also consume 35 percent of the world’s crude oil and would like to reduce this number. According to Pope, if they get together, they would be able to negotiate either a more gradual or a faster shift to EVs. It would all depend on whether OPEC would agree to maintain lower prices or not. A more skeptical view would note the challenges in EV adoption such as subsidies and infrastructure. These would take time to be overcome even if everyone played together. Yet long-term, an oil buyers’ alliance could be a force to be reckoned with by the oil producers, and the latter need to start paying attention now. Adam Shaheen Womens Jersey
India emphasises energy security before US officials’ visit
With a team of US officials likely to visit India soon to hold discussions on sanctions against Iran and impact on oil imports, the government on Thursday emphasised on energy security that is vital for economic growth. “We are, of course, prepared to take all necessary steps, including engagement with all stakeholders. I had mentioned about ensuring our energy security. We will have to see how we go about doing that. It is vital for economic growth. We have to see the steps we take, the discussions we have, and the engagements which we have to undertake to ensure that we maintain our energy security,” External Affairs Ministry Spokesperson Raveesh Kumar told reporters here. Kumar said that he was not aware of any firm dates for the discussions at this stage. He said that whenever the discussions take place there would be representatives from the Ministries concerned, including of external affairs and petroleum and natural gas. He was reacting when asked about reports of a US delegation’s visit to India to talk about the Iran nuclear deal. Kumar said that the question pertained to a statement made by a US State Department official and there was no specific mention about any country. Brian Hook, Director of Policy Planning at the US State Department, had said on Monday that the US was not looking to grant licences or waivers because doing so would substantially reduce pressure on Iran. He had said that the US was prepared to work with countries reducing their imports on a case-by-case basis, but as with our other sanctions, it is not looking to grant waivers or licences. Iran is India’s third-largest oil supplier after Iraq and Saudi Arabia. The US has told India and other countries to cut oil imports from Iran to “zero” by November 4 or face sanctions. US Ambassador to the United Nations Nikki Haley is also learnt to have reiterated the US position in a meeting with Prime Minister Narendra Modi.
Iran to Trump: oil will cost $100 per barrel, and it is your fault
Oil will soon cost $100 per barrel due to supply disruptions caused by U.S. President Donald Trump, Iran’s OPEC Governor told Reuters on Thursday, as he warned expectations that Saudi Arabia and Russia would help bring down prices were in vain. Trump again accused the Organization of the Petroleum Exporting Countries of driving fuel prices higher on Wednesday, and urged U.S. allies such as Saudi Arabia to pump more if they wanted Washington to continue protecting them against their top foe Iran. Iran, OPEC’s third-largest producer, is facing U.S. sanctions on its oil exports that are prompting some buyers to cut purchases. Iranian OPEC Governor Hossein Kazempour Ardebili told Reuters that Trump “should have expected” when blocking Iran’s access to the global markets that it would end up as “hostage (to) Saudi Arabia and Russia”, who he said had little vested interest in bringing down prices. “The responsibility of paying unnecessary prices for oil by all consumers of the whole world, especially in U.S. gas stations, is solely upon your (Trump’s) shoulders and the price of over $100 per barrel is yet to come,” Kazempour said. The Republican president has lashed out at OPEC in recent weeks. Rising gasoline prices could create a political headache for Trump before November mid-term congressional elections by offsetting Republican claims that his tax cuts and rollbacks of federal regulations have helped boost the U.S. economy. In a tweet on Saturday, Trump said Saudi Arabia had agreed to increase oil output by up to 2 million barrels, an assertion the White House rowed back on in a subsequent statement. The leader of Saudi Arabia, OPEC’s biggest member, has assured Trump that the kingdom can raise oil production if needed, and that the country has 2 million barrels per day of spare capacity that could be deployed to help cool oil prices to compensate for falling output in Venezuela and Iran. Trump has been complaining about OPEC at the same time that Washington is piling pressure on its European allies to stop buying Iranian oil. Iran has threatened to block oil exports through a key Gulf waterway in retaliation against any hostile U.S. action. Kazempour said: “We are neighbours and will remain so, we know we can and we must live together. No one wants you (Trump) to protect anybody… You are fighting with everybody, Sir, since you came to office”. Kyle Wilber Womens Jersey
South Korea suspends Iranian oil loading in July for first time since 2012
South Korea will not lift any Iranian crude and condensate in July, halting all shipments for the first time in six years amid US pressure to cut all imports of Iranian oil from November, sources familiar with the matter said on Friday. Japanese customers, however, are continuing to import for now, with multiple buyers considering buying Iranian oil through September loading, said a North Asia trading source familiar with Iranian oil shipping arrangements. The move by South Korea, one of Iran’s main customers in Asia along with China and Japan, comes as it is in talks to seek an exemption from US curbs on buying Iranian oil, in line with a waiver it received during previous sanctions. “There was pressure from the South Korean government to halt purchases,” said the source familiar with Iranian shipping arrangements. “South Korea overall is lifting zero oil (from Iran) for July loading.” Two other sources said South Korea cancelled July loadings of crude and condensate cargoes from Iran as it was uncertain whether the country would receive an exemption from U.S. sanctions on Iran trade. The cancellations mean South Korea will import no Iranian oil in August, the first month of zero imports since August 2012 when South Korean buyers put Iranian oil purchases on hold before getting a waiver to import limited amounts of Iran crude. The United States in May said it was walking away from an international deal on Iran’s nuclear programme. In late June, it demanded its allies halt all imports of Iranian oil from November and said exemptions were unlikely. South Korean refiners have since curtailed their Iranian oil purchases and turned to alternative sources such as American and African crude due to expensive Middle East grades and uncertainty over trade with Iran. South Korean buyers of Iranian crude and condensate are SK Energy and SK Incheon Petrochemical, owned by SK Innovation , Hyundai Oilbank and Hanwha Total Petrochemical. Japan, which reduced Iranian oil imports significantly during the previous Western sanctions on Tehran that were lifted in 2016, is also seeking an exemption from the latest US sanctions on Iran. “Japanese buyers also nominated cargoes for August, though they were not allowed to buy additional crude on top of term contractual volumes,” the shipping source said. Japanese oil refiners may have to stop loading Iranian crude oil from October 1 if the government does not secure another exemption, the president of the Petroleum Association of Japan said last month. Jorge Posada Authentic Jersey