Sri Lanka Seeks Indian Advice on Oil Imports from Iran
Sri Lanka, which is dependent on Iranian light crude, has sought advice from India on its strategy on purchasing oil from the country in the light of tightening US sanctions. Sri Lanka’s Petroleum Minister Arjuna Ranatunga has sought information on how India will act in the case of tighter sanctions from Indian External Affairs Minister Sushma Swaraj, a statement from the office of the Prime Minister Ranil Wickremesinghe who is leading a delegation said, economy next website reported on Sunday. Swaraj had explained India’s strategy on oil purchases and has said Sri Lanka could also follow the process and promised further information. Sri Lanka’s aging state-run refinery, originally built by the Soviet Union, works best with Iranian light crude, with other heavier crudes not generating enough light distillates. US President Donald Trump announced in May that Washington was pulling out of the nuclear agreement which lifted nuclear-related sanctions against Tehran in exchange for restrictions on Tehran’s nuclear program. The deal had been signed between Iran and the five permanent members of the UN Security Council — the United States, Britain, France, Russia and China — plus Germany in 2015. The US administration reintroduced the previous sanctions while imposing new ones on the Islamic Republic. It also introduced punitive measures — known as secondary sanctions — against third countries doing business with Iran. A first round of American sanctions took effect in August, targeting Iran’s access to the US dollar, metals trading, coal, industrial software, and auto sector. A second round, forthcoming on November 4, will be targeting Iran’s oil sales and its Central Bank.
Australia will not trigger LNG export controls: Minister
Australia’s government will not impose controls on exports of liquefied natural gas (LNG) next year because it does not see any shortages in the domestic gas market, Resources Minister Matt Canavan told Reuters in an interview on Tuesday. The country, which is vying to become the world’s biggest LNG exporter, enacted a law last year to control LNG exports in reaction to surging domestic natural gas prices. Not triggering the export controls will ease concerns among its buyers including Japan, the world’s biggest LNG importer. “No … definitely not,” Canavan told Reuters when asked if he will trigger the mechanism. “Next year is not going to be a shortfall year.” Canavan is in Japan attending energy conferences and meeting with customers for Australia’s LNG, coal and other resource exports. Rising natural gas prices became a political issues in Australia as households and manufacturers complained of the higher costs, especially in the country’s more populous east coast. Yet Australia has an abundance of gas and is a major LNG supplier to Japan, China and South Korea under long-term contracts. To deal with the crisis, Australia’s government passed a law to limit exports from any of the three LNG plants on the country’s east coast to beef up local supply. That had sparked concern among buyers in Japan, where imports of the fuel soared after the Fukushima nuclear disaster led to the shutdown of the country’s reactors. The east coast plants, operated by Royal Dutch Shell , ConocoPhillips and Santos, agreed to plug any deficits. “We have also recently updated the agreement we have with the producers,” Canavan said. “Providing that agreement is met there will be no need for us to use the formal export controls that are in place now.” Australia no longer faces a looming gas shortage, thanks to the government pressure on exporters to divert the commodity into local markets and a reduced demand forecast for gas-fired power, the nation’s energy market operator said in June.
OMCs raking in profit as refining margins rise
The government decision to let state-owned oil marketing companies (OMCs) absorb Rs 1 per litre increase in retail price of petrol and diesel is unlikely make a major dent in their revenues as almost all entities are constantly making major gains from a rise in their gross refining margins or GRMs. GRM is a key measure of profitability for refining firms and is derived by deducting the cost of crude oil they buy from the total market value of the refined products they produce. The hardening of crude prices and favourable demand-supply equation in the global market have shot up GRMs of all oil marketing firms leaving them with higher profits even though the skyrocketing retail price of petrol and diesel continues to throw household budgets haywire. According to oil ministry’s Petroleum Planning and Analysis Cell (PPAC), the GRM of the country’s largest oil marketing company Indian Oil Corporation (IOC) has increased three-four times from its largest refineries in the last three years. This has also increased its net profit in the same margin. India has around 235 million metric tons per annum (MMTPA) of refining capacity, making it the second-largest refiner in Asia. The surplus capacity results in exports of products largely by private sector refineries. The weighted average GRM of nine IOC refineries stood at $ 5.06 a barrel in FY16 but it has more than doubled to $10.21 at the end of April-June quarter of FY19. Similarly, weighted average of two refineries of BPCL has increased from $6.59 in FY16 to $7.49 in Q1 of FY19. The GRM of two Hindustan Petroleum Corporation (HPCL) refineries has also increased from $ 6.68 a barrel to $ 7.15 a barrel in the same period. Though the GRMs of state-owned entities have risen, it is still lower than Reliance Industries that has seem its margins rise to $11.60 a barrel in FY18. Similarly, Nayara Energy (formerly Essar Oil) has also seen its GRM oscillating in the range of $9–11 a barrel. The higher GRM has come with higher profitability for companies. IOC has increased its profit to Rs 213.4612 billion in FY 18 increasing from Rs 191.0640 billion in FY17 and Rs 98.7798 billion in FY16. “Its not just the market dynamics that is dictating higher GRMs for OMCs. Freedom to price auto fuel and reduction in subsidy sharing burden has increased OMCs’ investible capital that has been used to upgrade technology and hence there is an improvement in GRMs. This should not been seen as OMCs making abnormal profits and hence having capacity to bear more burden of faulty government policies,” said an industry expert asking not to be named. Earlier this month, the Centre decided to reduce the retail price of petrol and diesel by Rs 2.50 per litre through excise duty cut of Rs 1.50 per litre and getting OMCs to absorb another Rs 1 hike in auto fuel prices. It also asked state to reduce duty to the tune of a similar Rs 2.50 per litre on both the products. Sources said the OMCs are now fearing that their higher GRM s may be capped so that government is able to reduce the retail price of sensitive fuels such as petrol and diesel even though global oil prices are expected to rise further after November 4, when US energy sector sanctions on Iran takes effect. It’s not that OMCs are the only gainers when global oil prices are higher. The centre has also more than doubled its excise revenue to over Rs 2240 billion in FY 18 from just about Rs 990 billion in FY 15 through nine increases in duty between November 2014 and January 2016. But with expectation of higher expenditure on populist schemes ahead of general elections in 2019, the Centre is not willing to cut excise duty further. This could bring pressure on OMCs who could see their margins erode faster than expected in coming quarters
Japan’s Osaka Gas begins marketing gas in Indonesia with Pertamina
Japan’s Osaka Gas Co said it has launched a natural gas joint marketing business in Indonesia with a gas trading unit of Indonesia’s state-owned Pertamina * This is the third Southeast Asian country into which Osaka Gas has expanded its energy business, following Singapore and Thailand, the company said in a statement * Under the agreement with Pertamina, Osaka Gas aims to promote efficient energy use and work to get consumers to switch to natural gas from other fuels, it said * Osaka Gas is also preparing to launch a service business in Indonesia that supports industrial customers in switching to natural gas at their plants with financing schemes, it said
Saudi to sign $50 billion in oil, gas, infrastructure deals: Source
Saudi Arabia plans to sign deals worth more than $50 billion in the oil, gas, industries and infrastructure sectors at an investment conference in Riyadh on Tuesday, a source familiar with the matter said. The deals will be signed with companies including Trafigura, Total, Hyundai, Norinco, Schlumberger, Halliburton and Baker Hughes, the source said. The deals will include the establishment of a copper, zinc and lead smelter with Trafigura Group; a joint agreement to build an integrated petrochemical complex and downstream park in the second phase of the SATORP refinery, jointly held by Saudi Arabia’s Aramco and Total; and investments in retail gas stations also by Aramco and Total.