BP to expand emissions disclosure on oil investments
BP has agreed to broaden its disclosure on greenhouse gas emissions to show how it thinks future investments in oil and gas align with UN-backed climate goals, it said on Friday. Following talks with a large group of investors, BP also agreed to back a shareholder resolution on the measures at its annual general meeting (AGM), further evidence of the way the energy industry and investors are engaging on climate issues. The agreement with a group of investors with $32 trillion under management, known as Climate Action 100+, comes weeks after rival Royal Dutch Shell agreed to introduce broad carbon emissions targets linked to executive pay. Unlike other companies, BP has agreed to detail how major future investments in fossil fuels will be consistent with the 2015 Paris agreement to reduce carbon emissions to net zero by the end of the century by phasing out fossil fuels. It will set out new metrics to measure greenhouse gas emissions from its operations. BP said in a statement it would link carbon targets to the remuneration of 36,000 of its employees, including executive directors. If the resolution is approved at the AGM, BP will introduce these changes into its reporting for 2019 onwards. But the joint agreement revealed a fundamental rift with investors over BP’s statement that its strategy today was in line with the Paris agreement. “Investors remain concerned that the company has not yet demonstrated that its strategy, which includes growth in oil and gas as well as pursuing low carbon businesses, is consistent with the Paris goals,” Climate Action 100+ said in statement. BP plans to rapidly grow oil and gas production over the next five years thanks to more than a dozen new projects launched in recent years, as well as the $10.5 billion acquisition of BHP’s U.S. shale portfolio last year. “We will be open and transparent about our ambitions and targets as well as our progress against them,” BP Chairman Helge Lund said in a statement. BP Chief Executive Officer Bob Dudley has repeatedly said that while the oil and gas sector needs to play a role in the transition to low carbon energy, it still needs to meet growing demand for fossil fuels, particularly in emerging economies. “BP is committed to helping solve the dual challenge of providing more energy with fewer emissions. We are determined to advance the energy transition while also growing shareholder value,” Lund said. Investors and analysts have said many oil and gas projects, such as complex and expensive investments in Canada or some deepwater basins, will not be needed in the transition to a low carbon energy. While BP agreed to increase its disclosure around climate, it also rejected another resolution tabled by climate activist group Follow This calling for emission reduction targets for all its operations, including emissions from products it sells to customers, known as Scope 3. BP announced in April plans to keep carbon emissions flat over the decade to 2025 even as its oil and gas output was set to grow. It also plans to invest up to $500 million per year on renewable energies such as solar, wind and power storage.
Budget 2019: Petroleum subsidy hiked 51% to Rs 37,478 crore for 2019-20
The government is budgeting for a mammoth 51 per cent jump in overall petroleum subsidy expenditure at Rs 37,458 crore next financial year (2019-20), the Budget documents tabled in Parliament today show. The revised estimate of petroleum subsidy, mainly meant for cooking gas and Kerosene, for the current fiscal stands at Rs 24,833 crore as against the budgeted estimate of Rs 24,933 crore, leading experts to raise concerns over the balance shortfall. “As per our estimate, there may be a shortfall of around Rs 17,000 crore in fuel subsidy provided for 2018-19 versus the subsidy provided of Rs 24,833 Cr (RE). Depreciation of the Rupee against the Dollar and the rise in crude prices in Year-to-Date, have contributed to the shortfall,” said K Ravichandran, Senior Vice President at research and ratings agency ICRA. He added that the under provision of subsidy will be marginally credit negative for state-owned oil marketing and Exploration and Production companies (E&P). “Options available to the government will be to either defer the subsidy payments to oil companies to the next fiscal, with appropriation from 2019-20 budgetary allocation or ask the downstream or upstream companies to bear part of the subsidy,” Ravichandran said. Interestingly, the oil ministry’s statistical arm Petroleum Planning and Analysis Cell (PPAC) said in its monthly summary report for December the under recoveries of oil firms are expected to reach Rs 45,781 crore in 2018-19. “The expected under recoveries/subsidy for 2018-19 in respect of PDS Kerosene and Domestic LPG (Under DBTL) is Rs 6,919 crore and Rs 38,862 crore respectively,” the report said. The adequacy of the government’s allocation of petroleum subsidy for 2019-2020 will depend on crude oil prices and the Rupee’s exchange rate against the dollar. “For 2019-20, the shortfall in subsidy could be around Rs 7,000 crore if the crude price and INR/USD were to be $70/bbl and 72 respectively. There could be a surplus if the crude was to be below $67 per barrel at a similar exchange rate,” Ravichandran said. He added that the budget announcement on the impending changes in bidding framework for new Oil & Gas blocks in order to boost domestic production will be a positive development for the sector. Also, the continued emphasis on providing free LPG connections under Ujjwala Yojana will be a positive event for the government-owned OMCs as the same will lead to faster growth in LPG sales.
Gail India sells US LNG cargoes
India’s state-owned gas distribution company Gail has flooded the liquefied natural gas (LNG) market this month with offers to sell cargoes from the US Gulf due to a shortage of tankers available to ferry to fuel to India. The Indian importer has 20-year deals to buy 5.8 million tonnes a year of US LNG, split between Dominion Energy’s Cove Point plant and Cheniere Energy’s Sabine Pass site. On Wednesday, Gail issued two tenders to sell US volumes, trade sources said. In one tender, Gail has offered to sell a cargo from the Cove Point plant on Apr. 27-29 and buy a cargo for delivery in India on Feb. 20-22 or March 1-7. In another tender, it has offered two cargoes for loading from Sabine Pass, one cargo for lifting in July and another in November. The tender closes on Feb. 1. “(Gail is) inherently short (on shipping)… They are certainly not able to lift all the cargoes they have from the US on the tonnage they have,” a shipbroker said. The two tenders came less than two weeks after Gail offered cargoes from Cove Point and three from Sabine Pass for loading in 2020. There was strong demand for these cargoes, with winners including Glencore, sources said. UK-based BP could also be one of the winners as it is long on shipping and may use the volumes to optimise the use of its fleet, sources said. Last year, Gail also made several swap deals with US volumes.
Budget 2019: Oil and gas sector fears being left behind on GST reforms
With the Interim Budget for 2019-20 failing to address the issue of bringing petroleum products and gas under the ambit of GST, the oil and gas sector fears being left behind on GST reforms, said accounting and consultancy firm PwC. “The Budget speech did not mention any plan about bringing petroleum products and gas into classical goods and services tax (GST). The sector feared being left behind in benefit of GST reform for a few years now,” said Deepak Mahurkar – partner and leader India oil & gas at PwC on Budget announcements. He added that the government has acknowledged the need for reforms in the oil and gas upstream industry. “The government has acknowledged need for reforms in upstream industry to overcome the issue of significant energy import dependence. Pure exploration contracts are appearing to be issued, which will be new dimension to India’s exploration and production,” he said. K Ravichandran, senior vice-president, group head – corporate ratings, ICRA said, “As per ICRA’s estimates, there may be a shortfall of around Rs 17,000 crore in fuel subsidy for FY19 versus the subsidy provided of Rs 24,833 crore (RE), which includes other non-fuel subsidies.” He added that depreciation of INR vs USD and rise in crude prices in year-to-date, have contributed to the shortfall. He said that the options available to the government would be to: Defer the subsidy payments to oil companies to the next fiscal, with appropriation from 2019-20 budgetary allocation; and ask downstream and/or upstream companies to bear part of the subsidy. Hence, the under provision of subsidy would be a marginal credit negative for the public sector undertakings (PSUs) oil-marketing companies (OMCs) and exploration & production companies. Ravichandran added that as regards to 2019-20, the shortfall in subsidy could be around Rs 7,000 crore if the crude price and INR/USD were to be $70/bbl and 72, respectively. “There could be a surplus of the crude were to be below $67/bbl at a similar exchange rate. Apart from the above, announcement on the impending changes in bidding framework for new oil & gas blocks in order to boost domestic production, will be a positive development for the sector,” he said. He added that the continued emphasis on free liquid petroleum gas (LPG) connections under the “Ujjwala Yojana” would be a positive for the PSU OMCs as the same would lead to faster growth in LPG sales. Adequate subsidy provided for Phulpur-Dhamra gas pipeline would be a positive for GAIL, as the same would improve the viability of the project, Ravichandran said.