IOC/BPCL-GAIL M&A deal on govt’s agenda this fiscal
The government after successfully merging fuel retailer Hindustan Petroleum with Oil and Natural Gas Corporation (ONGC) last year, has now set its eye on merging gas-utility giant GAIL with Indian Oil Corporation (IOC) or Bharat Petroleum (BPCL), a news report said today. According to a report by new agency IANS, the government is looking to split GAIL’s gas marketing and transportation business and intends to merge the marketing business with either IOC or BPCL. The government is also mulling to sell GAIL’s transportation business to a strategic partner. Both the fuel retailers — IOCL and BPCL — had approached the petroleum ministry in 2017 to acquire the government’s stake in GAIL. Oil minister Dharmendra Pradhan had last week told ETEnergyWorld that the ministry has instructed GAIL to come up with a plan for bifurcating its marketing and transmission business. “Marketing and laying of pipelines or transmission are two different segments, the ministry has always been of the opinion that these two job functions being done by GAIL should be separated. Yes, we have told them to prepare a road map for this,” Pradhan said. He added that as of now no timeline on the split has been decided. Interestingly, the long-standing plan of splitting GAIL may now finally reach completion considering the government also needs to meet its higher disinvestment target of Rs 1.05 lakh crore. Finance Minister Arun Jaitley in his Budget 2017-18 speech had expressed the government’s intention to strengthen central public sector enterprises through consolidation, mergers and acquisitions, saying that the possibilities of such restructuring were visible in the oil and gas sector. Under the proposal, the government intends to create an integrated public sector “oil major” which would match the performance of international and domestic private sector oil and gas companies. The government has expressed its resolve to continue with public sector undertaking consolidation with Finance Minister Nirmala Sitharaman making a case for it in her Budget speech this year. IOC is the country’s second-largest gas marketer.
Pradhan, Saudi oil minister discuss enhancing bilateral hydrocarbon cooperation
Union Petroleum Minister Dharmendra Pradhan on Thursday held discussions here with his Saudi Arabian counterpart Khalid Al-Falih to further enhance bilateral hydrocarbon cooperation between the two countries and also deliberated on the prevailing global oil market scenario. The leaders discussed enhancing cooperation in hydrocarbon sector to make it a strong pillar of the existing overall strategic partnership between India and Saudi Arabia. During the meeting, Pradhan discussed the current developments in the global oil and gas markets and raised India’s concerns on the recent increase in Asian Premium. Issues like disturbances in the Strait of Hormuz impacting the movement of oil/LNG tankers and the decision of OPEC Plus members on extending production cuts, leading to oil price volatility were also discussed at the meeting. “He also highlighted the adverse impact that these developments are having on the Indian economy. He also highlighted the need for responsible and reasonable crude pricing in the larger interest of both consuming and producing countries,” the government said in a press release. Pradhan highlighted the long-term energy partnership between the two countries and reiterated its invitation to Saudi’s state oil company ARAMCO to participate in the country’s Strategic Petroleum Reserve Program. Saudi minister Al-Falih emphasized the need for capitalizing on the growing momentum in bilateral hydrocarbon cooperation. Both the leaders also reviewed the progress on Saudi’s investments in Indian oil and gas sector, including the West Coast refinery.
Saudi Arabia aims to expand pipeline to reduce oil exports via Gulf
Saudi Arabia aims to raise the capacity of its east-west pipeline by 40% in two years so more of its oil exports can avoid passing through the Strait of Hormuz, the energy minister said on Thursday. Khalid al-Falih also told Reuters that importers should, as a first immediate step, secure shipments through the strategic waterway at the mouth of Gulf, after attacks on oil tankers in the area and the seizure of a British-flagged ship by Iran. Falih said the international community should take swift action to protect oil supplies and secure the Strait, through which about a fifth of the world’s oil passes. Oil importers “have to do what they have to do to protect their own energy shipments because Saudi Arabia cannot take that on its own,” he said in an interview during a visit to India. The United States, which has imposed economic sanctions on Iran to halt its exports of oil, is trying to rally support for a global coalition to secure Gulf waters. Britain has called for a European-led naval mission to protect shipping. “India also needs to do its part in securing free navigation of sea links transporting energy to the rest of the world,” Falih said after meeting Indian Oil Minister Dharmendra Pradhan. India has deployed two warships in the Strait. Saudi Arabia already exports some of its oil through the Red Sea using a 1200-km (750-mile) pipeline that runs from the east of the kingdom, where much of its oil production is based, to the Red Sea port city of Yanbu in the west. Saudi Arabia aimed to maximize exports through the 5 million barrels per day (bpd) east-west pipeline if required, he said. “We are hoping to increase it to 7 (million bpd),” Falih said, although he said the expanding capacity of the east-west pipeline, called Petroline, would take two years. Routing oil supplies away from the Strait is more difficult for countries like Kuwait and Iraq, whose only coastline is on the Gulf, or the United Arab Emirates and Iran, which have major oil export terminals on the Gulf. But exporters are looking at alternatives, such as Iraq which plans to export more oil to Turkey’s port of Ceyhan and to build new pipelines to ports in Syria, Lebanon and Saudi Arabia. In his talks in India, Falih said Saudi Arabia was prepared to supply additional oil to India. He also said state-run Saudi Aramco’s talks about buying a minority stake in the refining assets of India’s Reliance Industries had not stalled after sources told Reuters this week they had hit a roadblock. On Saudi plans to list Aramco, Falih said the kingdom was “absolutely ready” for launching an initial public offering, adding that the share sale was “possible” next year depending on global economic and financial conditions. The minister said global oil demand was reasonably healthy but was lower than estimates had put it at the start of 2019. The International Energy Agency is revising down its 2019 global oil demand growth forecast to 1.1 million bpd and may cut it again if the global economy slows further amid a U.S.-China trade spat. “I am not concerned at all,” Falih said, adding that the U.S.-China trade row was not “impacting demand to a measurable degree” as Asia oil demand was healthy.
ONGC’s crucial offshore rig conversion project facing further delays
An age-old project of Oil and Natural Gas Corporation (ONGC), India’s state-owned petroleum explorer, that aims at converting oldest offshore rig Sagar Samrat to a Mobile Offshore Production Unit (MOPU) has been delayed again and is now likely to be commissioned by December this year, a status report by Ministry of Statistics and Programme Implementation (MOSPI) showed. An ONGC executive confirmed the delay and added that the commissioning time had to be extended due to rains and the company, after terminating the original contract with Mercator last year, has now appointed United Arab Emirate (UAE)-based Gulf Piping Company to undertake the project. The project, crucial for raising output, has been delayed by 79 months so far and is facing cost overruns to the tune of Rs 715 crore, the report showed. The rig is proposed to be deployed in WO-16 cluster fields close to Mumbai High. The conversion of the off-shore rig Sagar Samrat was approved on March 2011 and was intended to be commissioned by May 2013 at an original cost of Rs 861.79 crore. ONGC had originally awarded the rig conversion project to Mumbai-based Mercator Ltd’s oil and gas subsidiary. However, that contract had to be terminated due to delays in execution. Post the award of contract to Gulf Piping Company, ONGC had projected to commission the project by March 2019. The delay in deployment of MOPU has been one of the main reasons for the company’s shortfall in crude oil production for financial year 2016-2017 and 2017-2018, according to a report by the oil ministry. ONGC has been under pressure from the government to arrest and increase its domestic crude oil production. Following the recommendations of a high-level committee headed by Niti Aayog Vice Chairman Rajiv Kumar, the company had to invite strategic partners to help enhance production from 64 fields. ONGC’s crude oil production in June this year declined 5 per cent to 1,686 Thousand Tonne. Cumulatively, the oil and gas explorer’s domestic oil production during the first three months of the current financial year decreased 5 per cent to 5,137 TMT from 5,392 TMT produced in the corresponding period last fiscal. The company has managed to win 10 oil and gas blocks under the first three rounds of Open Acreage Licensing Programme (OALP).