Securing affordable, sustainable energy top agenda: Pradhan after Saudi oil attacks
With the biggest attack ever on the Saudi oil industry creating volatility in the market, Petroleum Minister Dharmendra Pradhan on Thursday said securing affordable and sustainable energy tops agenda of “vulnerable” importing nations like India which were exposed to supply concerns. India was able to secure most of its contracted supplies from its second-biggest oil supplier, Saudi Arabia, in the aftermath of the September 14 drone and missile assault on the Kingdom’s main oil facility that knocked out about 5.7 million barrels a day, about half of the country’s output. “Today, we are meeting in the backdrop of a major oil and gas crisis resulting from attacks on Saudi oil processing plants at Abqaiq and Khurais,” Pradhan said at the World Economic Forum here. “The price volatility and concerns about sustained oil supplies made consuming countries vulnerable given the fact that India, along with most South Asian countries, have a major dependency on crude oil and gas imports. So, securing affordable and sustainable energy figures as a top agenda for all these countries, including India,” he said. While oil supplies from Saudi Arabia have not been impacted in the aftermath of the attack, liquefied petroleum gas (LPG) imports have been impacted. Saudi Arabia has deferred at least two shipments of LPG which India had to make up by importing from other countries such as the UAE and Qatar. “It is only natural that the global energy deliberations pay close attention to the developments in the energy sector in India,” he said. “This has a lot to do with the emergence of India as third-largest energy consumer in the world, and the fact that India is playing a leading role globally by implementing several transformative initiatives to reduce energy poverty in the country.” India, he said, recorded the highest growth of foreign energy investments in the world, which touched USD 85 billion. Pradhan said in pursuit of a USD 5-trillion economy by 2024 from USD 2.9 trillion size now, it was imperative to increase energy availability to 1.3 billion people, whose per capita energy consumption is lower than the global average. “The energy demand, thus, is estimated to grow at 4.2 per cent per annum up to 2035,” he said. The government’s approach to energy policy, he said, covers four pillars of energy access, energy efficiency, energy sustainability and energy security. “As part of our integrated approach towards energy planning, energy justice will also be a key objective in itself,” he said. “As we reorient energy policies, in this age of unprecedented energy transition, we will lay emphasis on advancing inclusive access, secure, affordable and sustainable energy services.” Stating that the challenge ahead is daunting, he said close attention is being paid to innovation and clean energy. “There is a definite need for integrating energy sources be it petroleum products, LPG or LNG (liquefied natural gas) in South Asia through regional electricity and gas grids,” he said. He said the commissioning of the India-Nepal petroleum products pipeline last month, helping the Maldives to change over to energy-efficient LED bulbs and transfer of hydropower from Nepal and Bhutan to India were examples of the government’s ‘Neighbourhood First’ policy. The minister said 8 crore free LPG connections to rural poor have helped increase coverage of environment-friendly fuel to 90 per cent of households in the country from 55 per cent five years ago. “Our success in Ujjwala programme has attracted enormous global interest, including many developing countries keen to emulate this model of providing clean cooking fuel. Our immediate objective will be to enhance the use of LPG in the South Asia region. We will, for the first time, be sourcing LPG from Bangladesh for our northeastern states,” he said. India, he said, is now leading the global movement in embracing renewable energy sources and would have 100 gigawatts of solar generating capacity by 2022. “Our target to transform India to a USD 5-trillion economy by 2024 requires a gradual and measured energy transition by deploying all sources of energy. We seek to provide energy justice to all in the country with wider supply of environmentally-compatible energy sources to its vast population,” he said.
HPCL-MRPL merger plan yet to reach board level: HPCL chief
HPCL’s proposed plan to acquire the Mangalore Refinery and Petrochemical Led (MRPL) for synergy is yet to reach board-level discussions, its CMD M K Surana said on Thursday. “We are working on that. Earlier we have said that makes a synergy for HPCL and we are working with the ONGC for this. It is a work in progress. It has not reached the board stage and once finalized, it will go to the three boards – HPCL, MRPL and ONGC,” Hindustan Petroleum Corporation Ltd Chairman and Managing Director Surana told IANS on the sidelines of India Economic Summit here. In August, ONGC Chairman and Managing Director Shashank Sekhar had said the proposed merger of its two subsidiaries – HPCL and MRPL – would happen next year. ONGC had acquired HPCL by buying out the entire government stake of 51.11 percent by paying Rs 36,915 crore. HPCL holds 16.93 percent and ONGC has 71.63 percent. The proposed consolidation exercise has seen HPCL reluctant to give parent status to ONGC soon after the government exited HPCL by selling its stake. HPCL, for quite some time, did not recognize ONGC as its promoter.
BPCL’s stake sale may prompt bond redemption: Moody’s
Ratings agency Moodys Investors Service on Thursday said the proposed stake sale of state-run Bharat Petroleum Corporation (BPCL) could sever the company’s links to the government and prompt bond redemption which will be a credit negative. According to the ratings agency, if the stake sale goes ahead, the impact on BPCL’s credit ratings will depend on whether the buyer is another state-owned company or a non-state-owned enterprise. “BPCL’s Baa2 ratings incorporate our expectation of the high likelihood of extraordinary support from the government, which results in two notches of uplift in the ratings,” the ratings agency said in a statement. If the government sells its entire stake to a non-government owned company, the ratings agency said: “We will no longer include the support from the government in BPCL’s ratings. As a result, we will likely downgrade BPCL’s ratings to Ba1, which is equal to its current Baseline Credit Assessment or its standalone credit strength, assuming there are no changes to the fundamental credit profile including our assessment of liquidity and refinancing risk. “If the stake is sold to another government-owned company such that the government continues to appoint all of BPCL’s board of directors and have substantial control over its operations, we will continue to include support in BPCL’s ratings.” However, it pointed out that a stake sale, whether to a non-government enterprise or a state-owned firm, will trigger a change of control on BPCL’s bonds, which will require the company to redeem its bonds within 45 days of the change of control being triggered. “There is no ratings condition attached to the put option for bondholders. A bond redemption will increase BPCL’s refinancing risk significantly,” the statement said. As of September 30, 2019, BPCL had $1.7 billion of foreign currency bonds outstanding. “BPCL’s liquidity is already inadequate and redemption of the foreign currency bonds will expose BPCL to significant refinancing risk,” the statement said. On September 30, 2019, the group of secretaries on disinvestment gave its approval for the government to sell its entire 53.29 per cent stake in BPCL. The stake sale requires further approvals from the cabinet of ministers and both houses of the Indian Parliament.
Govt says Saudi crisis over, oil firms expect fuel prices to come down
The price and supply concerns over the recent terror strikes at Saudi Aramco oil processing plants at Abqaiq and Khurais for consuming nations are over now, Petroleum minister Dharmendra Pradhan said on Thursday. Oil marketing companies also see the price of petrol and diesel coming down soon. On Thursday, the price of petrol dropped by 10 paise to Rs 74.51 a litre and diesel by 6 paisa to Rs 67.43 a litre in Delhi, the first cut since September 8. “At present, there are no concerns. The world has averted such a big crisis,” Pradhan said on the sidelines of the World Economic Forum’s India Economic Summit held in New Delhi. Sanjiv Singh, chairman, IndianOil Corporation, said, “The price in India has started coming down from today. After the attacks on Saudi facilities, product prices were also affected. Gasoline (petrol) and diesel price had gone up.” One of the major steps that helped India in avoiding the Saudi Aramco crisis is its diversified crude and product basket. Due to the shortfall in supply from Saudi Aramco, India was staring at a liquefied petroleum gas (LPG) supply crisis in states like Maharashtra, Karnataka, Punjab and Goa. “There is no shortage on supply front for LPG now. We have managed the situation,” Singh added. Abu Dhabi National Oil Company (Adnoc) had assured two additional cargoes of LPG to India during this period to avert crisis due to higher festive demand. Pradhan added that price volatility and concerns about sustained oil supplies made consuming countries vulnerable given the fact that India, along with most South Asian countries, have a major dependency on crude oil and gas imports. “So, securing affordable and sustainable energy figures as a top agenda for all these countries, including India.” The minister said the energy demand in India is estimated to grow at over 4 per cent per annum till 2035 and to transform into $5 trillion economy, the country should ensure energy availability to 1.3 billion people too. India has chalked out a roadmap to increase the share of non-fossil fuels, by increasing renewable energy capacity to much beyond 175 giga watt (GW) by 2022, and later upto 450 GW. “We will make our transport sector green through e-mobility. The proportion of the biofuel blend in petrol and diesel will be increased,” Pradhan added. In addition, the country has set a goal to enhance the use of LPG in the South Asia region. “We will, for the first time, be sourcing LPG from Bangladesh for our north-eastern states,” Pradhan added.
Gas price cut credit negative for ONGC: Moody’s
The 12.5 per cent cut in domestic natural gas price is credit negative for India’s biggest producer ONGC as its earnings will fall by over Rs 1,400 crore, Moody’s Investors Service said on Thursday. On September 30, the government announced a 12.5 per cent reduction in domestic natural gas price to USD 3.23 per million British thermal units (mmBtu) from USD 3.69 per mmBtu (on a gross calorific value basis). This is the first reduction in gas price in India since April 2017. “The price decrease is credit negative for Oil and Natural Gas Corporation Ltd (ONGC) because its revenue and earnings from the gas business will fall by around Rs 1,460 crore. “The decline is equal to 0.3 per cent of the company’s expected consolidated revenue and around 2 per cent of consolidated EBITDA for fiscal 2020, which ends on March 31, 2020,” Moody’s said in a note. The decline in natural gas revenue and earnings will have a limited effect on ONGC’s metrics for fiscal 2020 because its gas business is small compared with its total upstream business, it said. “For the year ended March 2019, ONGC derived only about 17 per cent of its revenue (excluding downstream operations) from gas, with most of its revenue coming from the sale of crude oil (73 per cent),” Moody’s said. The reduced price is applicable for October 1, 2019 to March 31, 2020. Prices are calculated using a formula implemented in November 2014 and domestic natural gas prices are revised every six months. Gas prices in India are determined by taking a volume-weighted annual average of the prices prevailing in Henry Hub (US), National Balancing Point (UK), Alberta (Canada) and Russia. ONGC is India’s largest integrated oil and gas company, accounting for 75 per cent of crude oil and natural gas production by volume, and 17 per cent of domestic refining capacity. The company recorded consolidated oil and gas production of 1.3 million barrels of oil equivalent (boe) per day for the fiscal year ended March 31, 2019. As of June 30, 2019, ONGC was 64.25 per cent owned by the government of India, “which has a significant influence on the company’s financial policies and strategy,” Moody’s added. Separately, rating agency Icra said the gas price revision is marginally positive for urea sector as the pooled price for the fertiliser sector is expected to moderate by USD 0.19 per mmBtu. “This should result in lowering of the cost of production and subsidy receivables for the urea players,” Icra said. Natural gas is a key raw material for manufacturing of urea and comprises nearly 70 per cent of the total cost of urea production. For the fertiliser sector, nearly 42 per cent of the gas requirement is met through domestic gas, while the remaining is met through R-LNG imports. The industry is supplied gas at pooled pricing, which takes into account the weighted average of domestic and R-LNG prices. K Ravichandran, Senior Vice-President & Group Head, Corporate Ratings, Icra said, “As per our estimates, the cost of production of urea changes by around Rs 1,600-1,800 per ton for every USD 1 per mmBtu change in the pooled gas price. As a result of the current revision in the domestic gas price, the subsidy outgo for the government would reduce by Rs 400 crore in H2 FY2020.” With the share of domestic gas falling in overall consumption mix for fertiliser sector, the impact of the change in domestic gas price has also been diminishing, he said, adding that nearly 58 per cent of natural gas demand in the fertiliser sector is being met through long term R-LNG, wherein the prices are governed by crude oil prices.
Mahanagar Gas cuts CNG, PNG prices
State-run Mahanagar Gas (MGL) on Thursday cut prices for the compressed natural gas (CNG) and domestic piped natural gas (PNG) from tonight following a drop in the domestically produced gas. “MGL has reduced its CNG price by Rs 2.04 per kg and PNG by Rs 1.19 per SCM in and around Mumbai effective from tonight,” the company said in a statement. Accordingly, revised delivered prices inclusive of all taxes of CNG and PNG will be Rs 49.95 per kg and Rs 30.60 per SCM (Slab 1) and Rs 36.20 per SCM (Slab 2) respectively. On September 30, the government announced a 12.5 per cent reduction in domestic natural gas price to USD 3.23 per million British thermal units (mmBtu) from USD 3.69 per mmBtu (on a gross calorific value basis). “After the revision, MGL’s CNG offers attractive savings of about 55 per cent and 29 per cent as compared to petrol and diesel respectively at current price levels in Mumbai,” it said.