India to invite foreign firms to invest in state-owned oil companies
International energy firms will be invited to participate in India’s privatisation of state-owned oil companies, the country’s Oil Minister Dharmendra Pradhan said late on Monday. Pradhan said Indian Prime Minister Narendra Modi recently met with the chief executives of energy firms in Houston, including those from Exxon Mobil Corp, BP Plc, Royal Dutch Shell, Rosneft Oil Co, Saudi Aramco and Abu Dhabi National Oil Co (Adnoc). This is the first time Pradhan has signalled the government’s intent bring foreign investment into the country’s state-owned oil companies. “We are inviting oil majors,” Dharmendra Pradhan told reporters at an energy conference in Abu Dhabi. “They are all towards India’s energy market,” he said. Asked if the response was positive, he said “I am very enthusiastic.” The minister said a planned oil refinery on India’s west coast in partnership with Aramco and Adnoc is on the right track. There will be more clarity once the a new government is formed in the state of Maharastra, where the project is planned, which is deadlocked after the recent elections, he said. Asked if a firm deal with Aramco and Adnoc could be sealed soon, he said “I think so,” declining to give a timeline. India is also open to crude oil imports from Russia, he said. “We are open to source our requirements from all over the world whoever gives us responsible and reasonable price. Russia is a very important partner for us.” On Monday, the chairman of Indian Oil Corp said the company was looking at buying Russian oil.
Adani looks to expand port presence in Maharashtra, Andhra
Adani Ports and Special Economic Zones (SEZ) is exploring opportunities to expand its presence in Maharashtra and Andhra Pradesh, group CEO Karan Adani told analysts on Monday. The port and logistics arm of the Adani Group recorded consolidated net profit of Rs. 1,059.20 crore, up 72.4% year-on-year from the same period last year, primarily on account of a one-time deferred tax write-back of Rs. 290.04 crore. “Andhra Pradesh and Maharashtra are the two places where we do not have any substantial footprint. So we would look at opportunities which would fall under that. We would evaluate them from growth, return and a risk point of view, on how much diversification we can face. But yes, we would look at it proactively,” Karan Adani said. The company has already emerged as a winning bidder for the beleaguered Dighi Port in Maharashtra. The operating profit of the company for the September quarter stood at Rs. 1791.17 crore, compared with Rs. 1,703.48 crore a year ago. The operating margin, however, fell 182 basis points to 63.5% in September. The Adani Group’s flagship company saw a 15% year-on-year increase in expenses to Rs. 2,440.56 crore in the September quarter compared with Rs. 2,122.77 crore a year ago, while total income for the September grew 13.8% year-on-year to Rs. 3,326.90 crore. Adani said that Mundra Port became the largest port (in volume terms), surpassing Jawaharlal Nehru Port Trust, in the September quarter. The net debt of the company stood at Rs. 22,483 crore as of September 30, the firm told analysts. The company saw an increase in debt on account of “restatement of forex debt, additional debt on the books on account of business-to-business acquisitions, and $750 million of bond issuance,” said Adani Ports CFO Deepak Maheshwari. He added that the company will continue to access the overseas markets and is exploring newer options to raise longer-term debt. Capital expenditure for the company will be within Rs. 4,000 crore in FY20, Maheshwari said. Adani Ports and SEZ revised its growth estimate to 8-10% for the current financial year, compared with the earlier estimated growth between 10-12% in FY20, accounting of the economic slowdown. Adani told analysts that while the corporate tax rate rationalisation helped the liquidity cycle of the medium and small enterprises, it has not yet resulted in a pick-up in new investments or increased interest in SEZs.
IndianOil gets environment clearance to set up Rs 7.66 billion 2G ethanol plant
The Ministry of Environment has granted clearance to the Indian Oil Corporation Ltd (IOCL) to set up a Rs 7.66 billion 2G ethanol plant in Haryana’s Panipat district. Making the announcement through a tweet on Sunday, Union Environment Minister Prakash Javadekar said, “Happy to inform that Environment Clearance is given to IOCL to set up new 2G Ethanol plant in Panipat.” He also said that the project would help in achieving the goal of doubling farmers’ income. “This project not only promotes use of environment friendly fuel but also aids in fulfilment of government’s goal of doubling farmers’ income,” he tweeted. The IOCL had submitted a proposal seeking environment clearance for its proposed 100 KLPD Ligno-Cellulosic 2G ethanol plant at Baholi in Panipat district of Haryana. The estimated investment in setting up the plant is Rs 7.66 billion. Ethanol produced will be used for blending in transportation fuel, an official source said. Recently, the central government had notified that no environmental clearance would be required by sugar mills to produce additional ethanol from sugarcane juice.
Govt to lift pricing curbs on domestically produced gas
In one of the last reforms in the oil and gas sector, the government is set to free up pricing of all domestically produced gas that would help scale up local production from fields of ONGC, OIL, Reliance and Vedanta and help create a uniform gas where the fuel is freely tradable on exchanges. Government sources said that discussions on lifting price restrictions on locally produced natural gas have started that would culminate into a decision about the timing of the new reform initiative. The current timing is considered ideal to free up gas prices as oil market and prices have remained stable. A panel led by the Niti Aayog vice chairman has also suggested free-market pricing for natural gas produced from all fields to boost domestic output. “We are looking at all proposals on bringing out domestic gas production from pricing regulations. A cabinet note proposing the changes would soon be finalised so that new system is put in place at the earliest,” said a government official privy to the development. However, any move to completely lift price regulation in the gas sector will be done gradually as has been suggested by the Kelkar Panel. This would mean that the present system of regulated gas pricing for domestic production would continue for at least three more years but during the period producers would be given freedom to sell a portion of the total output under negotiated pricing deals (market determined) with their customers. The NDA government’s reform initiatives has already allowed free gas pricing for production coming from small and marginal blocks, difficult high pressure/deep water blocks and all production coming under the newly bid blocks under the Hydrocarbon Exploration Licensing Policy (HELP). But the pricing and marketing of gas from Pre-NELP exploration blocks and those under New Exploration Licensing Policy (NELP) is still regulated. This regulation will be lifted gradually, once the new policy is approved. The current gas pricing method for pre-NELP and NELP blocks is based on a 2014 government-set formula that takes average rates from global trading hubs to determine domestic prices twice a year – in April and then in October. Under the formula, the current gas price is at $3.23 per million metric British thermal unit (mmBtu). Gas producers have been critical of this low pricing that adversely impacts investments in the upstream sector. “It’s about time when government frees up gas pricing, if it is serious about developing a gas based economy in the country. Apart from lifting domestic pricing restrictions on domestic gas, the government should also do away with price caps for market determined gas price. This would enable market forces and competition to offer best available prices to consumers,” said a senior official of a private sector oil and gas explorer who did not wish to be named. At present, producers can charge market rates for gas from deep sea and other difficult fields but rates must stay below a government-prescribed ceiling that’s linked to the prices of alternative fuels. The price ceiling is currently at $8.43 per mmBtu. The new policy will look into this ceiling price as well, sources said. India is looking at investor friendly policies in oil and gas sector to attract investments that has remained miniscule for last several years. Due to this, domestic oil production has stagnated while gas production has not picked up in a big way. In fact, domestic gas output shrank by 1.5 per cent in the April-September period of FY20 pushing up the demand of expensive imported liquefied natural gas. The government is aiming to increase gas production by two-and-a-half times by 2030, which would help raise the fuel’s share in the country’s energy mix to 15 per cent from the current 6 per cent. At present, out of 310 exploration blocks awarded so far under various bidding rounds (discovered field, pre-NELP & NELP), 189 blocks/fields are operational. Seventeen blocks under nomination are being operated by ONGC and OIL. Petroleum Exploration Licences (PEL) for domestic exploration and production of crude oil and natural gas were granted under four different regimes over a period time: nomination basis – PEL, Pre-NELP discovered field, Pre-NELP exploration blocks and New Exploration Licensing Policy (NELP). As many as 117 companies are operating in these blocks post the ninth NELP round. This has at least 11 public sector undertakings, 58 private firms and 48 foreign companies.
Indian Oil expects diesel demand to recover in six months
India’s diesel demand is expected to recover in the next six months as a longer-than-usual monsoon season that affected transportation and industry has ended, the chairman of top domestic refiner Indian Oil Corp (IOC) said on Monday. Diesel consumption usually tapers in monsoon season as rains hit construction and mobility. Any longer-term slowdown in fast-growing India’s fuel use could dim prospects for global oil demand. “Fuel demand, especially diesel, is falling … In (July-September) normally demand is low because of monsoons, excess rain and floods,” Indian Oil’s Sanjiv Singh said. India’s fuel demand fell to its lowest in more than two years in September, with consumption of diesel at its weakest since January 2017. “It is a temporary slowdown,” said Singh, who was in Abu Dhabi to attend an energy conference. State-owned refiners, such as IOC, Bharat Petroleum Corp and Hindustan Petroleum Corp, traditionally buy fuel from private companies to meet demand at the pump. But falling local demand for diesel, which accounts for about two-fifths of overall fuel consumption, is prompting state refiners to export the product. Singh said that in the current fiscal year to March, IOC’s diesel exports could be more than before because of the slowdown in consumption. He did not elaborate. Bharat Petroleum will export about 200,000 tonnes of diesel every month between November and March, its head of finance N. Vijayagopal said last week. IOC accounts for about a third of India’s refining capacity of 5 million barrels per day. Singh also said his company was looking at buying Russian oil.
Worst winter likely for LNG as Asian prices to stay at seasonal low
Liquefied natural gas (LNG) spot prices in Asia have dropped to seasonal lows and could remain weak on expectations of a mild winter depressing demand for gas for heating, trade sources and analysts said. A slowdown in China’s coal-to-gas switch amid a weaker economy is also curbing purchases and weighing on prices, traders said. Spot LNG prices are currently at their lowest for this time of the year in a decade since Reuters first started publishing the price. “Milder winter weather is forecast across northeast Asia. Although long-range forecasts are highly uncertain, the prospect of milder weather and weaker demand is weighing on market sentiment,” said James Taverner, director at research and consultancy firm IHS Markit. In Japan, electricity prices fell to a six-month low last week as temperatures held above average for this time of the year, while clear skies after a wet October increased solar supplies. Japan, the world’s largest LNG importer, is expected to have warmer-than-usual weather through January 2020, the weather bureau said in late October. Imports of the super-chilled fuel into Japan had already dropped by 3% in October from the previous month, the first time since 2014 that shipments fell in October, Refinitiv shiptracking data showed. “There haven’t been that many import tenders from Japan, so that’s a sign that their demand is not so high,” a Singapore-based trader said. In China, the world’s second biggest LNG importer, temperatures are up to 3 degrees Celsius higher than normal in some regions, according to the Ministry of Emergency Management. The warmer weather combined with a weaker Chinese economy could also weigh on spot prices, traders said. The potential slowdown in demand is expected to further dent earnings of gas producers, some of whom have reported lower quarterly revenues due to subdued energy prices. Still, there could be some upside in demand from South Korea where the government is planning to temporarily stop power generation from up to one quarter of the coal-fired power fleet from December to February, and up to half in March, next year, which could support LNG consumption, Taverner of IHS Markit said. The global LNG supply glut due to new projects coming on stream this year could hit prices during summer next year, he added. “Fundamentals point to summer 2020 spot prices potentially dropping even lower than experienced in 2019,” Taverner said.
IOC’s Panipat refinery introduces special winter-grade diesel for Ladakh
Indian Oil Corporation (IOC), the country’s largest fuel retailer, has launched a special winter-grade diesel which has a “pour point” of -33 degree Celsius, with a potential to address the issue of freezing of fuel faced by people in Ladakh, the company said in a statement. The pour point of a liquid is the temperature below which it loses its flow characteristics. Paraffin present in diesel starts solidifying when temperatures reach below 32 degrees Fahrenheit. “Using the normal grade of diesel fuel becomes an arduous task for the people in the winter months where temperatures fall to sub zero temperatures of nearly – 30°C. However, the winter grade diesel produced by Panipat Refinery for the first time has a pour point of – 33 Degree Celsius and does not lose its fluidity function even in extreme winter weather of the region, unlike the normal grade of Diesel which becomes exceedingly difficult to utilize,” the company said. The winter-grade diesel meets the Bureau of Indian Standards (BIS) specifications for BS VI grade diesel and was produced and certified by the Panipat refinery last week. The first tank truck containing the special fuel has been flagged off from the Panipat marketing complex and subsequent supplies would be carried out from the Jalandhar terminal. From there, it will reach Leh and Kargil depot to meet the demands of customers of the region during peak winters.
ONGC auction gets tepid response
Oil and Natural Gas Corp’s bid to seek private operators for its 64 producing small fields is attracting limited interest from experienced players as potential bidders want a key auction criterion changed: they want the state-run firm to offer a part of the baseline production on top of the proposed share in incremental output from these fields. In June, ONGC had sought private contractors for these fields, organised in 17 onshore contract areas and with a reserve of 300 million metric tonnes of oil equivalent, and is currently engaged in pre-bid talks with potential bidders. The bidding will close in December. “Most of the interest so far has come from inexperienced players. They have sought clarity on certain issues and are being answered,” an ONGC executive said. Essar Oil, oilfield services firm Baker Hughes and Sun Petro, and several less-experienced companies have sought clarifications on how the contract would work. While the auction process is underway, ONGC has stopped investing in these fields, which may lead to an output contraction from these fields this year, executives said. New investment has been stopped since it is likely to help the private player eventually picked up to operate the field, they said. Private operator is expected to bring in new technology and capital to raise output from these mature fields. It would bear all new cost and receive a share in the increased production after it takes over as operator but would get no part of the baseline production agreed to under the business-as-usual scenario. The bidder seeking the least share of revenue from the incremental production would be picked as winner. But some potential bidders feel that just a share in incremental revenue may not make these fields lucrative enough for them and private operators should get a share in the baseline revenue as well. Another contentious area is the baseline revenue and whose estimates should be relied upon for that. ONGC may need to seek Cabinet approval to change the terms of the contract. ONGC had faced a similar problem in the past to rope in private partners to enhance production from its two mature fields of Geleki in Assam and Kalol in Gujarat.
Pradhan woos foreign firms to invest in India’s oil & gas sector
India on Monday wooed foreign companies to invest in its oil and gas sector as the world’s third-largest energy consumer is likely to see over $100 billion spending in energy infrastructure creation to meet rising demand. Oil Minister Dharmendra Pradhan, who is on a two-day visit to the United Arab Emirates, showcased investment opportunities, promising political and fiscal stability, predictable policies and a huge diverse market. “Our focus is to attract global investments into the oil and gas sector, as India would invest $100 billion by 2024 in refining, pipelines and gas terminals,” he said at a conference in Abu Dhabi. “There is no better place to invest (than India) if you are in the business of energy.” India is expanding oil refining capacity to produce more fuel and petrochemicals as also investing in pipelines and terminals to increase the share of natural gas in the energy mix. With no one fuel expected to meet all the energy needs of the vast nation, a closer look at India’s energy mix reflects a clear trend towards gas and renewables, he said adding that the share of natural gas in the country’s energy basket is being targeted to be raised to 15 per cent by 2030 from the current 6 per cent. “India has a huge appetite for energy and will be the key driver of global energy demand in the coming decades,” he said. “India’s oil demand is projected to rise at the fastest pace in the world to reach 5.05 million barrel per day in 2020 and expected to reach 10 million barrel per day by 2030.” Natural gas consumption is projected to increase 3 times to reach 500 million standard cubic metres per day (mmscmd) by 2030 from current 150 mmscmd. India’s share in total global primary energy demand is expected to double to 11 per cent by 2040, he said. “In the last five years, a series of transformational policy reforms have been introduced laying the path for unlocking the value of Indian hydrocarbon industry,” he said highlighting a new licensing policy for oil and gas exploration as well as downstream pricing and marketing reforms. “There is no place better than India (to invest),” he said. “Political and fiscal stability, predictable policies and huge diverse market make India a favourable investment destination for global investors.” He asked foreign companies and investors “to take note of this incredible opportunity” and invest in oil and gas exploration licensing rounds, farm-in to existing blocks or invest in oilfield equipment and services sector where $100 billion investment is required in the next 10 years. These are besides the downstream investment opportunities in refining, petrochemical and gas business. “Our government is exploring strategic partnerships for the overall development of the oil and gas sector,” he said. “The role of the private sector for bringing in investments with necessary innovations for future energy landscape in the country will remain crucial.” Pradhan said the world is in the midst of a paradigm shift in energy supply and consumption. “Global energy transition is driven by Asia becoming the centre of energy consumption, greater availability of LNG (liquefied natural gas), a greater promise of energy independence through renewables including solar and wind energy, emergence of US as a leading hydrocarbons exporter and the urgency to meet COP 21 Paris climate commitments.” These developments, he said, are redefining the oil and gas industry. “India, with a per-capita consumption of energy far below the world average, is redefining a new and sustainable energy mix. India is, therefore, expected to become the largest growth market for energy by mid-2020s,” he said. “India, as the third-largest energy consumer, will play its rightful role.” He said India being largely import-dependent on crude oil and LNG, external developments impact significantly its consumers, who are extremely price-sensitive. The minister said Indian companies were embracing new technologies which together with improving productivity and efficiencies could result in cost reduction of primary energy by 20-25 per cent by 2050. “An area that calls for attention is enhanced oil recovery to reduce import dependence,” he said. “Petrochemicals offer a great opportunity to expand the downstream value chain. India’s petrochemical market is expected to grow at a compound annual growth rate of 10 per cent over the next five years to reach the $100 billion mark by 2022,” he said. “The industry can potentially enhance the country’s growth through the development of niche products for exports and advanced integrated complexes for polymer production.”