Russia’s Rosneft keen to bid for BPCL
Russia’s largest oil producer Rosneft is keen to bid for acquisition of Bharat Petroleum Corp Ltd (BPCL), sources said after the Russian firm’s CEO Igor Sechin met Oil Minister Dharmendra Pradhan on Wednesday. Rosneft, which is the majority owner of India’s second biggest private oil refinery, is keen to expand in the world’s third largest and the fastest growing energy market. Sechin first met Pradhan over breakfast, and then in delegation-level talks expressed interest in bidding for acquisition of government stake in Bharat Petroleum Corp Ltd (BPCL), an official privy to the discussions said. The government is selling all of its 53 per cent stake in BPCL in the country’s biggest privatisation plan. The official said the government is expecting national oil companies from the Middle East, such as Aramco of Saudi Arabia and ADNOC of UAE, to join the bidding for BPCL.
Rosneft, IOC sign pact for crude supply; Pradhan discusses BPCL sale with Sechin
Russian oil and gas giant Rosneft today signed a contract with India’s largest fuel retailer Indian Oil Corporation (IOC) for supply of 2 million tonne (MT) crude oil to India by end 2020, Rosneft said in a statement. “Rosneft Oil Company and Indian Oil signed a contract to supply up to 2 MT of oil to India via the port of Novorossiysk by the end of 2020,” it said. This would be the first such contract signed by a state-owned oil marketing company with Rosneft. Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL) are also interested in signing annual crude deals with Rosneft, ET reporter earlier this month. The signing took place during the visit of Igor Sechin, Chief Executive Officer (CEO) of Rosneft to New Delhi. Sechin also held a meeting with oil minister Dharmendra Pradhan. The Rosneft CEO expressed his company’s interest in acquiring BPCL, a news report said. Rosneft and Trafigura led consortium already own 49.13 per cent stake in Nayara Energy (formerly Essar Oil Limited). Nayara owns and operates 20 million tonnes per year refinery at Vadinar in Gujarat and also owns more than 5,600 petrol pumps in the country. “An important subject of talks between Sechin and Pradhan was the issue of providing Indian consumers with quality crude and petroleum-based products, including the increase in Russian oil supplies to India. During the meeting, the parties discussed the ongoing joint projects of Rosneft and Indian companies, including Sakhalin-1, Taas-Yuryakh, the Vankor cluster (a consortium of Indian companies owns 49% in the Vankor cluster field), Far East LNG, and Nayara Energy,” Rosneft said in a statement. According to Rosneft, a separate topic of discussion was held regarding Indian companies’ participation in implementing the Vostok Oil project located in the North of Russian Krasnoyarsk Territory. “In order to negotiate the terms of Indian companies’ entering Vostok Oil in the shortest time possible the parties agreed to create a regular working group of representatives of Russian and Indian companies,” Rosneft said. Vostok Oil’s competitive advantage lies in its proximity to the Northern Sea Route, a unique transport corridor. The route provides an opportunity to supply crude from the project’s fields in two directions at once – to European and Asian markets.
Stake in Gujarat Gas good for valuation
Gujarat State Petronet (GSPL) has come out of its two-year consolidation range of Rs 232 recently and if history is to repeat, then the stock is expected to give a decent return over the medium term. Analysts are bullish on the stock given its healthy, free cash flows and compelling valuation considering its stake in Gujarat Gas. GSPL has 54.17 per cent controlling stake in Gujarat Gas which has rallied 50 per cent in the last three months compared to an 11 per cent rise in GSPL shares. “GSPL’s controlling stake in Gujarat Gas offers a less risky exposure to the latter’s healthy growth prospects in PNG and CNG within Gujarat and the new licence areas won in the recent bidding rounds” said Amit Agarwal, research analyst, Nirmal Bang Equities. “We are bullish on the stock based on sustained long-term growth outlook in transmission volume, supported by India’s booming natural gas market and compelling valuation that offset concerns over tepid growth over FY21-22 as well as regulatory / policy issues and execution risk” he added. GSPL stock declined 2 per cent to close at Rs 244.8 on Tuesday. The company has been consistently delivering good numbers and in its latest quarterly result, the company’s profit has shot up to Rs 933 crore, driven by a deferred tax write-back and strong growth in Gujarat Gas. The company has reduced its debt from Rs 5,386 crore in March 2018 to Rs 3,383 crore in September 2019. Stake in Gujarat Gas good for valuation “At 10 times FY22 estimated earnings, valuations look attractive considering improving volume visibility,” said Rohit Ahuja, analyst, BOB Capital Market.
Coronavirus to hit oil demand by around 0.5% in 2020: BP CFO
The global economic slowdown in the wake of China’s coronavirus outbreak is set to reduce global oil demand in 2020 by up to 0.5%, BP’s Chief Financial Officer Brian Gilvary said on Tuesday. The drop in industrial activity and flight cancellations has so far hit oil demand by around 200,000 to 300,000 barrels per day (bpd), Gilvary told Reuters, after BP reported its fourth quarter results. For the whole year, the slowdown will reduce consumption by 300,000 to 500,000 bpd, roughly 0.5% of global demand, according to Gilvary. The impact in China has been more pronounced, reducing demand by around 1 million bpd, he added. Oil prices have dropped by over 20% from their early January peak to hit a one-year low this week.
Common man suffers high fuel prices even as world oil market slides
The high retail price of petrol and diesel continues to impact the common man even though global market has thrown enough cues for a sharp cut in the price of auto fuels. While the Coronavirus scare and continued flat demand for oil has pushed down the global crude price that has fallen sharply by over 24 per cent to $53 a barrel over last one month, there has been less than proportional decrease in retail price of petrol and diesel with oil companies building a cushion for possible increase in oil prices later this year. Petrol is being retailed at Rs 72.98 a litre while diesel at Rs 66.04 a litre in Delhi when crude oil price of Indian basket is about $55 a barrel. At this level of crude in September-October 2017 (crude price between $ 54-56 a barrel), petrol was being retailed between Rs 69 and Rs 70 a litre and diesel between Rs 57 and Rs 58 a litre in Delhi. Again on a crude price of $57-59 a barrel in December-January FY19, petrol prices remained close to Rs 71 a litre while diesel at Rs 64 a litre. And the continuing high price of auto fuels now is despite the government having reduced excise duty on the two petroleum products by Rs 2 a litre and Rs 1.50 a litre in the year 2017 and 2018 respectively after increasing the duty on two products on nine occasions in the past. The duty also moved up last year in Budget by Rs 2 a litre. “It seems state-owned oil marketing companies are making up for the losses they have incurred in earlier months when there was a momentary spike in prices. This is gross injustice for consumers who have braved historically high levels of auto fuels when global oil prices were rising in late 2018. Ideally, petrol and diesel prices should have been lower by at least Rs 3-5 a litre than current levels,” said a top official of an oil producing company asking not to be named. Officials of OMCs, however, disagree over higher cuts in retail price of petrol and diesel saying that the current scenario should also be viewed in the context of fall in rupee against dollar that makes oil purchases expensive. But rupee has remained strong in last one month only to fall marginally lately. In the last one year, rupee has depreciated from about Rs 68 to a dollar to about Rs 71 now. Even if this depreciation is taken into account, experts say the retail price gets impacted by about Rs 1-2 per litre. This still means current petrol and diesel are higher by at least Rs 3 per litre. Under daily price revision mechanism, OMCs have reduced the price of diesel and petrol by just about Rs 3 per litre from Rs 76.01 a litre and Rs 69.17 a litre respectively to Rs 72.98 and Rs 66.04 a litre now. Interestingly, even this period when global oil prices have dropped consistently, OMC have held back retail price revision on few occasions to make up any earlier losses and build buffer for future when oil prices jump again. The benchmark Brent oil prices have fallen below $55 a barrel now but analysts expect prices to rise again if the oil cartel OPEC decides to extend production cuts while the unrest in the Middle East continues to disrupt supplies. But in all this, the spread of Coronavirus and impact on demand would weigh heavily on global oil prices. Oil prices have fallen by over 20 per cent in last one month due to continuing flat demand conditions and the spook Coronavirus has created. But analysts believe that once the current problems get resolved, there could be a rise in crude prices but in may remain range bound around $60-70 a barrel putting lesser pressure on oil importing nations like India which imports more than 80 per cent of its needs.
ONGC Plugs Massive Gas Leak in Andhra
ONGC’s quick intervention has helped plug a massive gas leak and prevented a big fire in an Andhra Pradesh gas field that was discovered by the state-run firm but auctioned to a small private player three years ago by the government. Following a desperate call from the field operator PFH Oil and Gas on Sunday afternoon, ONGC executives from the nearest base in Andhra Pradesh mounted a 40-hour operation, deploying their expertise, men, material and sophisticated equipment to plug the leakage that had the potential to spark an inferno of the like Andhra Pradesh had seen five years ago, people familiar with the matter said. A 2014 gas pipeline fire in Andhra Pradesh had killed more than two dozen people. PFH Oil and Gas executive director Harsh Poddar didn’t return calls made to his office.
New production from KG D6 project to start by mid-2020: RIL-BP
Reliance Industries Ltd (RIL) and British multinational oil and gas company BP Plc have said their joint venture completed the safe cessation of production in a planned manner from the D1 D3 field in block KG D6 off the east coast of India. The D1 D3 field was India’s first deepwater gas field to be put on production in April 2009. “The RIL-BP joint venture has successfully worked to extend the life of production from the D1 D3 Field which otherwise would have ceased production in 2015 due to issues of reservoir pressure and water ingress,” it said in a statement. Through innovation and application of first-of-their-kind solutions, the field’s life was extended for almost five years, to February 2020, maximising the recovery from the field, it added. The KG D6 block has so far produced an overall 3 trillion cubic feet equivalents (TCFes) resulting in energy import savings of over 30 billion dollars. These fields also established several global benchmarks in terms of operational performance including 99.9 per cent uptime and 100 per cent incident-free operations. The JV has committed an additional five billion dollars (about Rs 350 billion) of investments towards monetising about 3 TCFes (about 500 million barrels of oil equivalent) reserves from three projects — R cluster, satellite cluster and MJ fields. These projects will utilise the existing gas production infrastructure. Further, this infrastructure can act as a hub for the development of any discovery from contiguous areas. The first-gas from these fields is expected in mid-2020. The peak production from these three fields is expected to reach 1 BCFe per day which is about 15 per cent of the then envisaged India’s demand. BP is one of the largest international energy companies in India employing around 7,500 people in the natural gas, lubricants and petrochemicals businesses. Reliance Industries is India’s largest private sector company with a consolidated turnover of Rs 6220 million. Its activities span hydrocarbon exploration and production, petroleum refining and marketing, petrochemicals, retail and digital services.
Oil minister moves Cabinet note for splitting GAIL
The Oil Ministry has moved a cabinet note seeking approval for hiving off state-owned gas utility GAIL (India) Ltd’s pipeline business into a separate entity for a possible sale to a strategic investor at a later date, sources privy to the development said. GAIL is India’s biggest natural gas marketing and trading firm and owns more than 70 per cent of the country’s 16,981-km pipeline network, giving it a stranglehold on the market. Users of natural gas have often complained about not ‘fairly’ getting access to GAIL’s 12,160-km pipeline network to transport their fuel. Sources said to resolve the conflict arising out of the same entity owning the two jobs, bifurcating GAIL is being considered. GAIL’s core business after the bifurcation would be the marketing of natural gas and petrochemical production. It will have to hire capacity on pipelines from the subsidiary and pay regulator approved traffics for the same. It will continue to execute the gas sales agreements it has already signed and will be responsible for the discharge of the obligation under purchase pacts including for import of LNG. The Ministry last month floated a note for consideration of the Union Cabinet for transferring the pipeline business into a 100 per cent subsidiary. The proposal involves separating the accounts of the pipeline division as well as transferring employees directly connected with the pipeline operations to the new subsidiary, they said adding a suitable name for the subsidiary is being mulled over. The Cabinet, they said, is likely to consider the proposal shortly. After the Cabinet approval, a consultant will be appointed to transfer the pipeline business into a separate subsidiary. This would take 8-10 months to accomplish. Sources said the pipeline subsidiary may be sold off to a strategic investor but the sale is not likely before 2022 as the thinking in the government is that the gas market will not be mature before that and state support would be needed for GAIL to accomplish building a national gas pipeline grid. The government had recently approved viability gap funding for a gas pipeline grid in the North-East which a consortium comprising GAIL and other state-owned firms will be executing. GAIL will continue to own the marketing business as also the stakes in liquefied natural gas (LNG) terminals after the split, they said. Previously, the government was considering transferring marketing business into a separate subsidiary for a sell-off at a later date but now a hive off of the pipeline business is being considered. GAIL has multiple long-term contracts to import gas in its liquid form (LNG) from countries such as the US and no strategic buyer would like to take the responsibility of those, particularly when the fuel is available at a cheaper price in the spot or current market, the sources said. They said it is now being considered that GAIL continues with the marketing business that would include all the sale contracts as also city gas retailing. Post-2022, the pipeline business can be sold to a strategic investor such as Canadian asset management company Brookfield that recently bought a 1,480-km pipeline owned by Mukesh Ambani’s Reliance Industries (RIL). The sources said the strategic partner will operate the pipelines and give access on a non-discriminatory basis to any entity wanting to transport gas either from a natural gas field or an LNG import terminal to consumers. GAIL already keeps separate accounts for its gas pipeline and marketing businesses, making it easier to split them into two entities. By unbundling GAIL and opening the sector, the government hopes to increase gas use to 15 per cent of the energy mix by 2030 from current 6.2 per cent. When talk of splitting first started in January last year, Oil Minister Dharmendra Pradhan had stated that GAIL should focus on laying pipelines, suggesting hiving off the marketing business. Incorporated in August 1984 by spinning off the gas business of ONGC, GAIL owns and operates over 11,500-km of natural gas pipelines in the country. It sells around 60 per cent of natural gas in the country. The sources said the oil ministry has not been very happy with GAIL’s performance in building the pipeline network. Besides, there is a possible conflict of interest in its role as an infrastructure provider and carrier. GAIL did not start executing the Rs 12,940 crore Jagdishpur-Haldia and Bokaro-Dhamra pipeline until the government agreed to give 40 per cent of the project cost as a grant from the budget. The pipeline takes the gas to Prime Minister Narendra Modi’s constituency, Varanasi. Plans to split the company had been discussed more than a decade back too but these did not materialise. The sources said refiners Indian Oil Corp (IOC) and Bharat Petroleum Corp Ltd (BPCL) had in 2017 evinced interest in acquiring GAIL to expand their gas marketing business. GAIL also owns a petrochemical plant at Pata in Uttar Pradesh. The company had in the past resisted the split on grounds that it’s gas marketing and transmission businesses operate at arm’s length and hence do not need to be separated. GAIL’s marketing business formed 76 per cent of its 2018-19 total sales and about 30 per cent pre-tax profit. The government has a 54.89 per cent stake in GAIL India.
IndianOil buys stake in Phinergy of Israel for manufacturing of aluminium-air batteries
Indian Oil Corporation (IOC), the country’s largest fuel retailer, has partnered with Israel-based start-up Phinergy for development, manufacturing, assembly and sale of aluminium-air batteries. “IndianOil has taken a minority equity stake in Phinergy (Israel). IndianOil and Phinergy are now in the process of forming a Joint Venture in India for collaboration in the field of Al-Air battery system including research & development, customization, manufacturing, assembly, sell and service of aluminium-air energy systems technology,” the company said in a statement. The joint venture intends to set up a factory in India to manufacture aluminium-air batteries (Al-Air batteries) for electric vehicles and stationary applications and facilitate the development of Al-Air technology. ETEnergyWorld had earlier reported that the oil refiner plans to foray in energy storage applications and is going to tie-up with an Israeli company for the same. Phinenergy specialises in aluminium-air (Al-Air) and zinc-air battery systems. Metal-air batteries have great potential in electric mobility and stationary applications, aluminum is naturally available in India and their extraction and recycling technologies are also well established. “We are confident that this Al-Air battery technology would complement Lithium-ion batteries to provide a hybrid solution for large-scale adoption of electric vehicles in the country. Al-air battery technology has advantages on a number of factors like range, energy density, safety of operations, life-cycle etc,” Sanjiv Singh, chairman at IOC said in a statement. A metal-air battery uses metals like aluminum as the anode and air as the cathode, along with a liquid electrolyte. In the case of the aluminium-based metal-air battery, oxygen from the air combines with the metal to create aluminum hydroxide, which activates the electrolysis process and creates an electric current. These batteries are lighter and compact with high energy density. S S V Ramakumar, Director (Research and Development) at IOC had earlier told ETEnergyWorld that metal-air batteries, when combined with conventional chemistries for powering vehicles, can provide a range of up to 500-600 Km per charge.