COVID-19 world: Iran may deny Farzad-B gas field rights to OVL
In a big setback for India’s ambitions to build its energy security by acquiring oil and gas blocks abroad, Iran is set to deny ONGC Videsh Ltd (OVL) exploration and production rights for the prestigious Farzad B gas field. Highly placed sources in the oil ministry said that Iran may not offer the Indian company to develop the gas field but so far it has not officially communicated its decision. Farzad-B, which was discovered by OVL in the Farsi block about 10 years ago, had in-place gas reserves of 21.7 trillion cubic feet, of which 12.5 Tcf is believed to be recoverable. If India gets a share of this gas, it could reduce its dependence on expensive LNG. Iran has been dilly dallying over the grant of the development right of Farzad B for a few years now. Things have come to a standstill since the US sanctions in 2018 on Iran with India also moving slowly in the matter. This would be a double blow for Indian investment in Iran as reports suggest that an Indian company may not be allowed to develop a rail line that was part of the Chabahar port second phase project. India has done the first phase work at the port. “There are two issues to Farzad B project. Iran may not be giving development tights to OVL but an Indian consortium continues to have part ownership of the block and would get its share of profit whosoever develops the project,” the source quoted earlier said. The OVL-led consortium, which also includes Oil India Ltd and Indian Oil Corp (IOC), have invested close to $100 million in the project. Farzad-B was discovered by OVL in the Farsi block about 10 years ago. India and Iran were initially targeting concluding a deal on Farzad-B field development by November 2016 but later mutually agreed to push the timeline to February 2017. The deadline to wrap up negotiations was later targeted for September 2017. But the deal was stuck over the pricing of the gas. Sanctions delayed the process thereafter and despite visits of ministers from both sides no agreement could be reached. OVL pushed for the deal with a sweetened offer that included investment of close to $11 billion. But that also did not break the ice and the project remains in limbo.
Mozambique gas project of OVL, OIL ties up $14.9 billion debt
ONGC Videsh Ltd (OVL), the overseas investment arm of state-owned Oil and Natural Gas Corp (ONGC), holds 16 per cent stake in Area-1, while Bharat Petroleum Corp Ltd (BPCL) has 10 per cent. Oil India Ltd has 4 per cent interest. Indian state-owned energy firms OVL and OIL and their foreign partners have secured USD 14.9 billion debt to part-finance their USD 24.1 billion liquefied natural gas (LNG) project in Mozambique. Led by French energy giant Total, the project envisages producing 12.88 million tonnes per annum of LNG from gas discovered in Area-1, offshore Mozambique. Oil India Ltd, a national oil company of India, announces that Rovuma Offshore Area 1 consortium (Area-1), led by Total confirms, the finalization of the Mozambique LNG senior debt financing of USD 14.9 billion for the two train LNG project on July 15, 2020,” the company said in a regulatory filing on Thursday. Indian firms hold a total of 30 per cent stake in Area-1, which has around 75 trillion cubic feet of recoverable gas resource. The consortium operating Area-1 had approved the final investment decision (FID) on June 18, 2019, Oil India Ltd (OIL) said. The total cost is estimated at USD 24.1 billion and is to be funded through a combination of debt (USD 15.8 billion), equity (USD 7.4 billion) and cash flow from operations (USD 0.8 billion). The senior debt financing comprises a loan facility with the African Development Bank, loans from commercial banks and credit from other financing institutions, OIL said, adding the project expects to achieve financial closure in the fourth quarter of this year. The project entails designing, building and operating an integrated Liquefied Natural Gas (LNG) plant, including offshore extraction, underwater pipeline, onshore processing plant, as well as ancillary support facilities. It will have a capacity of 12.88 million tonnes per annum of LNG and will source gas from the Golfinho-Atum (GA) field within Area-1, which is located 40kms off the coast of Mozambique. The project will supply gas for LNG exports (mainly to Europe and Asia) and domestic consumption.
Dharmendra Pradhan invites US oil, gas firms to invest in India; eyes this much investment in 5 years
Petroleum Minister Dharmendra Pradhan invited the US companies and investors to engage and invest in India, ahead of the second ministerial meeting of India and the US Strategic Energy Partnership scheduled tomorrow. Dharmendra Pradhan said that India will see an investment of over $118 billion in the oil and gas sector in the next five years. He added that India is preparing to meet the needs of a fast-growing economy, hence the country is striving for setting up oil and gas exploration facilities and natural gas infrastructure, including the development of gas supply and distribution networks across the country. The minister underlined that there have been a few collaborative efforts between Indian and American companies in this sector, but it is far below their potential. He also said that the resilience of the US-India Energy Partnership is one of the most durable pillars on which the bilateral relations of both countries rest. In an interaction organised by the US-India Business Council (USIBC), Dharmendra Pradhan added that even during these challenging times, India and the US have been working in close collaboration, be it in stabilising global energy markets or in collaborative efforts to address the coronavirus pandemic.
Tamil Nadu: Villagers protest laying of LPG pipelines via fields
Villagers of Kulayankarisal and Pottalkadu, on Thursday, staged a protest to oppose the laying of LPG pipelines through agricultural fields in their villages. The protest was to grab the attention of the district administration and demand that the pipelines be laid in an alternative route. According to sources, the Indian Oil Corporation Limited (IOCL) is laying pipelines in a stretch of 142 km from Ramanathapuram to a private fertilizer plant in Tuticorin. Sources said that the work has been completed for about 134 km that include 53 revenue villages. As the works reached Kulayankarisal and Pottalkadu, the villagers feared it would pose a threat to their lives and farming. On Thursday, the villagers, led by Selvasekar, gathered at a common place in the village and began the protest. Selvasekar said that adequate land is available to lay the pipes through alternative routes. Police personnel were deployed in large numbers as tension gripped the place and the protest continued till late in the evening. Though revenue officials including Tuticorin sub-collector Simranjeet Singh Kahlon and the superintendent of police for Tuticorin district S Jayakumar tried to convince the protesters, they insisted on continuing the protest.
Aramco seeks 20 per cent cut in Reliance’s O2C business valuation; deal hits roadblock
Reliance Industries’ planned sale of a fifth of its oil-to-chemical business to Aramco has stalled after the Saudi company sought at least 20 per cent cut in $75 billion valuation billionaire Mukesh Ambani’s firm was seeking. Sources privy to negotiations said Saudi Aramco had right from the beginning resisted the $15 billion price tag Reliance had put for the 20 per cent stake in O2C business, which comprises of the company’s twin refineries at Jamnagar in Gujarat, petrochemical plants and 51 per cent in fuel retailing venture. And with crude oil prices plunging due to the pandemic, it sought a complete re-evaluation, putting a price tag of no more than $57-60 billion for the business ($11-12 billion for 20 per cent stake), they said. Aramco felt the business would need substantial investment to convert oil to valuable chemicals and not produce substantial quantities of petrol, diesel, and ATF as Jamnagar refineries currently do. And the slump in crude prices has squeezed refinery margins, requiring reworking of the valuations for the business, it felt. Aramco also had reservations on the debt Reliance had loaded on the O2C business. The sources said Reliance resisted any move to reopen the valuation or to resize the debt. With both sides holding on to their positions, Ambani at Reliance’s annual general meeting on Wednesday said the Aramco deal was delayed due to “unforeseen circumstances in the energy market and the COVID-19 situation”. He neither said if the deal was on track nor gave any fresh timelines for its completion. Reliance did not immediately reply to an email sent seeking comments. Bernstein in its comments on the issue said: “The sell-down of a 20 per cent stake in the refinery and chemical business to Aramco for $15 billion has not progressed as planned given changes in market conditions. We believe a deal is still possible although at a lower valuation closer to our estimate of $57 billion gross”. Ambani had in August last year announced talks to sell a 20 per cent in O2C business to Aramco for an asking of $15 billion. He at that time stated that the deal would conclude by March 2020. But the talks have dragged on. “Reliance is working to complete the contours of a strategic partnership with Saudi Aramco,” Ambani had said in the firm’s latest annual report without giving timelines. The partnership with Aramco would give Jamnagar refineries “access to a wide portfolio of value-accretive crude grades and enhanced feedstock security for higher oil-to-chemicals conversion,” he had said in the annual report released last month. Aramco is a significant supplier of crude oil to Jamnagar refineries and Ambani at the AGM on Wednesday said the company value “two-decade relationship” and is “committed to a long-term partnership”. To facilitate the deal, Reliance had earlier this year decided to spin off the O2C business into a separate subsidiary, and Ambani on Wednesday said that process would continue and is likely to be completed by early 2021. But for him, the urgency of the deal has diminished after Reliance amassed over Rs 2.12 lakh crore from sale of nearly 33 per cent stake in the conglomerate’s digital arm Jio Platforms, rights issue and selling 49 per cent stake in fuel retail business to BP. This money helped the oil-telecom-to-retail conglomerate to become a zero net debt company nine months ahead of the target. “Our equity requirements have already been met,” Ambani said on Wednesday. With a stake, Aramco would not just have a share in one of the world’s best refineries and the largest integrated petrochemical complex but also access to one of the fastest-growing markets — a ready-made market for 5 lakh barrels per day of its Arabian crude and a potentially bigger downstream role in future. Antique Stock Broking Ltd said the partnership with Aramco appears uncertain. “The sudden outbreak of COVID-19 has adversely impacted petroleum markets globally with financial ramification for petroleum majors, including Saudi Aramco”. Axis Capital said while COVID-19 delayed the Aramco deal, RIL continues to draw interest from global players for the strategic partnership of its petrochemicals business. “Saudi Aramco stake sale unlikely to happen any time soon, but given large stake sales, the balance sheet has materially de-leveraged,” JP Morgan said. It said its net debt numbers are higher than Rs 1.61 lakh crore estimates of Reliance after including spectrum dues, capex creditors, and other statutory dues. However, “the balance sheet has materially de-leveraged post the stake sales and hence even as the Aramco deal timelines are unknown at this point, the balance sheet is not impacted”.