Licensing rounds: No takers for hydrocarbon exploration permit
No company has expressed interest for a hydrocarbon exploration permit in the latest licensing rounds in the country. The sixth and seventh licensing rounds, which ran between December and July, attracted no explorer as the pandemic clouded prospects for the oil sector, restricted mobility, and kept oil company executives busy with their operational challenges. “The pandemic didn’t permit much focus on acquiring new acreages. Once this settles down, we would again look at it,” said an executive at a state-run oil company. Even before the onset of the pandemic, private players were shy of seeking exploration acreages in India. A revamped licensing policy launched in 2018 did attract some private sector attention initially but the charm faded quickly. In the fourth and fifth rounds, there has barely been any contest with just two state-run firms – ONGC and Oil India – dominating bids. In the fifth round, where the government is in the process of awarding blocks, 12 bids were received for 11 blocks on offer, effectively reducing the contest to just one block. The bids included seven by ONGC, four by Oil India and one by Invenire Petrodyne ltd. Similarly, in the fourth round, a total of eight bids were received, including seven from ONGC and one from Oil India. Of the total blocks awarded in the first four rounds, Vedanta has 51 blocks, the highest for any company. Two other private players, Hindustan Oil Exploration Company and the joint venture of Reliance Industries and BP also have one block each. ONGC and Oil India have won 17 and 21 blocks, respectively, in the first four rounds. Other state firms—Indian Oil, BPRL and GAIL—too have one block each.
Dharmendra Pradhan invites US companies to engage in developing gas infrastructure in India
Union Minister of Petroleum and Natural Gas and Minister of Steel Dharmendra Pradhan on Thursday discussed ‘Strategic Energy Partnership’ during video conferencing with Kenneth Juster, the US Ambassador to India, and invited the US companies to engage more intensely in developing the gas infrastructure in India. Informing about the same in series of tweets, the Ministry of Petroleum and Natural Gas said that, the Minister also reviewed the strategic petroleum reserves’ cooperation initiated in June this year. “Minister of Petroleum & Natural Gas and Minister of Steel Dharmendra Pradhan had a discussion through VC with Kenneth Juster, the US Ambassador to India on India-US Strategic Energy Partnership. The US Ambassador to India recognized that the energy component is emerging as a key constituent of the India-US strategic partnership,” tweeted the Ministry. “Minister Dharmendra Pradhan invited US companies to engage more intensely in developing the gas infrastructure in the country and reviewed the strategic petroleum reserves’ cooperation initiated in June this year,” it said in another tweet.
Indian Oil Corp seeks petrol after BPCL’s post-hiatus purchase
Indian Oil Corp is seeking gasoline, a tender document showed, making it the second refiner from the country looking to plug a gap caused by low crude runs to curb inflating supplies of diesel and jet fuel, industry sources said. IOC, which does not typically comment on its spot deals, is looking to import 30,000 tonnes of gasoline for Oct. 10-11 arrival at Chennai and Kochi through a tender closing on Sept. 29. This comes after Bharat Petroleum Corp Ltd bought gasoline from an oil major last week for Oct. 7-11 arrival at Kandla, its first purchase this year. India went on a buying spree in 2019 as refineries upgraded to produce cleaner fuels, causing the country’s monthly gasoline imports to hit an all-time high of about 410,000 tonnes in September last year, official data showed. However, coronavirus lockdowns wiped out most of the demand earlier this year, with India’s August 2020 gasoline imports seen at 30,000 tonnes. “Indian demand for gasoline is (now) super strong. Current (refinery) runs are not adequate and will require some cargoes to be imported in October,” said one of the sources. But Indian refiners are under pressure to keep output low due to persistent weak demand and bad refining margins for diesel and jet fuel, the source added.
China on course for record LNG imports as industries recover, expand
China’s imports of liquefied natural gas will likely grow 10 per cent to new highs this year as companies scoop up cheap supplies to cover increasing industrial use and robust residential demand. With its total natural gas use likely expanding at 4-6 per cent this year, China is the only major bright spot on the world gas market, where demand is set to fall by about 4 per cent as the global economy contracts due to coronavirus lockdowns. LNG imports are set to hit a record 65-67 million tonnes this year, analysts and Chinese traders estimate, a tenth more than 2019’s total and at a growth rate that could see China overtake Japan as the world’s top buyer by 2022. Some analysts believe China’s economy is now pretty much back to its pre-virus growth path. “After taking a brief hit earlier this year due to the COVID-19 pandemic, China’s gas demand recovered faster than expected, driven mostly by the industrial sector that has recovered to 2019 levels since May, ” said Alicia Wee, analyst at FGE. Companies booked more super-chilled gas from Qatar, Russia and Australia, taking advantage of record-low prices earlier in the year as demand sagged elsewhere. To accommodate higher LNG imports, top gas importer PetroChina reduced costlier pipeline supplies from central Asia, mainly Kazakhstan, using contract tolerances, said a Beijing-based PetroChina official. “(Fourth-quarter)imports will remain robust…as LNG is both more competitive and flexible versus pipeline gas, despite a recent spot price spike,” Lu Xiao, senior analyst at IHS Markit. January-August imports of LNG rose 10.3 per cent over the same year-ago period to 42.2 million tonnes, while piped gas fell 7.4 per cent, Chinese customs data showed. China sees natural gas as a bridge fuel on its long journey to reach carbon neutral by 2060, and since 2016 has switched millions of homes and thousands of factories to gas from coal. The gasification pace slowed along with the economy since 2019, but new pockets of industrial demand have emerged in manufacturing hubs like south China’s Guangdong and east China’s Shandong provinces. In Guangdong, China’s first region to import LNG, authorities are pushing ceramic and glass makers to burn gas instead of coal, which will likely generate up to 8 billion cubic metres of fresh gas demand this year, or 2.6 per cent of the national total, according to a report carried this week by the Shanghai Oil and Gas Exchange. Guangdong, the top gas power generator by province and second-largest gas consumer after Jiangsu, added 3 gigawatts of capacity in the first eight months to raise its total to 26 GW, more than a quarter of China’s total, said IHS Markit’s Lu. Residential demand also continues to grow, accounting for roughly 30 per cent of total demand, said independent gas distributor ENN Energy Holdings and China Resources Gas Group Ltd , which each connected over one million households to their pipeline network in the first half of 2020. WINTER COVERAGE Despite the growth in demand, China is not expected to suffer supply shortages during the cold winter months when demand peaks. Domestic gas production has also expanded. It is up nearly 9 per cent in the first eight months versus a year ago as PetroChina and CNOOC Ltd stepped up domestic drilling to meet national supply obligations. Companies have also filled underground storages with total effective working capacity of 14 billion cubic metres. “Sufficient supplies and flexible demand make gas shortage a remote possibility,” said Huang Miaoru, senior manager at Wood Mackenzie.
BPCL sale may be delayed to next fiscal year, worsening federal deficit woes
India’s efforts to privatise refiner Bharat Petroleum Corp. Ltd. could spill over into the next fiscal year, according to a government document and sources, hurting New Delhi’s efforts to rein in a ballooning fiscal deficit. The privatisation of key companies, including BPCL, is a key part of government plans to pare the fiscal deficit, which has breached its target level just four months into the current fiscal year. Industry sources last year estimated the government’s 53.29% stake in BPCL could fetch $8 billion to $10 billion. With India’s economy contracting by a record 23.9% in the June quarter due to COVID-19, a delayed sale of BPCL could hinder the government’s ability to generate funds for stimulus efforts aimed at restoring growth. New Delhi’s plan to sell its stake in BPCL was first announced in November 2019, and is part of a broader program to spin off or sell stakes in dozens of state-owned companies. The sale has been targeted for completion in the current fiscal year at end-March, but the deadline for initial expressions of interest was pushed out by two months due to pandemic-related movement restrictions that have prevented potential buyers from inspecting the facility. A sale status report issued last month and reviewed by Reuters showed the sale was only due to complete the third step of a 25-step process established for government divestments this month. The document suggests it could take as long as another 21 months for the sale to be completed, although some stages could be carried out concurrently. Potential buyers still needed to attain security clearance, conduct valuation assessments and agree financial terms. “This looks challenging. But we are doing our best to complete the transaction in this financial year,” a senior government official familiar with the sale told Reuters. A second official said the process could take at least 7-8 months more, which would delay completion until at least the end of April, and mean that the proceeds of any sale would only hit government coffers next fiscal year, which begins on April 1 “It may not be possible for overseas companies to do due diligence as air travel is restricted,” added a third official involved in the privatisation process. All three officials declined to be named because of the sensitivity of the issue. The sale also faces domestic opposition. The state government of Kerala, where BPCL’s 310,000 barrels per day Kochi refinery is located, fears job losses and plans to challenge the privatisation in the Supreme Court, its industry minister EP Jayarajan told Reuters. Companies including Saudi Aramco and Rosneft have indicated they would look at BPCL since the privatisation plan was announced. BPCL shares have fallen more than 20% since November last year. Interest may be dampened as the industry looks to shift to greener energy investments. The government had budgeted collections of over $27 billion from privatisations and minority stake sales of state-owned companies this fiscal year, but had raised only about $775 million after the first 6 months.
Indian Oil is betting on plastics as it looks to diversify from a challenging fuel business
India’s biggest oil refiner is betting on plastics as it seeks to diversify from an increasingly challenging fuels business. Indian Oil Corp. plans to add petrochemical plants to all of its future refinery expansions and boost existing output at its current facilities, Chairman Shrikant Madhav Vaidya said. Overall, less than 10% of the crude processed by the refiner is used to make petrochemicals — the building blocks for everything from food packaging to car parts — but the business contributes almost a quarter of the company’s profits, he added. While there is consumer and government pressure across the world to reduce the use of plastics, processors in Asia are building or planning petrochemical plants with demand for transport fuels set to ease in the years ahead. Indian Oil this week finalized a $2.4 billion expansion at its Gujarat refinery to include a polypropylene unit, which can make products for packaging and textiles. “We realized that the volatility of the fuel market can be easily controlled by having a good footprint in the petrochemicals sector,” Vaidya said in an interview. “Petroleum fuels continue to be my main business as far as turnover is concerned, but profitability I intend to get from petrochemicals.” Indian Oil, which operates nine refineries, saw its profit tumble more than 90% in the year ended March 31 as volatility in oil and product prices led to narrow or negative margins. Overall, the company plans to double the amount of crude processed at its refineries to make petrochemicals. At major plants Panipat, Paradip and Gujarat, the proportion of oil processed to produce petrochemicals is expected to climb to 25%, from 15-20% currently, Vaidya said. Vaidya, however, is optimistic about India’s demand growth outlook for petroleum fuels and future investments in the sector. In the short term, he sees consumption reaching pre-virus levels as early as year-end, allowing the refiner to boost processing rates to 90-100%, from about 75% now. Fuel stockpiles have also eased closer to a more typical level that’s sufficient enough to meet two weeks of demand, he said. Indian Oil, which controls 40% of the nation’s petroleum fuels market, also plans to expand into natural gas and renewable energy. “We have every intention of becoming an energy company, not just restricted to fossil fuels,” Vaidya said.
NCLAT sets aside NCLT order rejecting insolvency plea against Coastal Oil Gas Infra
The National Company Law Appellate Tribunal (NCLAT) has set aside the NCLT order rejecting the insolvency plea filed against Andhra Pradesh-based Coastal Oil Gas Infrastructure on the grounds of delay in filing. A three-member NCLAT bench has now directed the Hyderabad bench of the National Company Law Tribunal (NCLT) to admit the plea filed by the financial creditors — Bank of India and Central Bank of India — and decide it “expeditiously” within one month. The NCLAT held that the NCLT had “wrongly considered” the date of default as March 16, 2015 for computation of limitation period to file an application before it and rejected the insolvency plea filed by the financial creditors. On October 30, 2019, the NCLT had dismissed the plea filed by the financial creditors on the grounds of delay after observing that it was filed on September 25, 2018, which was more than three years of default occurred on March 16, 2015. “We set aside the impugned order dated October 30, 2019, passed by NCLT, Hyderabad. “We are further remanding back the matter to the adjudicating authority to admit the application under section 7 after issuing notice and examining all other aspects under section 7 of I&B Code,” said the NCLAT. As per the Limitation Act, which is also applicable on the Insolvency and Bankruptcy Code (IBC) cases, if a default has occurred over three years prior to the date of filing of the application, then such application are barred under article 137 of the Act. The NCLAT’s direction came over a petition filed by Bank of India and Central Bank of India, challenging the NCLT order. The appellate tribunal observed that first loan agreement between the lenders and the debtor was entered on August 1, 2011 and after the corporate debtor failed to repay the dues in accordance with the agreed terms, a second agreement was entered between the consortium of lenders after debt restructuring. After the company failed to comply with the terms of the second amendment agreement, a default notice was issued on December 7, 2017, and filed a plea to initiate insolvency before NCLT on September 19, 2018. According to the NCLAT, after entering into the second agreement on March 15, 2015, the earlier agreement shall be subsumed with it and all the prior defaults shall become irrelevant. The date of default shall be decided as per the second agreement. “Therefore, we are of the opinion that the adjudication authority (NCLT) has wrongly considered the date of default to be March 16, 2015 for computation of limitation period to file an application before it,” it said. The appellate tribunal suggested that the default would occur from December 22, 2017, on the expiry of 15 days from the date of default notice which was served upon the company for recalling the loans. “We are of the view that the application filed by the corporate debtor under Section 7 was required to be admitted by the adjudicating authority, but the adjudicating authority failed to consider the matter in proper perspective. The NCLAT further said that the limitation is a mixed question of law and facts therefore, unless it becomes apparent from the reading of the company petition that the same is barred by limitation, the petition should not be rejected by “selectively considering the documents” on record. The consortium members had sanctioned term loan limit of Rs 641.85 crore to Vishakhapatnam-based Coastal Oil Gas Infrastructure to construct, operate and maintain 12 crude oil tank facilities and other project facilities and services and a refinery at Poochimedu in Cuddalore District, Tamil Nadu. Coastal Oil and Gas Infrastructure is a Special Purpose Vehicle incorporated by Abir Infrastructure and Nagarjuna Group developing liquid bulk storage terminal facility for Nagarjuna Oil Corporation, for its 5.94 million metric tonne per annum (MMTPA) oil refinery. Nagarjuna Oil Corporation Ltd (NOCL) is also facing liquidation after the financial creditors could not find a suitable resolution plan for the company. Haldia Petrochemicals Ltd has shown interest to take over the assets of the NOCL.