More trouble for PNGRB’s open access proposal
After facing opposition for its proposed transportation tariff for the city gas distribution (CGD) network, the Petroleum and Natural Gas Regulatory Board (PNGRB) is facing further push back from top CGD companies of the country who allege that the proposed regulation for open access in the sector sidesteps those who have already invested heavily in the sector. The PNGRB’s open house on Monday, inviting comments on the draft open access guidelines, part of the public consultation process, saw companies like Torrent Gas Pvt Ltd, Adani Gas Pvt Ltd, GAIL Gas Ltd, Gujarat Gas Ltd (GGL), Mahanagar Gas Ltd (MGL) and Indraprashtha Gas Ltd (IGL) raising concerns about the PNGRB’s move that aims to end exclusivity of supplier after five years of operations. Any infringement on the infrastructure exclusivity of an entity is not appropriate and will severally harm the interests of the CGD entities who are spending huge amounts on creating infrastructure, Torrent Gas said in its representation. “The issue of open access has stirred a hornet’s nest in the CGD sector, opening up more disputes rather than finding a solution for increasing CGD penetration in the country,” said a senior bureaucrat in the know of the matter. The existing draft regulation shall lead to making the overall CGD development project as economically unviable for the authorized entity by making it the supplier of first and last resort for PNG domestic segment only, according to the IGL. Many of the companies are of the view that despite having repeatedly raised concerns over cherry picking by new entrants, the PNGRB has been ignoring them. “The Draft Access Code will allow third party marketers and shippers to ‘Cherry Pick’ customers, and thus endeavour to be opportunistic and endeavour to serve a very select customer type or population,” according to the Adani Gas. Allowing other entities to set-up CNG stations (including dispensers) within such authorized geographical area will be a gross infringement on the interests of CGD entities and against the very understanding under which such CGD entities have bid and been authorized geographical areas, the Adani further said in its representation to the regulator. The PNGRB shall take due cognizance of pending litigations and order passed by the Courts till date, before finalizing the proposed regulations, the Gujarat Gas said in its comments. The CGD projects are very capital intensive with a long gestation period. In acknowledgement of the same, the PNGRB has also extended the market exclusivity period from initial five years to eight years during ninth and tenth bidding rounds, according to the GAIL Gas. “It is to be appreciated that the CGD industry is still in growing phase and we are yet to achieve market maturity. The CGD sector needs Board’s support and hand holding is necessary for the growth of the sector,” the company said in its feedback to the PNGRB. “The feedback processes including open houses seem to be eyewash, a mere formality,” said a senior state government official.
HPCL to pay 34% premium for Rs 2,500 crore share buyback
Hindustan Petroleum Corporation Ltd (HPCL) on Wednesday announced share buyback worth Rs 2,500 crore at 34 per cent premium, even as the second-largest oil refiner and fuel retailer more than doubled its September quarter profit to Rs 2,477 crore from Rs 1,052 crore in the previous corresponding period. Company chairman M K Surana said the shares will be bought back from the market to “unlock value” for investors and “reward those who have remained invested,” including minority shareholders. Parent ONGC, the flagship explorer, will not offer any share from its kitty for the buyback. HPCL will buy back some 10 crore shares, accounting for 6.56 per cent stake, at Rs 250 each, or a 34 per cent premium on Wednesday’s closing price of Rs 187.20 on the NSE. Surana said this was a good time for buyback as the stock price was low and funds were also available at cheaper rates. “We believe that HPCL share has a lot more intrinsic value than what it is reflecting right now. HPCL has been liberal in rewarding its shareholders and buyback is one of the ways (to do that),” he said, adding it will also give a good opportunity to those who want to exit. The current share price is nearly half of its 52-week high of Rs 327.80 and market cap of Rs 27,367.85 crore is less than Rs 36,915 crore, or Rs 473.97 per share, ONGC had paid for acquiring the government’s 51.11 per cent stake in 2018. The company more than doubled its profit for the July-September period in spite of total income decreasing to Rs 62,419 crore from Rs 66,854 crore in the previous corresponding period. Surana said the downstream (refining and fuel retailing) sector was out of the woods, going by the growth in fuel sales and capacity utilisation of refineries. The company’s sales in September reached 98 per cent of the year-ago level and refineries clocked a combined capacity utilisation of more than 100 per cent through optimisation of day-to-day crude run rate and regulating the product procurements from other sources. He said the company’s investments were on track and work on projects was progressing after the hiccups during the countrywide lockdown imposed from March 25 to contain the spread of Coronavirus pandemic.
Malaysia’s energy giant Petronas targets net zero emissions by 2050
Malaysian state-owned energy giant Petroliam Nasional Berhad, or Petronas, said on Thursday it aims to become a net zero emitter of greenhouse gases by 2050 and also plans to increase its investments in renewable energy. Burning of oil and gas accounts for the vast majority of the world’s carbon emissions, and many investors have pushed global oil majors to do more to combat climate change. Petronas, the world’s fourth-largest exporter of liquefied natural gas, said it will intensify its efforts toward reducing the so-called Scope 1 and Scope 2 greenhouse gas emissions, referring to direct emissions from operations and the electricity used by the company. The company, a significant source of revenue for the federal government, also said it will pursue new avenues of revenue generation via investments in nature-based solutions and set up greater accessibility to clean energy solutions. Petronas, the sole custodian of Malaysia’s oil and gas reserves, is also engaged in exploration and production activities overseas. It also produces petrochemicals. The Malaysian firm’s 2050 target is in line with peers BP and Shell – though the companies have marked varying goals to strengthen their green ambitions. Some have even committed to reducing Scope 3 emissions from the final consumption of their products. Petronas has made a push towards renewable energy in recent years and also acquired a Singapore-based solar energy company in 2019. Earlier this year, Petronas said it was looking to expand its renewable energy portfolio after posting its first quarterly loss in nearly five years following a coronavirus-related demand slump and lower oil prices.
GAIL India invites bids for charter of LNG tanker: Sources
GAIL (India) is inviting bids from interested companies to charter the liquefied natural gas (LNG) tanker Meridian Spirit for a period of one year, two industry sources said on Wednesday. The 163,000-cubic metre tanker will be available from March 2021 to March 2022, and companies are requested to submit bids by Nov. 6 with bids remaining valid until Nov. 9, the sources said. They spoke on condition of anonymity because they are not authorised to speak with the media. The Indian importer has been using the ship to transport gas from the United States where it has 20-year deals to buy 5.8 million tonnes a year of LNG, split between Dominion Energy’s Cove Point plant and Cheniere Energy’s Sabine Pass site in Louisiana. A GAIL official could not immediately be reached for comment on the matter.
OPINION: Coronavirus surge throws oil recovery into reverse
Oil futures prices have started to signal OPEC+ may have to do more to offset a second wave of coronavirus and a renewed economic slowdown. Between mid-September and mid-October, Brent’s six-month calendar spread had been tightening, a signal traders expected production to run below consumption and inventories to fall. Over the last ten days, however, the spread has gone into reverse, implying traders are less confident about an inventory draw down over the next six months. This has coincided with a second wave of coronavirus across most of North America and Europe and further business closures and travel restrictions in several major economies. Libya’s oil production, which had been badly disrupted by the country’s civil war, has also started to increase, which is adding extra barrels to the market and pressuring the spread. So far, the spread reversal is only a relatively weak signal that the market rebalancing process is being blown off course. But the spread has been an accurate indicator of changes in the production-consumption balance since the start of the year, clearly identifying turning points, especially when smoothed to reduce day-to-day volatility. Most traders already anticipate OPEC+ will postpone the output increase scheduled for January in response to a slower-than-expected resumption in international aviation and oil consumption. OPEC+ officials have done little to dispel the increasingly widespread assumption they will postpone the increase by at least three months until the start of April. But the spread’s renewed weakness indicates that might not be enough, and it has coincided with an uptick in official chatter that OPEC+ might actually reduce output further. Deeper cuts would strain the group’s political unity; some members have been pushing to be allowed to raise their production. Rolling over existing production levels for three months remains a simpler course. Nonetheless, if the COVID-19 pandemic continues to accelerate, the implied hit to consumption will keep the option of deeper cuts on the table.
Adani Gas signs pact to acquire defaulter Jay Madhok Energy’s 3 city gas licenses
Adani Gas Ltd on Wednesday announced the acquisition of city gas licences for Ludhiana, Jalandhar and Kutch (East) from Jay Madhok Energy for an undisclosed sum of money. Jay Madhok Energy Pvt Ltd has been show-caused by the oil regulator Petroleum and Natural Gas Regulatory Board (PNGRB) over defaulting on timelines and alleged irregularities in the acquisition of the city gas licence. “Adani Gas Ltd has signed a definitive agreement for acquisition of three geographical areas namely Ludhiana, Jalandhar and Kutch (East),” the firm said in a statement. It, however, neither disclosed the name of the city gas licence holder for the three cities nor the acquisition price. “All 3 GAs have high volumes potential in terms of demand of over 6.5 million standard cubic meters per day over a period of 10 years. These geographical areas’ (GA’s) are under Phase 1 of Bharat Mala Pariyojana by NHAI which will further boost the development and volume growth,” it said. Jay Madhok had in 2013 won the licence to retail CNG to automobiles and piped natural gas to households and industries in Jalandhar in Punjab and two years later it got a licence for Ludhiana and Kutch (East) in Gujarat. The three cities were bid out in the 3rd city gas licensing round where the bidder offering to lay the longest length of gas pipeline and provide the most cooking gas connections got the licence. But the firm, according to PNGRB, made little progress on its commitments. PNGRB in 2016 cancelled its licences. Jay Madhok challenged the cancellation in Appellate Tribunal, which in April 2017 set aside the PNGRB order and asked the regulator to follow the set procedure for cancellation. Since then the matter is pending before PNGRB and Jay Madhok had been seeking adjournments on one pretext or the other. In March 2019, PNGRB issued another notice to Jay Madhok over alleged irregularities in the networth used to acquire the licence. It also alleged fraud in the furnishing of a loan sanction letter from Deutsche Bank AG, Singapore. Sources said PNGRB will now have to examine if a sale of the licence is permissible under the statute and what happens to the default by the original licensor. PNGRB can accord an approval if it concludes that such a deal is in the best interest of the development of the licence. With the acquisition, Adani Gas now has a licence for 22 GAs. It has another 19 licences in a joint venture with state-owned Indian Oil Corp (IOC). These GAs cover 74 districts. “Ludhiana and Jalandhar are twin cities of Punjab and are major industrial and commercial hubs with very high-volume potential of CNG and piped natural gas (PNG) homes. Both cities are in the vicinity of the pipeline connectivity,” the company statement said. Kutch (East) in Gujarat is poised to take centre stage for the industrial development in Gujarat. “AGL has strong presence in Gujarat,” it said, adding Kutch (East) is well connected with pipeline and LNG terminal infrastructures making it an attractive destination for the development of CGD network. Given the availability of pipeline connectivity in the surroundings, all the 3 GAs will offer early monetisation opportunity to AGL. “The transaction is subject to necessary regulatory and other customary approvals,” the statement said. Speaking on the occasion, Suresh P Manglani, CEO, Adani Gas said, “These 3 GAs offer high PNG and CNG volumes together with excellent infrastructure growth opportunities”. “This transformational acquisition shall allow AGL to supply cleaner fuels – PNG in fulfilling much-awaited aspirations of a large number of homes, commercial and industrial consumers, Gurudwara, hotels, restaurants and environmental friendly CNG to automotive consumers in Ludhiana, Jalandhar and Kutch (East) GAs. This initiative by AGL shall further support the vision of central and state governments to provide PNG and CNG to all,” he said. Adani will aim to fast track the infrastructure developments across all these GAs, he added. “These 3 GAs shall add significant high volumes and infrastructure developments and will take AGL to a high growth trajectory. “With the strong parentage of AGL, the residents of Ludhiana, Jalandhar and Kutch (East) shall also be beneficiary of best in class CGD networks, operations, maintenance, digital and customer-centric approach with continued focus on health and safety, community development and better returns to the stakeholders,” he noted.