Shell writes down up to $4.5 billion in oil and gas assets
Royal Dutch Shell on Monday it will write down $3.5 to $4.5 billion in the value of oil and gas assets in 2021, the latest in a string of impairments this year as it adjusts to a weaker outlook. In an update ahead of its fourth-quarter results, the Anglo-Dutch company said it expects oil and gas production in its upstream division to be around 2.275 and 2.350 million barrels of oil equivalent per day, impacted by the closure of platforms in the Gulf of Mexico due to hurricanes as well as mild weather in Northern Europe. Oil refinery utilisation is expected to be at between 72 per cent and 76 per cent of capacity, reflecting continued weak demand due to the coronavirus pandemic.
ONGC opens eighth hydrocarbon producing basin of India
State-owned Oil and Natural Gas Corporation (ONGC) on Sunday opened India’s eighth hydrocarbon producing basin when it started oil flow from a well in the Bengal basin. Oil production commenced from the well Asokenagar-1 in 24 Pargana district, the company said in a statement. “The well Asokenagar-1 was completed as an oil producer under an early-monetisation plan issued by the Government of India,” it said. With this ONGC has discovered and put to production seven out of the eight hydrocarbon producing basins of India, covering 83 per cent of established oil and gas reserves. ONGC is India’s largest oil and gas producer contributing 72 per cent of the country’s hydrocarbon production. The Bengal basin is spread across nearly 1.22 lakh square kilometres, with nearly two-third of it falling under the waters of the Bay of Bengal. Till now, ONGC has invested Rs 3,361 crore to explore hydrocarbon in the Bengal basin, the statement said adding Rs 425 crore will be spent on exploration activities in the basin in the coming two years. Oil Minister Dharmendra Pradhan dedicated the new basin to the nation at a function at Asokenagar, West Bengal. Speaking on the occasion, Pradhan congratulated ONGC said the discovery would play a role for India’s energy security. With this discovery, around seven decades of relentless endeavours by scientists and engineers of India have borne fruits, giving a new hope for robust development of West Bengal, he said. Bengal basin finally looks set to find a place on the oil and gas map of the world, the statement quoted him as saying. He said that the Indian government is committed to fully support ONGC to make this a turning point in its strive to bring more oil and gas from the subsurface of West Bengal and help to bring a new phase of prosperity for the state and its people along-with local employment. First oil consignment from well Asokenagar-1 was sent to Indian Oil Corporation Ltd’s (IOC) Haldi refinery on November 5. “Re-energised by this discovery and eager to script more success stories in the newly awarded Open Acreage Licensing Policy (OALP) acreages in the Bengal basin, ONGC has already set aside a sling of fresh geoscientific activities,” the statement said. These comprise appraisal programme of Asokenagar discovery for an area of about 739 square kilometers including 3D seismic, low frequency passive seismic (LFPS) survey and drilling of two wells. Besides ONGC will acquire about 1,300 line km of 2D, 2,900 sq km of 3D and drill 13 wells in the next three years in the newly awarded OALP acreages. ONGC chairman and managing director Shashi Shanker was present at the event held at the production site of Asokenagar, around 50 km from state capital Kolkata.
BPCL sale: India plans tough annual targets for state firms to boost valuations
India plans to set tough financial targets for state-run firms to try to improve their valuations ahead of a push by Prime Minister Narendra Modi to privatize some companies, according to a draft government document and sources. The government, which is trying to rein in its fiscal deficit, wants state-run firms to focus on improving market capitalisation and dividend payouts from the 2021/22 fiscal year, starting April, as well as ramping up the sale of non-core assets, the sources said. State-run companies have traditionally largely targeted raising output and increasing revenues, rather than improving efficiency and valuations, contributing to years of share price underperformance versus the broader market. “The companies need to raise their valuation and profitability in a changing business environment. Then only we will be able to get a better price (from stake sales). Shareholders and investors should be rewarded,” said a government source with knowledge of the plan. After regaining power in 2019, Modi’s government prepared a plan [https://reut.rs/3nGyaZh to raise as much as 3.25 trillion rupees ($44 billion) over 5 years by selling down its stakes in companies including Oil and Natural Gas Corp, Indian Oil Corp, NMDC Ltd, Coal India, Bharat Heavy Electricals Ltd and BEML Ltd. It announced moves to privatize companies in non-strategic parts of the economy and reduce the number of firms in key sectors. The government has already initiated steps to privatize Bharat Petroleum, Container Corp and Shipping Corp. However, weak investor sentiment and limited demand have led to delays. So far this fiscal year to end-March 2021, the government has raised only a tenth of its targeted 1.20 trillion rupees stake sales. The planned changes in annual targets could be announced in next year’s federal budget, due in February, a second government source said. “The state run companies will need to deploy funds raised through asset monetization for issues like debt repayment. They should have return on capital employed and return on equity quite high on the margin,” the source said. For the first time, India will include annual targets for state-run companies on metrics such as earnings before interest, tax, depreciation and amortisation (EBITDA), according to the sources and a document on the draft guidelines, which is currently before a government committee. Other targets will include increasing market capitalisation or share price, as well as measures such as return on net worth and capital employed, they said. For unlisted companies an improvement in earnings per share will be a key parameter instead of market capitalisation, the document showed. Managers at state-run companies will have their bonuses and incentives linked to meeting the annual targets. India’s finance ministry and department of heavy industries did not respond to Reuters emails seeking comments. The new annual target structure has yet to be approved by the committee, which comprises officials from various ministries and the cabinet secretary, the first source said. Changes in the annual target policy had been suggested by the Department of Investment and Public Asset Management (DIPAM), which spearheaded the federal government’s stake sale drive, the source added. For companies in which the government wants to cut its stake, DIPAM will set targets like listing, buyback, offer for sale, minimum public shareholding norms and strategic disinvestment to help the government get a better price for any selldown, the document showed.