Bunker suppliers Reliance, IOC, BP, HP and Nayara get show-cause notice for violating surveillance audit
The Directorate General of Shipping has sought an explanation from ship fuel (bunker) suppliers such as Reliance Industries, Indian Oil Corporation, Bharat Petroleum Corporation, Hindustan Petroleum Corporation and Nayara Energy for violating “annual surveillance audit” requirement set by the country’s maritime administration. These five are among the 24 valid bunker supplier registration certificate holders who have been asked to show cause why their permits should not be withdrawn for non-compliance with rules prescribed by a Merchant Shipping Notice issued in 2014. “Certificate issued as above shall cease to be valid, if the bunker supplier fails to carry out an annual surveillance audit within three months, before or after each anniversary date. The verification report has to be forwarded to the Directorate, on completion of the audit for records”, according to Para 8.4 of MS Notice 3 of 2014. However, these 24 entities have “violated” the rules prescribed by Merchant Shipping Notice of 2014 and “continued to supply bunkers to various vessels with deemed invalid bunker supply registration certificate”, J Senthil Kumar, Engineer and Ship Surveyor-cum-Deputy Director General (Technical), wrote in the show cause notice, a copy of which was reviewed by BusinessLine. The bunker supply registration certificate issued by D G Shipping mandates satisfactory completion of annual surveillance audit of bunker supply management system by the D G Shipping or auditors of the Indian Register of Shipping, a ship classification society. “Therefore, you are hereby called upon to show cause to why the bunker supply registration certificate issued to the Company under MS Notice 3 of 2014 should not be withdrawn,” Senthil Kumar wrote in the December 21 notice, asking for a response within 15 days. Failure to respond within the deadline will be presumed by the D G Shipping that the companies have “no defence to offer and accept the charges”. Reliance Industries holds a permit to supply bunkers at Kakinada; Bharat Petroleum has a certificate for four locations – Surat, Kandla, Mahul and Sewree; Hindustan Petroleum at two locations (Sewree terminal and Surat); Indian Oil Corporation at JNPT in Navi Mumbai and Budge Budge; Oil and Natural Gas Corporation at Nhava in Navi Mumbai and Nayara Energy in Gujarat. Other valid bunker supplier registration certificate holders who have been sent notices include Bhambhani Shipping (Mumbai); G P Global Energy (Gujarat); Geostan Marine (Kochi); Kan Enterprises (Visakhapatnam); Modest & Parsons International (Mumbai); Ocean Bunkers (Mumbai); Vert Line Marine Bunkers (Chennai); SES Bunkering (Mumbai); Sea Petroleum International (Mumbai); Shiny Shipping & Logistics (Mumbai); Tycoon Oil (Mumbai); Global Cambay Marine Services (Surat); Manali International (Gandhidham).
PM to virtually inaugurate Kochi-Mangaluru GAIL pipeline
Prime Minister Narendra Modi would virtually inaugurate the Kochi-Mangaluru GAIL pipeline on January 5, Kerala Chief Minister Pinarayi Vijayan said on Thursday. Vijayan told reporters here that it was a matter of happiness that the Prime Minister had agreed to launch the natural gas pipeline project. “Union Minister Dharmendra Pradhan called yesterday. He informed that the Prime Minister consented to virtually inaugurate the Kochi-Mangaluru GAIL pipeline on January 5,” he said. It was a matter of happiness that a project, believed to never materialise, was finally ready and the Prime Minister himself was inaugurating it, the Chief Minister added. The 444-km long pipeline was launched in 2009 at an estimated cost of Rs 2,915 crore and was to be commissioned in 2014. But opposition on safety and commercial grounds wherein the land price was the main hurdle, both from political parties and the public, had left the project hanging fire. This had led to the project cost nearly doubling to over Rs 5,750 crore.
Assam extends ban on strike by oil and gas sector employees for 6 months under ESMA
The Assam government on Thursday extended the ban on strike by employees of oil and gas sector in the state for six months from January 1 next year under the ESMA, an official statement said. The fresh order under the Essential Services Maintenance (Assam) Act, 1980 will be valid till June 30, 2021. Strike by the officers, workers, contract labourers, tanker drivers and their helpers involved in the oil and gas sector has been prohibited till June 30 next year under the ESMA, the statement said. Any service in any oilfield or refinery of any establishment or undertaking dealing with the production, supply of petroleum products, including natural gas, will fall under the purview of this order, it added.
Indian Oil to buy 15 hydrogen buses for Delhi
Delhi will become the first city in the country to seriously try out hydrogen — touted as the fuel of the future — as a serious public mobility solution, with Indian Oil Corporation (IOC) procuring 15 buses kitted with polymer electrolyte membrane fuel cells for plying in the city. “IndianOil has been pioneering hydrogen efforts in the country and this exercise is a part of a bigger project which aims at addressing all aspects of the hydrogen value chain,” a company statement quoted chairman S M Vaidya as saying. The venture is being supported partially by the oil ministry’s hydrogen corpus fund. This project is the first-ever attempt in the country to address all the aspects of hydrogen-based mobility as the ultimate green option, the statement said. According to IOC director (R&D) S S V Ramakumar, the fuel cell stack/system technology would be indigenously developed and manufactured, thus accelerating the creation of a local ecosystem to support further activities in the hydrogen energy domain. The fuel cell buses would be evaluated in collaboration with selected OEM (original equipment manufacturer) partners through a large-scale field validation exercise in Delhi-NCR. To facilitate the hydrogen supply for refuelling these buses, IndianOil is also setting up demo units for different pathways with a capacity to produce approximately one tonne per day of hydrogen at its state-of-the-art R&D Centre in Faridabad.
Gas price rally buoys North American LNG developers looking to 2021
North American LNG exporters are sounding more confident about the prospects for new projects in 2021 due to a sharp rally in prices driven by surging Asian demand, even as most industry analysts expect next year to be another difficult one. Natural gas futures in Europe and Asia have climbed to their highest levels in more than a year due to a sharp increase in demand late in 2020, especially out of China, where buyers have scrambled to secure supply. Asian nations have driven record growth in liquefied natural gas (LNG) as they seek to replace dirtier coal plants and fuel growing energy consumption. Numerous projects slated for groundbreaking in North America were put off in the last two years due to historically weak prices and worries about oversupply. That concern has dissipated after production dropped this year in Australia, Malaysia, Norway and Qatar, some of the world’s largest LNG producers. With spot prices in Asia hitting a six-year high, LNG operators are seeing greater interest in long-term supply deals that would allow developers to build new export plants. Tom Mason, general counsel and president of LNG at Energy Transfer LP, which is developing an export plant at its Lake Charles import facility in Louisiana, said the rise in prices “has translated into a pickup in traction with customers for long-term commitments for LNG purchases.” At the start of 2020, a dozen or so developers said they planned to make final investment decisions (FIDs) to build new projects in the United States, Canada and Mexico by the end of this year. Only one of those export plants went forward – Sempra Energy’s $2 billion addition to its Costa Azul LNG import facility in Mexico. All other proposals were delayed because not enough customers were willing to sign long-term deals to finance the multibillion-dollar projects with spot prices so low. Gas futures in Europe and Asia collapsed to record lows in the spring due to coronavirus demand destruction before rebounding in recent weeks to their highest in over a year. There are now 14 North American projects awaiting FID in 2021, most carried over from 2020, but analysts do not expect all to go forward next year. Global LNG demand has risen by about 10% each year over the past three years to hit an all-time high of around 355 million tonnes per annum in 2019. Some analysts project that growth rate will slow to 3% to 4% a year through 2025 and then decline further as governments phase out fossil fuels to meet net-zero carbon emissions policies. LNG developers, however, say that the recent dearth of construction will leave the LNG market undersupplied in coming years, especially as demand keeps rising in Asia. “The current forecasts have not taken into account recent announcements out of Japan, China and South Korea that will shift more power generation from coal to gas,” said Doug Shanda, CEO of Mexico Pacific Ltd. Mexico Pacific plans to make a decision in late 2021 or early 2022 on whether to build an LNG export plant on Mexico’s Pacific coast. Analysts said “brownfield” projects built at existing LNG terminals like Energy Transfer’s Lake Charles or Sempra’s Costa Azul have a better chance of going forward than “greenfield” projects. Five of the six big operating U.S. LNG export plants are at brownfield sites. “Brownfield projects tend to involve less cash and shorter development lead times,” said Henning Gloystein, director of energy, climate & resources at Eurasia Group in Singapore. “It will indeed be tough for most greenfield projects in North America to get FID in 2021.”
Gas price rally buoys North American LNG developers looking to 2021
North American LNG exporters are sounding more confident about the prospects for new projects in 2021 due to a sharp rally in prices driven by surging Asian demand, even as most industry analysts expect next year to be another difficult one. Natural gas futures in Europe and Asia have climbed to their highest levels in more than a year due to a sharp increase in demand late in 2020, especially out of China, where buyers have scrambled to secure supply. Asian nations have driven record growth in liquefied natural gas (LNG) as they seek to replace dirtier coal plants and fuel growing energy consumption. Numerous projects slated for groundbreaking in North America were put off in the last two years due to historically weak prices and worries about oversupply. That concern has dissipated after production dropped this year in Australia, Malaysia, Norway and Qatar, some of the world’s largest LNG producers. With spot prices in Asia hitting a six-year high, LNG operators are seeing greater interest in long-term supply deals that would allow developers to build new export plants. Tom Mason, general counsel and president of LNG at Energy Transfer LP, which is developing an export plant at its Lake Charles import facility in Louisiana, said the rise in prices “has translated into a pickup in traction with customers for long-term commitments for LNG purchases.” At the start of 2020, a dozen or so developers said they planned to make final investment decisions (FIDs) to build new projects in the United States, Canada and Mexico by the end of this year. Only one of those export plants went forward – Sempra Energy’s $2 billion addition to its Costa Azul LNG import facility in Mexico. All other proposals were delayed because not enough customers were willing to sign long-term deals to finance the multibillion-dollar projects with spot prices so low. Gas futures in Europe and Asia collapsed to record lows in the spring due to coronavirus demand destruction before rebounding in recent weeks to their highest in over a year. There are now 14 North American projects awaiting FID in 2021, most carried over from 2020, but analysts do not expect all to go forward next year. Global LNG demand has risen by about 10% each year over the past three years to hit an all-time high of around 355 million tonnes per annum in 2019. Some analysts project that growth rate will slow to 3% to 4% a year through 2025 and then decline further as governments phase out fossil fuels to meet net-zero carbon emissions policies. LNG developers, however, say that the recent dearth of construction will leave the LNG market undersupplied in coming years, especially as demand keeps rising in Asia. “The current forecasts have not taken into account recent announcements out of Japan, China and South Korea that will shift more power generation from coal to gas,” said Doug Shanda, CEO of Mexico Pacific Ltd. Mexico Pacific plans to make a decision in late 2021 or early 2022 on whether to build an LNG export plant on Mexico’s Pacific coast. Analysts said “brownfield” projects built at existing LNG terminals like Energy Transfer’s Lake Charles or Sempra’s Costa Azul have a better chance of going forward than “greenfield” projects. Five of the six big operating U.S. LNG export plants are at brownfield sites. “Brownfield projects tend to involve less cash and shorter development lead times,” said Henning Gloystein, director of energy, climate & resources at Eurasia Group in Singapore. “It will indeed be tough for most greenfield projects in North America to get FID in 2021.”
Arbitration panel cites PM, minister’s assertion on retro tax to overturn Cairn tax demand
A three-member tribunal at the Permanent Court of Arbitration in The Hague cited statements by Prime Minister Narendra Modi and other ministers pledging not to use retrospective taxation to overturn a Rs 10,247 crore tax demand on British oil and gas company Cairn Energy Plc. The tribunal, in a 582-page judgment on December 21, ordered return of the value of shares that the Income Tax Department sold as also the dividend it seized and tax refunds it withheld to recover tax demand that was levied following the 2012 amendment to the Income Tax Act that gave authorities powers to seek taxes on past deals. It ruled that the 2006 reorganisation of Cairn Energy’s India business prior to listing on local bourses was not “unlawful tax avoidance” and ordered tax authorities to drop the tax demand. In the order, the tribunal, which consisted of one member appointed by the Indian government, said the Bharatiya Janata Party’s (BJP) 2014 “election manifesto criticised the preceding government for having unleashed ‘tax terrorism’ and ‘uncertainty’, which ‘negatively impact[ed] the investment climate’.” In his first budget speech in July 2014, the new Finance Minister, Arun Jaitley, proposed that a CBDT-supervised ‘High Level Committee’ be implemented to scrutinise fresh cases that had arisen following the 2012 Amendments. After stating that, “[t]his government will not ordinarily bring about any change retrospectively which creates a fresh liability”, he announced that “henceforth, all fresh cases arising out of the retrospective amendments of 2012 in respect of indirect transfers and coming to the notice of the Assessing Officers will be scrutinized by a High Level Committee to be constituted by the CBDT before any action is initiated in such cases,” the order said. On November 7, 2014, Jaitley, according to the order, insisted that his government had taken a “policy decision that as far as this government is concerned […] even though there is a sovereign power of retrospective taxation, we are not going to exercise that power”. On January 13, 2015, Jaitley was quoted as saying that the 2012 Amendment had “scared away investors from India” and that “the government had no intention of using the retrospective tax provision”. “This view was confirmed by Prime Minister Narendra Modi on February 14, 2016. The Prime Minister was quoted in the Financial Times as saying that the government “will not resort to retrospective taxation; we are making our tax regime transparent, stable and predictable”, the tribunal said. The Income Tax Department in 2015 slapped a Rs 10,247 crore tax demand on Cairn for alleged capital gains it made in the 2006 business reorganisation. Cairn denied the scheme, avoided any tax that were prevalent on that date and challenged the demand through an arbitration. During the pendency of the arbitration, the government sold Cairn’s near 5 per cent holding in Vedanta Ltd, seized dividends totalling Rs 1,140 crore due to it from those shareholdings and set off a Rs 1,590-crore tax refund against the demand. The tribunal ordered the government to return the value of shares it had sold, dividends seized and tax refunds withheld to recover the tax demand along with interest. Also, it was asked to reimburse the cost of arbitration. All this totalled to USD 1.25 billion plus interest. The government in response to the arbitration award had stated that it will study the order and “will consider all options and take a decision on the further course of action, including legal remedies before appropriate fora”. This is the second loss the government has suffered in three months over the retrospective levy of taxes. In September, UK’s Vodafone Group won an international arbitration against the demand of Rs 22,100 crore in taxes.
No going back on privatisation of BPCL, Air India
COVID-19 carnage may have slightly pushed back timelines but there is certainly no going back on privatisation of bluechip public sector undertakings like BPCL and Air India as the government feels it has no business to be in business. The spadework started late last year and 2020 was supposed to be the landmark year in India’s history of privatisation with at least three top PSUs — the nation’s second-biggest fuel retailer Bharat Petroleum Corporation Ltd (BPCL), national carrier Air India and Shipping Corporation of India (SCI) up for sale. But the outbreak of the coronavirus pandemic pushed the timelines into the next fiscal but the government is firm on not going back on its disinvestment plans with Finance Minister Nirmala Sitharaman on more than one occasion emphatically stating that the government will continue to push for stake sales. Oil Minister Dharmendra Pradhan, whose ministry is the nodal ministry for BPCL, went to the extent of saying that, “the government has no business to be in the business”. In February, Sitharaman set a record disinvestment target of Rs 2.10 lakh crore for the fiscal beginning April but Rs 12,380 crore from minority stake sales in four public sector companies is all that has been garnered so far. The disinvestment target, like last year, looks almost impossible to achieve. The target was anyway daunting as it was four times that of Rs 50,298 crore raised in 2019-20. The target of Rs 2.10 lakh crore, includes Rs 1.20 lakh crore from CPSE disinvestments and Rs 90,000 crore from stake sale in state-run financial institutions, including LIC and IDBI. Government officials expressed confidence of completing BPCL and Air India sale in the next few months. Privatisation drive The Department of Investment and Public Asset Management (DIPAM), which manages government stake sale programmes, had kicked off the privatisation drive inviting preliminary bids for debt-laden Air India in January. In early March, it invited bids for selling its 53.29 per cent in oil marketing and refining firm BPCL. But then, India imposed a nationwide lockdown to contain the spread of coronavirus from March 25. The outbreak of the pandemic took its toll on the privatisation drive and the government had to repeatedly extend the deadline for submission of bids for the two companies. As the year drew to a close, the government said it has received “multiple” preliminary bids for the two companies, but the real test remains with those translating into financial bids after potential investors undertake detailed scrutiny of the companies. While mining-to-oil conglomerate Vedanta and two global private equity funds — Apollo Global Management and I Squared Capital-owned Think Gas — have put in bids for BPCL, salt-to-software conglomerate Tata Group and US-based fund Interups Inc aree among the potential buyers of Air India. Late in 2020, the government invited preliminary bids for the sale of its entire stake in Shipping Corporation of India (SCI) with the hope of completing the transaction in 2021. With over two dozen companies, including Container Corporation, Cement Corporation, BEML, Pawan Hans, Scooters India and some steel plants of SAIL lined up for strategic sale since 2019, the question remains as to how soon the real privatisation drive starts. Trailing CPSE shares With share prices of CPSEs (Central Public Sector Enterprises) trailing compared to private sector peers, the government has put the onus on the top management of CPSEs to improve investor confidence by way of quarterly dividend payout to reward them and engage with them to assuage their concerns, if any. DIPAM Secretary Tuhin Kanta Pandey had flagged the issue of lagging market valuation of CPSEs saying that between March and November while the Sensex and the Nifty rose by about 50 per cent, the BSE CPSE Index climbed only 19 per cent. “In general, we have a problem of PSU stock valuation in the market. We must also do atma chintan (introspection)… as to why this is happening. Is it due to something inherently problematic in the way we manage our companies, or is it some issue in the government policy,” Pandey had said. He had also suggested inclusion of CPSEs’ market capitalisation improvement and asset monetisation as parameters in the MoU target they sign with the government. Improving share price is the need of the time and till privatisation starts, the government would be banking on minority stake sales to meet its disinvestment target. Revenue pressure The run rate of disinvestment mop up has been slow in the first nine months, but then typically, it is the January-March period that sees conclusion of a spate of deals. The plans to launch the initial public offering of Life Insurance Corporation (LIC) this fiscal is ambitious as the pre-IPO process of the country’s largest insurer would take time with technicalities involved in actuarial valuation and valuation of huge real estate assets of the company. While Air India disinvestment is not likley to conclude by March 2021, the BPCL deal, coupled with privatisation of Shipping Corporation and CONCOR can push disinvestment proceeds to close to Rs 80,000 crore this fiscal. However, that would still be far less than the Rs 2.10 lakh crore earmarked from disinvestment.