Macquarie Capital launches LNG project development platform
Macquarie Capital, the corporate advisory and principal investing arm of Macquarie Group , said on Tuesday it had launched a platform to develop and operate liquefied natural gas (LNG) infrastructure projects. The platform, called WaveCrest Energy, will deliver project financing, construction and operation solutions for regasification, power and downstream LNG infrastructure assets. WaveCrest Energy will initially focus on Latin American and Asian markets, helping enable a switch to natural gas, Macquarie Capital said. Macquarie Capital has more than $25 billion in infrastructure projects under construction or development.
NTPC inks pact to buy GAIL’s 25.1% stake in Ratnagiri Gas and Power
NTPC on Tuesday said it has signed a share purchase agreement to buy GAIL’s 25.51% stake in Ratnagiri Gas and Power Pvt Ltd (RGPPL), which is commonly known as Dabhol project. After the transaction is complete, NTPC would have 86.49% stake in the RGPPL. Earlier in January, the company had announced acquiring 37.47% stake in RGPPL from its lenders. Initially, NTPC and GAIL had 25.51% stake each in the Dabhol project. “NTPC Ltd has executed share purchase agreements with GAIL (India) Ld on February 23, 2021, for purchase of GAIL’s share (25.51%) in Ratnagiri Gas and Power Pvt Ltd (RGPPL) and sale of NTPC’s share (14.82%) (on fully dilutive basis) in Konkan LNG Ltd (KLL),” according to a BSE filing. It added that after transfer of shares as per the agreements, NTPC will exit from KLL, and NTPC’s shareholding in RGPPL will stand at 86.49%. RGPPL was incorporated on July 8, 2005, and is promoted by NTPC Ltd and GAIL (India) Ltd. The company was set up to take over and revive the assets of Dabhol Power Company Project. RGPPL owns an integrated power generation and re-gasified LNG facility. The power station is one of the India’s large gas-based combined cycle power station.
Gas may come under India’s unified tax regime ahead of gasoline, diesel
India’s aim to bring crude, transport fuels and gas under a unified tax regime has so far met with stiff resistance from state governments, but gas could come under the tax umbrella earlier than other oil products — although the move towards that target won’t be free of hurdles. Even nearly four years after the goods and services tax or GST came into effect, crude oil, natural gas, gasoline, gasoil and jet fuel are still outside its purview as state governments argue that the central tax would hit their revenues, especially after the COVID-19 lockdown hit their revenues. But the recent pledge from Indian Prime Minister Narendra Modi to bring gas under the GST has spurred a rally in the share prices of gas companies in a country where gas accounts for only 6% of the country’s energy mix, compared with a world average of around 25%. “Bringing gas under GST would be a stepping stone in bringing the overall petroleum sector under the ambit of the GST. But now because of COVID-19, everyone — both center and the states — is short of revenue and petroleum is a good source of revenue, it will take some time to build a consensus,” said Dharmakirti Joshi, chief economist at CRISIL, a unit of S&P Global. GST is a unified indirect tax that aims to replace various taxes levied by the federal and provincial governments, such as the value added tax, or VAT. Senior officials argued that states need to look at natural gas a bit differently from the rest of the petroleum products as the clean fuel volumes are relatively smaller compared with gasoline and diesel, so the revenue loss would be relatively less. “Looks like gas may come under the GST before transport fuels and crude,” said a senior official at a multinational energy firm in India. Varying levels of taxes VAT rates on natural gas in India can differ from 5% to 24.5% in different states and are subject to rebates for certain industries in each state. In Gujarat, where the majority of the LNG terminals are located, gas incurs a 15% VAT, whereas Andhra Pradesh, the state from which ONGC and Reliance-BP will supply their KG-Basin gas production, has a VAT rate of 24.5%. The government of Andhra Pradesh increased the rate of tax on natural gas to 24.5% from 14.5% in September 2020 to boost its revenue after the pandemic lockdown dried up its coffers. A Reliance-BP domestic gas tender to supply gas produced from the KG-D6 basin at JKM minus 18 cents/MMBtu on an ex-Gadimoga basis would incur the higher VAT rate applicable in Andhra Pradesh at 24.5%. Based on the JKM price of $6.275/MMBtu on Feb. 23, the VAT incurred would be around $1.50/MMBtu. Whereas, if the GST rate was set at 5% for natural gas, the tax incurred would drop down to around 31 cents/MMBtu. However, companies that have procured gas through the tender for supplying to another end-user for consumption outside Andhra Pradesh can provide a C-form and pay a 2% central sales tax, or CST. VAT would be charged at the point of sale depending on the natural gas tax rate in each state. “Gas under the purview of GST would be a big plus for Indian gas demand as it would bring down the cost for end-buyers. Suppliers would also be able to apply for input tax credit and the complex VAT and CST regime would get simplified,” and Indian RLNG buyer said. Sumit Pokharna, vice president of Kotak Securities, said that with gas being outside the GST, gas-based industries like fertilizers, power, refinery and petrochemicals do not get the benefit of tax credit of VAT paid on purchases of gas, resulting in a higher cost of production for industrial consumers. Secondly, in the latest federal budget the government has highlighted its plans to monetize pipeline assets of public sector undertakings like GAIL. “If gas comes under GST, demand for natural gas will improve substantially, resulting in better valuations for pipeline assets,” he added. Tough task at hand “VAT is levied by the state governments; inclusion of gas in GST might impact revenues of state governments. Hence, resistance is coming from state governments,” Pokharna said. But oil and gas companies — both state-run and private — have highlighted that the move to keep gas and the four energy commodities out of the GST list had affected investments in infrastructure, as their input costs have risen. While a downstream player pays GST on the procurement of a plant, machinery and services for the production of petroleum products, it has not been able to claim input tax credit against the excise duty and VAT paid on petrol, diesel and aviation turbine fuel, as these products are outside the ambit of the GST. Currently, only LPG, naphtha, fuel oil and kerosene are under the GST. “The central government will find it hard to convince the states for the inclusion of gas in the GST, but with Narendra Modi speaking about gas coming under the ambit of the GST, it has given more confidence to buyers,” an Indian end-user said.
IOC to set up mega biorefineries in Telangana, Andhra Pradesh
As part of its transition from fossil-fuels to a multi-source, clean energy play, public sector oil & gas giant, Indian Oil Corporation Ltd (IOC), plans to set up two mega bio-refineries in Telangana and Andhra Pradesh, a top IOC official has said. These second generation (2G) bio-refineries, which will extract ethanol from agri-residue like wheat and paddy straw, are part of IOC’s plans to set up 12 bio-refineries across multiple states, including Haryana, Gujarat and Uttar Pradesh, IOC’s R&D director SSV Ramakumar said here on Wednesday. The biorefineries will have a extract 5 lakh litres per day capacity and are slated to come up at an investment of Rs 600 crore each, IOC executive director & state head for Telangana and AP, RSS Rao said. “It’s a week-old proposal. We have approached the Telangana government which has identified two parcels of land for the project. We are yet to approach the AP government,” Rao said, adding that the Telangana bio-refinery would definitely come up within 200 km of Hyderabad’s periphery. The refineries will take at least 18 months to come up after IOC takes possession of land for the project, Rao said Meanwhile talking about IOC’s transition, Ramakumar said over the next 5-10 years, an IOC petrol station will no longer be a mere petrol pump but an energy pump where you can get not just the cleanest petrol and diesel, but also charge your EVs, swap EV batteries, get Hydrogen CNG, among others. Elaborating on IOC’s strategy to ramp up ethanol output led by in-house R&D, Ramakumar said IOC has found efficient ways to not just extract ethanol and compressed biogas from agri-residue but also from carbon dioxide using select natural bacteria and microbes. In addition to this, it has devised a process for converting Carbon dioxide into Omega 3 fatty acids, for which it has also been granted a global patent, Ramakumar said. “The government has mandated the usage of 10% of ethanol in transportation fuel but currently not more than 6% ethanol is being added to fuel due to its non-availability. IOC’s R&D has found new avenues to produce ethanol as the government has mandated an ethanol mix percentage of 20% by 2025. This has led to the development of 2G & 3G Ethanol,” he explained.
Reliance seeks bids for gas from coal bed methane block in Madhya Pradesh
Reliance Industries has sought bids for gas from its coal bed methane block in Madhya Pradesh. Bids have been invited for sale of 0.82 million metric standard cubic meters a day (mmscmd) of gas for a period of one year beginning April 1, according to public notice by the company. Bidders are expected to quote a price in terms of percentage of the Dated Brent, which would be the average of Platts’s benchmark rates for three months preceding the supply month. Bids cannot be lower than 9.5% of the Dated Brent. The actual price gas buyers pay will be the higher of the bid price or the domestic formula price published every six months by the Oil Ministry’s petroleum planning and analysis cell. Potential buyers can start registering on the e-bidding platform from March 6 for the auction slated for March 18. The minimum volume one can bid for is 0.01 mmscmd. RIL has appointed CRISIL Risk and Infrastructure Solutions Limited to manage the auction.
Exxon Mobil’s total reserves drop by a third after COVID-19 oil price drop
Exxon Mobil’s global oil and gas reserves tumbled by a third last year as the COVID-19 pandemic crashed global oil prices and demand, the company said on Wednesday. The largest U.S. oil producer is reeling from the sharp decline in oil demand and a series of bad bets on projects when prices were much higher. It slashed project spending by a third last year, cut jobs and added to debt to cover its dividend. The reserves reductions were “a result of very low prices during 2020 and the effects of reductions in capital expenditures,” the company said in a filing. Total reserves for all products fell to 15.2 billion barrels of oil and gas at the end of 2020 from 22.4 billion the year before, mostly driven by oil sands in Canada and U.S. shale gas properties, according to a regulatory filing. The plunge in the value of oil and gas properties was worse than during the 2014 through 2016 downturn, when Exxon had a 4.8 billion cut in its reserves. The number of Exxon workers at the end of the year was 72,000, down from 74,900 at the end of 2019. Exxon has said it could cut 14,000 employees, or 15% of its global workforce, by the end of 2021. It reported a net annual loss of $22.4 billion for 2020 compared with a full-year profit of $14.34 billion in 2019. Exxon churned out profits since it merged with Mobil in 1999 and through the 1980s oil bust.
Economists bat for fuel tax cut to rein in inflation
Non monetary measures may be needed to rein in inflation from rising crude prices. Direct impact of a $10 per barrel increase in crude prices would add upto 23 basis points (bps) to inflation. Economists are batting for a cut in fuel tax which is inflating retail prices. Global prices of Brent and crude oil prices in India during January -February are lower than the comparable period year ago. However, at the pump, retail prices have gone up on an average 20-25% year-on-year due to high domestic excise taxes. In mid-February, the retail selling price of petrol was 2.8 times the base price of oil. “That is because, taxes (centre and states) on petrol are 170% of the base price, keeping retail prices high” said Radhika Rao, India economist at DBS. “Modest cuts in excise rates are likely, but not sharp (as it remains a key revenue source; contributed 0.7% of GDP) and thereby underpinning transport costs, in the inflation basket” Inflation has fallen under 6%, the upper tolerance limit. But the RBI’s RBI’s Monetary Policy Committee(MPC) minutes also flags members’ concerns and warning that core inflation needs monitoring, particularly due to rising global commodity and crude prices. Every $10 per barrel movement in oil price can push inflation higher by 20-30bps, according to an RBI study. ” For India, the relentless hardening of international crude prices is worrisome, especially as their impact on inflation is amplified by disproportionately high excise duties” said RBI deputy governor, Michael Patra, an internal member of the MPC in the minutes released earlier this week. Higher commodity prices are translating into higher inputs costs, especially in an environment in which demand is recovering. ” Proactive supply side measures, particularly in enabling a calibrated unwinding of high indirect taxes on petrol and diesel – in a co-ordinated manner by centre and states – are critical to contain further build-up of cost-pressures in the economy” noted RBI governor Shaktikanta Das in the minutes. BoA Securities has raised its FY’22 Center’s fiscal deficit by 30bps to 7.5% of GDP, expecting Rs5 per litre oil tax cut. Besides, the current account deficit too could widen along with a drain on foreign exchange reserves. the firm has also raised its current account deficit forecast by 30bps to 0.8% of GDP and cut RBI forex intervention by $9bn to $36bn in FY’22, implying a slowdown in forex reserves pile-up.