IOC renews deal to buy up to 2 MT of oil from Russia’s Rosneft
Indian Oil Corporation (IOC), the nation’s largest oil firm, has renewed a deal to buy up to 2 million tonnes of crude oil in 2022 from Russia’s Rosneft, the Russian oil producer said. IOC had in February 2020 signed a deal with Rosneft Oil Company to import up to 2 million tonnes of oil via the port of Novorossiysk. In 2021, the deal envisaged supply of up to 1.7 million tonnes of crude oil but IOC bought just on parcel or shipload as the cost of transporting the oil made it uneconomical, when compared to alternatives. For 2022, the deal is for the supply of up to 2 million tonnes of oil from the Black Sea port of Novorossiysk. India has tied up supplies from Russia to the US in a bid to diversify its oil import basket, cutting reliance on the Middle East to meet its oil needs. “Rosneft and IOC signed a contract for the supply of up to 2 million tonnes of oil to India through the port of Novorossiysk by the end of 2022,” the Russian firm said on its website. The signing took place during the visit of Russian President Vladimir Putin to India, during which he met with Prime Minister Narendra Modi and held bilateral talks in an expanded format. The leaders of the two countries, the statement said, attach great importance to the development of all-around trade, economic and investment cooperation. Energy is one of the key areas of interaction between the companies of the two countries. “The signing of a new contract for the supply of oil confirms the strategic nature of the long-term partnership between Rosneft and Indian Oil,” said Igor Sechin, Chief Executive Officer of Rosneft. “It is important that cooperation between the companies develops in an integral format and covers the entire technological chain – from extraction to the sale of raw materials. I hope that our interaction with Indian Oil will develop within the framework of other projects.” India’s Ministry of External Affairs, listing out the 28 agreements signed during Putin’s visit, said the crude oil supply agreement “seeks to renew the previous contract between Rosneft and IOC”. IOC also signed a Statement of Intent of Collaboration with Russian petrochemicals company SIBUR to explore the feasibility of setting up a dual-feed cracker along with downstream units at its 15 million tonnes a year Paradip refinery in Odisha, the MEA said. In another pact with Gazpromneft, IOC is looking for VGO Hydrocracking Technology, Catalytic Iso-dewaxing for lobs and catalyst regeneration for fixed bed catalyst. IOC is already an investor in some of Rosneft’s production projects in Russia, including Vankorneft and Taas-Yuryah. Since 2016, IOC along with ONGC Videsh Ltd, Oil India Limited and Bharat Petroresources own 49.9 per cent of the Vankorneft subsidiary. This company is located in Krasnoyarsk province and developing Vankor oil and gas condensate field – the largest among the fields that were discovered in Russia in the past 25 years. Also, a consortium of IOC, Oil India and Bharat Petroresources owns 29.9 per cent of the company Taas Yuryakh Neftegazodobycha, which holds licenses for the areas of the Central Block of Srednebotuobinskoe Field and Kurungskiy license area (the other shareholders are Rosneft and BP). ONGC Videsh, the overseas investment arm of state-owned Oil and Natural Gas Corporation (ONGC), in 2001 bought a 20 per cent stake in Sakhalin-1 Project in Russia’s Far East (the other shareholders are Rosneft, ExxonMobil and the Japanese company Sodeco). In 2020, the project produced 12.4 million tonnes of oil and condensate and delivered more than 2.4 billion cubic meters to consumers. Rosneft owns a 49.13 per cent stake in the Indian company Nayara Energy, which operates a 20 million tonnes a year capacity oil refinery at Vadinar in Gujarat. This refinery is the second-largest in India and one of the most technologically advanced in the world, the Rosneft statement said. “The consortium is reviewing an option of a two-fold increase of the refining throughput at the Vadinar Refinery. In the first stage, the consortium plans to invest USD 850 million towards the building of a petrochemical unit in Vadinar within 2 years,” it said. The plant will produce up to 4,50,000 tonnes a year of polypropylene. Nayara Energy’s business also includes a deep-water port that can harbour super large VLCC class tankers and one of the largest retail networks in India now comprising more than 5,600 petrol pumps.
Saudi Aramco, BlackRock sign $15.5bn gas pipeline deal
Saudi Aramco said it has signed a $15.5 billion lease and leaseback deal for its gas pipeline network with a consortium led by BlackRock Real Assets and Hassana Investment Company in its second major infrastructure deal this year. The deal signed on Monday underscores how Aramco — the kingdom’s cash cow — is seeking to monetise its once-untouchable assets to generate revenue for the Saudi government as it accelerates efforts to diversify the oil-reliant economy. In June, Aramco sold a 49 percent stake in its oil pipeline business to a consortium led by US-based EIG Global Energy Partners for $12.4 billion. Under the new deal, a newly formed subsidiary, Aramco Gas Pipelines Company, will lease usage rights in Aramco’s gas pipeline network and lease them back to Aramco for a 20-year period, the Saudi oil firm said in a statement. In return, Aramco Gas Pipelines Company will receive a tariff payable by Aramco for the gas products that flow through the network, backed by minimum commitments on throughput. Aramco will hold a 51 percent stake in Aramco Gas Pipeline Company and sell a 49 percent stake to investors led by BlackRock and Hassana, a Saudi state-backed investment management firm. “With gas expected to play a key role in the global transition to a more sustainable energy future, our partners will benefit from a deal tied to a world-class gas infrastructure asset,” Aramco president and CEO Amin Nasser said in a statement. “BlackRock is pleased to work with Saudi Aramco and Hassana on this landmark transaction for Saudi Arabia’s infrastructure,” BlackRock chairman and CEO Larry Fink said. “Aramco and Saudi Arabia are taking meaningful, forward-looking steps to transition the Saudi economy toward renewables, clean hydrogen, and a net zero future.” Aramco, the world’s biggest oil producer, has pledged to achieve net zero carbon emissions in its operations by 2050. Saudi Arabia, one of the world’s biggest polluters as well as the top oil exporter, has also pledged to achieve net zero carbon emissions by 2060. Long seen as the kingdom’s “crown jewel”, Aramco and its assets were once tightly under government control and considered off-limits to outside investment. But with the rise of de facto ruler Crown Prince Mohammed bin Salman, who is pushing to implement his “Vision 2030” reform programme, the kingdom has shown readiness to cede some control. Aramco sold a sliver of its shares on the Saudi bourse in December 2019, generating $29.4 billion in the world’s biggest initial public offering.
Gail opens a new round for submission of proposals from Start-Ups
To support the Start-Ups operating in identified focus areas, GAIL (India) Limited plans to invest in such companies through its Start-Up initiative ‘Pankh’. The state-owned company has now opened a fresh Round for Solicitation of Investment Proposals from the Start-Ups operating in areas such as natural gas, petrochemicals, energy, project management, bio manure marketing, nanomaterials, IoT and data mining, environment, health and social, etc. The current Solicitation Round will remain open from 1st December 2021 to 15th January 2022.
Oil’s not well with domestic production
The threat of the Omicron variant has spooked global markets, taking oil prices lower. But this could be only transient as global oil demand still exceeds supply this year. Brent crude prices ruled at levels of $71 a barrel last week, well below the average of $84 in October, but are substantially up on the start of 2021. The impact of high global oil prices is bound to be serious for countries like India, which imports 85% of its requirements. For India, costlier oil implies a higher import bill and inflation. Indications are that the crude import bill this fiscal is likely to exceed last year’s level of 196.5 million metric tonnes, worth $62.2 billion. Till October this fiscal, India imported 118.5 MMT worth $61.1 billion, as against 104.6 MMT amounting to $26.9 billion in April-October 2020-21. Costlier oil stems from global oil supply not growing fast enough at 95.97 million barrels a day to meet the recovering demand at 97.53 million barrels a day in 2021, according to the short-term outlook of the US Energy Information Administration. Oil prices have risen over the past year due to steady drawdowns of global oil inventories. The Organisation of the Petroleum Exporting Countries and its allies reaffirmed on December 2 that they will keep production targets unchanged to raise output by 400,000 barrels a day in January 2022. However, the grouping will closely monitor the market situation and may meet again if prices slide further. But there are cautious grounds for optimism that with higher supplies outpacing slowing global demand, Brent crude prices may fall to an average of $72 a barrel in 2022. To reduce vulnerability to high and volatile global prices, determined efforts must be made to increase the levels of relative self-sufficiency by stepping up domestic oil and gas production. Unfortunately, this is not happening. Domestic crude production has been steadily declining from 38.1 MMT in 2011-12 to 30.5 MMT in 2020-21. Till October this fiscal, production at 17.4 MMT is virtually unchanged from the levels during the corresponding period in 2020-21, according to the Petroleum Planning & Analysis Cell. Domestic production is falling due to declining output from old and marginal fields. India lacks the technological capability for deepwater exploration. There have also been no major hydrocarbon discoveries of late either. The preferred strategy in recent years is to pick up stakes in foreign oilfields to enhance India’s energy security. But with elevated international oil prices, stepping up domestic production must be prioritised at all costs. Indian state-owned oil majors like the Oil and Natural Gas Corporation must be able to generate internal resources to undertake exploration. Unfortunately, this cannot happen if ONGC is asked to give away a 60% stake plus operating control in India’s largest oil and gas producing fields of Mumbai High to foreign companies and divest its drilling and services arm to become asset light, among others. This prompted a former Union secretary, EAS Sarma, to write to the Prime Minister that instead of “weakening” ONGC, the government should adopt a conscious strategy to strengthen its ability. While addressing global oil and gas CEOs, PM Narendra Modi told them that the focus has shifted from revenue to production maximisation. This should be welcomed. Domestic oil majors like Cairn Oil and Gas have stated that as much as 70% of their revenue generation goes as levies to different governments while costs of running operations take up 20-25%, making it difficult for them to invest in capital-intensive technologies. Domestic oil producers must be incentivised to produce more to reduce import-dependence over the medium-term.