TotalEnergies, Inpex to sell their interests in Block 14 in Angola
France’s TotalEnergies (TTEF.PA) and Japan’s Inpex Corp (1605.T) said that they had agreed to sell their interests in Angola’s Block 14 B.V. to Angolan Company Somoil for an undisclosed sum. Angola Block 14 B.V, which is owned by TotalEnergies Holdings International B.V with a 50.01% stake and Inpex Angola Block 14 Ltd with a 49.99% stake, holds a 20% interest in block 14 in Angola and a 10% interest in block 14K. Net production from Block 14 B.V. was 9,000 barrels of oil equivalent per day in 2021, TotalEnergies said. “By divesting this interest in mature fields, TotalEnergies is implementing its strategy to highgrade its oil portfolio, focusing on assets with low costs and low emissions” said Henri-Max Ndong-Nzue, Senior Vice President Africa of TotalEnergies Exploration & Production. For Inpex, Japan’s biggest oil and gas explorer, the move is part of an ongoing review of its asset portfolio amid the global trend toward decarbonisation, a company spokesperson said. Inpex said in October that it had sold all its interests in the offshore D.R. Congo Block where it had been engaged in the development and production of crude oil, following an exit from Venezuela’s oil and gas assets earlier that month. “Our core geographic areas for exploration and production (E&P) are Japan, Australia, Indonesia and Abu Dhabi, with an additional exploration focus on Barents Sea in Norway,” the Inpex spokesperson said. “We will not sell all E&P assets in other geographic areas, but we will continue to review to optimize our asset portfolio,” they added. In an effort to boost cleaner energy assets, Inpex said in December it will buy an offshore wind power generation company in the Netherlands from Mitsubishi Corp (8058.T), and that it will purchase a stake in the Muara Laboh geothermal power project in Indonesia.
Megha Engineering, Adani Total Gas Emerge As Top Winners In CGD Bidding
Megha Engineering and Infrastructures Ltd (MEIL) walked away with the most 15 licences to retail CNG to automobiles and piped cooking gas to households in the latest city gas bidding round, while a joint venture of billionaire Gautam Adani’s gas arm and Total of France got 14 licences. According to the results of the bid opening for the 11th round of city gas distribution (CGD) bidding, Indian Oil Corporation (IOC) stands to get nine licences and Bharat Petroleum Corporation Ltd (BPCL) 6. While Assam Gas Company is winning three licences, Dinesh Engineers Ltd is set to bag licences for four geographical areas (GAs). Hindustan Petroleum Corporation Ltd (HPCL), GAIL Gas Ltd, Think Gas Distribution Pvt Ltd, IRM Energy Pvt Ltd, Indraprastha Gas Ltd and Sholagasco Pvt Ltd are to get one licence each. An official of the Petroleum and Natural Gas Regulatory Board (PNGRB) said the bids have been opened and the preliminary winners decided but a formal announcement will be made in the next few days after the documents submitted by the bidders are verified. Bids for 61 out of the 65 GAs offered in the 11th round were received at the close of bidding last month. IOC had bid for 53 out of 61 GAs while Adani Total Gas Ltd had bid for 52 GAs. Adani group had originally ventured into the city gas business in a joint venture with IOC but it later tied up with Total. Adani and IOC did not put any combined bid in the latest bid round. PNGRB had bid out 65 GAs, including Jammu, Nagpur, Pathankot and Madurai, in the latest licensing round. Four GAs in Chhattisgarh did not receive a single bid. I Squared Capital-backed Think Gas Distribution Pvt Ltd was the third largest bidder as it put in offers for 44 GAs. Privatisation-bound BPCL had put in bids for 43 GAs, while GAIL Gas Ltd – the city gas arm of state gas utility GAIL India Ltd – had bid for 30 areas. HPCL bid for 37 GAs and Torrent Gas for 28. Indraprastha Gas Ltd – the firm that retails CNG in the national capital and adjoining areas – bid for 15 GAs, Gujarat Gas for 14 and Assam Gas for 10 GAs. Megha Engineering had a winning percentage of 24.6 per cent, while Adani Total Gas Ltd was successful in 23 per cent of the GAs where it had bid. IOC was successful in 14.8 per cent and BPCL’s success rate was 9.8 per cent. While Torrent Gas drew blank, other major bidders had a success rate of just 1.6 per cent. The bids were decided on the basis of those offering to give most city gas connections and those setting the largest number of CNG retail outlets. PNGRB had last month stated that as much as Rs 80,000 crore investment is envisaged in setting up city gas infrastructure in the 61 GAs. The 65 GAs offered in the 11th bid round are spread over 215 districts in 19 states and one Union territory covering 26 per cent of India’s population and 33 per cent of its area. Currently, there are 228 geographical areas authorised by PNGRB in 27 states and UTs covering about 53 per cent of the country’s geographical area and 70 per cent of its population. In the last city gas distribution bidding round (the 10th CGD bidding round), 50 GAs were authorised for the development of the CGD network. In the current round, 215 districts clubbed into 65 GAs are being offered. Bids were received for 61 GAs, according to PNGRB. During 2018 and 2019, PNGRB gave out licences to retail CNG to automobiles and piped cooking gas to household kitchens in 136 GAs. This extended coverage of the city gas network to 406 districts and around 70 per cent of the country’s population. The push for city gas expansion is part of the government’s plan for raising the share of natural gas in the country’s energy basket to 15 per cent by 2030 from the current 6.3 per cent. While 86 GAs, made up of 174 districts, were offered for bidding in the 9th round that concluded in August 2018, 50 GAs, comprising 124 districts, were offered in the 10th round in 2019.
Oil, budget and economic sentiment
Traditionally, Union budgets have mattered for people at large because of two reasons: prices of goods and income tax rates. There is some merit in the argument that inflation is a bigger dampener on economic sentiment in India than low growth rates There is some merit in the argument that inflation is a bigger dampener on economic sentiment in India than low growth rates. Traditionally, Union budgets have mattered for people at large because of two reasons: prices of goods and income tax rates. With the roll-out of the Goods and Services Tax (GST) in 2017, the Budget has lost its importance as a determinant of prices. The GST has subsumed central and state indirect taxes on most domestically produced goods and rates are decided in the GST Council. However, the budget still has a major influence on the price of an important commodity: fossil fuels such as petrol and diesel. What the forthcoming budget does regarding prices of petrol and diesel will have important implications for the economy. Here are four charts which explain this in detail. Petrol-diesel taxes were increased post-pandemic As the world came to a standstill after the pandemic, consumption of petroleum products crashed. This led to a sharp fall in petroleum prices as well. Brent crude – the international benchmark for crude oil prices – fell to $9.12 per barrel on April 21, 2020, the lowest level in 21 years. The price of India’s Crude Oil Basket (COB) fell to $19.90 in the month of April 2020, the lowest level in 18 years. The government saw an opportunity in this development and significantly increased taxes on petrol and diesel. Because the base price was very low, retail prices did not increase despite the sharp rise in taxes. This is best seen in petroleum ministry statistics on price build-up of petrol and diesel. High taxes brought a fiscal windfall, but mostly for the Centre Numbers speak for themselves. Data from the petroleum ministry shows that contribution of the petroleum sector to the exchequer increased from ₹5550 billion in 2019-20 to ₹6730 billion in 2020-21. It needs to be underlined that this happened when overall GDP actually saw a contraction in India. Provisional estimates for the first half of 2021-22 put this number at ₹3500 billion. However, it was the Centre which enjoyed most of these windfall gains from petroleum taxes. While the Centre’s earnings from the petroleum sector increased from ₹3300 to ₹4500 billion between 2019-20 and 2020-21, the states actually saw a minor fall in their earnings from the sector from ₹2210 billion to ₹2170 billion. To be sure, the fall in headline numbers for states’ earnings should not be used to infer that the states did not raise taxes. It needs to be remembered that consumption of petroleum products itself saw a large fall in 2020-21, and barring the rise in taxes by states, the overall earnings would have fallen even more. One reason why the Centre’s gains in petroleum taxes did not accrue to states is that the additional taxes were kept in the category of cess, not included in the divisible pool of taxes. But retail prices started rising as crude prices recovered and taxes were not lowered Monthly average of petrol-diesel prices reached a record high in Delhi – prices vary across most districts – in October 2021. India’s COB was priced at $82.11 in that month. This is significantly lower than the price of India’s COB between February 2011 and August 2014 when it was hovering above the $100 mark. However, retail prices of both petrol and diesel were significantly lower back then, largely because of the difference in tax burden. While indirect taxes on petrol-diesel were reduced in November 2021, the tax burden is still significantly higher than pre-pandemic levels. It remains to be seen whether finance minister Nirmala Sitharaman announced a further reduction in union excise duty on petrol and diesel or keeps them at current levels. While cutting taxes is likely to give a boost to economic sentiment (more on this later) bringing tax rates to pre-pandemic levels also means foregoing ₹1000 billion in revenues. Oil prices have shown large volatility in the post-pandemic phase Brent crude experienced one of its sharpest-ever rallies to reach $85.76 per barrel in October 2021 from its 21-year low of $9.12 during April 2020 when the pandemic broke out. It has shown an almost V-shaped trajectory in the last three-four months. Brent prices were at $84 per barrel in the beginning of November 2021 and they fell to around $71 in the beginning of December 2021 and are once again close to the $84 mark now. Whether crude oil prices stay at these levels, increase further or actually come back to pre-Covid levels matters a lot for the Indian economy. This is not just relevant for the amount of taxes the government can levy without fuelling inflation – fuel inflation is one of the most important contributors to retail inflation at the moment – but also determines the net impact on trade and therefore GDP. As oil prices have increased India’s petroleum deficit as a share of GDP has been rising gradually. It is very likely that the question of whether or not to reduce petroleum taxes will come up many times when the finance minister and her colleagues are finalising the 2021-22 budget. While concerns of boosting economic sentiment demand that the taxes are lowered – contrary to popular belief the poor consume a large amount of petrol and diesel in India – the budget will have to find ways to at least partially compensate the revenue loss from such a move
HPCL to raise Iraqi oil imports by 45% in 2022
Indian state refiner Hindustan Petroleum Corp. will lift 45 percent more oil from Iraq this year to meet its expanded refining capacity, sources familiar with the matter said. The refiner will buy 3.2 million tons or about 64,000 barrels per day (bpd) from Iraq this year, up from 44,000 bpd in 2021, they said. Iraqi state-owned marketer SOMO and HPCL did not immediately respond to Reuters’ request for comment. Iraq is the top supplier of oil to India, and higher purchases by HPCL will further strengthen the Middle East nation’s share in Indian markets. As OPEC’s second-largest oil producer, Iraq will be able to boost exports by as much as 250,000 bpd from the second quarter after finishing the installation of pumping stations at its Gulf ports, an Iraqi oil source has said. Last year HPCL’s chairman M K Surana said the company’s import of high sulfur crude oil would rise after the expansion of its 166,000-bpd plant at its Vizag plant to 300,000 bpd by March this year. It aims to complete a bottom upgradation project at the Vizag refinery by the end of the year. In the last quarter of 2021, HPCL expanded capacity at its Mumbai refinery to 190,000 bpd.
Brent climbs above 7-year high on Mideast tensions, tight supply
Oil prices rose more than $1 on Tuesday to a more than seven-year high on worries about possible supply disruptions after Yemen’s Houthi group attacked the United Arab Emirates, escalating hostilities between the Iran-aligned group and a Saudi Arabian-led coalition. The “new geopolitical tension added to ongoing signs of tightness across the market,” ANZ Research analyst said in a note. Brent crude futures rose $1.01, or 1.2%, to $87.48 a barrel by 0316 GMT, after earlier hitting a peak of $87.55, their highest since Oct. 29, 2014. U.S. West Texas Intermediate (WTI) crude futures jumped $1.32, or 1.6%, from Friday’s settlement to a three-month high of $85.14 a barrel. Trade on Monday was subdued as it was a U.S. public holiday. After launching drone and missile strikes which set off explosions in fuel trucks and killed three people, the Houthi movement warned it could target more facilities, while the UAE said it reserved the right to “respond to these terrorist attacks”. UAE oil firm ADNOC said it had activated business continuity plans to ensure uninterrupted supply of products to its local and international customers after an incident at its Mussafah fuel depot. CommSec analysts said oil prices were being supported by colder winter temperatures in the northern hemisphere which were driving up demand for heating fuels. The tight supply-demand balance is unlikely to ease, analysts said, as some producers within the Organization of the Petroleum Exporting Countries are struggling to pump at their allowed capacities, due to underinvestment and outages, under an agreement with Russia and allies to add 400,000 barrels per day each month. “That should continue to be supportive for oil and increase talk of triple figure prices,” said OANDA analyst Craig Erlam.
Sri Lanka to hold talks with Indian Oil to tide over energy crisis
Sri Lanka will hold talks with the Indian Oil Corporation on Tuesday as part of a desperate measure to tide over the current fuel and energy crisis faced by the island nation, Power Minister Gamini Lokuge said on Monday. Lokuge said that the talks with the Indian Oil Corporation’s local entity would be held for a solution to the fuel crisis. The Lanka IOC, the Sri Lankan subsidiary of India’s oil major Indian Oil Corporation (IOC), has been in operation in Sri Lanka since 2002. I have asked my officials to start talks with the LIOC tomorrow (Tuesday), I will join if necessary, the power minister said. He said that the continuous electricity supply could be assured until January 22. Previously, he said the supplies could be ensured until January 18. Energy Minister Udaya Gammanpila had said that there was no point in discussing with the power ministry on continued supplies of diesel and furnace oil required to generate power. They must find their own dollars to pay for the supplies and order their requirements well in advance, Gammanpila said. He said that the country’s national carrier, Srilankan Airlines, had found dollars on their own to pay for fuel supplies. Sri Lanka is currently facing a severe foreign exchange crisis with falling reserves. The country is grappling with a shortage of almost all essentials due to the lack of dollars to pay for the imports. Additionally, power cuts are imposed at peak hours as the state power entity is unable to obtain fuel to run turbines. The state fuel entity has stopped oil supplies as the electricity board has large unpaid bills. The only refinery was recently shut as it was unable to pay dollars for crude imports. Early this week, the Indian government announced a billion dollar assistance package in addition to other balance of payment support to Sri Lanka. The billion dollar loan credit facility is to be used to avert a food crisis while allowing for the import of items and medicines. Additionally, there will be USD 500 million for importing fuel from India.
Reliance to invest Rs 5950 billion in green energy, other projects in Gujarat
Reliance Industries Ltd (RIL) has proposed to invest Rs 5000 billion in Gujarat, over the next 10 to 15 years, to set up 100 GW renewable energy power plant and green hydrogen eco-system development, to make Gujarat net zero and carbon free. RIL will also develop an eco-system for assisting small and medium enterprises (SMEs) and encourage entrepreneurs to embrace new technologies and innovations, leading to captive use of renewable energy and green hydrogen, RIL stated in a release. RIL’s initiatives for decarbonisation and creating a green ecosystem emanate from the vision of Prime Minister Narendra Modi, it added. RIL said the company, in consultation with the Gujarat government, has started the process of scouting land for 100 GW renewable energy power project in Kutch, Banaskantha and Dholera. The company has requested for 4,50,000 acres of land in Kutch. RIL on Wednesday signed a memorandum of understanding (MoU) with the government of Gujarat for a total investment of Rs 5955 billion as part of investment promotion activity for Vibrant Gujarat Summit 2022. RIL will invest another Rs 600 billion in setting up New Energy Manufacturing-Integrated Renewable Manufacturing, which include Solar PV Module (manufacture of Polysilicon, wafer, cell and module), Electrolyzer, Energy-storage battery and Fuel Cells. RIL said it would make a further Rs 250 billion investments in existing projects and new ventures over the next 3 to 5 years. RIL has also proposed to invest Rs 75 billion over 3 to 5 years for Jio Network upgradation to 5G and another Rs 30 billion over 5 years in Reliance Retail. These projects together will create 1 million direct and indirect employment opportunities in the state, the company stated.
India’s gasoil sales ebb in Jan 1-15 as COVID-19 spread deters retail spending
India’s gasoil sales declined in the first fortnight of January as rising COVID-19 infections hit consumer spending and truck movement in the country. Gasoil sales by the country’s state fuel retailers amounted to 2.47 million tonnes during Jan. 1-15, data compiled by state-owned refiners showed, down by 14.1% from the same period in December and about 5% from a year ago. Sales were down about 8% from the same period in 2020. “Truck movement declined to 75% in January 1-15 from 85% in December,” said S.P. Singh, senior fellow at Indian Foundation for Transport Research and Training. He said local cargo movement has been restricted as the rising number of COVID-19 infections has added to the fear of job losses, hitting consumer spending and retail sales. State retailers Indian Oil Corp IOC.NS, Hindustan Petroleum Corp HPCL.NS and Bharat Petroleum Corp Ltd BPCL.NS own about 90% of the country’s retail fuel outlets. Sales of gasoil, which account for about two-fifths of India’s overall refined fuel consumption, are directly linked to industrial activity in Asia’s third-largest economy. The Manufacturing Purchasing Managers’ Index INPMI=ECI, compiled and collected by IHS Markit, fell to 55.5 in December from November’s 57.6. Gasoline sales during the period was at 964,380 tonnes, a decline of about 14% from the first fortnight of December and 2.8% lower than a year ago, the data showed. The sales of gasoline however continued to stay above pre-COVID-19 levels, rising by about 5.66% from 2020, as people continued to prefer using personal vehicles over public transport for safety reasons.
IndianOil to invest Rs 70 billion in new gas distribution projects
Indian Oil said on Sunday that it secured nearly 33 per cent of the potential demand in the recently concluded round of the city gas distribution (CGD) bidding by the Petroleum & Natural Gas Regulatory Board (PNGRB). The energy major bagged nine out of the 15 high potential geographical areas (GA). Indian Oil plans to invest over Rs 70 billion in these new CGD projects, over and above the Rs 200 billion already marked for the vertical, it stated. The recently acquired GAs include major districts such as Jammu, Pathankot, Sikar, Jalgaon, Guntur (Amravati), Tuticorin, Tirunelveli, Kanyakumari, Madurai, Dharmapuri and Haldia (East Mednipore) that contain high demand customers for piped natural gas (PNG) and compressed natural gas (CNG). The oil major said that during the bidding the nearest competing bidder was left with less than 20 per cent of the demand potential in the bidding round. With the win, Indian Oil and its associates will service almost 28 per cent of the combined CGD potential in the three rounds so far – substantially ahead of the next major player. “IndianOil has a proud legacy of always aligning its growth agenda with the national priorities. And our concerted efforts to expand the Gas business across the length and breadth of the country reflects our commitment to realise the Government’s vision of raising the share of Natural Gas to 15%. Gas will play a significant role in India’s march towards a low carbon future as part of its Panchamrit pledge during COP-26 summit to reduce total carbon emissions by one billion tonnes from now till 2030,” said Chairman IndianOil Mr Shrikant Madhav Vaidya. The energy major said that after the latest round, Indian Oil along with its 2 JV companies is now present in 49 GAs and 105 districts across 21 states and UTs. When it comes to a standalone basis, Indian Oil will now be present in 26 GAs and 68 districts across 11 states and UTs covering nearly 20 per cent of the total CGD market potential. (Source: Business Today) IOC’s expansion in city gas distribution a positive; strong refining, marketing outlook add to prospects January 18, 2022: Indian Oil Corp. Ltd. (IOCL) plans to expand its city gas distribution (CGD) business, looking to invest ₹70 billion over and above the ₹200 billion already planned for the vertical. In the recent round auctions by the Petroleum and Natural Gas Board, the company bagged 9 of the 15 high potential GAs (Geographical Areas). Analysts say that these investments can create value and will be earnings accretive, but the gains will accrue only over time. The pipeline infrastructure and expansions will take some time to complete while the bidding has been aggressive. There may be more upfront investments in terms of capex. All these are key factors to look out for, as per analysts. Also, since the geographical areas are relatively large, the company’s earnings can see upside of 4-5% but only over a period of time, said analysts. Since benefits will accrue over time, the stock reaction has been relatively muted following the announcement on investments. IOCL’s shares had risen by up to 1.46% in morning deals, but gave up most gains to trade 0.3% higher by noon. The stock, nevertheless, has been on an uptrend of late. From closing lows of ₹108.75 seen on the 20 December, it has risen more than 13%. The outlook on the company’s refining and marketing business is improving. Refining margins which significantly corrected post the first wave of pandemic have continued to do well. The benchmark Singapore Gross Refining Margins (GRM’s) averaged at $6.0/barrel during the December quarter, up $2.2 a barrel sequentially, primarily led by improvement in diesel and ATF cracks. The near-term outlook for petrochemicals realisations is also firm. The closure of facilities and thus lower supplies from the US in the harsh winter season is likely to support petchem realisations. Meanwhile, demand for auto fuels has continued to rise. While the Omicron spread may trigger some challenges in the current quarter, overall volume outlook remains strong. Crude oil prices, too, have come off peak while companies have been continuously passing on higher crude costs to consumers, keeping intact their margins. With state elections in sight, though, investors have become cautious on the ability of state-run oil marketing companies (OMCs) to pass on higher crude prices to consumers. Analysts at HSBC Securities and Capital Markets (India) Pvt. Ltd. in their note said, “we believe OMCs will surprise on its ability to retain higher marketing margins despite election interventions”. Also, analysts at Antique Stock Broking said that “historically OMCs have subsequently recovered any margin squeeze during elections and in the current case, cushion already exists as marketing margins have had a strong run since November’21 averaging closer to ₹8/liter and ₹5.1/litre, much higher than the ₹3.6/litre and ₹4.1/litre over the last two years.”