IndianOil says LIOC will always remain aligned with Sri Lanka’s national interests
Lanka IOC PLC Chairman Ranjan Kumar Mohapatra on Saturday reiterated that the company’s business priorities for the past two decades was and will always remain aligned with Sri Lanka’s national interests and assured further excellence going forward. He made this remark at the gala celebrations of LIOC’s 20th anniversary at Hilton Colombo attended by the Speaker of Parliament, Indian High Commissioner, Cabinet Ministers, State Ministers, officials, private sector and business partners. “LIOC has been working tirelessly to develop the Sri Lankan market for the past two decades and be a partner in the progress of the national economy,” Mohapatra told the ceremony. He said that the anniversary offers a fresh opportunity to reiterate the company’s commitment further the service and product excellence in the future along with greener operations. It is also an opportunity to reflect on the 20-year journey, celebrate the many achievements and the learnings, he stressed. “LIOC business priorities will always remain aligned with Sri Lanka’s national priorities as displayed during the recent energy crisis times including operating the Trincomalee terminal around the clock for two months to ensure adequate supplies. LIOC is always poised to leverage its resources and strengthen fuel supplies with the support of the Government of Sri Lanka,” said Mohapatra, who is also the IndianOil Human Resources Director and IndianOil Mauritius Ltd. Chairman. Commending all LIOC employees for the journey so far in transforming the energy sector in Sri Lanka, Mohapatra stressed: “Our employees belong to our company and also to Sri Lanka.” He also thanked Sri Lankan people for reposing their faith in LIOC. “What we set out for in 2002 we have made people realise that in 2022 it is possible and we can and we care.” Indian Oil Corporation (IOC) owns 75% stake in LIOC and the public float of 25% is held by 13,000 shareholders. LIOC Chairman also announced the start of the commercial operations of Sri Lanka’s first grease plant with 3,000 tons capacity set up by LIOC in Trincomalee with an investment of Rs. 350 million. “This is a proud moment for LIOC as it will save valuable foreign exchange since the hitherto grease requirement of Sri Lanka was entirely imported,” added Mohapatra who visited Trincomalee to commission the facility yesterday. He also officiated the launch of Servo Futura P+ 10W30 Lubricant blended at Trincomalee, which is premium performance Petrol Engine Oil specially produced for new generation petrol vehicles. Indian High Commissioner Gopal Baglay, pointing to 20 years, said LIOC has come of age adding that teenage is a very exciting time but youth is when you see the potential and move towards fulfilling it. He commended LIOC for winning the trust of Sri Lankans and also thanked the Government of Sri Lanka for its support. He described the 20-year journey as remarkable especially in 2022 especially in helping Sri Lanka overcome its fuel crisis. He likened O in Oil for opportunity and C in Company to challenge and said LIOC have risen to the occasion converting challenges to opportunities and in doing so the company helped India to fulfil a promise of ensuring energy security to Sri Lanka. He added that LIOC has a major role to play going forward as well with the proposed development of Trincomalee oil tank farm in partnership with Ceylon Petroleum Corporation for further energy security. On a lighter vein, Baglay recalled that when he assumed office in Sri Lanka many diplomats said that the Indian High Commissioner in Sri Lanka is a very powerful person. “But I can say that Manoj Gupta (LIOC Managing Director) gave me a run for my money,” said Baglay, erupting the audience at anniversary celebrations into laughter. Power and Energy Minister Kanchana Wijesekera on behalf of President Ranil Wickremesinghe and the Government congratulated LIOC for its 20th anniversary and thanked LIOC for its contribution to the country. He thanked India for $ 700 million credit line and LIOC continued support of the CPC in the difficult economic situation. He said LIOC is a good trademark of India Sri Lanka bilateral corporate relationship. He said Sri Lanka and India can collaborate further in terms of ensuring energy security especially in terms of creating an energy hub that exports petroleum products to the region. Minister Wijesekera concluded his remarks with two requests to the IOC. One was to release its Lankan Managing Director Gupta to CPC after he completes his term in Sri Lanka. The other request was IOC as the parent will set off the dues from CPC to LIOC. Managing Director Manoj Gupta said LIOC was extremely fortunate and humbled to be marking the 20th anniversary which he described as a unique milestone. He said it has been an incredible journey full of challenges and success and it was a testimony of LIOC’s vision, entrepreneurship spirit and commitment of founders and leaders. He also said LIOC prides itself on its diversity and inclusivity. “With utmost humility I would like to express my sincere most gratitude for the trust placed in LIOC over the years by our value stakeholders including the Government of Sri Lanka, shareholders, employees, export houses, retail customers, business partners and the entire Sri Lankan community by and large,” he said, adding: “We remain resolute on our commitment to create a sustained long-term value for all our stakeholders,” Gupta added. It was pointed out that as prospects remain promising LIOC is confident of a brighter future under the aegis of experienced and versatile Chairman and the Board of Directors. “We are relentlessly pursuing the unparalleled value creation in an enduring pledge to serve the people of Sri Lanka.” Gupta also thanked and commended the Government of Sri Lanka, Ministry of Power and Energy, the Central Bank for constructive approach and inclusive decision making in handling various industry issues in most challenging circumstances.
Australia to back G7 Russian oil price cap
Australia has pledged its support for a plan by G7 nations to try to impose a price cap on Russian oil, in a bid to limit Vladimir Putin’s ability to fund his invasion of Ukraine, and to ease pressure on the cost of living. Although Australia has already banned all imports of Russian oil, gas, and refined petroleum products, Treasurer Jim Chalmers said backing the G7 action would hopefully encourage other nations to do the same and lead to a moderation of global oil prices. Treasurer Jim Chalmers and Indonesian Finance Minister Sri Mulyani shake hands after signing an economic pledge. “We recognise that rising energy prices are among the biggest concern for Australians already struggling to keep up with the skyrocketing cost of living,” he said in a statement. “And we know that higher oil prices will likely drive higher inflation and risk slowing global economic growth. “We’re looking to limit some of the impacts of the war in Europe on the cost of living, by supporting this price cap.” The cap, agreed to by the G7 on September 2, will come into effect on December 5 and aims to force down the price of Russian oil by imposing an artificial price cap, probably about $US40-$US60 a barrel. The G7 and supporting nations would seek to impose a cap on the price paid by importing nations by legally prohibiting the provision of services, such as insurance, which enable maritime transportation of Russian crude oil and petroleum products purchased above the price cap. Mr Putin has largely been able to circumvent Western embargoes on Russian oil because India and China have refused to condemn the Ukraine invasion and further trade with Moscow. One hope from the G7 plan is China and India would negotiate down the prices they are paying if the cap works. Despite lower export volumes, Russia’s proceeds from oil sales in June were up $US700 million ($1 billion) over the previous month, because of soaring prices. Mr Putin has threatened not to sell oil to anyone participating in the price cap scheme but US Treasury Secretary Janet Yellen believes Russia would have an incentive to sell oil at or near the cap because it would otherwise have to shut down production that would be difficult to restart. Foreign Minister Penny Wong said, “supporting the price cap demonstrates Australia’s resolve to limit the global economic impact of Russia’s invasion of Ukraine while maximising the pressure on Russia to end the conflict”. “Australia will engage constructively with the G7 as they work towards effective implementation of the cap. “We encourage other countries to join Australia and our partners in implementing the oil price cap.” The Ukraine invasion was on the agenda in Canberra on Monday when Dr Chalmers met his Indonesian counterpart, Sri Mulyani, to sign a Memorandum of Understanding that strengthens the economic co-operation between the two countries. Indonesia is hosting the G20 leaders’ summit in Bali on November 15-16 and Mr Putin’s participation will be controversial. The G20 finance ministers’ meeting next month will be dominated by the global economic instability being exacerbated by the Ukraine invasion. “You will have Australia’s full support as we navigate some tricky terrain,” Dr Chalmers told Ms Mulyani. “Let’s not mince words: our challenges are intensifying, not dissipating. “Inflation stalks the world, with central banks responding decisively and bluntly; global growth is slowing; most risks are tilted to the downside. “The United States and United Kingdom’s economies are in reverse, and China’s is decelerating. “Meanwhile, in Europe, the war in Ukraine has sparked an energy crisis that shows no signs of abating.”
India gains Rs 350 billion by importing discounted Russian crude following Ukraine conflict
The import of Russian crude at discounted rates has benefitted India hugely. Crude import at discounts coupled with levying windfall tax on domestic crude helped India gain Rs 350 billion. The Centre introduced the windfall tax in view of a surge in prices following the Russia-Ukraine conflict which began in February. The crude import from Russia made it India’s second-largest oil supplier, sending Saudi Arabia to the third spot in July. However, the latter secured its earlier position in just a month and now Russia is our third-largest oil supplier, Reuters reported citing trade data. India went on bargain hunting for Russian crude as the Ukraine conflict prompted Moscow’s traditional buyers to shun those barrels, and traders started offering big discounts. Despite immense pressure from developed nations to not buy from Russia, India chose to import crude. The move was even defended by foreign minister S Jaishankar who called it the “best deal” for the country. Earlier, he said India and others, like Europe, should be free to ensure the impact on their economies is not traumatic. India has emerged the second-largest buyer of Russian crude after China. India’s import from Russia India imported $11. 2 billion mineral oil from Russia during April-July. There is a significant eight-fold jump in the number as it was $1. 3 billion in the corresponding period last year, according to the data from the commerce department. Since March, when India stepped up imports from Russia, imports have topped $12 billion, against just a shade over $1. 5 billion last year. To be clear, oil is purchased by refiners and not the government, however, cheaper oil has a positive impact on macroeconomic parameters of the economy. Oil bought at a lower cost helps in keeping the costs down, the current account deficit in check as it lowers the import bill and reduces dollar demand, reported ToI. It is worth mentioning here that after this is the second time that looking for discounted rates in the global oil market has saved India money. Earlier, we managed to Rs 250 billion in 2020 when oil prices crashed as the pandemic shut down the world. The Indian government had than filled up strategic reserves and refiners stored oil in ships.
Oil Ministry Seeks Review Of Windfall Tax; Wants Certain Fields Exempt
The oil ministry has sought a review of the two-and-a-half-month old windfall profit tax on domestically produced crude oil saying it goes against the principle of fiscal stability provided in contracts for finding and producing oil. The ministry in the August 12 letter, reviewed by PTI, sought exemption for fields or blocks, which were bid out to companies under Production Sharing Contract (PSC) and Revenue Sharing Contract (RSC), from the new levy. It stated that companies have been since the 1990s awarded blocks or areas for exploration and production of oil and natural gas under different contractual regimes, wherein a royalty and cess is levied and the government gets a pre-determined percentage of profits. The ministry, according to the letter, was of the opinion that the contracts have an in-built mechanism to factor in high prices as incremental gains get transferred in form of higher profit share for the government. Emails sent to the oil ministry as well as the finance ministry for comments remained unanswered. India first imposed windfall profit tax on July 1, joining a growing number of nations that tax super normal profits of energy companies. While duties were slapped on the export of petrol, diesel and jet fuel (ATF), a Special Additional Excise Duty (SAED) was levied on locally produced crude oil. The SAED on domestic crude oil initially was Rs 23,250 per tonne (USD 40 per barrel) and in fortnightly revisions brought down to Rs 10,500 per tonne. The government levies a 10-20 per cent royalty on the price of oil and gas as also an oil cess of 20 per cent on production from areas given to state-owned Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL) on a nomination basis. Other than them, fields were awarded under the PSC regime where the government gets around 50-60 per cent of the profit made after deducting costs. RSC regime specifically has a clause to capture windfall gains for the government. According to oil ministry calculations, the letter said, the new levy in the case of PSC and RSC results in a situation where the operator ends up paying much more than the windfall gain itself. Besides, the contracts specifically provide for fiscal stability for the contracting parties, it said, adding any change of law or rule or regulation that adversely changes expected economic benefits to parties can lead to seeking revision and adjustments to the terms of the contracts. Requests have already been received for such revisions or amendments to the contracts, the ministry. The oil ministry was of the view that there was an urgent need for aggressive investment in the domestic oil and gas hunt. Considering that PSC and RSC contracts already have in-built mechanisms to share revenues with the government in a high-price regime, the government should consider exempting all the blocks falling under such contractual regime from the new levy, the ministry letter said. It went on to state that it has already got representations from major crude oil producers, including state-owned ONGC and OIL and private sector Vedanta Ltd, for a review of the new levy as it was adversely impacting their investment plans. The concerns raised by these firms include economic unviability and contract clause violation, it added.
A Natural Gas Shortage Is Looming For The U.S.
Last week, the media rushed to report that natural gas prices in the United States had fallen sharply after trade unions and railway companies reached a tentative deal that averted a potentially devastating strike. Indeed, natural gas prices fell by nearly a dollar per million British thermal units, helped by a respectable build in inventories. And yet, inventories remain below the seasonal average, exports are running at record rates, and producers are beginning to struggle to meet demand, both at home and abroad. Reuters’ John Kemp wrote in a recent column that domestic and international gas consumption had risen to record highs, and shale producers—the ones that account for the bulk of U.S. natural gas output—were having a hard time catching up with this demand. Meanwhile, although higher on a weekly basis, inventories remained at the second-lowest for this time of the year for the last 12 years, Reuters’ market analyst noted. He also added there were no signs of any improvement in the level of inventories despite the rise in prices. None of this suggests lower prices for natural gas are coming to either the United States or international markets as the northern hemisphere heads into winter. On the contrary, the latest figures suggest more financial pain for gas consumers. And they confirm, to an extent, forecasts made earlier this year. In the spring, the principals of investment firm Goehring & Rozencwajg said U.S. gas prices will converge with international prices towards the end of 2022. They noted something few other analysts tend to mention: the concentration of much of U.S. gas production in a handful of fields, with just two—Marcellus and Haynesville—accounting for as much as 40 percent of the total. The Permian contributes another 12 percent of the U.S. total gas output, and the rig count in the Permian has been down for two weeks in a row, according to the latest data. Less drilling means less associated gas to add to the national total. Meanwhile, on the demand side, electricity generation in the United States is seen reaching a record high this year, Kemp noted in his column, driven by the post-pandemic economic rebound. A hotter summer also contributed. A cold winter would certainly push gas consumption even higher. Another contributor is the lack of alternative sources of electricity generation: coal plants are being retired, and droughts in many parts of the country have compromised its hydropower capacity, the Reuters analyst also noted. While this is happening at home, demand for gas continues strong across the globe, too, as everyone seeks to stock up on fuel for the winter. U.S. energy companies are exporting liquefied natural gas at record rates. And disgruntlement at home is beginning to rear its head. “We appreciate that the [Joe] Biden administration has been working with European allies to expand fuel exports to Europe. A similar effort should be made for New England,” a group of governors from New England wrote in a letter to Energy Secretary Jennifer Granholm this summer, per a Financial Times report. The governors then went on to call on the administration to make sure there was enough LNG for American consumers, essentially asking politicians to reduce LNG exports. This does not bode well for balance in the U.S. gas market. In May, John Kilduff from Again Capital told CNBC he expected gas prices to top $10 per mmBtu and maybe reach $12 to $14. “This is a commodity that trades parabolically a lot. It’s no stranger to parabolic moves up and down. It’s incredibly volatile, and it also has the ability to reset. We could get to $10 or $12 and if you have a cool August, then you could be down below $8 again,” he said at the time. The Energy Information Administration this month revised its gas price forecast for the full year upwards, seeing the commodity average $9 per mmBtu in the final quarter before falling to $6 per mmBtu in 2023. The decline would come as a result of rising local gas production, the EIA noted. In the meantime, however, until this increase in production materializes to a degree that begins to affect prices, there seems to be only one way they will be going: up. With heating season around the corner in both Europe and the United States and with a lot of people in both places using gas for heating, the price outlook for gas does not look good from a consumer’s perspective. It does look good from a gas exporter’s perspective, however. It is unlikely that U.S. gas prices will climb anywhere near European levels, but they are up by a whopping 300 percent from a few years ago when gas was cheap because it was abundant. That sort of price increase affects everything along the supply chain that involves electricity produced using gas, sending ripples across the economy. And the more gas utilities use for lack of reliable alternatives, the longer the energy-driven inflation will continue.