ADNOC Expects To Raise $2 Billion By Listing Its Natural Gas Business
The United Arab Emirates’ state oil and gas major, ADNOC, has said it expects to raise some $2 billion from the listing of its gas business. The price range for the IPO would give the business a market valuation of between $47 billion and $50.8 billion, Reuters reported. If the offering ends up at the higher end of the range it will become the largest ever for Abu Dhabi. Separately, Bloomberg reported that the share offering had been subscribed in full in a matter of hours, suggesting there was still strong investor appetite for Gulf stocks. Cornerstone investors, the report noted, had committed $850 million in the offering. These included funds with links to the Abu Dhabi government, Bloomberg said. The Emirati state energy major announced it would be listing its gas business last year before the business was even set up as a separate unit. This took place at the beginning of this year. The new unit, ADNOC Gas, has a production capacity of some 10 billion cu ft daily and operates a pipeline network of over 2,000 miles. The new company said it expects to pay its new shareholders a total of $3.25 billion this year The shares of the new business entity will be floated on March 13, with institutional investors having until March 2 to subscribe. Retail investors can make orders until March 1. Two years ago, just as oil markets began recovering after the pandemic hit they suffered in 2020, ADNOC announced spending plans of $127 billion for the period between 2022 and 2026. The money, the company said, would go towards expanding the UAE’s oil and gas production capacity and building a greater presence in low-carbon energy. LNG capacity expansion is among the priorities, with ADNOC eyeing an annual export capacity of 15 million tons.
Saudi Arabia’s Oil Revenues Hit $326 Billion In 2022
Saudi Arabia received as much as $326 billion in oil revenues for 2022, its biggest oil sales haul in the era of Crown Prince Mohammed bin Salman, although monthly revenues have been lower in recent months after oil prices slid to around $80 per barrel at the end of last year. Saudi Arabia recorded its highest-ever oil revenues back in 2012. The rise in oil prices last year, especially the spike in the first half to over $100 a barrel after the Russian invasion of Ukraine, raised the revenues for the world’s largest crude oil exporter. The value of oil exports accounted for more than 70% of all Saudi exports last year. In December 2022, oil exports increased by 11.1% year over year to $22.8 billion (85.5 billion Saudi riyals), but fell compared to November, according to data released by Saudi Arabia’s General Authority for Statistics on Tuesday. The share of oil exports in total exports increased from 71.9% in December 2021 to 79.0% in December 2022, the authority said. China, Japan, and India were Saudi Arabia’s main trading partners for exports in December 2022, due to the oil sales. According to flash estimates, real GDP in the fourth quarter of 2022 grew by 5.4% compared to the same period of 2021, and the real GDP during the year 2022 rose by 8.7% compared to 2021, the General Authority for Statistics said last month. Saudi economic growth was the highest among the G20 group of countries. Thanks to rising oil income, Saudi Arabia also booked its first annual budget surplus in nearly a decade. Analysts believe that the Kingdom needs oil prices at $75-80 per barrel to balance its budget.
Levy 5% GST on natural gas to reduce fertiliser subsidy
Finance minister Nirmala Sitharaman has said that the tax rate for five petroleum goods – crude oil, natural gas, petrol, diesel and aviation turbine fuel (ATF) – can be fixed under the Goods and Services Tax (GST) as soon as the states give their consent at a GST Council meeting. GST is a ‘single tax’ applied all over India with a set-off provision for tax paid on inputs. The Constitutional Amendment Act, 2016 on GST while providing for the inclusion of petroleum products under its ambit, had kept them ‘zero-rated’. These goods continue to attract central excise duty and state-level value-added tax (VAT). When will the ‘zero-rated’ tag go? The Act has given the power to the GST Council to decide. Rate setting for natural gas under GST – a major input used in the manufacture of fertilisers – has been on the Council’s agenda ever since the tax regime was adopted on July 1, 2017, but a decision was deferred. Will the Council follow up on FM assurance at its next meeting? Meanwhile, let us assess the cost of keeping natural gas zero-rated. At present, natural gas attracts ‘nil’ central excise duty on supplies to fertiliser plants and VAT varying from a high 24.5 percent in Andhra Pradesh to a low 5 percent in Rajasthan. This not only leads to wide variations in the price of natural gas supplied to plants from state to state but also has a cascading effect on its delivered cost. The fertiliser industry gets nearly two-thirds of its natural gas requirement from imported liquefied natural gas (LNG). During October-December 2022, India paid around $35 per million British thermal units (mmBtu). After adding import duty of 2.75 percent (basic 2.5 percent and 10 percent social welfare surcharge), the cost of re-gasification and other charges such as terminal charges, vessel-related charges and port charges, the price rises to $37 per mmBtu. There are other additional costs such as charges for transportation of re-gasified LNG, marketing cost and marketing margins of around $ 2 per mmBtu. The price comes to $39 per mmBtu at the delivery point in a state. The share of imported LNG in total gas supply being two-thirds, its weight in price comes to $26.1 per mmBtu.
OMCs face Rs 50 billion in under-recovery in Q4FY23: Nomura
Oil marketing companies (OMCs) such as Bharat Petroleum (BPCL), Hindustan Petroleum (HPCL) and Indian Oil (IOCL) may have to bear an under-recovery of Rs 50 billion (Rs 50 billion) on the sale of auto fuels in the fourth quarter of this fiscal, brokerage firm Nomura has said. This is significantly lower than the under-recovery numbers reported earlier in the fiscal when the OMCs were estimated to have borne under-recoveries of up to Rs 1 trillion in 9MFY23. The improvement in the bottom line was thanks to a fall in crude prices but the brokerage’s analysts do not believe it will last in the near term and have retained their reduce rating on all three stocks. While blended marketing margins are looking better, on a week on week (Rs 3.3/litre versus Rs 0.7/litre) and quarter-to-date over the previous quarter (Rs 1.7 versus Rs 1.4), they may lose their buoyancy once global demand recovers, the report said. “Based on current crude and product prices, blended marketing margins are at super-normal levels of INR4.4/liter, albeit these are unlikely to sustain in the near-term, in our view, underpinned by a strong global diesel demand and inventory drawdowns in the EU as the bloc is unable to fully offset the supply disruption from Russia,” they wrote in the recent “Energy markets in flux” report.
India’s Dependency on Imported Crude Oil Rises To 87 % during current FY
A robust recovery in the demand for fuel and other petroleum products amid flat domestic crude output has led to India’s dependency on imported crude rising to 87 per cent in April-January from 85.3 per cent in the year-ago period, latest data released by the Petroleum Planning & Analysis Cell (PPAC) showed. The data suggests that that the trend will hold for the last two months of the ongoing fiscal year as well, leading to a higher import dependency for the full year than 85.7 per cent in 2021-22 and 84.4 per cent in 2020-21. The government wants to cut India’s excessive reliance on imported crude oil but stagnant domestic production and continuously rising demand for petroleum products have been major roadblocks. Reducing expensive oil imports is also one of the key objectives of the government’s push for electric vehicles, biofuels, and other alternative fuels for transportation as well as industrial sectors. Over the past few years, the government has also intensified efforts to increase domestic crude oil production by making exploration and production contracts more lucrative for upstream oil companies and opening vast areas for hydrocarbon exploration. Heavy reliance on oil imports make the Indian economy vulnerable to volatility in international oil prices, in addition to having a significant bearing on the country’s trade deficit, foreign exchange reserves, rupee’s exchange rate, and inflation. As per PPAC, which comes under the petroleum and natural gas ministry, India’s domestic consumption of petroleum products in April-January rose nearly 10 per cent year on year to 183.3 million tonnes. However, domestic crude oil production for the period declined by about 1 per cent to 24.6 million tonnes. Crude oil imports in April-January rose 9.4 per cent year on year to 192.4 million tonnes. In value terms, crude oil imports in April-January were at $136.2 billion, against $94.2 billion in the year-ago period, according to PPAC data.