BPCL says no payments pending for Russian oil imports
Bharat Petroleum Corp (BPCL) has cleared all payments for Russian oil purchases, its head of finance Vetsa Ramakrishna Gupta told an analysts’ conference after the company’s September quarter earnings report. “As of today nothing is there beyond the due date,” Gupta said in response to a question about whether any payments to Russia were delayed. The Indian government has expressed discomfort over settling payment for Russian oil in Chinese yuan. Gupta also said that BPCL was processing Russian oil at the maximum “potential level” at its three plants, averaging about 30-40% of overall crude intake. BPCL operates a 240,000 barrel-per-day (bpd) refinery in Mumbai, western India; a 310,000-bpd refinery in Kochi, southern India; and a 156,000 bpd plant in central India.
Sri Lankan government renews Lanka IOC’s petroleum licence for 20 years
The Sri Lankan government has renewed the petroleum products licence granted to Lanka IOC, the local subsidiary of Indian Oil Corporation, for another 20 years, officials said on Monday. The licence originally issued in 2003 was to expire in January 2024. This will allow Lanka IOC to continue its retail operations on the debt-trapped island nation until January 22, 2044. The licence renewal letter was handed over by President Ranil Wickremesinghe to Dipak Das the Managing Director of LIOC late last week, Aseem Bhargav, the Chief Financial Officer of LIOC said in a statement. The government has renewed the petroleum products licence granted to Lanka IOC, the local subsidiary of Indian Oil Corporation, for another 20 years, the LIOC officials told PTI on Monday. “The licence enables LIOC to import, export, store, transport, distribute, sell and supply petrol diesel, heavy diesel, furnace oil, kerosene, Naphtha and other mineral petroleum including premium petrol and premium diesel.” The LIOC holds around 20 per cent of the market share in the auto fuel segment in Sri Lanka. When Sri Lanka plunged into an economic crisis with no forex to import petroleum products, the LIOC operation became crucial in the energy sector. It operates over 200 retail outlets throughout the island nation. Since the economic crisis came to bite Sri Lanka, it liberalised the energy sector. China’s Sinopec entered in August as the third player in the retail fuel trade while USA’s RM Parks and Australia’s United Petroleum are also due to commence operations soon. However, the main opposition party Samagi Jana Balawegaya (SJB) on Sunday expressed its strong opposition to the Government’s decision to extend Lanka IOC’s petroleum licence. Speaking at a press conference held at the opposition leader’s office in Colombo, SJB Deputy General Secretary Mujibur Rahman raised questions regarding the basis on which the licence renewal was granted by the Government. Rahman pointed out that IOC was unable to address the fuel shortages during Sri Lanka’s most severe crisis or provide better prices to the public.
Dhamra LNG terminal built entirely on promoter finance; no financial commitment from IOC, GAIL, say sources
Adani Group built an LNG import facility at Dhamra in Odisha entirely based on financial backing of promoters, with no financial undertaking or guarantees of public sector giants IOC and GAIL, who merely were tenants, sources said. Clarifying the group’s position, they said Indian Oil Corporation (IOC) and GAIL (India) Ltd have hired capacity on the newly built terminal at rates lower than a similar but older and depreciated facility at Dahej in Gujarat. This came in response to reported comments by Trinamool Congress MP Mahua Moitra, who is facing a Lok Sabha Ethics Committee examination over cash for query in Parliament, on Dhamra being built on financial backing and commitments to buy gas at a fixed price. The project cost of Dhamra LNG terminal is Rs 6,450 crore, the sources said responding to Moitra’s assertion that the terminal to import natural gas in its liquid form, called LNG, was built at a much higher cost than Rs 5,000 crore that IOC incurred in construction of a similar sized facility at Ennore in Tamil Nadu. Sources said no amount upfront or during the project either as cash or bank guarantee has been given by IOC and GAIL. The project is fully financed by equity and debt by shareholders of Dhamra LNG terminal, they said, rejecting the assertion that IOC and GAIL paid Rs 46,500 crore. IOC had in 2015 signed to use up to 60 per cent of the terminal’s 5 million tonnes a year capacity for importing gas for its refineries at Haldia in West Bengal and Paradip in Odisha. GAIL too had signed up for 1.5 million tonnes of the terminal’s regasification capacity. Sources asserted that its tariff and commercial terms of Dhamra LNG terminal (inclusive of port charges) was arrived at through competitive benchmarking. Petronet LNG (which is owned by IOC, GAIL, BPCL and ONGC) operates India’s largest LNG terminal at Dahej was used as benchmarking the tariff and commercial terms, they said. Dhamra tariff is 1.5 per cent lower (Rs 46.49 per ton or Rs 21 crore annually over 4.5 million tonnes of LNG capacity use) than Dahej LNG terminal charges and has better commercial terms as well. Moitra had, however, compared the tariff of Dhamra with Ennore, which was commissioned not so long back. This charge compares to Rs 57.38 per mmBtu regasification charges for Ennore LNG terminal, he had said. Originally, IOC and GAIL had on September 21, 2016, signed a ‘non-binding’ agreement to buy a 50 per cent stake in Adani Group’s Rs 5,500-crore Dhamra LNG project in Odisha. But that agreement expired on September 20, 2018, without being translated into a firm pact apparently because of differences over valuation. Sources said IOC and GAIL import LNG on their own and only pay tolling charges. Dhamra LNG will not buy and sell LNG during the operations of the facility. It only provides the service of LNG handling and dispatch, they said, rejecting the claim of a 20-year fixed payment by IOC and GAIL to Adani for gas. On a charge that businessman Darshan Hiranandani posed questions on Adani Group using Moitra’s parliamentary logins as his business was impacted because of IOC and GAIL committing to Dhamra, sources said Hiranandani’s H-Energy had obtained a NOC from the Kolkata Port Trust to set up a LNG terminal in Kukrahati in February 2020. Though this NOC is still valid, they have been unsuccessful in progressing the same. This terminal of H-Energy would cater to the same catchment area being serviced by Dhamra LNG, they said. H-Energy was also looking at IOC and GAIL to book capacity for their terminal. However, they were unable to justify a value proposition to IOC and GAIL that was better than what was being offered at Dhamra LNG terminal. This stymied their efforts to develop this facility, sources claimed. On IOC and GAIL not taking equity in Dhamra, they said the LNG terminal was able to offer commercially competitive terms to the users and given the pipeline tariff competitiveness of supplying nearby consumption centres, IOC and GAIL were confident of bringing LNG at the cheapest terms via Dhamra to their consumption centres. Hence, their strategic objective was met without injecting equity and they decided to progress on a capacity booking basis only. The strong credentials of the project developers and the significant amount of pre-investment undertaken by Adani gave further confidence to IOC and GAIL on project completion, they added.
American Oil Giants Boost Domestic Footprint As Geopolitical Tensions Mount
ExxonMobil and Chevron have just announced mega acquisition deals to buy U.S. firms, which will boost the footprint of the U.S. oil supermajors in their domestic upstream market and the hottest exploration success of the past few years, Guyana. Betting on expectations of sustained global oil and gas demand and the lower costs of supply through synergies with the targeted acquired companies, Exxon and Chevron are now looking to build stronger upstream portfolios closer to home after divesting assets in Western Europe, West Africa, and Russia in the past few years. Amid growing geopolitical uncertainties and flare-ups in other parts of the world, the U.S. supermajors are betting on higher domestic production and the huge reserves of Guyana—basically in America’s backyard in Latin America—to strengthen their portfolios with more advantaged resources and raise returns to investors. The End of an Era The age of the U.S. oil giants holding a variety of assets spread worldwide is over, analysts have told The Wall Street Journal. This month, Exxon announced a deal to buy Pioneer Natural Resources in an all-stock transaction valued at $59.5 billion. The implied total enterprise value of the transaction, including net debt, is around $64.5 billion. Less than two weeks later, Chevron said it would buy Hess Corporation in an all-stock transaction valued at $53 billion with a total enterprise value, including debt, at $60 billion. Through the deals, Exxon, which has pulled out of Russia, Cameroon, and Chad in recent years, will become the Permian’s top producer. Chevron, for its part, will add assets offshore Guyana and in the U.S. Bakken shale play, after ditching assets in the UK and Norway in recent years. By buying Hess, Chevron will become Exxon’s partner in Guyana’s vast discovered resources under development. Chevron will get 30% ownership in more than 11 billion barrels of oil equivalent discovered recoverable resource with high cash margins per barrel, strong production growth outlook, and potential exploration upside, the company said. Guyana is more politically stable than other parts of the world and closer to the United States—efficient for crude exports to America. In a sign of operations being disrupted by geopolitical turmoil, weeks before the announced acquisition of Hess, Chevron was ordered by Israel to shut down production at the offshore Tamar gas field following the Hamas attack. The Hess deal will also give Chevron 465,000 net acres of high-quality, long-duration inventory in the Bakken supported by the integrated assets of Hess Midstream, complementary U.S. Gulf of Mexico assets, and steady free cash flow from its Southeast Asia natural gas business. In the Bakken, Hess Corp’s net production was 190,000 barrels of oil equivalent per day (boepd) in the third quarter of 2023, compared with 166,000 boepd in the prior-year quarter, reflecting increased drilling and completion activity and higher NGL and natural gas volumes received under the percentage of proceeds contracts due to lower commodity prices. In the Permian, Exxon will become the biggest producer after the Pioneer deal. The combination with Pioneer “transforms ExxonMobil’s upstream portfolio by increasing lower-cost-of-supply production, as well as short-cycle capital flexibility,” Exxon said when announcing the deal. The company expects a cost of supply of less than $35 per barrel from Pioneer’s assets. “By 2027, short-cycle barrels will comprise more than 40% of the total upstream volumes, positioning the company to more quickly respond to demand changes and increase capture of price and volume upside.” Exxon’s CEO Darren Woods commented on CNBC after the deal was announced: “The real challenge that we have, I think, as a company and an industry is to make sure that we’re developing these resources in a very low cost to supply.” “Scott’s built that business with Pioneer, and the combination of the two of us will have even a stronger business with lower cost to supply. So, we’re basically indifferent to wherever those prices go, making sure that we can supply cost effectively whatever the market conditions are,” Woods said.
Oil May Be About To Go Down On Higher Costs
Analysts have been talking about three-digit oil prices for months now, yet the benchmarks have stubbornly refused to move above $100, whatever happens. One reason for this is the economic headwinds pressuring prices and keeping them from breaking out above $100. The other: costs related to moving oil around have soared, souring demand. Bloomberg reported earlier this month that freight rates on 16 global maritime routes had gone up by 50% since the Hamas attack on Israel. The data came from the Baltic Exchange and concerned the period between October 9 and October 15. “Shipping historically has benefited from geopolitical turmoil,” John Kartsonas, managing partner at Breakwave Advisors, a shipping-related ETF manager, told Bloomberg. “The urge to secure energy supplies is the first thing in mind of traders when wars or conflicts begin.” This week, Reuters reported similar data, this time from LSEG, and the report also noted signs of weakness in the physical oil market, suggesting these were about to spill into the futures market, pushing benchmark prices down. “Globally, demand is tracking sideways from here, and we’re going to see increases in crude supply from non-OPEC. Come January, the market could start looking a bit longer,” the report quotes FGE analyst James Davis as saying. This is all but a certainty because we are definitely not going to see more supply from OPEC. Saudi Arabia and Russia have signaled they were ready to extend their cuts for as long as necessary to get the prices they want, and some other OPEC members are seeing fewer loadings because of the freight rate problem. Per the Reuters report, which also cited traders, loadings of crude from Nigeria and Angola have slowed down lately because of the changes in freight rates. As a result, the premium of physical oil prices to benchmarks have already shed between $1 and $2 per barrel. There is also the issue of lower refining margins. For months, refiners have enjoyed strong margins on strong demand and not too high crude prices. Now, things have started to change as driving season in the U.S. draws to a close, implying lower demand for gasoline and as crude-to-product spreads have declined. A Bloomberg news outlet reported last week that the Singapore gross refining margin had slumped by 50% since the start of the fourth quarter, reaching $4.80 per barrel at October 15, per Reuters data. For context, the average margin over the second quarter of the year stood at $9.60 per barrel. All these are signs that weaker prices may be coming because of weaker physical trade. Indeed, benchmarks are already down after the initial surge following the breakout of violence in Israel and Gaza, as expectations for a quick resolution increase amidst diplomatic efforts to put an end to the conflict before it spreads. But it is the physical market that matters, and there the signals seem to be even stronger. Per the Reuters report, there are between 20 and 30 cargoes of Nigerian crude sitting unsold, along with six or seven cargoes of Angolan crude. Typically, at this time of the year, the amount of unsold cargoes is much lower, Reuters noted in the report. Meanwhile, margins are falling in the United States, too, which seems to be already affecting refiners’ production decisions. And that’s despite robust exports of crude and fuels this summer. Some have suggested this is the result of more EVs displacing demand for gasoline. Yet EV sales are still a fraction of total U.S. car sales, so this may be a premature conclusion to make. Instead, it is more likely that refiners are raising their distillate production rates: middle distillates are in a much tighter supply globally, but especially in the United States. And they are reducing run rates because of those falling margins. Those three-digit oil prices may yet be far away.
Punjab signs pact with HPCL
Punjab Energy Development Agency (PEDA) on Friday signed a memorandum of understanding (MoU) with Hindustan Petroleum Corporation Ltd (HPCL) for setting up ten compressed biogas (CBG) projects and other new and renewable energy projects in the state. The pact was signed by Chief Executive Officer, PEDA, Amarpal Singh and Executive Director, HPCL, Shuvendu Gupta here in the presence of Ravi Bhagat, Secretary, New and Renewable Energy Sources, Punjab. Gupta said HPCL would initially set up ten CBG projects with an investment of about Rs 6 billion. It will also explore possibilities of establishing other renewable projects. These ten plants are expected to produce over 35,000 tonnes of CBG and about 8,700 tonnes of organic manure annually, besides generating revenue of around Rs 3 billion annually from CBG production. The projects will also generate direct employment opportunities for more than 600 people and about 1,500 indirect jobs. Amarpal Singh said with the implementation of these ten projects, at least 2,75,000 tonnes of paddy straw will be prevented from being burnt in about 1,10,000. This will prevent creation of CO2 emissions and other pollutants to the tune of 5,00,000 tonnes annually, which is equivalent to planting 83,000 trees each year. The projects will also create around 50 rural entrepreneurs for supply of paddy straw to these plants, further creating employment for more than 500 people. Inviting other CBG developers for investment in the state, Punjab New and Renewable Energy Sources Minister, Aman Arora, said the government’s business-friendly and transparent policies have created the most conducive environment for industrial growth. He emphasised that Punjab is an agrarian state and has an immense potential for crop residue-based CBG projects.
As a rising India becomes the ‘launderer’ of Russian oil, doubts over Western security ties grow
Sitting at the top of a business empire that spans fossil fuels, telecoms and retail, he is India’s – in fact, Asia’s – richest person. Like India’s ascendant Prime Minister Narendra Modi, he hails from the western state of Gujarat, and is one of the country’s most visible and powerful tycoons. Among his international targets is Australia, where he is aiming to develop energy projects worth billions of dollars in the coming years. His name, contrary to what most Australians with a passing interest in sub continental business and politics might think, is not Gautam Adani, the moustachioed head of his eponymous company. It is Mukesh Ambani. The 66-year-old, whose Reliance Industries is India’s largest company by market capitalisation, has a personal fortune estimated by Bloomberg at $US84 billion ($132 billion). Few businesses have been more important to the amassing of that wealth than Reliance’s oil refineries. Those refineries are now at the centre of an international game of intrigue being played at the highest levels between the West on one side and its substantial band of critics on the other. How it came to be, and how it evolves, could well have significant implications not only for the wealth of people such as Mr Ambani, but for Australia’s very own security ties. Desperate seller, willing buyer At the heart of the game is the oil trade between Russia and India, for so long a mere footnote in the trading accounts of the world’s energy users. Whereas India historically bought negligible amounts of Russian oil, that all changed in February last year when Vladimir Putin made the fateful decision to invade neighbouring Ukraine. It was an act of naked aggression that shocked the world. It was also a decision that tipped the world’s energy markets on their heads and prompted Moscow’s biggest energy customer – Europe – to try to wean itself off Russian supplies by the end of that year. Virtually overnight, India went from buying a few thousand barrels of Russian oil a day to more than a million. In September, India bought more than 1.5 million barrels of Russian oil, or roughly 20 per cent of its exports Ian Hall, an international political scholar at Griffith University, said there was little doubt the burgeoning oil trade between Russia and India was one of convenience for both sides. He said Russia was getting a willing buyer for exports that had been shut out of western markets, while India was able to hoover up big amounts of energy for its growing economy. But Professor Hall said there were deeper things than opportunism that underpinned the relationship between the two giant countries. He said Russia had been one of the few powers to show sympathy to India when it emerged, weak, from British colonial rule in the mid-20th century. Russia, he said, supplied India with cheap loans, agricultural goods and, crucially, defence gear. Shared ‘anti-Western’ history Professor Hall said just as importantly, Russia backed Delhi at a time when the US was helping to support – and arm – India’s great rival Pakistan “as a bulwark against Communism in South Asia”.