Govt mulls selling 149 fields of ONGC to private companies
The government is mulling selling as many as 149 small and marginal oil and gas fields of ONGC to private and foreign companies and allow the state-owned firm to focus only on big fields, sources with knowledge of the development said. On the anvil is some kind of extension of the Discovered Small Field (DSF) bid round where discovered and producing fields of Oil and Natural Gas Corp (ONGC) are auctioned to firms offering the maximum share of output to the government, sources said. This is the second attempt by the oil ministry to take away some of the fields of ONGC for private and foreign companies. In October last year, the Directorate General of Hydrocarbons (DGH) had identified 15 producing fields with collective reserve of 791.2 million tonnes of crude oil and 333.46 billion cubic meters of gas of national oil companies for handing over to private firms in the hope that they would improve upon the baseline estimate and its extraction. The plan, however, could not go through as ONGC strongly countered the DGH proposal with its own suggestion that it be allowed to outsource operations on same terms as the government plan. Sources said the current plan started as a follow up of the October 12 meeting called by Prime Minister Narendra Modi to review domestic production profile of oil and gas and the roadmap for cutting import dependence by 10 per cent by 2022. At a meeting, the ministry made a presentation showing that while 95 per cent of ONGC’s production was from 60 large fields, 149 smaller fields contributed to a mere five per cent. It was suggested at the meeting that these smaller fields could be given out to private and foreign firms and ONGC could concentrate on the big ones where it could rope in technology partners through production enhancement contracts (PEC) or technical service arrangements. Sources said thereafter a six-member committee under Niti Aayog CEO Amitabh Kant was set up to give a proposal on the same. ONGC, however, is opposed to the plan as it feels it should be allowed the same terms that the government extends to private and foreign firms in DSF. The government gave out 34 fields to private firms by offering them pricing and marketing freedom for oil and gas they produced from the fields in the first round of DSF. A second round of DSF with 25 fields on offer is currently under bidding. The fields offered in DSF were taken away from ONGC and Oil India Ltd on the pretext that they were lying idle and unexploited. But under the present proposal, the government plans to take away discovered and producing fields. Sources said ONGC feels it too should be allowed to seek revenue sharing partnership for its fields. Field operations could be outsourced to foreign or private firms that offered the highest revenue or production share over and above a baseline production. The ministry is reasoning that the areas where the fields discovered by ONGC were given to the state-owned firm on nomination basis. In the proposal that was mooted in October last year, the plan was to give out 60 per cent stake in 15 fields — 11 of ONGC and four of Oil India. These included Kalok, Ankleshwar, Gandhar and Santhal — the big four oilfields of ONGC in Gujarat. The DGH too had identified 44 fields of ONGC and OIL, which could take on partners for production enhancement work where bidders would get the ‘tariff’ that they bid as a return for increasing the output ‘over the baseline production’ for an initial period of 10 years. The oil ministry is unhappy with the near stagnant oil and gas production and believes giving out the discovered fields to private firms would help raise output as they can bring in technology and capital, sources said. It has been tasked by the prime minister to cut dependence on oil imports by 10 per cent by 2022 over 77 per cent in 2014-15. But, the dependence has only increased and is now over 83 per cent. The privatisation is repeat of the infamous round in 1992-93 when medium sized discovered fields like Panna/Mukta and Tapti oil and gas field in the western offshore was given to now defunct Enron Corp of the US and Reliance Industries Ltd (RIL). As many as 28 fields were then awarded. Under this regime, ONGC was made licensee and given an option to farm in 40 per cent of stake. The controversial privatisation under the then oil minister Satish Sharma had resulted in an inquiry by the Central Bureau of Investigation.
Oil exporters discussed proposal for supply cut next year, Kuwaiti official says
A meeting of major oil exporters in Abu Dhabi has “discussed a proposal for some kind of cut in (crude) supply next year”, state-run Kuwait News Agency KUNA on Monday cited a Kuwaiti oil official as saying. It said the proposal did not specify the volume of the cut, according to Kuwait’s governor to the Organisation of Petroleum Exporting Countries (OPEC), Haitham Al-Ghais. Sunday’s meeting was attended by OPEC and non-OPEC countries with several oil ministers still in Abu Dhabi on Monday, including Saudi Arabia’s Khalid al-Falih.
India to lease out half of Padur strategic oil storage to ADNOC
India plans to lease out half of its Padur strategic oil reserve site in southern India to Abu Dhabi National Oil (ADNOC) for storing crude, sources said. Indian Strategic Petroleum Reserves Ltd (ISPRL) will sign an initial agreement with ADNOC on Monday in the presence of oil minister Dharmendra Pradhan, three sources with direct knowledge of the matter said. The agreement will allow ADNOC to sell oil to local refiners but give the government of India the first right to the oil in the case of an emergency. It will be the second such deal with ADNOC, which is already storing oil at the Mangalore strategic storage in Karnataka. “We will sign a memorandum of understanding with ADNOC to fill two compartments in Padur along the same lines as the Mangalore cavern,” said one source with direct knowledge of the matter, declining to be named ahead of an official statement. In return for allowing ADNOC to store its crude at a strategic reserve site, India does not have to pay for the imports, only accessing the oil in emergencies. India’s oil ministry and ISPRL, a government entity that builds the caverns, did not respond to Reuters’ request for comments. An ADNOC spokesman said: “We are already working with India’s ISPRL in Mangalore and we hope to build on this positive working relationship in the future.” India’s cabinet last week approved a plan allowing foreign oil companies to store oil in Padur’s strategic storage. “Participation by foreign oil companies will significantly reduce budgetary support of government of India by more than 100 billion rupees ($1.38 billion) based on current prices,” Law Minister R. S. Prasad told a news conference last week. The Padur site is located about 5 km (3 miles) from the southwest coast and 40 km from Mangalore Refinery and Petrochemicals Ltd’s refinery. India relies heavily on oil imports, which account for about 80 per cent of its total demand. To protect itself from potential supply disruptions, it has built emergency storage in underground caverns at three locations, with a capacity to hold 36.87 million barrels of crude, or about 9.5 days of its average daily demand.
Rosneft’s Middle East Strategy Explained
Where some see hardship, others see opportunity. Russia’s most valuable export products are oil and gas of which the top producers are Rosneft and Gazprom, respectively. The latter’s dominant position on the European gas market has put it in the spotlight as a foreign policy tool of Moscow after the crisis in Ukraine and the annexation of Crimea. Rosneft, on the other hand, has had fewer setbacks while propping up its engagement in multiple countries on several continents. The impact of these deals could have a far-reaching effect on the global energy market and domestic politics. One of the regions of attention is Iraq’s northern Kurdistan area where Rosneft CEO Igor Sechin has made several important deals, cementing the company’s position. With preparations underway to start extracting oil, Bagdad has voiced its discontent concerning Rosneft’s activities. Rosneft’s balancing act As Russia’s largest oil producer, Rosneft is a highly valuable company. The Russian state owns 50.00000001% of its shares while Sechin also maintains close personal relations with President Putin. The Kremlin has not been shy to exert control over the energy company. While this doesn’t mean that Rosneft isn’t a commercial organization, Moscow’s foreign policy objectives have been taken into consideration. The energy company has to walk a fine line between the Russian state’s interests and its commercial opportunities. For a regular company, this would be a hard task. However, the backing of the Russian government gives Rosneft some advantages over its competitors. The company has lent $6 billion to Venezuela where it could end up owning Texan refineries currently in the possession of Venezuelan PDVSA because the assets are collateral against the debt. In India, Rosneft has invested $13 billion in a refinery which was above the market price but the company was required to outbid Saudi Aramco in order to cement Russian, Indian ties. Arguably Rosneft’s deal with the Kurdish Regional Government or KRG in Northern Iraq has the most potential in terms of political and financial dividend. The KRG’s independence referendum in the fall of 2017 was a fiasco. During the crisis, Bagdad regained control over the significant oil fields near Kirkuk and nullified hopes for Kurdish independence. At the height of the crisis, when Secretary of State Rex Tillerson was trying to defuse tensions, CEO Igor Sechin was busy negotiating the acquisition of the Kirkuk-Ceyhan pipeline. Instead of easing tensions, Sechin doubled down in a letter to Bagdad in which he stated his support for the Kurds which showed “a higher interest in expanding strategic cooperation”. The deal to transfer control over the pipeline and several oil fields was struck on October 20th, 2017 at the height of the post-election chaos. Iraq’s weakness and opportunities Bagdad opposes any deal the KRG strikes without the consent of its parliament. Rosneft, however, maintains the right to engage with the Kurds according to the existing power-sharing agreement between the central government and Erbil. The meeting between Iraqi oil minister Jabar al-Luaibi with Sechin’s right-hand man Didier Casimiro in Bagdad in April was a sign of acquiescence by the central government. Despite its discontent, Bagdad prefers to maintain good relations with Russia for several reasons. First, Moscow in recent years has acquired a formidable position in the Middle East by maintaining good diplomatic relations with all regional actors. Second, the Coordination and Information Centre set up in September 2015 by Russia, Iran, Iraq, and Syria in Bagdad to coordinate the fight against ISIS, has also functioned as a trust sharing platform. Furthermore, Iraq is the second largest importer of Russian arms after India. From a strategic point of view, Bagdad’s relations with Moscow provide it with a highly needed balance against the two other important foreign actors in Iraqi politics: Iran and the U.S. Although Russia cannot provide financial and political support on the same level as Washington or doesn’t share the same cultural and religious background as neighboring Iran, Moscow is able to provide strategic balancing if required. Moscow’s green light Besides oil, natural gas is also a topic the KRG and Rosneft are discussing. A pipeline could provide Turkey and Europe with an additional source of energy. Gazprom in Russia has a monopoly concerning the export of gas through pipelines. The opening of the Iraqi gas market could go at the expense of Gazprom’s market share in Turkey and Europe. Moscow has on several occasions intervened to confirm the Russian gas giants monopoly vis-à-vis pipeline exports. The Kremlin, however, has remained silent concerning Kurdish gas. Its muted acquiescence is based on maximizing financial dividends and increasing or at least maintaining, political influence in Europe. The opening of a second ‘Russian controlled gas corridor’ from Iraq could possibly go at the expense of Gazprom’s market share. However, relatively expensive LNG imports could be hit even harder. Furthermore, the KRG could prefer Rosneft constructing and exploiting the pipeline as the company has supported the regional government during the past year while other governments and companies have kept their distance.
The BOC Group offers to delist Linde India, take full ownership of firm
The BOC Group Ltd, promoter of Linde India Ltd, has offered to take full ownership of the company and delist the firm from the country’s bourses. This follows as a result of the global merger between Linde AG and Praxair Inc, whereby Linde Plc has acquired control and voting rights of Linde AG. The BOC Group is part of the Linde Group and owns 75 per cent equity in Linde India. In a notice to the BSE, Linde India said that the primary objective of making the delisting offer is to obtain full ownership of equity shares of this company by the promoters. This will provide the promoter group with operational flexibility to support the business and future financing needs. Moreover, ongoing expenses with the maintenance of listing on BSE and NSE will be reduced, including investor relations expenses, and the management can dedicate its full time and energy to focus solely on the business. Moreover, for a non-listed entity, time dedicated to compliance with listing requirements gets reduced. About delisting from the bourses, a letter written by Andrew Brackfield, director at The BOC Group, reasoned that according to Securities and Exchange Board of India (Sebi) regulations, 25 per cent of the equity share capital of a company is required to be held by public shareholders. “In the event any public shareholder subscribes to the open offer, the promoter group’s direct and indirect (as applicable) shareholding in the company post the completion of the aforementioned open offer will exceed 75 per cent of the equity share capital of the company and could be as much as 100 per cent in case the open offer is fully subscribed,” the letter read. According to this letter, the promoter group, thus, will have to consider divesting the excess shareholding in the secondary market in a time-bound manner within 12 months of the completion of the open offer. “Therefore, the promoter group believes that a delisting proposal is a quicker and more cost-effective way for the promoter group to comply with SCRR, Sebi LODR,” Brackfield said. Linde India’s board has already appointed ICICI Securities as the merchant banker for carrying out the due diligence process. According to The BOC Group, the delisting price will be determined in accordance with the reverse book building process in the manner specified in the delisting regulations after the fixing of the floor price. “The floor price is not a ceiling for the purpose of the reverse book building process and the public shareholders may offer their respective shares at any price higher than floor price,” the letter added. Linde India shares closed at Rs 582.65 apiece, surging by 20 per cent, on the BSE.
Shale cash gusher sees EOG join oil’s $1 billion-a-quarter club
The well-heeled, buttoned-down world of international oil now has competition from cowboy boots and jeans. EOG Resources Inc.’s $1.1 billion in third-quarter adjusted net income vaulted the biggest American shale driller into the same league as Italian oil giant Eni SpA, ConocoPhillips and Occidental Petroleum Corp. and ahead of Spain’s Repsol SA. But there’s one major difference: EOG is growing production at more than 20 percent a year. Those veteran operators build multibillion-dollar engineering marvels around the world, have government ministers on speed dial, and operate myriad assets on several continents. It’s not a club typically associated with scrappy shale wildcatters, better known for burning through investors’ cash as quickly as they can drill a well in a Texas dust bowl. “The period of systematic outspend might be over,” said Irene Haas, a Houston-based analyst at Imperial Capital Group LLC. “EOG is there already but in 2019 a lot of companies are going to be hitting a point where they’re generating pretty substantial cash flow.” EOG, which hasn’t topped the billion-dollar profit mark in a decade, appears to have reached a sweet spot of surging production and free cash flow. Dividends are up 31 percent this year. At a time when West Texas Intermediate currently trades at about $60 a barrel, EOG says its new wells provide 30 percent after-tax returns with oil as low as $40. EOG, which once stood for Enron Oil & Gas, is not alone. Continental Resources Inc., Pioneer Natural Resources Co. and Devon Energy Co. also generated considerable free cash flow in the third quarter. Conoco and Occidental have also made shale one of their key investment targets. Permian legend Mark Papa, who was a pioneer of U.S. shale as EOG’s CEO from 1999 to 2013, said in an interview last month that he never expected the country’s production to grow as fast as it has: “Not in our wildest dreams did we think it was going to turn out to be numbers like it turned out to be.”
Major oil producers to consider cuts after price slide
Major oil producers meet in Abu Dhabi on Sunday to consider reverting to output cuts after a sharp slide in crude prices revived fears of a 2014-style crash. Oil prices shed a fifth of their value in just one month after surging to a four-year high in early October, driven by a combination of factors centred on higher supply and fears of sluggish demand. Brent crude dropped below $70 a barrel on Friday for the first time since April while the New York’s West Texas Intermediate (WTI) sank below $60 a barrel, a nine-month low. The United States has upped production of shale oil, while Saudi Arabia, Russia and others have raised supplies of crude amid signs of slowing demand. The slide also comes during signs of a softer-than-expected impact from US sanctions on Iran oil exports. “Prices have been falling amid a continued rise in crude supplies from big producers, such as Saudi Arabia, Russia and the US, more than compensating for lost Iranian barrels,” Forex.com analyst Fawad Razaqzada told AFP. “With the Iranian sanctions not being as severe as initially feared, officials from the OPEC and non-OPEC producers may discuss at the weekend the need to bring compliance back down towards the 100-percent level or risk another 2014-style slide in prices,” he said. Energy ministers of top producers Russia and Saudi Arabia will join other OPEC and non-OPEC officials for the meeting of the Joint Ministerial Monitoring Committee, which oversees production levels. The world’s second and third crude producers — after they were overtaken by the United States thanks to shale oil — Russia and Saudi Arabia are the core of an alliance of producer nations that succeeded in solidifying oil prices after the 2014 crash. Through large production cuts starting at the beginning of 2017, they managed to push up oil prices from below $30 a barrel to over $85 a barrel in October, strongly improving their revenues. But the producer nations eased the output cuts in June after signs of a tight market and higher prices, allowing hundreds of thousands of extra barrels into the market. Saudi Arabia raised its production from around 9.9 million barrels per day in May to around 10.7 million bpd in October, according to Energy Minister Khalid al-Falih. Kuwait, Iraq, Russia and the United Arab Emirates also boosted their output. Cailin Birch, analyst at the Economist Intelligence Unit, said a slowing oil demand is beginning to appear in China, the world’s largest importer of crude oil. “The recent drop in oil prices reflects a combination of factors. For one, signs of slowing oil demand are beginning to appear; the rate of GDP growth in China is beginning to ease,” Birch told AFP. The meeting, which will also be attended by the oil ministers of Kuwait, Venezuela and host nation the UAE, is not due to make decisions but will most likely send signals. The JMMC, a technical committee, is expected to make important recommendations on production cuts to a key ministerial meeting in Vienna next month for the OPEC and non-OPEC producers. Commerzbank, Germany’s second-largest lender, said Friday oil producers must act to prevent a free fall of prices. “If they fail to signal any intention to reverse the latest increase in production, oil prices threaten to slide further,” the bank said in a note.
Poland signs deal for long-term deliveries of US gas
Poland’s main gas company has signed a long-term contract to receive deliveries of liquefied natural gas from the United States as part of a larger effort to reduce its energy dependence on Russia. The state company PGNiG signed the 24-year deal with American supplier Cheniere Thursday in Warsaw, in the presence of US Energy Secretary Rick Perry and Polish President Andrzej Duda. The value of the deal was not released, in line with secrecy of such sensitive energy deals. However, Piotr Wozniak, the president of PGNiG’s management board, said the price is 20-30 percent lower than what Poland pays its current supplier “in the East,” a reference to Russia. Polish ruling party leader Jaroslaw Kaczynski said he was “happy that the deal will increase Poland’s energy security.”
Oil set for longest losing run since 2014 as supply fears ease
Oil rose as Opec and its allies were said to plan discussions about fresh production cuts next year, responding to recent increases in oil inventories amid surging US supply. Futures in New York gained 1 per cent. Ministers from the Organization of Petroleum Exporting Countries gathering in Abu Dhabi this weekend will discuss options for 2019 including the scenario of fresh supply cuts, said delegates. That would mark an abrupt end to six months of supply increases, reflecting the prospect that US sanctions on Iran won’t be deep enough to prevent another surge of American shale oil creating a new surplus. Supply concerns that drove crude to a four year high last month faded on speculation the US would soften the blow of its sanctions on Iran to lower pump prices at home. Opec also pledged to offset any supply gaps. The group led by Saudi Arabia will gather in Abu Dhabi this weekend as they face a fresh surge of US shale oil threatening to unleash a new surplus in 2019. The market has “more bearish overtones in terms of supply, with American crude output seen rising this year by the most ever,” said Stephen Innes, Singapore-based head of trading for Asia Pacific at Oanda. West Texas Intermediate crude for December delivery advanced 60 cents to $62.81 a barrel on the New York Mercantile Exchange at 6:05 am local time. Total volume traded was 77 per cent above the 100-day average.
GAIL contracts pipes for Barauni-Guwahati gas pipeline
State-owned gas utility GAIL (India) Ltd on Thursday said it has purchased steel pipes worth Rs 1,100 crore for laying the Barauni-Guwahati gas pipeline, putting on fast track the implementation of the project that will connect the north-east with the national gas grid. Work on the 729-km pipeline, which will act as a branch line from the prestigious Pradhan Mantri Urja Ganga pipeline project, will commence from December, the company said in a statement here. GAIL said it has awarded “contract for the purchase of 616 km of line pipe worth Rs 1,100 crore for the Barauni-Guwahati pipeline, putting on fast-track project execution of the crucial 729 km feeder line linking North East India with the Pradhan Mantri Urja Ganga pipeline network.” Work across India’s single largest pipeline spanning 3,400 km under Jagadishpur-Haldia-Bokaro-Dhamra project – also known as Pradhan Mantri Urja Ganga, is in full swing and progressing as per schedule, it said. GAIL Chairman and Managing Director B C Tripathi said the award of the tenders supports ‘Make in India’ efforts of steel pipe manufacturers and suppliers in the country and marks the completion of mainline ordering for the entire 729 km section. The Barauni-Guwahati pipeline will connect to the ‘Indradhanush’ gas grid network, which is being developed by GAIL along with joint venture partners Indian Oil Corp (IOC), Oil India Ltd, Numaligarh Refineries Ltd (NRL) and Oil and Natural Gas Corp (ONGC) to provide uninterrupted supply of natural gas across all the North Eastern states. “The Pradhan Mantri Urja Ganga project endeavours to connect East and the North East States of India with the existing gas pipeline grid to ensure access of clean energy solutions for household, transport, industrial and commercial applications in the energy deprived region,” the statement said. GAIL said work on the pipeline originating from Jagadishpur in Uttar Pradesh to Haldia in West Bengal and branch lines to Bokaro in Jharkhand and Dhamra in Odisha is in full swing. “Physical progress under phase-1 of the flagship project is 92 per cent complete and it is expected to be completed within next two months, whereas the balance phases including the additional section under Barauni-Guwahati spur lines are lined up for sequential completion by December 2021,” it said. Tripathi said, GAIL is concurrently executing over 5,500 kilometers of gas transmission network at an estimated outlay of Rs 25,000 crore. “In spite of recent impact to on-going project work due to calamitous floods, construction of natural gas pipelines in Kerala and Karnataka are fast-tracked for completion by the end of current fiscal year as more than 85 per cent physical progress has been achieved under the Kochi to Mangalore pipeline project,” he said. The pipelines will not just supply CNG to automobiles and cooking gas to household kitchens in cities along the route, but also to industries to meet their feedstock or fuel requirement. “City gas distribution at Varanasi, Bhubaneshwar, and Cuttack have commenced operations. Given the steady progress achieved so far, the city gas projects could soon be rolled-out at Patna, Ranchi, Jamshedpur, and Kolkata,” he added.