ONGC board gives nod to explore group restructuring options
The board of state-owned Oil and Natural Gas Corp (ONGC) has given in-principle approval for exploring options for a restructuring of the group firms including the merger of subsidiaries MRPL and HPCL. The India’s largest oil and gas producer, ONGC has several subsidiaries and joint ventures including two in refining sector – Hindustan Petroleum Corp Ltd and Mangalore Refinery and Petrochemicals Ltd and two petrochemical units – ONGC Petro additions Ltd (OPaL) and ONGC Mangalore Petrochemicals Ltd. It also has an overseas investment arm in ONGC Videsh Ltd. “The board of directors of ONGC, at the 308th meeting held on June 29, accorded its in-principle approval for exploring options for the restructuring of ONGC group companies,” the company said in a regulatory filing. While ONGC did not provide details of the proposed restructuring, sources in the company said an advisor would be appointed to suggest possible options. The board of the company will take a call on the options suggested by the advisor. ONGC is looking at trimming down the structure by merging some of the subsidiaries. While MRPL operates a 15 million tonnes a year refinery at Mangalore in Karnataka, HPCL has two refineries at Mumbai and Vizag. OPaL has built at Rs 32,000 crore petrochemical complex at Dahej in Gujarat, while ONGC Tripura Power Co Ltd (OTPC) operates a 726 MW power plant at Palatana in Tripura. It also has two SEZ companies – Dahej SEZ Ltd and Mangalore SEZ Ltd. Also, it has a pipeline company in Petronet MHB Ltd and a stake in helicopter service operator, Pawan Hans Ltd as well as Petronet LNG Ltd. Sources said while there is certainly a case for merger of MRPL with HPCL for not just business synergies but also help avoid penalties from market regulator SEBI for not meeting public float requirement in case of the former. Also, some other units too can be combined. In the regulatory filing, ONGC referred to the acquisition of government’s stake in HPCL earlier this year as part of government’s proposal to create a public sector ‘oil major’ which will be able to match the performance of international and domestic private sector oil and gas companies. ONGC has in past spoken of benefits of bringing all refining business under one company. HPCL management too has supported taking over MRPL to create India’s second-biggest public sector oil refining firm. “The restructuring proposal shall safeguard the overall interest of the public shareholders of all ONGC group companies,” ONGC said. The restructuring, it said, would be done taking into account the need for better value creation and synergy among group firms. Also, it would be done to meet the minimum public shareholding requirement in case of MRPL. SEBI’s listing rules require a minimum public float of 25 per cent. In case of MRPL, the float is less than 11.5 per cent. “The implementation of any such restructuring proposal shall be subject to the approval of the Government of India, the board of directors of the relevant companies and other stakeholders of such companies in terms of applicable laws,” ONGC said. OG Anunoby Authentic Jersey
BP starts first gas deliveries to Turkey from Azerbaijan’s Shah Deniz II
A BP-led international consortium started its first commercial deliveries of natural gas to Turkey from Azerbaijan’s giant Shah Deniz field from Saturday, BP said on Monday, part of efforts aimed at cutting Europe’s dependence on Russian energy supplies. The European Union is trying to cut its reliance on Russian gas by developing the so-called Southern Gas Corridor, which is expected to bring about 16 billion cubic metres (bcm) of gas a year to Europe by 2020. Russian gas has become increasingly politicised since 2014 when Moscow annexed the Crimea peninsula and rebellion flared in eastern regions of Ukraine. Russian gas giant Gazprom caters for 34 percent of Europe’s gas market. The gas would come from the Shah Deniz II field in Azerbaijan via the 1,850 km the Trans-Anatolian Natural Gas Pipeline (TANAP) through Turkey, the 487-km South Caucasus pipeline extension through Azerbaijan and Georgia and the 878 km Trans-Adriatic Pipeline (TAP) across Greece, Albania and Italy. “BP as operator is very pleased that the longstanding partnerships we have in Azerbaijan and the entire region have allowed us to bring this world class project to success, enabling us to meet our commitments to consumers in Turkey,” Gary Jones, BP’s regional president for Azerbaijan, Georgia and Turkey, said in a statement. BP said with an investment of some $28 billion, the project had a planned total of at least 26 subsea wells, two bridge-linked platforms, 500-km of subsea pipelines and flowlines, a major expansion at the Sangachal Terminal near the Azeri capital Baku and an expansion of the South Caucasus Pipeline. “Start-up of Shah Deniz II is a milestone not just for Azerbaijan and the BP-led consortium, but for the Caspian as a whole region: a complex megaproject delivered on schedule and under budget,” Ashley Sherman, principal analyst, Caspian & Europe Upstream oil and gas, at Wood Mackenzie, said in a statement. The Shah Deniz I field, which has been pumping gas since 2006, produces more than 10 bcm of gas per year, and output from Shah Deniz II is expected to reach an annual 16 bcm of natural gas, with 10 bcm earmarked for Europe and 6 bcm for Turkey. Total production from the Shah Deniz fields will be up to 26 bcm of gas and up to 120,000 barrels of condensate a day, BP said. Charley Taylor Womens Jersey
India has `Plan D’ for Iran oil as Donald Trump adds sanction pressure
One of Iran’s biggest oil buyers said it has enough alternative sources of crude to replace any supplies cut off by U.S. sanctions on the Persian Gulf state — even if shipments stop completely. Indian Oil Corp. Chairman Sanjiv Singh says Saudi Arabia alone can cover most of the world’s supply shortfall in case Iran’s oil exports dry up. Also a narrowing spread between Brent crude and Dubai oil gives Indian Oil even more options, the head of the state-run refiner known as IOC, one of Iran’s largest customers, said in an interview. “We have a very wide crude basket. There’s nothing we can’t procure, there’s nothing we can’t process,” Singh said. “So, even if Iran supplies get disrupted, the supplies to the Indian market will still continue. That’s assured.” Some customers in Asia are already considering acquiescing to President Donald Trump’s demand to end trade with Iran by early November, when sanctions aimed at curbing the Islamic republic’s nuclear program come into effect. Several refiners in the largest oil market are looking at alternative supplies from Saudi Arabia to Iraq after the White House said it won’t offer extensions or waivers to U.S. allies. Ramping Purchases IOC plans to buy 7 million tons of crude from Iran in the year ending March 31 versus 4 million tons in the previous fiscal year, A.K. Sharma, director of finance at the refiner, said in May. India imported 771,000 barrels of crude oil a day from Iran in May, a 35 percent increase from the previous month, tanker tracking and shipping data compiled by Bloomberg show. “We buy high sulfur crude from Iran. Today if you look at the price difference between Brent and Dubai, the difference is hardly anything,” he said. “So, the option is wide open and there’s no need that we replace high sulfur with high sulfur.” The global oil benchmark Brent traded at a premium of $3.58 a barrel to Dubai crude on Monday, down from an almost four-year high of $4.64 a barrel in April, according to data from broker PVM Oil Associates. That allows IOC the option to look at sourcing crude from regions other than the Middle East. IOC added 16 new grades of crude during 2017-18 and has the ability to process 175 different varieties, boosting flexibility in oil sourcing. It also expanded the capabilities of its refineries to process cheaper and heavier grades, which make up close to 60 percent of its crude diet. Fully Prepared “We have Plan B, Plan C, Plan D. We are fully prepared,” IOC’s Singh said, without giving details. India’s government has so far been sending mixed signals about its stance on Iranian imports. While the country said it plans to seek exemptions from the sanctions and is also looking at alternate payment mechanisms to enable it to continue purchases from the Persian Gulf state, the government has also asked refiners to brace for all eventualities, including zero imports. India insists it will make sure its energy security is not compromised and a call on Iran oil imports will be guided by its own interests. India continued with purchases from Iran during the last round of sanctions. “The situation is changing everyday,” Singh said. “We have to wait and watch how things unfold with time. We can manage and we will manage.” David Perron Authentic Jersey
Equinor plans largest natural gas reserve off Norway
Equinor submitted on Tuesday a 7.8 billion Norwegian crowns ($954.46 million) plan to develop gas reserves in the western part of its Troll field, the largest natural gas source off Norway. Reserves will be produced by using subsea installations tied-in to the Troll A platform about 25 kilometres (15.53 miles) north-west of the reserves. Equinor holds a 30.58 per cent stake in the Troll field, Petoro 56 per cent, Shell 8.1 per cent, Total 3.69 per cent and ConocoPhillips 1.62 per cent. Matthew Stafford Authentic Jersey
Oil rises on Libya force majeure, but demand slowdown holds back market
Oil prices climbed on Tuesday after Libya declared force majeure on some of its supplies, although an overall rise in OPEC output and an emerging slowdown in demand held back markets. Brent crude oil futures were at $77.71 per barrel at 0217 GMT, up 41 cents, or 0.5 percent, from their last close. U.S. West Texas Intermediate (WTI) crude futures were up 57 cents, or 0.8 percent, at $74.51. “The Libyan power struggle between the Tripoli-based National Oil Corp that is internationally recognised and controls the export sales and the NOC-East group based in Benghazi that currently has physical control of the infrastructure … wipes out the planned increase from the OPEC+ coalition,” said Stephen Innes, Head of Trading for Asia-Pacific at futures brokerage OANDA in Singapore. OPEC’s June output was 32.32 million barrels per day (bpd), a Reuters survey showed on Monday, up 320,000 bpd from May. The June total is the highest since January 2018. Libya’s National Oil Corporation (NOC) declared force majeure on loadings from Zueitina and Hariga ports on Monday, resulting in total production losses of 850,000 bpd due to the closure of eastern fields and ports. Traders have also been watching U.S. oil production , which has surged by 30 percent over the last two years to 10.9 million bpd, absorbing some of the recent disruptions. Overall, however, analysts said OPEC’s production policy as well as unplanned supply disruptions were currently the main price drivers. “In the near-term, the level of OPEC production – deployment of spare capacity by Saudi Arabia, Iraq, UAE, Kuwait (and ex-OPEC by Russia), and involuntary disruptions in Libya, Venezuela, Iran – are more important drivers of crude prices,” Goldman Sachs said in a note published late on Monday. DEMAND SLOWDOWN What has become a concern, at least for producers, is a slowdown in demand which may end years of consecutive records. “U.S. petroleum demand growth slowed significantly to 385,000 bpd year-on-year in April, compared with a growth of more than 730,000 bpd year-on-year in Q1,” Barclays bank said, adding that this was mostly due to higher fuel prices. In Asia, the world’s top oil consuming region, seaborne oil imports have been falling since May, as higher costs turned off consumers and as the escalating trade dispute between the United States and China starts to impact the economy. “There are … signs that growth in China has slowed in recent months, particularly infrastructure spending by local governments. I would assume that infrastructure investment is quite energy intensive, so perhaps that had a knock-on effect to oil demand,” said Frederic Neumann, Co-Head of Asian Economic Research at HSBC in Hong Kong. “At this stage, however, it appears more that growth in Asia is softening, rather than decelerating sharply,” he added. Lane Taylor Authentic Jersey
Taiwan agrees preliminary LNG purchase deal with U.S. producer
Taiwan’s CPC Corp on Monday announced a preliminary deal to buy liquefied natural gas (LNG) from U.S. producer Cheniere Energy for 25-years, according to a statement. CPC, a major importer of LNG, signed a Heads of Agreement to purchase 2 million tonnes of LNG annually from Cheniere, which is gearing up to start exports from its second U.S. export plant at Corpus Christi, Texas. Cheniere started exporting LNG from its Sabine Pass plant in Louisiana in 2016. Authentic Jersey
Argentina to free retail fuel prices in August
Argentina will allow fuel retailers to freely set pump prices starting in August, according to an Energy Ministry official familiar with the plan, a move that could encourage badly needed investment in the nation’s oil patch but risks worsening sky-high inflation and angering consumers. Separately, the ministry is looking to set up an auction process for the natural-gas market that it hopes will lower prices, according to the official, who was not authorized to speak publicly. The actions signal that President Mauricio Macri is moving ahead with free-market reforms to attract private investment to develop the nation’s abundant shale oil reserves, even as rising global oil prices and a precipitous weakening of the nation’s currency have led to pressure for more interventionist government policies. The moves will also bring relief to the oil sector. Price controls have squeezed refiners’ margins, prompting one refinery to suspend operations. Macri’s pro-business government freed fuel prices last year, part of its efforts to unwind state controls on Argentina’s economy. But his administration reversed course in May due to a rapid decline in the peso. The sudden depreciation rattled markets and prompted Argentina to turn to the International Monetary Fund (IMF) for emergency financing. In May, the government reached a deal for a two-month freeze on pump prices with the three largest oil companies operating in Argentina: state-owned YPF, Shell, and BP’s Pan American Energy. It later set the price of domestic crude at $68, about $10 below the global Brent crude price, to mitigate the impact of freezing fuel prices on refiners’ margins. By freeing pump prices, the government is betting that gas stations will limit price hikes to avoid losing customers, the official said, and that by freeing crude prices it would encourage more investment in domestic drilling, part of a long-term strategy to wean Argentina from petroleum imports. “Price controls do not help with anything,” the official said. The government and the oil companies agreed to loosen the freeze June 1, allowing for hikes of 5 percent in June and 3 percent in July. Macri’s administration had kept the industry guessing as to what it might do in August. Th earlier increases were unsatisfactory to oil industry players, three of whom complained privately to Reuters that the modest bumps did not come close to covering their increased costs. Last month, global trader Trafigura announced it was suspending activities at its 30,500 barrel-per-day refinery in the port city of Bahia Blanca due to the “mismatch between fuel prices and production and import costs.” An oil industry executive who spoke with Reuters recently expressed frustration with the bind. “The adjustment that needs to be done is not 3 percent, it is 45 percent,” said the person, who requested anonymity to speak freely. VACA MUERTA RAMP-UP An end to retail price caps would likely infuriate Argentine consumers, who are already incensed at the government for the drop in the peso and inflation that is running at a 26.3 percent annual clip. But Macri’s government has prioritized reviving the energy sector to shake Argentina’s dependence on imported oil and gas, and to put an end to market-distorting subsidies. Argentina possesses the world’s second-largest reserves of shale natural gas and ranks No. 4 in reserves of shale oil, mostly in the Vaca Muerta fields in Patagonia. But it faces stiff competition to attract the billions in private investment needed to develop these resources. Oil production is languishing at multi-decade lows. The picture is brighter with natural gas. Rising output in Vaca Muerta helped boost the country’s production by 3.4 percent in the first quarter of 2018 compared with the same period last year, according to government data. “We are beginning to have an abundance of gas in Argentina,” the Energy Ministry official said. As a result, the ministry will create an auction process for wholesale customers to bid on the open market for their natural gas supplies during the low-demand summer months, the official said. The plan is to phase out the current fixed-contract system in a move the government hopes will lower prices. The auctions could start in September or October, and could account for as much as 70 percent of wholesale supply by March or April of 2019, the official said. Argentina is also expected to begin gas exports to Chile in the fourth quarter of this year, another result of rising Vaca Muerta output. Argentina will still need to import liquefied natural gas (LNG) to meet demand in winter months. Maxime Lagace Authentic Jersey
Petrol, diesel prices to rise sharply again as crude rates flare up
Domestic fuel prices are set to rise sharply again after falling or staying stable for a month as international rates have jumped and the rupee weakened. State-owned oil companies have kept rates of petrol and diesel unchanged for six days although global crude oil prices have increased about $3 a barrel during this period. Since June 21, crude oil has gained more than $6 to reach $79.5 a barrel as the United States is seeking stronger compliance of its sanctions against Iran that traders fear could substantially reduce oil supply from the market. The decision of a cartel of key oil-producing countries to raise output by a million barrels per day is seen as insufficient to meet the rising demand, and has aided the recent surge in prices. Crude oil prices have stayed high this year owing to factors such as robust demand, an artificial supply restriction by key oil-producing countries led by Saudi Arabia and Russia, and a sharp drop in Venezuela’s output. A weaker rupee, along with zooming oil prices, has begun to hurt Indian economy and consumers. The rupee last week fell to a record low of more than 69 to a dollar. India’s import bill is set to balloon as the country imports nearly 83% of its crude oil requirement. Since June 26, the price of petrol has been constant at Rs 75.55 and that of diesel at Rs 67.38 a litre in Delhi. Similarly, in Mumbai, the petrol price has been unchanged at Rs 82.94 and that of diesel at Rs 71.49 per litre. State-owned oil companies determine local prices of petrol and diesel using international fuel rates and the currency movements. International prices of petrol and diesel follow the crude oil trajectory, albeit with some lag. The price of petrol in Delhi has fallen Rs 2.88 per litre since May 29. The price of diesel is down Rs 1.93 per litre since May 29, after which prices started declining. Indian Oil Corporation’s website, a key source of pricing information for petrol and diesel prices, has changed the way it publishes fuel prices, making it slightly difficult for people to know fuel rates. It has also stopped publishing historical price data for all previous years. Dontari Poe Authentic Jersey
Vedanta chairman’s family trust agrees to buy rest of company
Vedanta Resources Plc said on Monday chairman Anil Agarwal’s family trust has agreed to buy the rest of Vedanta in a deal that values the mining conglomerate at 2.3 billion pounds ($3.03 billion). An independent committee, formed to review and evaluate the proposal, has indicated to Volcan Investments that it supports the offer and intends to recommend a firm offer to Vedanta’s shareholders. Volcan currently holds about 66.53 per cent of Vedanta. The offer of 825 pence per share represents a 27.6 per cent premium to London-listed Vedanta’s close on Friday of 646.8 pence. In addition to the offer price, shareholders will also be entitled to receive a previously announced dividend of 41 cents per Vedanta share, the company said, adding that this would boost the offer price to 856 pence per share. Indian industrialist Agarwal said last year he does not intend to keep Vedanta in family hands and would withdraw from the group in the next few years. Agarwal is also Anglo American’s biggest shareholder with a nearly 20 per cent stake through Volcan. Agarwal earlier this year played down speculation that he is seeking a tie-up with Anglo. Vedanta has come under increased scrutiny in India since police opened fire on protesters, killing 13, at a demonstration against a copper smelter in May. The smelter has since been shut down. Tedric Thompson Authentic Jersey
Will getting petrol & diesel under GST lower prices and the options before the government
Petrol and diesel continue to be outside the ambit of GST and the general view is that getting it under the new indirect tax regime can significantly reduce prices. However, MS Mani, Partner, Deloitte India, believes that it may not be as straight forward as that. “Unlike what people might think petroleum products don’t mean diesel and petrol only. It also includes natural gas and aviation turbine fuel, among other things. Each of these products is not taxed at the same rate, either by the Centre or states,” he says. Petroleum products attract an excise duty which is a central tax, and also state specific tax. The Centre taxes petrol, diesel differently from the way it taxes aviation and natural gas. Each state levies a different tax rate. For example, Maharashtra has the highest rate of tax on petrol and diesel in India “When GST was introduced, GST Council felt at point of time, perhaps rightly so, that petroleum products can be taken up in stage two. This was also done to remove the apprehension of the states that feared a significant revenue loss. There was no empirical data to suggest what could be the GST collection. So it wasn’t possible for the government to do any kind of extrapolation to say that under GST, this is the revenue which this particular state would get.And therefore it was felt necessary to run GST with products other than petroleum, and then take it up as a later stage,” he added. Technically there is no link between the international prices of crude and the need for GST on petroleum products. These are two different issues and price of crude also depends to a large extent also on the commercial agreements we have with oil producing nations. “One is a commercial issue, the other is a tax policy issue. But, due to whatever reasons it has been combined,” says Mani. However, as the government explores putting petroleum products under GST, there are a few options that the Finance Ministry can follow: 1. To have Central Excise Duty replaced by GST at the initial phase and include state tax in the next phase. 2. Similarly, products like natural gas and ATF can come under GST. So natural gas and aviation gas can come under GST fold followed by petrol and diesel. Most of the states, tax natural gas at the same rate, so the variation in rates in not too much. But when it comes to petrol and diesel, the variation is huge among states. And therefore many may not want it to be taxed at the initial phase. “Every meeting of the GST Council in the last six months has been unanimous. On this aspect when it comes to inclusion of petroleum products, it would be commendable to see all the states acting in tandem,” says Mani. Gale Sayers Authentic Jersey