Biggest Indian explorer ONGC is said to plan first ever borrowings
Oil and Natural Gas Corp. plans to tap the debt market for the first time, an opportunity that may be hard to pass up for bond bulls. India’s largest state-run energy producer may sell bonds and take out loans of as much as $4 billion to pay for the purchase of the government’s $5.2 billion stake in Hindustan Petroleum Corp. and bankroll $4.5 billion of projects, according to company executives with knowledge of the matter. Given the company’s credit metrics — it has 130 billion rupees ($2 billion) of cash on its books and a long-term rating that’s a notch above the government — the issuance will be bought by investors drawn to one of the world’s fastest growth rates and Prime Minister Narendra Modi’s economic policies. “The sentiment is positive toward India and because the supply from Indian corporates is limited, there will be demand,” Rishabh Tiwari, a Zurich-based fund manager for emerging market credit at Swiss Life Asset Managers, said in an interview. “ONGC has strong credit fundamentals and the acquisition of HPCL will help it diversify into downstream refining.” The appetite for India’s corporate debt is so strong that Hindustan Petroleum’s $500 million offering in July attracted bids for six times the amount. Billionaire Anil Agarwal’s Vedanta Resources Plc last week sold seven-year dollar notes in its second $1 billion sale this year. Even so, the planned fundraising could weaken ONGC’s credit profile at a time when earnings have been hit by the slump in global energy prices. Estimated cash flows of about 400 billion rupees this fiscal won’t be enough to pay for the planned investments, the executives said, asking not to be identified as they are not authorized to speak publicly. Risk Premium To Swiss Life Asset and Frankfurt-based Union Investment Privatfonds, it boils down to how attractively the issuance is priced. “If ONGC is willing to reflect the increased credit risk premium in light of the transaction, there’ll be interested investors,” said Hyun Kim, who manages $2 billion under four funds at Union Investment. “ONGC was one of the strongest quasi-sovereign credits before the HPCL transaction was announced. Leverage will likely increase with this, but the company should be able to handle it.” The company hasn’t borrowed since at least 1993 when it was converted into a corporation, the executives said. Its overseas investment unit, ONGC Videsh Ltd., has tapped the market to fund purchases of oil and gas blocks. Moody’s Investors Service has a Baa2 score on ONGC’s debt, making it the nation’s highest rated state-run company, said Vikas Halan, vice president and senior credit officer at rating company. That should provide the company with a “very strong access” to funding. Le’Raven Clark Womens Jersey
Top oil buyers go on light crude oil hunt to meet diesel demand
Captain Tsitrelis Ioannis and the 26-strong crew of the Malibu arrived at Ulsan in early August after sailing almost 9,000 nautical miles to deliver a million barrels of Kazakh CPC crude from the Black Sea to South Korea, one of the key buyers in the world’s biggest oil market. Another cargo of light oil, which is less sulfurous than heavier grades, is set to arrive in a couple of months at Ulsan from even farther away — the U.S. — to be processed by SK Innovation Co., South Korea’s top refiner. The two shipments are part of a stream of similar varieties flowing to Asia as companies look to process the kind of crude that yields more diesel to capitalize on surging demand for the fuel. Last month, profit margins from making diesel in Asia touched the highest since November 2015, contrary to expectations for a typical seasonal drop in demand during this time of the year due to monsoon rains. The unusual gains have been driven by higher imports of cleaner diesel by India after the government imposed new quality standards and as China uses more to feed the expansion of its construction and industrial sectors. “There’s no reason not to buy more,” Kim Wookyung, a spokeswoman at SK Innovation, said by phone from Seoul. “The margins of these fuels are pretty high.” Profits in Asia from turning benchmark Dubai crude into diesel jumped to $14.38 a barrel on July 31, a gain of 57 percent since touching a nine-month low on May 4. The crack spread, as it’s known, was at $12.64 a barrel at 12:05 p.m. in Singapore on Wednesday. The surge helped lift overall crude refining margins to $7.82 a barrel on Aug. 7, up more than 200 percent from a year earlier, according to data compiled by Bloomberg. “Diesel demand has been strong in emerging economies, including the Philippines, Indonesia and India as they focus on increasing infrastructure spending,” said Peter Lee, an analyst at BMI Research. “China’s diesel demand has returned to growth in the second quarter as construction and industrial consumption picked up.” That’s led South Korean refiners SK Innovation and GS Caltex Corp., among the top regional exporters of distillate fuels, to scour countries from Algeria to the U.S. in search of light crude. Typically, lighter varieties with a lower sulfur content will yield about 85 percent of lucrative products such as gasoil and gasoline, and about 15 percent of residue. Heavier varieties, which are usually cheaper, would yield only 55 percent of valuable fuels, according to SK Innovation. Still, the company — and most refiners — don’t process purely light or heavier crude at any given time. It blends about 15 different grades of oil before a crude distillation unit cracks it into products including diesel and gasoline. The proportion of varieties changes depending on market factors, according to an official at SK Innovation’s plant in Ulsan. While low-cost drilling methods have unlocked vast deposits in places like Texas, supplies from U.S. shale fields are primarily light, low-sulfur oil, which many of the refineries along the American Gulf Coast aren’t designed to process. As a result, exports surged and America now ships more than some members of the Organization of Petroleum Exporting Countries. More Attractive Meanwhile, supplies of heavier crudes — which are more prevalent in the Middle East — have shrunk as OPEC nations including Saudi Arabia curb output as part of a deal aimed at propping up prices. That’s made regional benchmark Dubai crude stronger relative to other markers such as Brent and U.S. West Texas Intermediate, making them more attractive to Asian buyers. “If you can get your hands on light crude now, it’s the time,” said Victor Shum, a Singapore-based vice president at industry consultant IHS Energy. “Given the current strong diesel cracks, refiners indeed should find light, sweet crude to be attractive.” SK Innovation, which is diversifying away from its long-term crude suppliers in the Middle East, will load one million barrels of WTI Midland crude in late August from Freeport, Texas, and the same amount of Mexican Isthmus crude, with both expected to arrive in Ulsan in mid-October. The increased appetite for light crude in new locations mean Captain Ioannis will be tasting new seas as he readies to embark on his next journey. While he’s still waiting to hear the destination, he doesn’t rule any country out. “I travel everywhere,” he said on board the Malibu, which was floating 3 miles off Ulsan. Nazem Kadri Jersey
India: Billionaire Dilip Shanghvi’s Sun Oil may buy GSPC’s Hazira field
Billionaire Dilip Shanghvi’s Sun Oil and Natural Gas is close to acquiring state-run Gujarat State Petroleum Corp.’s (GSPC) 66.67% stake in the Hazira gas field located in the Cambay basin in Gujarat, two people aware of the development said. The deal is expected to close by September, the people said on condition of anonymity, without disclosing the deal value. The purchase would give Sun Oil and Natural Gas full control of the gas field, in which it bought a 33.3% stake from Canada’s Niko Resources Ltd in December for an undisclosed sum. Also in December, state-owned explorer Oil and Natural Gas Corp. Ltd (ONGC) said it had decided to purchase an 80% stake and development rights in GSPC’s Deen Dayal West field in the Krishna -Godavari offshore block OSN-2001/3 for $995.26 million. The Hazira field is part of 16 hydrocarbon assets in Gujarat’s Cambay basin in which GSPC holds stakes. Niko has operated the field for the past 22 years. Sun Oil and Natural Gas is a unit of Shanghvi’s Sun Petrochemicals Pvt. Ltd. GSPC is 87% owned by the Gujarat government. “With the Deen Dayal deal with Oil and Natural Gas Corp. done, GSPC is looking at monetizing other assets. GSPC is in talks with Sun Oil and Natural Gas to sell its entire stake in the field,” said one of the two persons cited earlier. Sun Oil and Natural Gas declined to comment. GSPC did not reply to an email sent on Monday. Currently, the Hazira field produces 1,300-1,400 barrels of oil per day (bopd) and 7-9 million standard cubic feet of gas per day. Gas production began from the field in 1996 and oil production commenced in March 2006. “The field has neared the end of its life and post September, GSPC may have to abandon the block. However, selling it to Sun Oil and Natural Gas would be a better way to monetize the field than abandoning it as abandoning a field costs nearly $30 million (to adhere to the safety norms of abandonment like dismantling the offshore platforms, maintenance of the pipelines etc),” added the first official mentioned above. A banker aware of the deal said it would be a good purchase for Sun Oil and Natural Gas, which has studied the field and wants to explore it further unlike Niko and GSPC, which have other financial commitments. “Sun Oil and Natural Gas’s technical advisers are confident of rich hydrocarbon deposits in the field, which Niko and GSPC do not wish to commit financially to. Thus Sun Oil and Natural Gas would be getting the field at almost scrap value,” said the banker, the second person cited above.
UDAN provides new hope for defence airports in Bengaluru
The Civil Aviation Ministry’s aggressive promotion of the regional connectivity scheme (UDAN) is providing some hope for defence airports in Bengaluru and Bidar to resume operations for small passenger aircraft. The recent “no-objection“ from the Bangalore International Airport (BIAL) board to the Hosur airport in Tamil Nadu to operate five flights a week is being seen as a positive step in this direction. The HAL airport in the city and the Bidar airport have not been able to benefit from the phenomenal growth in the civil aviation sector in recent years because of a clause in the concession agreement the Civil Aviation Ministry has signed with private airport operators. This clause seeks to protect private investors by barring a second airport for commercial flights within a radius of 150 km. The Fairfax Group-controlled BIAL and the GMR Group-controlled Rajiv Gandhi International Airport in Hyderabad have not allowed HAL and Bidar airports, in that order, to host commercial flights. Industries and infrastructure minister RV Deshpande told ET that he has been pursuing with the Bengaluru and Hyderabad airport operators on the need for regional connectivity at these two airports on certain terms and conditions. “I have told BIAL to look at HAL airport’s case in the same way as Hosur airport. I recently met GMR Group chairman GM Rao and told him to help as the north Karnataka region badly needs air connectivity in the backdrop of industrial and other activities.“ The GMR Group chairman, he said, responded positively and the Rajiv Gandhi International Airport CEO has followed it up with a letter to the Civil Aviation Ministry . The minister said he has also spoken to MoS (Civil Aviation) Jayant Sinha to call a meeting with all airport stakeholders and open the HAL and Bidar airports for regional connectivity . “As far as HAL airport goes, the ball is in BIAL’s court. Both BIAL and HAL have to work together to make things happen. That the BIAL Board granting permission for Hosur airport is a good sign and it may pave way for similar treatment for HAL airport too,“ said DV Prasad, Additional Chief Secretary, Industries Department, and a BIAL board member till recently . HAL, a company spokesperson said, has recently written to the Civil Aviation Ministry requesting inclusion in the list of airports identified for regional connectivity . According to government officials, non-availability of takeoff and landing slots at Bengaluru and Hyderabad international airports may work in favour of HAL and Bidar airports. These metro airports are unlikely to entertain small aircraft deployed for regional connectivity in peak hours. At a recent meeting the Karnataka government convened, airline executives told Deshpande that airlines deploy smaller aircraft such as ATRs for regional connectivity and ATRs usually take more time for takeoff compared to a large aircraft. Metro airports prefer slotting bigger aircraft to turboprops precisely because of this reason. The turboprops too would need peak-hour slots if regional connectivity scheme has to meet passenger needs, they said.
ONGC Videsh to pump $150 million in Colombia, Kazakhstan & Bangladesh
ONGC Videsh, the overseas arm of the state-run Oil and Natural Gas Corp, plans to invest $150 million in exploration this fiscal year to drill more wells in Colombia, where it just made a commercial discovery, as well as in Kazakhstan and Bangladesh. ONGC Videsh, which operates the CPO-5 block of Colombia, has made a commercial discovery in its exploration well Mariposa-1, managing director Narendra Verma has said. The company is now drawing up plans for the development of the Mariposa-1well that has begun a test production of 4,500 barrels per day, he said. The success has also opened opportunity for further exploration in the block. “To chase this lead, we plan to drill two more wells,” Verma said. ONGC has 70% participating interest in CPO-5 block in which the remaing 30% stake in held by Amerisur Resources of UK. ONGC has participating interest in a total of six blocks in Colombia. This includes a producing block whose current output is 35,000 barrels per day. ONGC has also accelerated its exploratory efforts in Kazakhstan and Bangladesh. Drilling has begun in the Kazakhstan block in the Caspian Sea while preparations are on to drill the first well in Bangladesh. “We are hopeful Kazakhstan drilling will end up in success,” Verma said. In all, the exploratory effort would require $150 million of investment this year, Verma said. ONGC Videsh plans to make a total capital spending of $1 billion in 2017-18 in exploration, development and production across all its projects. ONGC Videsh’s production jumped 40% in 2016-17 mainly on 26% stake acquisition in Russia’s prolific Vankor fields. The output is expected to rise further 15% in the current fiscal year to 14.35 million tonnes of oil equivalent (mtoe). “We are actively working towards meeting our target of 20 mtoe by 2020,” said Verma. The company has also entered Namibia’s oil and gas sector with a purchase of 30% interest from Tullow Oil in the African country’s three oil blocks. ONGC Videsh’s investment in the Imperial fields of Russia will likely get some production boost after an associated gas processing plant comes up. The tender for the plant has been awarded and it would be ready in about 18 months, Verma said. This would help push up oil production from the field by 4000 barrels/day from the current 7000 barrels/day. Gerald Green Jersey
40-year-old aircraft may not get DGCA nod for cloud seeding
The government’s efforts to provide respite to farmers struggling without rain through cloud seeding might hit a legal hurdle. One of the four aircraft to be used for the purpose is unlikely to get clearance from the Directorate General of Civil Aviation (DGCA), which has earlier denied permission to one such plane for the project. While the Karnataka government has awarded the Rs 30-crore project to Hoysala Projects, two other firms with valid licences to operate aircraft have been roped in to provide the service. The first one was to bring three planes and the second company one. But the former’s request for permission for one of the three planes was denied as it was aged 25 years. DGCA regulations stipulate that the maximum age of aircraft for temporary import from a foreign firm should be 18 years. Documents with TOI show that the second firm has now sought permission to bring in an aircraft – Piper Cheyenne Aircraft N 361 JC – manufactured in 1977. But the DGCA, which has already denied permission for an aircraft aged 25 years, is unlikely to consider the proposal to fly in a 40-year-old plane. Further, documents reveal that Piper was purchased by Agni Aviation Consultants, Bengaluru for $9,27,000 in 2009. Mike Gesicki Womens Jersey
After Uttar Pradesh, Jharkhand manages to renegotiate solar tariffs
Solar power developers who won the mega auction of 1,200 MW of projects in Jharkhand 16 months ago have agreed to reduce tariffs, which will help them sign power purchase agreements. Jharkhand is the second state after Uttar Pradesh to renegotiate solar tariffs arrived at through an auction. But while UP went back on signed PPAs, Jharkhand has not actually signed any because the state distribution company found it too costly. Developers had offered a tariff of Rs 4.99 per unit of power to the Jharkhand Renewable Energy Development Agency (JREDA) at a recent meeting. Among projects offered at 45 different locations in the state, winning bids ranged from Rs 5.08 to Rs 7.95, depending on size and location of the project. The agency has not yet taken a decision and the matter may even be discussed by Jharkhand cabinet at its next meeting likely later this week. The biggest winner in March 2016 Jharkhand auction was ReNew Power with 522 MW. Other notable winners included Suzlon Energy with 175 MW, OPG Power Generation with 124 MW, Acme Solar with 75 MW, Adani Green Energy with 50 MW and the now defunct SunEdison with 150 MW. Most of the developers declined comment, given the delicate stage of the negotiations. A solitary exception was ACME Solar Holdings, which won 75 MW, and indicated its willingness to discuss a reasonable tariff revision. “PPAs were not signed because it was not beneficial for the state to get power at the arrived tariff,” said Nikhil Dhingra, CEO at ACME Solar Holdings, which won 75 MW. “We remain committed to the state for future bids. It will really help both parties if the gap between the bidding and the PPA tariff adoption is minimised for it to make sense for the state.” Letters of intent were sent out to the winners in May 2016, but thereafter the state power distribution company Jharkhand Bijli Vitaran Nigam (JBVN) refused to actually sign PPAs with the winning developers. The developers claim they were told the rates were too high as the state bought conventional power at about Rs 4.30 per kwH. JREDA officials were unwilling to comment on why, despite letters of intent having been issued, PPAs had not been signed more than 16 months after auction was held. Nor would they confirm or deny fresh offers from developers. But in an interaction with ET in October last year, a Jharkhand official had hinted that the delay was due to both JREDA not having enough funds and its apprehension that the winning tariffs at the auction were too high Ten months later, the matter has still not been resolved. With LoIs already issued, cancelling the bids is not an easy option either for the state. In the meantime, solar tariffs have fallen even further across the country, thanks to a drop in input costs, with the lowest tariff reached being Rs 2.44 per kwH at an auction held for projects at the Bhadla Solar Park in Rajasthan in May. Developers say Jharkhand tariffs were higher because of many factors. One winner, who did not want to be named, recently pointed out five of them in a letter to JREDA: low solar irradiation, relatively more expensive land, the security threat posed by Naxalites, insufficient power evacuation infrastructure and lack of any sovereign guarantee from the state government that it would step in if the discom JBVNL were to default. “As compared to Rajasthan, Andhra Pradesh, Karnataka and Gujarat, solar irradiation in Jharkhand is 7-9 % less, thus resulting in low plant load factor (PLF) for similar plant design,” the letter noted. “Jharkhand has large forest cover and large contiguous land without vegetation is scarcely available. Land prices in other states are Rs 3-5 per acre, whereas In Jharkhand they are double and vary between Rs 8 lakh and Rs 10 lakh per acre.” ET View: Fresh bidding is sensible Things seem to be in a state of flux, and it would make sense to opt for fresh bidding. Looking ahead, the auction needs to reflect current state of affairs and future prices in the offing. Also, we need to differentiate supply-side policy from the demand side in renewable power. While upfront supply-side subventions can be phased out, given falling costs of hardware, we do need to encourage and step-up demand for renewables with dedicated line capacity and the like. It would be for the greater good. Tanner Glass Authentic Jersey
Energy Information Administration cuts U.S. oil production growth forecast for 2018
The U.S. Energy Information Administration said on Tuesday it expects U.S. crude oil production in 2018 to rise by less than previously expected. The agency forecast that 2018 crude oil output will rise by 560,000 barrels per day to 9.91 million bpd. Last month, it expected a 570,000 bpd year-over-year increase to 9.9 million bpd. For 2017, it forecast a rise of 500,000 bpd to 9.35 million bpd. Last month, it expected a 460,000 bpd increase to 9.33 million bpd, according to the EIA’s monthly short-term energy outlook. Meanwhile, the agency forecast that U.S. oil demand for 2017 is set to grow by 340,000 bpd compared with a 310,000 bpd previously. For 2018, oil demand is expected to rise by 330,000 bpd vs 360,000 bpd previously. Mike Gartner Authentic Jersey
OPEC expects laggards to comply more fully with oil cut pact
OPEC expects greater adherence to its pact with non-OPEC producers to cut oil output after two days of meetings in Abu Dhabi aimed at boosting compliance with the accord. The Organization of the Petroleum Exporting Countries, Russia and other producers are cutting output by about 1.8 million barrels per day (bpd) until March 2018 to get rid of a glut and support prices. OPEC producers Iraq and the UAE have shown relatively low compliance with the deal based on figures from secondary sources OPEC uses to monitor its supply. Meanwhile, non-OPEC Kazakhstan and Malaysia have been boosting output in the last few months, according to the International Energy Agency. In Abu Dhabi, a panel comprising Russia, Kuwait and Saudi Arabia, plus officials from OPEC’s Vienna headquarters, met individually with officials from Iraq, the United Arab Emirates, Kazakhstan and Malaysia. “Discussions were conducted in a constructive atmosphere and proved fruitful,” OPEC said in a statement. “The conclusions reached with the countries at the meeting will help facilitate full conformity,” it added, although it did not give details on how compliance would be increased. The meeting was a special session of the JTC, or Joint Technical Committee, which is monitoring adherence to the deal. A ministerial panel, known as the JMMC, met last month and instructed that the Abu Dhabi meeting be held. “The UAE, Iraq, Kazakhstan, and Malaysia all expressed their full support for the existing monitoring mechanism and their willingness to fully cooperate with the JTC and JMMC in the months ahead in order to achieve the goal of reaching full conformity,” OPEC said. Another OPEC source said the officials discussed crude exports and some countries’ disagreement with the level of their production as assessed by the secondary sources. At a meeting held in Russia last month, the UAE and Iraq confirmed their commitment to the pact but offered no concrete plan on how to meet their production targets, sources said. Iraq and the UAE say the assessment of their production by secondary sources – figures from government agencies, consultants and industry media that OPEC uses to monitor its output – before the pact took effect in January was too low. They argue that as a result, the two countries have the unpalatable task of making an even bigger cut to comply fully. Sheldon Rankins Jersey
Delhi to have a terminal for private flights by 2020
To streamline flight movement and cater to the demands of chartered flights in the capital, IGI Airport will have a dedicated terminal and parking bays for private planes by 2020. By consolidating general aviation — all civil aviation operations other than scheduled flight services — the new terminal seeks to provide faster access to chartered flights as well as reduce congestion in Terminal-1 from where these flights now take off. The airport operator, Delhi International Airport Limited, has appointed two concessionaires to develop fixed base operator (FBO) as well as world-class maintenance, repair and overhaul (MRO) facilities at the new terminal that will have separate hangars and aircraft parking bays for general aviation services. At close to 1,250 movements each month, IGI handled close to 15,000 general aviation movements during the financial year 2016-17. “Initially, general aviation operations at the Delhi airport was unorganised and many local agencies were involved in providing such services. Hence, the services and associated infrastructures offered to general aviation operators were not at par with international standards,” said a DIAL spokesperson. The new general aviation terminal will cater to the increasing demand of non-scheduled operators, he added. IGI airport currently handles the maximum traffic in terms of general aviation movement and VIPs using private planes also use Terminal-1 to board a chartered flight. “The new terminal can further boost that growth by providing faster access to such flights and providing world-class facilities. Even the larger planes can then be accommodated at the IGI airport,” said Rajesh Kumar Bali, MD, Business Aircraft Operators Association. Besides new facilities, the terminal will let a person board a private plane within five-10 minutes of arriving at the airport, said officials from Bird ExecuJet — one of the two concessionaires at the general aviation terminal. “One just needs to directly enter the terminal, get the details verified and directly walk on to the plane. Earlier, this process would take close to two hours and further congest T-1. With India’s GDP rising steadily and globalisation spreading its wings, this type of aviation is becoming a necessity and not a luxury. With the upcoming fixed base operations at Delhi’s IGI, passengers will have better access to these services,” said Gaurav Bhatia, executive director, Bird Group. Mike Gartner Womens Jersey