ONGC not to make open offer post HPCL acquisition: Official
ONGC will not be required to make an open offer to minority shareholders of HPCL after buying out government’s 51.11 per cent stake as the deal won’t trigger takeover norms as did the IOC-IBP merger in 2002, a senior government official said. The Cabinet Committee on Economic Affairs (CCEA) last week gave in-principal approval of Oil and Natural Gas Corp (ONGC) buying out government’s entire 51.11 per cent stake in fuel retailing and marketing company Hindustan Petroleum Corp Ltd. HPCL will continue to be a separate listed company. ONGC will not have to make an open offer to minority shareholders of HPCL as the government’s holding is being transferred to another state-run firm and the ownership isn’t really changing. “Open offer is not required because the management complexion is not changing. So it is a related party transaction,” the officer said. As per Sebi’s takeover code, if a company acquires more than 25 per cent in another listed company, it has to make an open offer to minority shareholders to buy at least 26 per cent more in the target firm. Way back in February 2002, state-owned Indian Oil Corp (IOC) had acquired government’s 33.58 per cent stake in fuel retailer IBP Co Ltd for Rs 1,153.68 crore and had to make an open offer for additional shares. “IOC and IBP merger had happened through bidding route. Reliance Industries was among the bidders. That time, IBP was being offered for outright sale, so when management chose to sell through bidding, the open offer got triggered,” the official said, requesting anonymity. In the present case, “in ONGC, I am transferring from direct government control to indirect holding,” he said. Government is 51 per cent owner of HPCL and 68 per cent owner of ONGC. “So, if one of the companies keeps the shares of the other, it is a related party transaction. But that does not mean government has sold the company. Government will indirectly hold stake in the company. “It is a related party transaction which should not trigger takeover code unless the valuations are absurd. If those conditions are satisfied, it will never happen. We have kept in mind interest of both ONGC and HPCL,” the official said. The deal, which flows from Finance Minister Arun Jaitley’s Budget announcement of creating an integrated oil company, will help ONGC spread its risks. From being a mere oil and gas producer, it will also have downstream oil refining and fuel retailing business. “When upstream business is down, downstream does great and vice versa. So now ONGC will be able to better manage its risks,” he said. “Through this vertical integration, what private sector could not achieve, the government has achieved,” he added. HPCL will add 23.8 million tonnes of annual oil refining capacity to ONGC’s portfolio, making it the third-largest refiner in the country after IOC and Reliance Industries. ONGC already is majority owner of MRPL, which has a 15- million tons refinery. Patrick Onwuasor Authentic Jersey
Oil gains ahead of producer meeting; Nigeria, Libya output in focus
Oil prices gained on Monday after a steep fall the session before, buoyed by expectations that a joint OPEC and non-OPEC meeting later in the day may address rising output in Nigeria and Libya, two OPEC members so far exempt from a push to cut production. Ministers from the Organization of the Petroleum Exporting Countries (OPEC) and other non-OPEC producers gather in the Russian city of St Petersburg on Monday to discuss the pact to curb output by 1.8 million bpd through the end of March 2018. The committee may recommend a conditional cap on Nigerian and Libyan oil production, sources familiar with the talks said, although some analysts were deeply sceptical the group would make such a move. “The committee may issue a statement on cooperation in production cuts, but output cuts by Libya and Nigeria would be next to impossible considering Libya was just re-emerging from the civil war, for example,” said Kaname Gokon, strategist for commodities brokerage Okato Shoji in Japan. Russian Energy Minister Alexander Novak said Libya and Nigeria should cap output when their output stabilizes, the Financial Times reported. London Brent crude for September delivery was up 24 cents at $48.30 a barrel by 0316 GMT on Monday. The contract settled down $1.24, or 2.5 percent, on Friday after a consultancy forecast a rise in OPEC production for July despite the pledge to rein in output. NYMEX crude for September delivery was up 17 cents at $45.94. Kuwait’s oil minister, Essam al-Marzouq, said on Saturday that compliance was good with oil production cuts by OPEC and non-OPEC countries and that deeper curbs were possible. Meanwhile, OPEC Secretary General Mohammad Barkindo said on Sunday that a rebalancing of the oil market is progressing more slowly than expected, but will speed up in the second half of 2017. Elsewhere, Turkish President Tayyip Erdogan travelled to Saudi Arabia and Kuwait on Sunday, the Gulf states’ official news agencies reported, as part of a diplomatic tour aimed at healing an Arab rift with Ankara’s ally Qatar. U.S. oil drillers cut one rig in the week to July 21, according to data from Baker Hughes. The United States is considering financial sanctions on Venezuela that would halt dollar payments for the country’s oil, sources told Reuters, which could severely restrict the OPEC nation’s crude exports. Aledmys Diaz Womens Jersey
RIL paying 6 per cent more to buy CBM gas from own block in MP
Reliance Industries is paying 6 per cent more price to buy coal-bed methane gas from its own block in Madhya Pradesh in the second quarter of current fiscal, the company said in an investor presentation. RIL had in May become the first buyer of gas it produced from its own coal-bed methane (CBM) block after agreeing to pay the highest price for the fuel. It paid USD 4.23 per million British thermal unit for the CBM produced during May-June. “For 2Q (July-September) FY18 supplies discovered price is USD 4.50 per mmBtu,” the company said in an investor presentation after announcing first quarter earnings. “RIL is the successful bidder.” RIL said it began CBM production from its Sohagpur blocks in Madhya Pradesh in March this year. “205 wells are flowing and production ramp up is in progress. Produced 8.6 million standard cubic meters of gas in 1Q FY18,” it said. Following the April decision of the government to give coal bed methane (CBM) producers freedom to discover market price, RIL invited bids from users of gas. The price discovered in the process was USD 4.23 for May-June and USD 4.5 for July-September. The rate is almost double the USD 2.48 per mmBtu price RIL gets for natural gas produced from its eastern offshore KG-D6 block. RIL said average production of gas from KG-D6 was 6.4 million standard cubic meters per per day and oil and condensate at 2,791 barrels per day during April-June quarter. This compares to 7.4 mmscmd of average gas production and 3,749 bdp of oil and condensate production during January- March. “Production continues to decline due to natural decline in the fields,” it said. “Currently eight wells in D1-D3 and three wells in MA field (in KG-D6 block) are under production.” RIL has invested about USD 500 million in CBM and laying a 300-km pipeline from Sohagpur to Phulpur in Uttar Pradesh to connect to the national gas grid. Through the April 13 notification, the oil ministry had stated that a CBM producer has to call for open bids for sale of coal gas and seek price quotes to discover the market price. The process prescribed was the same as the one RIL had run in 2012 to discover a price for CBM gas it is to produce in Madhya Pradesh. Back in 2012, it had sought bids for 3.5 mmscmd (as against 0.40 mmscmd put on offer this time) of coal gas from its Sohagpur CBM block in Madhya Pradesh at a benchmarked rate at 12.67 per cent of JCC, or Japan Customs- Cleared Crude, plus USD 0.26 per million British thermal unit. The formula was the same at which Petronet LNG, a joint venture of public sector oil companies, whose chairman is the oil secretary, used to buy long-term liquefied natural gas (LNG) from Qatar. At USD 100 per barrel oil price prevalent that year, CBM from RIL’s Madhya Pradesh block was to cost USD 12.93 per mmBtu. At USD 55 a barrel rate currently, it would cost USD 7.2. That formula was, however, rejected by the ministry even though 59 valid bids seeking about 70 mmscmd of gas were received in the open tender. This time, RIL sought bids in form of a deductible from Platts DES West India price of USD 7.659 per MMBtu. Roger Staubach Womens Jersey
Oil India submits report to Centre for gas pipeline to Assam
PSU major Oil India said it has submitted a feasibility report to the Central government for laying gas pipeline from Barauni in Bihar to Numaligarh in Assam to tackle shortage of gas in the North Eastern state. “Last week, we submitted the feasibility report to the Petroleum Ministry regarding laying of pipelines from Barauni to Numaligarh. We have addressed various aspects of gas transportation and its economic viability in the report,” Oil India Ltd (OIL) Chairman and MD Utpal Bora said here. The distance between the two points will be about 750 km, and currently OIL has two pipelines transporting crude and oil between Barauni and Naharkatia in Assam, he added. “If we want to have a complete new line, then the entire project will have to start from the scratch like acquiring land. But, as we already have Rights of Use (RoU) agreement with land owners and two pipelines are operational, so the Assam government wants us to implement the project,” Bora said, adding ideally GAIL should carry out the work. He said if the government gives nod to the report, OIL may form a joint venture with GAIL as they have the expertise in this field. Giving details about the feasibility report, Bora said it studied the possibility of setting up a third pipeline in the route, which has 18 metres of width as per the RoU. “The economic viability option has also been looked at in the report. It takes Rs 4 crore for laying one kilometre of pipeline. So, if it is not economically viable for any entity, then we have suggested the government to provide us assistance in terms of viability gap funding, which would be about Rs 40 crore,” he added. The report also dealt with other consumer related issues with availability of gas in Assam like setting up CNG fuel stations and providing pipe LPG to each household, Bora said. Also, some portions of the land have been encroached by people at different places and these have to be cleared before starting any work, he added. “The current requirement is 10 mmcmd (million cubic meter per day) and there is a shortage of 2 mmcmd. So, this project is very important to Assam. As we already have the RoU, it is easier. However, there are some challenges as well,” Bora said without elaborating further. James White Authentic Jersey
Cabinet may take up sale of HPCL to ONGC on Wednesday
The Cabinet is likely to take up flagship explorer ONGC’s proposal to acquire the government’s entire 51.1% stake in the country’s third largest refiner-retailer Hindustan Petroleum (HPCL) on Wednesday in a deal size estimated at over Rs 28,000 crore. The deal size could rise by another Rs 14,600 crore or so if the government does not waive the need for making an open offer to acquire an additional 26% from the market as required under norms. The move is in line with the government’s intention to create integrated Indian oil companies of global size and heft through mergers and acquisitions among existing state-run players. The stake sale in HPCL will also help the government meet some 38% of its disinvestment target of Rs 72,500 crore for this fiscal. “We see opportunities to strengthen our CPSEs (central public sector enterprises) through consolidation, mergers and acquisitions. By these methods, the CPSEs can be integrated across the value chain of an industry. It will give them capacity to bear higher risks, avail economies of scale, take higher investment decisions and create more value for stakeholders. Possibilities of such restructuring are visible in the oil and gas sector. We propose to create an integrated public sector ‘oil major’ which will be able to match the performance of international and domestic private sector oil and gas companies,” finance minister Arun Jaitley had said in his budget speech. Deciphering the Budget proposal, oil minister Dharmendra Pradhan had told TOI, “The Budget has laid the policy. Integration is the need of the hour. Globally, M&As (mergers and acquisitions) are the trend in the oil industry. With the policy in place, companies will chalk out mergers and acquisitions in accordance to their strength and weaknesses. We will see M&A activities in the public sector oil industry in coming days.” Soon after the Budget announcement, ONGC examined the proposals to acquire HPCL or the country’s secondlargest refiner retailer Bharat Petroleum (BPCL) — which also has an attractive exploration portfolio — and settled for the former as a more reasonable acquisition target. But don’t expect to see HPCL’s 14,000-odd petrol pumps — roughly a quarter of outlets operated by state-run companies — to change colours after acquisition by ONGC, which is unlikely to merge it and would retain the company as a subsidiary and carry on with the brand. ONGC could, as part of the entire transaction, shift its refining subsidiary MRPL under HPCL’s umbrella. ONGC holds 71.6% in MRPL, while HPCL owns 16.9% in the Mangalore-based company that runs a refinery with an annual capacity of processing 15 million tonnes of crude. HPCL has two refineries at Mumbai and Visakhapatnam in Andhra Pradesh with a collective refining capacity of over 14 million tonnes per year. HPCL will add 23.8 million tonnes of annual oil refining capacity to ONGC’s portfolio, making it the third-largest refiner in the country after IOC and Reliance Industries. Patrick Omameh Authentic Jersey
BHP Billiton to ramp up US shale rigs despite divestment calls
BHP said Wednesday it would double the number of onshore US shale rigs, despite a major shareholder pushing for the commodities giant to divest its American oil and gas assets. The Anglo-Australian firm said in an annual operational review ending June 30 that it increased the rig count to five during the April-June quarter, with plans to boost that to 10 in the 2018 financial year. The ramp up came even as BHP said it would sell-off non-core shale assets in Hawkville, Texas, in the September quarter. New York-based Elliott Advisors, a significant shareholder in the company, is pushing for BHP to restructure the business, including spinning off its US oil and gas operations and dissolving its costly dual stock market listing. The world’s biggest miner rejected Elliott’s proposal in April, while Canberra has warned that removing BHP from the Australian Stock Exchange was not in the national interest. Apart from iron ore and energy coal, annual production for BHP’s other assets — petroleum, copper and metallurgical coal — all fell, pushing shares down 1.67 percent to Aus$24.68 in Sydney Wednesday. Total iron ore production for the 2017 financial year rose four percent to 231 million metric tons after record output from its Western Australia operations. The lift also came during a period where prices for the metal surged following a slump from a supply glut and softening Chinese demand. Copper output eased 16 percent for the year to 1,326 kilotonnes, hurt by a strike in Chile at the world’s largest copper mine Escondida, with the industrial action also costing BHP US$546 million in costs. But copper production was “expected to rebound strongly in the 2018 financial year”, BHP chief executive Andrew Mackenzie said, on the back of a new water project and an extension programme at Escondida. Rio Tinto, the world’s second-largest miner, said Tuesday in its second-quarter production report that shipments and production for iron ore, its main commodity, slipped slightly for the period owing to “adverse weather conditions”. Michael Raffl Womens Jersey
NTPC a key enabler of India’s electricity transformation: IEEFA
A recent Morgan Stanley report has downgraded the Indian utilities industry. It highlighted that renewable energy is becoming so cheap that thermal power, mostly coal, is uncompetitive. This is a highly significant market signal which will likely be accompanied by growth in the already impressive list of high calibre international investors moving into India’s renewables sector, including from Japan, the Netherlands, Italy, China, France, Australia, Singapore, Hong Kong and Canada. The Institute for Energy Eonomics and Financial Analysis (IEEFA) has long predicted India’s growing global leadership role in the transformation to a low carbon economy. But it is happening at a speed faster than we dared to imagine. India’s draft National Electricity Plan forecasts that 57 per cent of the country’s energy capacity will be from renewables and other zero emissions technologies by 2027. This is well ahead of the Paris target of 40 per cent by 2030. But this is not fundamentally a matter of environmental concern. It is common sense economics since solar is now cheaper than existing coal-fired generations. Indian state-owned utility National Thermal Power Corporation (NTPC) is a case in point. IEEFA’s recent report on NTPC details how, despite its deep historical connection to coal-fired electricity generation technology, it stands to be one of the country’s key clean energy enablers. The company provides 25 per cent of India’s electricity supply and as such it plays a critical role in the country’s economic activity. With economic growth at 7-8 per cent annually, India is the world’s fastest-growing major economy. Last week, a news report stated that NTPC was planning to invest $10 billion in three new coal-fired power stations over the next five years. Citing senior officials, the article stated that the expected 5 GW of coal would nearly double the capacity of those currently being phased out. It went on to say that if built it would “raise questions about Prime Minister Narendra Modi’s vow to stand by commitments under the Paris climate accord”. This is a misrepresentation of the actualities. NTPC’s current development pipeline represents its past more than its future. The latest National Electricity Plan has made it clear that no new coal-fired generation will be needed beyond what is already planned. The Power Ministry has stated that 11GW of NTPC’s older coal-fired plants will be shut down over the next five years, to be replaced by new, super-critical plants in an effort to increase efficiency and reduce India’s carbon footprint. In an electricity market where demand is growing plus-six per cent per annum, a one per cent per annum expansion of coal capacity is still likely to be needed. If current trends persist, new demand will increasingly be covered by lower cost renewables. NTPC will be a key enabler of this transformation. Its Chairman and Managing Director Gurdeep Singh, in his discussion with IEEFA, noted that it expects to progressively close end-of-life inefficient coal capacity. This will mean its net thermal addition is more like 1 GW per annum. Indian thermal power plants are now operating at a utilisation rate of 50-60 per cent. This is mainly because demand has not kept up with the rollout of new fossil fuel generation infrastructure. One innovative solution being proposed to maximise such existing assets is to build solar PVs around them. This will leverage current land and grid connectivity and allow NTPC to continue to supply 24X7 power as needed — solar in the day and coal as the balance. NTPC is also playing an important role in private solar developments by purchasing the electricity. Its strong balance sheet de-risks such private investment, helping to drive down the cost of solar in a country that has seen a succession of low-cost records set and then broken in 2017. There has also been a move into hydropower and electric vehicle charging infrastructure, further diversifying NTPC away from coal. All of this is a major strategic shift for NTPC. Utilities in many countries, including the US, Germany, France, Italy and Australia, are at various stages of business-model transformation in response to a rapidly changing technology and investor-driven environment. As innovation continues, acceleration towards a cleaner economy will take an exponential trajectory. NTPC stands to be a cornerstone in India’s national electricity transformation, which has now reached critical mass. As per the recent Blackrock (the largest investor in the world) announcement — coal is dead. It will take decades to fully transition, but the process is now unstoppable. DJ Chark Jersey
OPINION: Focus on distribution, not power generation
It is welcome that Union power minister Piyush Goyal has offered the Centre’s good offices to sort out the problem of stressed stranded projects in the vexed power sector. As many as 54 projects adding up to over 25,000 MW are currently stranded and not generating power. But the problem, in the main, is the sorry lack of reforms in distribution and attendant, routine and large-scale theft of power. It is rampant revenue loss in distribution and moribund finances of state power utilities that stultifies offtake and demand. In a shocking illustration of the problem, engineer Abhimanyu Singh was killed and four of his colleagues injured while fleeing a mob attack in southwest Delhi on Monday, where they had gone for spot inspection of power theft. The powers that be must immediately resume CISF protection for theft detection teams, which was questionably withdrawn in 2009. The fact is that despite showcase power reforms in Delhi, large pockets continue to experience massive theft and recurring non-payment with 25-50% of power unaccounted for. The point is to clamp down on political patronage of theft and non-payment for power in the states. It is true that of late, 25 states have issued bonds under the Ujwal Discom Assurance Yojana for over Rs 2 lakh crore, to clear state power utility losses. But in tandem, we need revamped institutional mechanism and improved governance to stem revenue losses in distribution. The way forward is to mandate stringent norms to boost transparency. For starters, distribution results need to duly be complied and published widely on a quarterly basis. Utilities can provide steady returns for the long term, and the Narendra Modi government needs to put distribution reforms at the core of its reform agenda. Patrick Maroon Jersey
Government weighs options on Air India’s Rs 30,000 crore debt
The government is weighing multiple options to raise money from Air India, going beyond the recommendation to take over Rs 30,000-crore debt suggested by NITI Aayog, which suggested stake sale of the cash-sucking carrier. One of the options is to go for a reverse bid that will pit the Rs 30,000-crore debt against rights such as landing slots and other operating assets that are owned by the national airline, which give it an edge over all its rivals, many of which are finding ways to reduce costs when they fly abroad, sources said. In addition, Air India enjoys a nearly unmatched infrastructure presence at Indian airports. “There are ways to improve the returns for the government, which will be considered, but at the moment these are all options and the panel of ministers will chart the best course of action,” said a source. Air India has nearly Rs 60,000-crore debt on its books, of which around Rs 22,000 crore is linked to its aircraft purchase programme. There are also loans of around Rs 6,000-7,000 crore related to its operations, which will go with the airline. NITI Aayog had suggested that the remaining amount could be taken over by the government to make the airline an attractive proposition for the new buyer. The sources said that writing off the amount will impose a burden on the exchequer as the government will have to take over the loans extended by banks. The lenders have refused to restructure the loan as it is seen to be an unviable proposition. “Through a reverse bid, we can realise better value and also make the whole process more transparent,” said a source. Investment bankers said that other options were also possible and they could look at the global experience if mandated. The details, including the extent of the sale, will be worked out by a panel of ministers headed by finance minister Arun Jaitley. Jahleel Addae Authentic Jersey
No plans to expand, invest in India: Oman Air
Oman Air will not expand its operations to India or buy a stake in Air India, under current circumstances, an official from Oman Air has confirmed. It was reported that Oman Air was likely to invest in the Indian carrier if the open skies agreement was worked out between the two countries; however, with troubled times for the aviation industry, the plan has been put on hold, along with the scheme to increase operations to India. “We have no plans to extend, unless entitlements are further increased for specific domestic airports,” Paul Gregorowitsch, chief executive officer (CEO) of Oman Air told the Times of Oman when asked about expanding operations to India. He stated that there was “no appetite to invest in foreign airlines,” implying that there was no plan to invest in Air India. Jared Spurgeon Jersey