Oil business seen in strong position as Trump tackles tax reform
Big Oil could be in a unique position to protect its interests against a Republican proposal to tax imports, given that President-elect Donald Trump’s cabinet is studded with oil champions sensitive to the risk of higher gasoline prices. Trump’s emerging leadership includes Exxon Mobil Corp Chief Executive Officer Rex Tillerson as secretary of state, former Texas Governor Rick Perry as energy secretary and Oklahoma Attorney General Scott Pruitt as Environmental Protection Agency administrator. Trump himself has made no secret of his support for the energy sector. And in Congress, both Republicans and Democrats have close industry ties, including House tax panel chairman Kevin Brady, a Texas Republican whose district takes in the northern Houston suburbs. House Republicans want to adopt a sweeping tax reform that would sharply reduce tax rates for corporations and end the taxation of U.S. corporate overseas profits. But a provision known as border adjustability is stirring up controversy. Though intended to boost U.S. manufacturing by exempting export revenues from tax, the provision worries some industries because it would also tax imports. Because U.S. oil refiners import about half the crude oil they use to make gasoline, diesel and other products, analysts say the change could lead to higher gasoline prices and potentially undermine economic growth. Integrated oil companies such as Exxon, Chevron Corp , BP Plc, Royal Dutch Shell Plc and ConocoPhillips could also be hit, depending on whether they are net importers. But the industry’s allies would likely move to soften any rough edges, analysts say. “I don’t see this mix of leadership figures in the House, Senate and the White House, doing something that has the effect of raising gasoline prices,” said Peter Cohn, an energy analyst with Height Securities, a Washington-based investment firm. The danger is that a move to protect the oil refiners could open the door to assistance for other industries, including retailers and automakers, which would also face higher costs if no longer able to deduct the cost of imports from their taxable income. Such a knock-on effect could prevent border adjustability from raising an expected $1 trillion in revenues to help pay for lower tax rates over the next decade. “We hope that raising these concerns early in the process will allow members of Congress to consider the issues carefully,” Chet Thompson, president of the American Fuel and Petrochemical Manufacturers trade group, said in a statement. Brady said earlier this month that his committee was sensitive to the impact on specific businesses and “listening very closely to how we can make sure we smooth that out.” Moreover, some economists dismiss industry worries about higher import costs, saying the dollar’s value would rise in response to such sweeping tax changes and ultimately reduce the cost of imports. Currency markets would adjust to higher oil prices by lowering the dollar value of crude, they predict. “This argument by the oil industry is, frankly, all wrong,” said Douglas Holtz-Eakin, former director of the nonpartisan Congressional Budget Office, who now heads the American Action Forum think tank. “Refiners are going to be basically held harmless. They’ll have a lower dollar price of oil. Net cost is the same. And they go about their business. I’m unsympathetic,” he added. Height Securities’ Cohn said Trump and his advisers could look for ways to soften any blow to refiners and their customers: “Trump doesn’t want to have refineries closing on his watch.” Oil already benefits from several tax code provisions in place for decades that would be eliminated under the House Republican plan. But they stand to gain more than they will lose. For instance, an existing tax deduction for domestic production lets oil producers shave down their corporate tax rate to 32 percent from the top headline rate of 35 percent. Under the congressional Republicans’ plan, the corporate rate would be cut to 20 percent; under Trump’s plan, to 15 percent. Similarly, companies that now write off intangible drilling costs or get a tax allowance for asset depletion would be able to immediately expense capital investments. Then there is a tax credit oil companies claim for fees from foreign countries. Congressional Republicans would eliminate foreign taxes altogether, while Trump would maintain taxation at a substantially lower rate. Derek Dorsett Authentic Jersey
RIL pumps offer diesel at lower price than PSUs to regain market share
Reliance Industries has slashed the price of fuel to snatch back market share lost to state pumps in the days after demonetisation, when the latter accepted old notes for some time and currently offer a discount on digital purchases. Filling stations run by Reliance Industries have begun offering diesel to customers at 1 discount to the price offered by pumps run by state companies such as Indian Oil, Bharat Petroleum and Hindustan Petroleum. “That (Reliance’s price discount) could have happened because of the incentive scheme provided by the PSUs,” Indian Oil Chairman B Ashok said. “Market-to-market, we would respond, if it is going to induce a fresh set of competitive pressure. Each market has its own tendencies, so we will respond accordingly.” State-run pumps are already feeling the heat in a little more than a week since Reliance’s diesel price discount began. “Reliance pumps have significantly gained share in the specific markets they operate in,” said Nitin Goyal, treasurer at All India Petroleum Dealers Association (AIPDA), a body of state pump dealers. At a meeting slated for January 7 in Bengaluru, the association will discuss, among other things, ways to neutralise Reliance’s move, Goyal said. To be sure, Reliance operates just 1,100 filling stations, mostly in Gujarat and some in southern states. But in the business of fuel sales, the slightest discount per litre can effectively wean away customers from a rival pump as the overall gains can be significant due to big volume play. Diesel sales are about three times that of petrol in the country. Reliance Industries declined comment. After the government banned old 500 and 1,000 notes in November, state-run pumps were allowed to accept the demonetised notes for fuel purchases for several days, drawing customers away from private pumps that couldn’t accept banned notes. The government also directed state pumps to offer 0.75% discount on fuel purchases, making diesel cheaper by about 40 paise. “But this comes as cashback after a few days. Reliance’s discount is bigger and upfront, making it more attractive for customers. Second, Reliance allows customers to use cash to load their prepaid cards while we have been instructed to allow only digital means. This again offers Reliance customers an advantage,” said Goyal of AIPDA. A staff at a Reliance-run pump said it imposed no ceiling on discounts, while state pumps offered a digital discount on a maximum purchase of 2,000 for a customer each time. A decade back, Reliance had grabbed about 14% in diesel sales in just a few years, using a mix of quality fuel, convenience, better service and loyalty programme. It had shuttered fuel retailing after oil spike brought back government price control. This time though Reliance has been slow to expand. Ron Parker Authentic Jersey
ONGC Videsh qualifies to bid for Iran oil, gas projects
ONGC Videsh Ltd, the overseas arm of state-owned Oil and Natural Gas Corp (ONGC), has won rights to bid for oil and gas development projects in Iran. OVL is among the 29 international oil companies from more than a dozen countries that Iran has pre-qualified to bid in the upcoming tender for oil and gas projects, according to the list put out by National Iranian Oil Co (NIOC). Others on the list include Royal Dutch Shell Plc, China National Petroleum Corp (CNPC), Total SA of France, Russia’s Gazprom and Eni of Italy. Iran, the holder of world’s fourth-largest oil reserves and OPEC’s third-largest oil producer, is hoping to attract as much as USD 150 billion in foreign investment in its oil, gas and petrochemicals sectors over the next few years. The list of pre-qualified firms also included Malaysia’s Petronas, Russia’s Lukoil, China’s CNOOC and Sinopec, Inpex of Japan, KOGAS of Korea. Most of these companies have been involved in Iran’s oil industry projects before the US- tailored sanctions were imposed against the country in 2011. Newcomers include Wintershall from Germany, Maersk from Finland, DNO from Norway and CEPSA from Spain, according to the NIOC list. US oil services provider Schlumberger Ltd was also among those identified, according to the NIOC website. OVL is already present in Iran. In 2008, it had discovered the Farzad-B gas field in the Farsi block in Persian Gulf. The discovery has an in-place gas reserve of 21.7 trillion cubic feet, of which 12.5 tcf are recoverable. “We are in negotiations with Iran for development rights of Farzad-B field,” a senior company official said. “Discussions on continuing a development plan that we submitted to Iranian authorities. We are hoping negotiations will continue soon.” Gas produced from the field can either be converted into LNG by freezing at sub-zero temperature and shipping in cryogenic ships to India or transported through a pipeline — via overland passing through Pakistan or sub-sea. The official said the OVL will definitely look at participating in the bid round that Iran will hold using a new, less restrictive Iran Petroleum Contract (IPC) model. The IPC model ends a buy-back system dating back more than 20 years under which Iran did not allow foreign firms to book reserves or take equity stakes in Iranian companies. Under a buyback deal, the host government agreed to pay the contractor an agreed price for all volumes of hydrocarbons the contractor produces. But now, NIOC will set up joint ventures for crude oil and gas production with international companies which will be paid with a share of the output. Also, different stages of exploration, development and production will be offered to contractors as an integrated package, with the emphasis laid on enhanced and improved recovery. The new IPC is said to be more flexible terms that take into account oil price fluctuations and investment risks. Jaromir Jagr Womens Jersey
HPCL to invest Rs 12 billion in city gas distribution business
Hindustan Petroleum Corp. Ltd (HPCL) plans to invest Rs 12 billion in city gas distribution (CGD) to expand network and build infrastructure, a company official said.“We would be investing Rs 12 billion in the next three to five years in various city gas distribution networks that we have. We are bullish on this segment and plan to expand our reach to more cities than we are in now,” the official said on condition of anonymity. HPCL has three city gas distribution joint ventures: Aavantika Gas Ltd, Bhagyanagar Gas Ltd and Godavari Gas Ltd.Aavantika Gas, its joint venture with GAIL (India) Ltd in Madhya Pradesh, supplies piped natural gas (PNG) to consumers in domestic, industrial and commercial sectors and compressed natural gas (CNG) for automobiles in Indore, Ujjain and Gwalior. Jim Otto Authentic Jersey
Indian Oil to deploy unique digital assistant app for field force as part of Digital India initiative
In support of the Digital India initiative, Indian Oil Corporation Ltd. (IndianOil) had deployed a new technology initiative, a ChatBot, at the recently concluded PETROTECH-2016, the 12th International Oil & Gas Conference and Exhibition at Delhi held under the aegis of the Ministry of Petroleum & Natural Gas. The ChatBot was deployed as a downloadable app. to serve as a digital assistant to the delegates, providing them with all the information on conference sessions, exhibition, speakers, special events, facilities and other useful information digitally on their mobile phones or on the event website. ChatBot is an intelligent conversation tool between humans and machines, where people can ask questions in the natural language and the bot, using its natural language capabilities and artificial intelligence technology, understands the context and replies to the query by fetching relevant information from the database at the backend. The initiative was taken in partnership with M/s. Microsoft. In view of the huge success of ChatBot at the PETROTECH-2016 Conference, IndianOil is planning to deploy this technology for its internal stakeholders with an aim to assess its usefulness to the field force in their day-to-day working. Earl Thomas Jersey
New airport terminal to be opened on Jan. 12
Chief Minister N. Chandrababu Naidu and Union Minister for Civil Aviation Ashok Gajapathi Raju will inaugurate the new terminal of the Vijayawada airport on January 12. Vijayawada MP Kesineni Srinivas (Nani) along with Airport Director G. Madhusudhan Rao on Monday visited the airport premises and inspected works that were nearing completion. To cater to the increasing passenger traffic, the construction of the new airport terminal—which will act as an interim terminal before the International terminal is built—began on October 8 last year. The works are expected to be completed by January 7. Bo Jackson Womens Jersey
GST may impact air ticket prices by 9-12%, says report
“Given the price sensitivity of Indian passengers, this could have a significant negative impact on demand. The implementation of GST may also result in higher upfront costs for aircraft and leases, spares and parts, and distribution costs, increasing cash flow requirements, although airlines will receive input tax credits later,” it added. The government is pushing for a new tax regime this year. The report also pitched for an “urgent review” of the country’s civil aviation policy, warning that it could “prove to be a hindrance” to the development of the sector. The India Aviation Outlook 2017-18 report said that “design flaws” in the policy, particularly with respect to regional connectivity, ground handling and bilateral policy, mean that it will be “difficult to implement in practice”. It could “inadvertently act as an obstacle” to achieving desired objectives, the report warned. Nikita Zadorov Womens Jersey
Local simulator training facilities must: DGCA tells airlines
Airline operators having more than 20 aircraft of one type should compulsorily have simulator training facility within India, aviation watchdog DGCA has said months after detecting lapses at an overseas simulator training facility used by IndiGo . Issuing a Civil Aviation Requirement (CAR), the regulator today also said domestic operators should “progressively” reduce the use of overseas simulator training facilities. “Operators with more than 20 aeroplanes of one type shall have owned/leased simulator capacity within India for that type by December 31, 2018,” Directorate General of Civil Aviation (DGCA) said. In June last year, DGCA had ordered budget carrier IndiGo not to train its pilots on one of the two simulators at a training centre in the UK following an inspection of the facility and the subsequent detection of the malfunctioning in one of the two such machines. At present, airlines shell out a significant amount towards training of pilots overseas and having enough number of simulators in the country itself would help in reducing the overall costs for the carriers. Alexei Kovalev Womens Jersey
ONGC, Cairn India demand lowering of cess on crude
Ahead of the Budget, state-owned oil producer ONGC and private sector Cairn India have asked the government to cut cess on crude oil saying the switchover from fixed to ad valorem rates had turned things from bad to worse. The producers want the government to cut the cess to 8 per cent of the price they realise on sale of domestically produced crude oil. In the previous Budget, Finance Minister Arun Jaitley had converted Rs 4,500 per tonne fixed cess on crude oil to 20 per cent ad valorem. “The 20 per cent cess rate provided benefit for a temporary period only up to moderate crude prices,” their association PetroFed last month wrote to Revenue Secretary Hasmukh Adhia. With the oil cartel OPEC deciding the cut production, global oil rates have started moving up. “As a result the domestic producers of crude oil are again feeling the pinch with 20 per cent ad valorem cess and are in fact in a much worse off than before,” PetroFed wrote. It said there was an urgent need to reconsider the issue and provide the much needed relief to the domestic oil producers. “On behalf of industry, we would once again like to submit for an expeditious correction in the levy of cess on domestic crude oil production from 20 per cent to 8 per cent of the realised price of crude oil,” it said. PetroFed said reducing the cess rate would help to expeditiously increase oil production, meeting vision of ‘Make-in-India’ and enhance energy security. The Oil Industry (Development) Act, 1974 provides for collection of cess as a duty of excise on indigenous crude oil. Cess incurred by producers is not recoverable from refineries and thus forms part of cost of production of crude oil. The cess was levied at Rs 60 per tonne in July 1974 and subsequently revised from time to time. During 2005-06, when crude oil prices had increased from an average of USD 40 per barrel to USD 60 per barrel, OID Cess was increased from Rs 1,800 to Rs 2,500 per tonne from March 1, 2006. Again, when the crude oil prices increased to over USD 100 per barrel, the rate of cess was increased by the government to Rs 4,500 per tonne (USD 10 per barrel) with effect from March 17, 2012, PetroFed wrote. It said the government had effectively linked the cess rate to prevailing crude oil prices in the past. Most of crude oil produced in India comes from pre-NELP and nomination blocks and is liable for payment of cess. While New Exploration Licensing Policy (NELP) blocks like Reliance Industries’ KG-D6 area are exempt from payment of cess, pre-NELP discovered blocks like Panna/Mukta and Tapti and Ravva pay a fixed rate of cess of Rs 900 per tonne. Dominik Hasek Jersey
OVL qualifies to bid for Iran oil, gas projects
ONGC Videsh Ltd, the overseas arm of state-owned Oil and Natural Gas Corp (ONGC), has won rights to bid for oil and gas development projects in Iran. OVL is among the 29 international oil companies from more than a dozen countries that Iran has pre-qualified to bid in the upcoming tender for oil and gas projects, according to the list put out by National Iranian Oil Co (NIOC). Others on the list include Royal Dutch Shell Plc, China National Petroleum Corp (CNPC), Total SA of France, Russia’s Gazprom and Eni of Italy. Iran, the holder of world’s fourth-largest oil reserves and OPEC’s third-largest oil producer, is hoping to attract as much as USD 150 billion in foreign investment in its oil, gas and petrochemicals sectors over the next few years. The list of pre-qualified firms also included Malaysia’s Petronas, Russia’s Lukoil, China’s CNOOC and Sinopec, Inpex of Japan, KOGAS of Korea. Most of these companies have been involved in Iran’s oil industry projects before the US- tailored sanctions were imposed against the country in 2011. Newcomers include Wintershall from Germany, Maersk from Finland, DNO from Norway and CEPSA from Spain, according to the NIOC list. US oil services provider Schlumberger Ltd was also among those identified, according to the NIOC website. OVL is already present in Iran. In 2008, it had discovered the Farzad-B gas field in the Farsi block in Persian Gulf. The discovery has an in-place gas reserve of 21.7 trillion cubic feet, of which 12.5 tcf are recoverable. “We are in negotiations with Iran for development rights of Farzad-B field,” a senior company official said. “Discussions on continuing a development plan that we submitted to Iranian authorities. We are hoping negotiations will continue soon.” Gas produced from the field can either be converted into LNG by freezing at sub-zero temperature and shipping in cryogenic ships to India or transported through a pipeline — via overland passing through Pakistan or sub-sea. The official said the OVL will definitely look at participating in the bid round that Iran will hold using a new, less restrictive Iran Petroleum Contract (IPC) model. The IPC model ends a buy-back system dating back more than 20 years under which Iran did not allow foreign firms to book reserves or take equity stakes in Iranian companies. Under a buyback deal, the host government agreed to pay the contractor an agreed price for all volumes of hydrocarbons the contractor produces. But now, NIOC will set up joint ventures for crude oil and gas production with international companies which will be paid with a share of the output. Also, different stages of exploration, development and production will be offered to contractors as an integrated package, with the emphasis laid on enhanced and improved recovery. The new IPC is said to be more flexible terms that take into account oil price fluctuations and investment risks. Al Horford Womens Jersey