Core group of secretaries to discuss National Monetisation Pipeline in today’s high-level meeting
Taking forward Finance Minister Nirmala Sitharaman’s announcement on Disinvestment during Union Budget 2021-2022, Sources tell ET Now that Cabinet secretary will be chairing a high-level meet at 3:30 pm in the afternoon with the core group of secretaries on Asset Monetization. Secretaries from Infrastructure sectors along with Niti Aayog officials will be part of this meeting. The core group of secretaries(CGoS) will be discussing monetization plans of oil and gas pipelines of Indian oil corporation(IOC), gas utility GAIL Ltd, and Hindustan Petroleum Corporation Ltd (HPCL) CGoS is also going to discuss privatization plans of six new airports in today’s meeting. The central government is looking to sell 12 more airports in the coming year through a new privatization clubbing scheme where loss-making airports will be clubbed with profitable ones in order to derive demand and to relieve Airports Authority of India off debt to operate the less profitable ones. FM Nirmala Sitharaman on February 1 also announced the launch of a “National Monetisation Pipeline” of potential brownfield infrastructure assets, stating that monetising operating public infrastructure assets is a very important financing option for new infrastructure construction. The core group of secretaries today may also discuss this and review the asset monetisation dashboard. “An asset monetisation dashboard will be created for tracking the progress and to provide visibility to investors, she said. Listing measures in this direction, she said the National Highways Authority of India (NHAI) and Power Grid Corporation of India (PGCIL) each have sponsored one InvIT that will attract international and domestic institutional investors,” as said by Finance Minister, Nirmala Sitharaman. The government is also banking on asset monetisation to help bring its fiscal deficit to below 4.5 per cent of GDP by 2025-26. The finance minister pegged India’s fiscal deficit at 9.5 per cent in 2020-21 and 6.8 per cent in 2021-22.
Oil climbs to 13-mth highs, as supply cuts, demand optimism support
Oil prices edged up on Tuesday to their highest in 13 months as supply cuts by major producers and optimism over fuel demand recovery support energy markets. Brent crude futures for April gained 29 cents, or 0.5%, to $60.85 a barrel by 0246 GMT. U.S. West Texas Intermediate crude (WTI) for March was at $58.25 a barrel, up 28 cents, or 0.5%. Both Brent and WTI are at their highest since January 2020. Front-month prices for both contracts are up for the seventh session on Tuesday, the longest win streak since January 2019. Additional supply reductions by top exporter Saudi Arabia in February and March, on top of cuts by producers in the Organization of the Petroleum Exporting Countries and their allies, are tightening supplies and balancing global markets. Investors are also pinning hopes on oil demand recovery when COVID-19 vaccines take effect. A weak dollar has also helped shored up prices of commodities. “Progress on U.S. stimulus and optimism around the roll-out and effect of vaccines across the remainder of 2021 and a slightly weaker USD help the view (for a recovery) albeit there was mixed news on the impact of the current vaccines formulated on the emerging South African variant,” Stephen Innes, chief global markets strategist at brokerage Axi. He cautioned, however, that both Brent and WTI are in overbought territory on technical charts. “While I remain a bit cautious at current levels, the medium and longer-term outlook for demand is healthy, and one can understand a willingness to look through some of the near-term uncertainty that remains for oil,” he said.
Nord Stream 2’s construction in Danish waters could be finished by end-April
Construction of Nord Stream 2 undersea gas pipeline from Russia to Germany in Danish waters is scheduled for completion by the end of April, Danish Maritime Authority said on Monday. Construction had been suspended in December 2019 after the United States announced its sanctions against the project, but the German government stood by it and work has resumed. The pipeline is mostly complete but around 120 km is left to be laid in Danish waters as well as almost 30 km in German waters, before it makes landfall at the northern German coastal town of Lubmin, near Greifswald. In its publication, the regulator said the pipe-laying work south and south-west of Bornholm island is being carried out from the pipe-laying vessel Fortuna, assisted by the construction vessels Baltiyskiy Issledovatel, Murman and other supply vessels. Nord Stream 2 said it will inform about its further actions in due course. On Saturday, the consortium behind the Russia-led Nord Stream 2 natural gas pipeline said it had resumed laying pipes in Danish waters despite mounting pressure on the project from Washington.
PM Modi dedicates slew of infra projects to nation in West Bengal’s Haldia
The government is focusing on expanding pipeline network and reducing natural gas prices to help turn India into a gas-based economy, Prime Minister Narendra Modi said after inaugurating a clutch of oil and gas projects in West Bengal on Sunday. “India today needs a gas-based economy,” Modi said, adding that the development of a national gas grid would contribute towards that. Reforms in the petroleum sector in recent years have helped India become one of the biggest gas consumers in Asia, he added. Modi inaugurated the 347-km Dobhi-Durgapur stretch of the Jagdishpur-Haldia natural gas pipeline. The stretch built at a cost of Rs 2,443 crore will help supply gas to industries, homes, and vehicles in several districts in West Bengal and Jharkhand. Modi also inaugurated an LPG import terminal built by Bharat Petroleum in Haldia at a cost of Rs 1100 crore. The terminal will help cater to the growing cooking gas demand from states in the east and north-east part of the country, Modi said. The coverage of cooking gas has risen from 41% in 2014 in West Bengal to above 99% now, resulting in increased demand, he added. Modi also inaugurated a flyway and laid the foundation stone of the second catalytic dewaxing unit at the Haldia Refinery of Indian Oil. “These projects will help Haldia develop into a modern and big import-export centre,” Modi said. It will also help boost both ease of living and ease of doing business in West Bengal and many other states, he added.
Iraq resumes transporting oil derivatives by train
The Iraqi Republic Railway Company (IRR) announced that it has resumed limited transportation of oil derivatives from the country’s central region to the south in an attempt to revive the railway sector. On Sunday, the government-owned corporation also announced the rehabilitation of 100 of its rail tank cars by the company’s workers, who also rebuilt many of the company’s damaged buildings and equipment, Xinhua news agency quoted the local al-Sabah newspaper as saying in a report. Under a contract signed with the Ministry of Oil, the IRR is currently transporting 1,000 cubic metres of oil derivatives a day from the Baiji oil refinery in Salahudin province in the north of Baghdad to Umm Qasr Port in the southern province of Basra, said Talib al-Husseiny, head of the IRR. Al-Husseiny pointed out that the contract will turn the railway company to be one of the profitable companies. Moreover, “the company has a contract to import 250 new rail tank cars, of which 39 have arrived in Iraq, and some 150 others will arrive in the coming days, while the remaining 61 rail tank cars will arrive later”, al-Husseiny added. Iraq seeks to support and revive its companies, which were negatively affected by years of wars and conflicts, to give a push to the country’s economy by reducing dependence on the export of crude oil. Currently, Iraqi economy relies heavily on crude oil exports, which represent more than 90 per cent of the country’s revenues.
Meghalaya govt to reduce tax on petrol, diesel by Rs 2 per litre: CM
The Meghalaya government has decided to reduce the tax on petrol and diesel in the state by Rs 2 per litre from Monday midnight, Chief Minister Conrad K Sangma. “In view of the recent price hike in petrol and diesel in #Meghalaya, Govt. has decided that the rate for both petrol and diesel will be reduced by 2 rupees per litre, effective from midnight of 8th February 2021,” the chief minister tweeted on Sunday. The state government’s decision to reduce rates comes days after local taxi operators in the state capital here protested against the high taxes in petrol in the state. The price of petrol is little over Rs 90 per litre in the state capital.
Hedge funds bet on oil’s ‘big comeback’ after pandemic hobbles producers
Hedge funds are turning bullish on oil once again, betting the pandemic and investors’ environmental focus has severely damaged companies’ ability to ramp up production. Such limitations on supply would push prices to multi-year highs and keep them there for two years or more, several hedge funds said. The view is a reversal for hedge funds, which shorted the oil sector in the lead-up to global shutdowns, landing energy focused hedge funds gains of 26.8% in 2020, according to data from eVestment. By virtue of their fast-moving strategies, hedge funds are quick to spot new trends. Global oil benchmark Brent has jumped 59% since early November when news of successful vaccines emerged, after COVID-19 travel curbs and lockdowns last year hammered fuel demand and collapsed oil prices. Last week it hit pre-pandemic levels close to $60 a barrel. U.S. crude has climbed 54% to around $57 per barrel during the same period. “By the summer, the vaccine should be widely provided and just in time for summer travel and I think things are going to go gangbusters,” said David D. Tawil, co-founder at New York-based event-driven hedge fund, Maglan Capital, and interim CEO of Centaurus Energy. Tawil predicted prices of $70 to $80 a barrel for Brent by the end of 2021 and is investing long independent oil and gas producers. Hedge funds’ bullish bets come despite the International Energy Agency warning in January a spike in new coronavirus cases will hamper oil demand this year, and a slow economic recovery would delay a full rebound in world energy demand to 2025. Normally, oil producers would ramp up production as prices increase, but a move by environmentally focused investors from fossil fuels to renewables and caution by lenders leaves them hard-pressed to respond, hedge funds and other investors say. The pace of output recovery in the United States, the world’s No. 1 oil producer, is forecast to be slow and will not top its 2019 record of 12.25 million barrels per day (bpd) until 2023. Production in 2020 tumbled 6.4% to 11.47 million bpd. The Organization of the Petroleum Exporting Countries, which has also revised down demand growth, however, still expects output cuts to keep the market in deficit throughout 2021. “We are going to see some incredible oil prices over the next couple of years, incredibly hot,” said Tawil. ‘BULL MARKET’ Global crude and condensate production was down 8% in December from February 2020, prior to the pandemic’s spread accelerating, according to Rystad Energy. North America’s output was down 9.5% and Europe’s production declined just 1% over the same time period. U.S. sanctions against Venezuela and declining oilfields in Mexico have kept oil output from Latin America sluggish. Some banks are forecasting the United States, which leads with the number of COVID-19 cases, to reach herd immunity by July, which would greatly stimulate oil demand, said Jean-Louis Le Mee, head of London-based hedge fund Westbeck Capital Management, which is long a mix of oil futures and equities. “Oil companies, for the first time in a long time, are likely to make a big comeback,” he said. “We have all the ingredients for an extraordinary bull market in oil for the next few years.” In the United States, hedge funds increased their allocation to Exxon Mobil Corp by 21,314 shares in the third quarter, the most recent U.S. filings compiled by Symmetric.io showed. Hedge funds added another 9,070 shares of U.S. majors ConocoPhillips and 4,144 to Chevron Corp over the same time period. Elsewhere, shorting activity in BP PLC fell by 16 million shares on Feb. 4 but increased slightly in European oil major Royal Dutch Shell Plc by 1.9 million shares, data from FIS’ Astec Analytics showed. Some investors remain skeptical on Canadian oil companies, among the world’s most carbon-intensive producers, though they are bouncing back faster from the pandemic than the United States. Current short positions rose in 10 out of 14 Canadian oil companies in the Toronto energy index during the second two weeks of January, according to filings reviewed by Reuters. U.S. shale production will not quickly rebound, given the capital required and debt producers are carrying, lending oil prices support, said Rafi Tahmazian, senior portfolio manager at Calgary-based Canoe Financial LP. North America’s oilfield services sector, which producers rely on to drill new wells, has been decimated, he said. “They’re decapitated from being able to grow,” Tahmazian said. “The supply side is broken.”
Pipeline commissioning helps Essar deliver coal gas to fertiliser plant
The commissioning of the Dhobi-Durgapur gas pipeline has helped Essar deliver gas it produces from coal seams to Durgapur fertiliser plant in West Bengal via GAIL, helping meet the urea requirement of the state. The company said the pipeline will help evacuate gas from its Raniganj coal-bed methane (CBM) block to the Matix fertilizer plant at Durgapur. Prime Minister Narendra Modi on Sunday inaugurated 348-km Dobhi-Durgapur natural gas pipeline built by GAIL. Prashant Ruia, Director, Essar Capital, said, “As Honourable Prime Minister Narendra Modi ji dedicates the Dhobi-Durgapur natural gas pipeline, a vision achieves reality. With investments of Rs 5,000 crore made towards our Raniganj block, it’s an honour for Essar to be part of this vision of providing clean energy to India.” He went on to complement the government of West Bengal for its sustained development work over the years and taking strong steps to help the state transition to clean energy. “With the commissioning of the Dhobi-Durgapur natural gas pipeline, gas from EOGEPL’s Raniganj block will be made available to Matix by GAIL India, thereby helping the people of the region with the availability of best-in-class fertiliser,” he added. EOGEPL stands for Essar Oil and Gas E&P Limited. The company operates the Raniganj East Coal Bed Methane (CBM) Block in West Bengal. In August 2018, EOGEPL had signed a Gas Sale and Purchase Agreement (GSPA) to sell gas produced from the block to state-owned gas utility GAIL (India) Ltd for a 15-year period. The company had last year reached a peak production capacity of 1.2 million standard cubic meters per day in the Raniganj asset. However, due to lack of a sustained gas market, it had to restrict the production. Now with commissioning of the GAIL pipeline, the company is looking at ramping up the production to 1.6 mmscmd from the existing wells. The company has plans to start the balance drilling and associated development task of around 250 additional wells as part of an expansion plan to achieve the sales volume of 2.6 mmscmd, according to information on its website. B C Tripathi, Operating Partner, Essar Capital, described the event as a “watershed moment” for the people of eastern India who will now get access to clean and green fuel. “Essar will be one of the proud suppliers of gas via the Urja Ganga pipeline, and are confident that it will change the very economic landscape of the eastern region and bring in prosperity and growth in line with the government’s Purvodaya initiative,” he said. Santosh Chandra, CEO, EOGEPL, said the company is one of the primary partners of GAIL in eastern India for gas supply to the ambitious Urja Ganga pipeline, which was just inaugurated by the Prime Minister. “I am confident that our PM’s vision of making India a gas-based economy, together with Atmanirbhar Bharat, is on the right track, and we will contribute more and more of the indigenous gas to make clean energy transition happen through production of our coal bed methane gas,” he said.
Reliance buys two-thirds of own gas from KG-D6; GAIL, Shell among other buyers
Billionaire Mukesh Ambani”s Reliance Industries has picked up two-thirds of its own new gas from KG-D6 block that was auctioned under new rules with state-owned GAIL and Royal Dutch Shell getting smaller volumes, sources said. Reliance and its partner UK”s BP Plc on Friday auctioned 7.5 million standard cubic metres per day of incremental gas from the R-series gas field in the KG-D6 block, benchmarking it to a gas marker for the very first time in the country. The auction was held under the liberalised price discovery rules notified by the government that allowed affiliates of the gas producer to bid and buy natural gas. Reliance O2C, an affiliate of Reliance, picked up 4.8 mmscmd of gas in Friday”s auction that lasted for seven-and-a-half-hours, sources with direct knowledge of the development said. State gas utility GAIL (India) Ltd won 0.85 mmscmd of supplies while Shell picked up 0.7 mmscmd. Adani Total Gas Ltd got 0.1 mmscmd, Hindustan Petroleum Corporation Ltd (HPCL) 0.2 mmscmd and Torrest Gas 0.02 mmscmd. Other buyers include IRM Energy (0.1 mmscmd), PIL (0.35 mmscmd) and IGS (0.35 mmscmd), they said. Sources said the gas was bought at a price of USD 0.18 per million British thermal unit discount to JKM i.e. price of JKM (minus) USD 0.18 with tenures ranging from 3 to 5 years. Reliance did not respond to email sent for comments. Reliance O2C is the new unit that holds the firm”s refinery and petrochemical assets. E-bidding process was conducted through an online web-based electronic bidding platform by CRISIL Risk and Infrastructure Solutions Limited (CRIS), an independent agency empanelled by Directorate General of Hydrocarbons (DGH). CRIS partnered with e-Procurement Technologies Limited (EPTL) and developed e-bidding platform. The bidding process was carried out as per the guidelines notified by the government in October 2020. Sources said the bidding process for sale of gas was launched on December 30, 2020 and it witnessed participation from around 15 bidders from city gas distribution sector, steel, power, refineries, petrochemicals, resellers and other industries. The e-bidding process required bidders to submit their price bids linked to international LNG price benchmark JKM (Japan Korea Marker). The JKM represents price for spot LNG delivered in Asian market and is now being widely used in LNG industry as a marker for in medium/ long term LNG contracts instead of traditional linkage to oil. This was second time Reliance-BP conducted an e-bidding process which ran on a dynamic forward auction basis for sale of KG-D6 gas. Earlier in November 2019, 5 mmscmd of natural gas was sold at price in range of around 8.6 per cent of Brent crude oil for tenure ranging from 2 to 6 years. Reliance-BP started production of gas on December 18 last year from the R Cluster ultra-deep-water gas field in block KG D6 off the east coast of India. The duo developing three deep-water gas projects in block KG-D6 — R Cluster, Satellites Cluster and MJ — which together are expected to meet around 15 per cent of India”s gas demand by 2023. R Cluster is the first of the three projects to come onstream and is the deepest offshore gas field in Asia. E-bidding auction rules asked bidders to “quote the variable denoted as ”V” in USD per million British thermal unit (MMBtu) terms.” “The gas price (in USD/MMBtu (GCV)) shall be = JKM + V,” the bidding notice said. GCV stands for gross calorific value. ”V” can be a positive, zero or negative number and up to two decimal places but it cannot be less than (-)0.30 USD/MMBtu, it said. This means users will have to quote -0.30 or higher value of ”V”. If JKM averaged USD 6 per MMBtu, the price will be USD 5.82 per MMBtu. But Reliance-BP will only get the government notified cap price for gas from deep-sea fields. Pricing of gas at JKM will be the first time that domestically produced gas is being sold at rates linked to an international gas benchmark, industry sources said. Also, this will be the first discovery of gas price since the October 2020 decision of the government setting out uniform e-bidding norms for finding the market price. That Cabinet decision also allowed the sale of gas to ”affiliates” and so while Reliance-BP affiliate companies couldn”t participate in the November 2019 price discovery, they did in e-bidding on February 5. The government has given operators the freedom to discover market prices but this rate is subject to a pricing ceiling or cap that the government notifies every six months. The cap for six months to March 31, 2021, is USD 4.06 per mmBtu. And accordingly, Reliance-BP would get only that amount for the gas. Essar Steel, Adani Group and state-owned GAIL in November 2019 bought the majority of the initial 5 mmscmd of gas planned to be produced from R-Series in the KG-D6 block by bidding between 8.5 and 8.6 per cent of dated Brent price. In that bidding, Reliance-BP had asked gas users to quote a price (expressed as a percentage of the dated Brent crude oil rate), supply period and the volume of gas required. A floor or minimum quote of 8.4 per cent of dated Brent price was set, which meant that bidders had to quote 8.4 per cent or a higher percentage for securing gas supplies. Dated Brent means the average of published Brent prices for three calendar months immediately preceding the relevant contract month in which gas supplies are made. Reliance got USD 4.205 per MMBtu for gas from D1 and D3 and MA fields during April 2019 and March 2014. It would have got double of that rate if a new formula proposed by the Rangarajan committee was approved but the new BJP government scrapped it and brought a new formula on pricing gas at rates prevalent in export surplus nations such as the US and Russia. The rates came to USD 5.05 in 2014 and are currently at USD 1.79 per mmBtu. Reliance-BP is investing USD
RIL sells south western Pennsylvania shale gas assets for $250 million to Northern Oil and Gas
Reliance Industries’ arm Reliance Marcellus has signed an agreement with Delaware-based Northern Oil and Gas for sale of shale gas assets in south western Pennsylvania for a consideration of $250 million cash and warrants, the Mukesh Ambani-led company said Thursday. The deal includes an unadjusted cash purchase price of $175 million plus equity warrants that will be issued to RIL upon closing of the transaction. The deal is expected to be closed in April 2021, subject to customary purchase conditions, Northern Oil and Gas said. “The valuation metrics speak for themselves; it’s a very compelling deal. It’s accretive across all the key metrics,” Nicholas O’Grady, chief executive officer, Northern Oil and Gas said in a web call after signing the deal. The assets include certain non-operated assets in the Appalachian Basin from that were operated by various affiliates of EQT Corporation. Northern Oil and Gas said that Arch Energy has partnered with for the acquisition and the latter will get 30% interest in the assets for a cash purchase price of $75 million Citigroup Global Markets, Inc. acted as financial advisor to Reliance and Gibson, Dunn & Crutcher LLP served as its legal counsel.