Adani Gas signs pact to acquire defaulter Jay Madhok Energy’s 3 city gas licenses
Adani Gas Ltd on Wednesday announced the acquisition of city gas licences for Ludhiana, Jalandhar and Kutch (East) from Jay Madhok Energy for an undisclosed sum of money. Jay Madhok Energy Pvt Ltd has been show-caused by the oil regulator Petroleum and Natural Gas Regulatory Board (PNGRB) over defaulting on timelines and alleged irregularities in the acquisition of the city gas licence. “Adani Gas Ltd has signed a definitive agreement for acquisition of three geographical areas namely Ludhiana, Jalandhar and Kutch (East),” the firm said in a statement. It, however, neither disclosed the name of the city gas licence holder for the three cities nor the acquisition price. “All 3 GAs have high volumes potential in terms of demand of over 6.5 million standard cubic meters per day over a period of 10 years. These geographical areas’ (GA’s) are under Phase 1 of Bharat Mala Pariyojana by NHAI which will further boost the development and volume growth,” it said. Jay Madhok had in 2013 won the licence to retail CNG to automobiles and piped natural gas to households and industries in Jalandhar in Punjab and two years later it got a licence for Ludhiana and Kutch (East) in Gujarat. The three cities were bid out in the 3rd city gas licensing round where the bidder offering to lay the longest length of gas pipeline and provide the most cooking gas connections got the licence. But the firm, according to PNGRB, made little progress on its commitments. PNGRB in 2016 cancelled its licences. Jay Madhok challenged the cancellation in Appellate Tribunal, which in April 2017 set aside the PNGRB order and asked the regulator to follow the set procedure for cancellation. Since then the matter is pending before PNGRB and Jay Madhok had been seeking adjournments on one pretext or the other. In March 2019, PNGRB issued another notice to Jay Madhok over alleged irregularities in the networth used to acquire the licence. It also alleged fraud in the furnishing of a loan sanction letter from Deutsche Bank AG, Singapore. Sources said PNGRB will now have to examine if a sale of the licence is permissible under the statute and what happens to the default by the original licensor. PNGRB can accord an approval if it concludes that such a deal is in the best interest of the development of the licence. With the acquisition, Adani Gas now has a licence for 22 GAs. It has another 19 licences in a joint venture with state-owned Indian Oil Corp (IOC). These GAs cover 74 districts. “Ludhiana and Jalandhar are twin cities of Punjab and are major industrial and commercial hubs with very high-volume potential of CNG and piped natural gas (PNG) homes. Both cities are in the vicinity of the pipeline connectivity,” the company statement said. Kutch (East) in Gujarat is poised to take centre stage for the industrial development in Gujarat. “AGL has strong presence in Gujarat,” it said, adding Kutch (East) is well connected with pipeline and LNG terminal infrastructures making it an attractive destination for the development of CGD network. Given the availability of pipeline connectivity in the surroundings, all the 3 GAs will offer early monetisation opportunity to AGL. “The transaction is subject to necessary regulatory and other customary approvals,” the statement said. Speaking on the occasion, Suresh P Manglani, CEO, Adani Gas said, “These 3 GAs offer high PNG and CNG volumes together with excellent infrastructure growth opportunities”. “This transformational acquisition shall allow AGL to supply cleaner fuels – PNG in fulfilling much-awaited aspirations of a large number of homes, commercial and industrial consumers, Gurudwara, hotels, restaurants and environmental friendly CNG to automotive consumers in Ludhiana, Jalandhar and Kutch (East) GAs. This initiative by AGL shall further support the vision of central and state governments to provide PNG and CNG to all,” he said. Adani will aim to fast track the infrastructure developments across all these GAs, he added. “These 3 GAs shall add significant high volumes and infrastructure developments and will take AGL to a high growth trajectory. “With the strong parentage of AGL, the residents of Ludhiana, Jalandhar and Kutch (East) shall also be beneficiary of best in class CGD networks, operations, maintenance, digital and customer-centric approach with continued focus on health and safety, community development and better returns to the stakeholders,” he noted.
Saudi Aramco third-quarter profit slumps 44.6 per cent as pandemic chokes demand
Saudi Arabian state oil group Aramco on Tuesday reported a 44.6 per cent drop in third-quarter net profit, in line with analysts’ estimates, dented by lower crude oil prices and volumes sold as the coronavirus crisis choked demand. Weaker refining and chemicals margins have also hit the company’s net profit, which fell to 44.21 billion riyals ($11.79 billion) for the quarter ended Sept. 30 from 79.84 billion riyals last year. Analysts had expected a net profit of 44.6 billion riyals in the third quarter, according to the mean estimate from three analysts, provided by Refinitiv. “We saw early signs of a recovery in the third quarter due to improved economic activity, despite the headwinds facing global energy markets,” Saudi Aramco Chief Executive Officer Amin Nasser said in a statement. The company said it would distribute a dividend of $18.75 billion for the third quarter of this year, in line with its plan to pay a base dividend of $75 billion for 2020. Dividends from the world’s top oil producing company play a critical role in helping the Saudi government manage its fiscal deficit.
India’s October LNG imports surge as demand rebounds to pre-Covid levels
Indian imports of liquefied natural gas (LNG) surged in October, shiptracking data from Refinitiv Eikon and data intelligence firm Kpler showed, as the country’s gas demand bounced back to pre-COVID levels. LNG shipments to India in October rose to about 2.5 million tonnes, the highest monthly volumes on its record, Refiniv Eikon data showed. Kpler pegged October arrivals at the second highest on record at 2.75 million tonnes, just under February’s imports of 2.79 million tonnes. “City gas, gas-based power sector as well as revival from other sectors is boosting LNG imports into the country,” an India-based gas importer told Reuters. “We are already back to pre-Covid levels with additional demand being seen from city gas and power sectors.” Spot gas imports by the electricity generation sector, which account for over a fifth of India’s total consumption of the fuel, doubled in the June quarter to the highest in at least 14 quarters. India’s natural gas prices fell to their lowest since 2014 for the October-March 2021 period which meant reduced costs for gas for fertilisers, automobiles and households. Asian LNG spot prices had also until recently been near record lows, which boosted appetite for imports of the super-chilled fuel, traders said, adding that this could slow from December, however, with spot prices rebounding to a more than one-year high. India has also been receiving at least one LNG cargo a month from Russia’s Yamal LNG plant since September, this year, after the last such flow was seen only in March, Refinitiv data showed. LNG shipments from Oman to India in October were also at a record high, the data showed. The South Asian country’s factory activity expanded at its fastest pace in over a decade in October as demand and output continued to recover strongly from coronavirus-related disruptions, in turn boosting gas demand.
India’s GSPL says new pipeline to boost FY22 gas supply by a quarter
Gas transmission by India’s Gujarat State Petronet Ltd will rise by about a quarter in the next fiscal year starting from April as it links northern regions to an existing grid in the western state, a company official said on Tuesday. The 930-km (578-miles) pipeline linking Mehsana in Gujarat to Bathinda in the northern state of Punjab at a cost of 55 billion rupees ($739 million) will be ready by March, the firm’s joint managing director, Sanjeev Kumar, told Reuters. “Around 80 per cent of the physical work of the pipeline has been completed,” Kumar said in a telephone interview. India’s coronavirus lockdown hit construction of the pipeline, with a daily capacity of 30 million cubic meters (mmscmd), delaying it past an initial completion date of December. GSPL operates about 2,700 km (1,678 miles) of gas pipelines with capacity of 43 mmscmd, but in the 2019-20 financial year it supplied 40 mmscmd gas, as one pipeline was commissioned only in November 2019. “The initial capacity utilization of the Mehsana-Bathinda pipeline will be 9 to 10 mmscmd, which will be scaled up as new gas import terminals come up in the state,” Kumar added. Two gas import terminals are expected to begin operations in Gujarat’s areas of Jaffrabad and Chhara in 2022. India’s six existing terminals can handle 42.5 million tonnes of gas imports annually, with about 3/4ths of that capacity located in its west. Gujarat’s robust gas infrastructure has led to the fuel accounting for about a quarter of its energy mix, against a national average of 6.2 per cent. As Prime Minister Narendra Modi looks to boost that figure to 15 per cent by 2030, Indian firms are spending billions of dollars to strengthen gas networks. GSPL will use the new pipeline to supply refineries in the northern cities of Panipat and Bathinda, as well as industries and city gas distributors, Kumar said. It will also be linked to one of its existing pipelines to supply a refinery being built at Barmer in the desert state of Rajasthan, he added.
Why inventory gains are helping oil companies
Both Indian Oil Corporation Ltd. (IOCL) and Bharat Petroleum Corporation Ltd. (BPCL) have reported strong financial results in the second quarter of this fiscal despite lower operating revenues. The key item driving profits for both companies in the quarter were “inventory gains”. We examine what causes inventory gains and how they impact the financial performance of oil marketing companies. HPCL, the third major state owned oil refiner, has not yet reported financial results for the second quarter. What are inventory gains? Inventory gains are registered from an appreciation in the value of inventory held by a company. In the case of oil marketing companies, inventory gains can be caused by an appreciation in the price of crude classified as refining inventory gains or an appreciation in the price of products such as petrol and diesel classified as marketing inventory gains. Refining inventory gains are a result of an appreciation in the price of crude oil in the company’s inventory. OMCs purchased crude oil in April when the price of Brent crude hit a low of $19.33 per barrel. The price of Brent crude oil recovered to around $40- 45 $ per barrel in mid-June though a recent fall has pushed it to $38 per barrel in late October. OMC, can also get inventory gains from an upward change in the price of end products including petrol and diesel that they have in stock. The price of petrol and diesel are calculated based on benchmark prices of petrol and diesel in the international market. Notably, OMCs were likely insulated from some possible declines in the international price of petrol and diesel as they stopped revising prices on a daily basis from March 16 to June 6 when international prices of petrol and diesel fell sharply as a result of low international crude prices. How did these changes in inventory value affect the performance of OMCs? The rise in prices of brent crude allowed IOC to register a gain of Rs 58.29 billion on crude alone and a total inventory gain of Rs 74 billion including marketing inventory gain on end products such as petrol and diesel when net profit for the quarter was Rs 62.27 billion. BPCL similarly saw a refining inventory gain of Rs 13.03 billion and marketing inventory gain of Rs 12 billion in the quarter ending September 30. Notably, All three state-owned OMCs registered major inventory losses in the previous financial year due to a sharp fall in the international price of crude oil. Indian oil corporation recorded a Rs 113.05 billion reduction in the value of its crude oil inventories as an exceptional item while BPCL recorded a reduction of Rs 10.81 billion leading to both companies posting large losses. Indian Oil posted a loss of Rs 77.83 billion in the Q4FY20 while BPCL posted a loss of Rs 13.61 billion. Hindustan Petroleum Corporation also suffered an inventory loss of Rs 41.13 billion in the January-March quarter. What quantifies operational performance of OMCs when inventory gains and losses play such a major role in earnings? While analysts do take into account the ability of a company to claw back inventory losses incurred, they asess operational performance by comparing gross profits with EBITDA or operating profit to assess the underlying operating performance of the company.
Diesel sales top pre-Covid level by 6 per cent in Oct; petrol, power demand head north on festive demand
India’s diesel consumption in October shot past the pre-pandemic level for the first time since the lockdown, while petrol and power demand continued to grow at a healthy trot, clearly indicating that economic recovery is gathering steam on the back of festival season demand. Latest market data shows state-run fuel retailers, who dominate 90 per cent of the market, selling six per cent more diesel in October than they did a year ago and petrol consumption rising four per cent year-on-year. Simultaneously, government data for October shows power consumption rising more than 13 per cent to 110.94 BUs (billion units), driven mainly by buoyancy in industrial and commercial activities, from 97.84 BUs a year ago. The sharp uptick in fuel and power consumption reinforces the recent projection by the International Energy Agency that India will lead the recovery in global energy demand, as reported by TOI on October 14. Prime Minister Narendra, too, echoed the view on October 26, when he told top guns of the global oil industry that, “India is set to nearly double its energy consumption over the long term.” On a month-on-month basis, October diesel sales spiked 19 per cent from September level but petrol demand tapered off to less than one per cent as the preference for personal vehicle appeared to be flattening. September diesel sales had jumped nearly 22 per cent over August, while petrol consumption had risen 10.5 per cent month-on-month. October jet fuel sales too rose more than 9.11 per cent from September as the number of flights increased, but it is still about half of the year-ago period. Predictably, consumption of LPG, or common household cooking gas, continued to rise and was 3.5 per cent higher than the year-ago period, indicating a lot more cooking as families get into the Diwali groove. Rising fuel sales will help refiners to ramp up operations of their units. Shrikant Madhav Vaidya, chairman of India’s largest oil refiner and fuel retailer Indian Oil, said he expected to run the company’s refineries at full steam in the next two months. Fuel sales have also been boosted by rising car and two-wheeler sales and exports of iron ore, garments and drugs, which increased movement of goods. Car sales rose 26 per cent and two-wheelers 12 per cent in September from a year ago. India’s exports too rose 6 per cent, contributing to the uptick in economic activity.
Bharat Petroleum Corp puts Bina refinery expansion plan on hold pending privatisation
India’s Bharat Petroleum Corp has put on hold its plans to expand its Bina refinery and install a secondary unit at its Mumbai refinery to boost efficiency pending privatisation of the company, its head of finance N. Vijayagopal said. The federal government wants to sell its 53.29 per cent stake in BPCL, the country’s second-largest state-run refiner, to raise funds to rein in a ballooning fiscal deficit. “It is for the new owner to decide whether they want and have the flexibility to add refining capacity,” Vijaagopal told an analyst conference. BPCL wanted to install a residue fluid catalytic cracker at the Mumbai refinery and connect the plant with a new site where it wanted to build an ethylene cracker. It wanted to expand the Bina refinery in central India to 300,000 barrels per day from 156,000 bpd along with a petrochemical plant. Vijayagopal said BPCL privatisation by March 2021 looks “challenging” as the initial bid submission deadline has been extended to mid-November and any spurt in coronavirus infections could prevent foreign players from traveling to do due diligence of the assets. The company, which has a robust retail presence in key Indian cities, aims to set up 6,000 retail outlets in three years with a focus on rural areas to raise its market share in diesel and gasoline sales to about 32 per cent from 29 per cent, he said.
Mitsui OSK signs 30-year charter contract for Russia’s Arctic LNG 2 project
Japan’s Mitsui OSK Lines Ltd (MOL) said on Monday it has signed a 30-year charter contract with the operator of the Arctic liquefied natural gas (LNG) 2 project, led by Novatek, for three ice-breaking carriers for the Russian project. The three vessels will be built by South Korea’s Daewoo Shipbuilding & Marine Engineering Co Ltd, costing about 90 billion yen ($859 million) in total, and are scheduled for delivery in 2023, MOL said. The carriers will mainly transport LNG from a loading terminal on the Gydan Peninsula in the Russian Arctic to the floating LNG storage unit (FSU) to be installed at the transhipment terminals in Kamchatka and Murmansk via the Northern Sea route. Unlike MOL’s existing ice-breaking LNG carriers, which can only sail eastbound in the Northern Sea route during mostly summer and autumn when the ice is thin, the new vessels will have a narrower width, higher ice breaking capability and increased propulsion engine output, which enable them to sail east via the Northern Sea route all year round. The eastbound transportation route will reduce the voyage’s distance by about 65% compared to the westbound route via the Suez Canal for Asian destinations, helping to cut greenhouse gas emissions by vessels, it said in a statement. MOL is in talks with another company to form a partnership for the charter deal to split the construction cost by half, a company spokesman said. If agreed, MOL expects the 30-year contract will contribute about 80 billion yen ($764 million) to its recurring profit in total, he said. The equity partners of the Arctic LNG 2 project include France’s Total, China National Petroleum Corp , China’s CNOOC and the Japan Arctic LNG consortium made up of Mitsui & Co and state-owned Japan Oil, Gas and Metals National Corp (JOGMEC).
SIAC arbitration order against Rs 24,713 cr deal with RIL not ‘enforceable, binding’: Future Retail
Future Retail on Sunday said the emergency order passed by the Singapore International Arbitration Centre (SIAC) putting its Rs 24,713-crore deal with Mukesh Ambani-led RIL on hold is not “enforceable and binding”, and any move to enforce it would be “resisted” by the company. The interim award passed by the Emergency Arbitrator (EA) of SIAC last week over the plea of Amazon.com NV Investment Holdings LLC are “void and coram non-judice”, said Future Retail Ltd (FRL) in a regulatory update. According to FRL, the EA order was passed in arbitration proceedings initiated by Amazon by invoking an arbitration clause in a contract to which FRL is not a party, it added. “FRL is advised that an Emergency Arbitrator has no legal status under Part I of the Indian Arbitration and Conciliation Act, 1996 and therefore, the proceedings before an Emergency Arbitrator are void and coram non-judice,” the Kishore Biyani-led company said. The EA order having been passed by an authority without jurisdiction is a nullity under Indian law, it added. Last Sunday, the SIAC passing an interim award in favour of Amazon had asked the Future group to put the deal on hold and said that the deal cannot go through until it finally decides the matter. In the interim arbitration award, a single-judge bench of V K Rajah barred Future Retail from taking any step to dispose of or encumber its assets or issuing any securities to secure any funding from a restricted party. “The EA order is not enforceable under the provisions of the Arbitration and Conciliation Act, 1996 and is not binding on FRL. Any attempt on the part of Amazon to enforce the EA order shall be resisted by FRL to the fullest extent available under Indian law. FRL is also in the process of taking appropriate legal action to protect its rights,” the Future group firm said. It has also said “the bourses BSE and NSE ought not to take cognizance of Amazon’s letter or the EA order” as FRL has complied with all the requirements of obtaining the requisite approval from its step-down firm Future Coupons Private Ltd (FCPL) as was required in the shareholders agreement executed by FRL with its promoters. “FRL is undergoing serious financial difficulties, particularly in light of the unprecedented impact of the COVID pandemic” and “the proposed scheme is the only way, it can come out of the situation”. The scheme is in the best interest of all stakeholders that includes shareholders, financial institutions, vendors and suppliers, and its employees and delay in the implementation “will cause irreparable losses” to all, FRL said. Earlier Amazon.com Inc complained to India’s market regulator SEBI that FRL misled shareholders by incorrectly saying it was complying with its contractual obligations to the US e-commerce giant. Over the process, the Future group firm said that consent for scheme was accorded by the Board of Directors of FRL at a properly constituted meeting held on August 29, 2020. “The said board resolution, as well as actions taken in pursuance of the same are consistent with the Articles of Association of FRL and remain valid and subsisting,” it said. Online retail giant Amazon had last year acquired a 49 per cent stake in Future Coupons Private Ltd, the promoter entity which owns a 7.3 per cent interest in Future Retail, the operator of more than 1,500 stores in India including grocery chain Big Bazaar. Amazon’s investment in Future Group came with contractual rights that include a right of first refusal and a non-compete-like pact. Also, the deal came with the right to buy into their flagship, Future Retail, after a period of between 3 and 10 years. On August 29, 2020, the Future group announced sale of its retail, wholesale and logistic etc to Reliance Retail Ventures Limited, the retail arm of the Reliance Industries (RIL). Amazon, Reliance and Walmart Inc’s Flipkart are in a battle to gain market share in India, where millions of middle-class customers are newly adopting online purchases of food and groceries due to the COVID-19 pandemic. The booming e-commerce market in the country will be worth USD 86 billion by 2024, according to research firm Forrester. The stakes are particularly high for Amazon, which believes India is a big growth market after shutting its online store in China last year. The oil-to-telecom conglomerate Reliance has since September 9 sold an 8.48 per cent stake in its retail unit to investors such as Silver Lake, KKR and Mubadala for Rs 37,710 crore to expand its so-called new commerce venture, which uses neighbourhood stores for online deliveries of groceries, apparel and electronics. The firm, whose retail operations already runs close to 12,000 stores, is looking to dislodge Amazon and Flipkart, which together control about 70 per cent of the online market in India.
India’s gasoline, gasoil consumption exceed pre-coronavirus levels
India’s gasoil consumption in October rose 6.6 per cent from a year earlier, the first such increase since Covid-19 restrictions were imposed in late March, preliminary data showed on Sunday, signalling a pick-up in industrial activity. Diesel sales by the country’s three state fuel retailers totalled 6.17 million tonnes in October, according to provisional data compiled by Indian Oil Corp (IOC), the country’s biggest refiner and fuel retailer. Sales of gasoil, which account for about two-fifths of India’s fuel demand, rose 27.5 per cent from September. Rising diesel sales in the world’s third-biggest oil consumer and importer should help refiners, who had to cut crude-processing runs during the coronavirus crisis. IOC hopes to operate refineries at full capacity in a couple of months, up from 95 per centnow, as local fuel demand is rising, company chairman S.M. Vaidya said on Friday. Rising gasoline and gasoil demand in India should also aid other markets hit by slow demand recovery. Local gasoline sales in October rose above pre-pandemic levels for a second month in a row. Gasoline sales rose 4 per cent from a year earlier to about 2.4 million tonnes, about 8.6 per cent higher than September, the data showed. State companies IOC, Hindustan Petroleum Corp and Bharat Petroleum own about 90 per cent of India’s retail fuel outlets. State retailers sold 3.8 per cent more cooking gas in October than a year ago, at about 2.44 million tonnes, while jet fuel sales halved to 328,000 tonnes.