Indian Oil is betting on plastics as it looks to diversify from a challenging fuel business
India’s biggest oil refiner is betting on plastics as it seeks to diversify from an increasingly challenging fuels business. Indian Oil Corp. plans to add petrochemical plants to all of its future refinery expansions and boost existing output at its current facilities, Chairman Shrikant Madhav Vaidya said. Overall, less than 10% of the crude processed by the refiner is used to make petrochemicals — the building blocks for everything from food packaging to car parts — but the business contributes almost a quarter of the company’s profits, he added. While there is consumer and government pressure across the world to reduce the use of plastics, processors in Asia are building or planning petrochemical plants with demand for transport fuels set to ease in the years ahead. Indian Oil this week finalized a $2.4 billion expansion at its Gujarat refinery to include a polypropylene unit, which can make products for packaging and textiles. “We realized that the volatility of the fuel market can be easily controlled by having a good footprint in the petrochemicals sector,” Vaidya said in an interview. “Petroleum fuels continue to be my main business as far as turnover is concerned, but profitability I intend to get from petrochemicals.” Indian Oil, which operates nine refineries, saw its profit tumble more than 90% in the year ended March 31 as volatility in oil and product prices led to narrow or negative margins. Overall, the company plans to double the amount of crude processed at its refineries to make petrochemicals. At major plants Panipat, Paradip and Gujarat, the proportion of oil processed to produce petrochemicals is expected to climb to 25%, from 15-20% currently, Vaidya said. Vaidya, however, is optimistic about India’s demand growth outlook for petroleum fuels and future investments in the sector. In the short term, he sees consumption reaching pre-virus levels as early as year-end, allowing the refiner to boost processing rates to 90-100%, from about 75% now. Fuel stockpiles have also eased closer to a more typical level that’s sufficient enough to meet two weeks of demand, he said. Indian Oil, which controls 40% of the nation’s petroleum fuels market, also plans to expand into natural gas and renewable energy. “We have every intention of becoming an energy company, not just restricted to fossil fuels,” Vaidya said.
NCLAT sets aside NCLT order rejecting insolvency plea against Coastal Oil Gas Infra
The National Company Law Appellate Tribunal (NCLAT) has set aside the NCLT order rejecting the insolvency plea filed against Andhra Pradesh-based Coastal Oil Gas Infrastructure on the grounds of delay in filing. A three-member NCLAT bench has now directed the Hyderabad bench of the National Company Law Tribunal (NCLT) to admit the plea filed by the financial creditors — Bank of India and Central Bank of India — and decide it “expeditiously” within one month. The NCLAT held that the NCLT had “wrongly considered” the date of default as March 16, 2015 for computation of limitation period to file an application before it and rejected the insolvency plea filed by the financial creditors. On October 30, 2019, the NCLT had dismissed the plea filed by the financial creditors on the grounds of delay after observing that it was filed on September 25, 2018, which was more than three years of default occurred on March 16, 2015. “We set aside the impugned order dated October 30, 2019, passed by NCLT, Hyderabad. “We are further remanding back the matter to the adjudicating authority to admit the application under section 7 after issuing notice and examining all other aspects under section 7 of I&B Code,” said the NCLAT. As per the Limitation Act, which is also applicable on the Insolvency and Bankruptcy Code (IBC) cases, if a default has occurred over three years prior to the date of filing of the application, then such application are barred under article 137 of the Act. The NCLAT’s direction came over a petition filed by Bank of India and Central Bank of India, challenging the NCLT order. The appellate tribunal observed that first loan agreement between the lenders and the debtor was entered on August 1, 2011 and after the corporate debtor failed to repay the dues in accordance with the agreed terms, a second agreement was entered between the consortium of lenders after debt restructuring. After the company failed to comply with the terms of the second amendment agreement, a default notice was issued on December 7, 2017, and filed a plea to initiate insolvency before NCLT on September 19, 2018. According to the NCLAT, after entering into the second agreement on March 15, 2015, the earlier agreement shall be subsumed with it and all the prior defaults shall become irrelevant. The date of default shall be decided as per the second agreement. “Therefore, we are of the opinion that the adjudication authority (NCLT) has wrongly considered the date of default to be March 16, 2015 for computation of limitation period to file an application before it,” it said. The appellate tribunal suggested that the default would occur from December 22, 2017, on the expiry of 15 days from the date of default notice which was served upon the company for recalling the loans. “We are of the view that the application filed by the corporate debtor under Section 7 was required to be admitted by the adjudicating authority, but the adjudicating authority failed to consider the matter in proper perspective. The NCLAT further said that the limitation is a mixed question of law and facts therefore, unless it becomes apparent from the reading of the company petition that the same is barred by limitation, the petition should not be rejected by “selectively considering the documents” on record. The consortium members had sanctioned term loan limit of Rs 641.85 crore to Vishakhapatnam-based Coastal Oil Gas Infrastructure to construct, operate and maintain 12 crude oil tank facilities and other project facilities and services and a refinery at Poochimedu in Cuddalore District, Tamil Nadu. Coastal Oil and Gas Infrastructure is a Special Purpose Vehicle incorporated by Abir Infrastructure and Nagarjuna Group developing liquid bulk storage terminal facility for Nagarjuna Oil Corporation, for its 5.94 million metric tonne per annum (MMTPA) oil refinery. Nagarjuna Oil Corporation Ltd (NOCL) is also facing liquidation after the financial creditors could not find a suitable resolution plan for the company. Haldia Petrochemicals Ltd has shown interest to take over the assets of the NOCL.
CGD sector to record volume growth of 10 per cent CAGR through 2030
The City Gas Distribution (CGD) sector in India is set to register Compounded Annual Growth Rate (CAGR) of 10 per cent over the next decade through 2030 thanks to the government’s efforts to improve the share of natural gas in India’s primary energy mix to 15 per cent from 6 per cent currently. With the 10th round of CGD bidding, 70 per cent of the country’s population and 50 per cent of the total area has been covered under the city gas network. “With the completion of these projects, CGD sales volumes are expected to grow at a CAGR of 10 per cent through 2020-30,” equity research firm Motilal Oswal said in a report. The report covers the growth registered by three main players — Indraprastha Gas (IGL), Mahanagar Gas (MGL) and Gujarat Gas. IGL incorporated a strong 22 per cent addition taking the total number of consumers to 1.4 million during FY20. In comparison, Mahanagar Gas added 100,000 consumers taking the total to 1.26 million households. Gujarat Gas also added 93,000 households taking the total to 1.4 million. The report said Gujarat Gas has set up 52 net new CNG stations, near IGL’s number of 55, while Mahanagar Gas added just 20 CNG stations in FY20. In terms of pipeline infrastructure, Gujarat Gas remains ahead of the other two with a total network of 24,300 kilometer, while IGL has a total network of 14,605 kilometer and Mahanagar Gas’ 5,630 Kilometer. Gujarat Gas was awarded six geographical areas (GAs) in the tenth round and the company is looking forward to the 11th round of CGD bidding which may include GAs adjoining to its operating areas.
Despite crude on rebound, sharp cuts in fuel prices in India
Petrol and prices in the country have fallen sharply again even though global oil prices rebounded and rose over $43 a barrel marking its fifth consecutive day of rise. On Friday, the pump prices of petrol and diesel fell by 26 and 35 paisa per litre, respectively in the national capital making it one of the sharpest daily fall in last five months. Accordingly, petrol is now at Rs 81.14 a litre and diesel Rs 72.02 a litre in Delhi. In the last two days of price cuts, petrol has become cheaper by 41 paisa per litre while diesel 54 paisa per litre. This is fourth fall in petrol prices and eighth reduction in diesel prices this month. Prior to this month while petrol prices had risen, diesel prices remained steady or fell on few days. According to Indian Oil Corporation website, petrol prices have now reduced to Rs 81.14, Rs 82.67, Rs 87.82 and Rs 84.21 a litre in Delhi, Kolkata, Mumbai and Chennai, respectively. Similarly the price of diesel in these metros in the same order stands at Rs 72.02, Rs 75.52, Rs 78.48 and Rs 77.40 per litre, respectively. Friday’s price cuts has been in the range of 23-26 paisa in the case of petrol and 33-37 paisa in the case of diesel. The latest changes in retail prices of auto fuel is in line with global price movement of the product in preceding weeks when prices had softened. But crude prices have risen in the last five days with benchmark Brent crude hovering over $43 a barrel for November delivery on Inter Continental Exchange. Even US crude WTI has shot over $41 barrel mark.
Oil refiners shut plants as demand losses may never return
Oil refiners are permanently closing processing plants in Asia and North America and facilities in Europe could be next because of the uncertain prospects for a recovery in fuel demand after the coronavirus pandemic cut consumption. The pandemic initially cut global fuel demand 30% and refiners temporarily idled plants. But consumption has not returned to pre-pandemic levels and lower travel may be here to stay, leading to the possibility plants may shut permanently. Here are some of the companies/refineries involved: Australia has proposed offering incentives worth A$2.3 billion ($1.68 billion) over 10 years to keep the country’s four remaining oil refineries open and said it would invest in building fuel storage as part of a long-term fuel security plan. The four refiners – BP Plc, Exxon Mobil Corp, Viva Energy Group and Ampol Ltd – all welcomed the proposals but made no commitment to keep their plants open. Viva Energy said earlier this month that a full shutdown of its refinery in Victoria was on the cards given the dire long-term outlook for the industry. Eneos Holdings, Japan’s biggest oil refiner and formerly known as JXTG, said it plans to close the 115,000 barrel per day (bpd) Osaka refinery that it owns with PetroChina in October, amid falling demand for crude products in Japan. Royal Dutch Shell will permanently shut its 110,000-barrel-per-day Tabangao facility in Philippines’ Batangas province, one of only two oil refineries in the country. Marathon Petroleum, the largest U.S. refiner by volume, plans to permanently halt processing at refineries in Martinez, California, and Gallup, New Mexico. JBC Energy said it expected a strong push for consolidation in China’s refining sector potentially offsetting part of the strong capacity growth expected in the country. Refining NZ said in late June it was considering shutting New Zealand’s only oil refinery and turning it into a fuel import terminal, but first would reduce its operations to cut costs and break even into 2021. Gunvor Group said in June it was considering mothballing its 110,000 bpd refinery in Antwerp as COVID-19 hurt the plant’s economic viability. Energy consultancy Wood Mackenzie put plants in Netherlands, France, and Scotland on a list of potential closures.
Less crude, more hydrogen: Oil giants plan for the future
Indian Oil Corp., one of the biggest refiners in Asia, is taking the bus to reach what it considers the future of energy: hydrogen. The company that sells almost half the oil products in India will deploy 50 buses around the capital powered by a blend of hydrogen and compressed natural gas, Chairman Shrikant Madhav Vaidya said. The fleet will serve the public and could start rolling as soon as this year, potentially creating a new market for a producer trying to rebound from its first annual loss in at least 20 years. Hydrogen , long touted as the fuel of the future, had a bit of a coming-out party at this week’s S&P Global Platts Asia Pacific Petroleum Conference, as some of the world’s biggest refiners, drillers and traders extolled it as key to fighting climate change. The efforts are emblematic of an oil industry trying to reposition itself after the pandemic wiped out demand and as shareholders call for reduced greenhouse gas emissions. “Hydrogen seems to be the most disruptive and has the potential to grow 10 times between now and 2050,” said Giovanni Serio, global head of research at Vitol Group, the world’s biggest independent oil trader. “It could be the one to solve the problem of storing energy and also addressing later the demand from the transportation sector.” Nearly $11 trillion of investment in production, storage and transport infrastructure is needed for hydrogen to meet about a quarter of the world’s energy needs by 2050, according to BloombergNEF. The fuel’s unique advantages include high energy density, flexibility of production sources and a wide range of applications, Vaidya said. It also emits no greenhouse gases when produced with renewable energy, although most current production is done via polluting methods. “With India and Asia set to lead the global energy demand in the future, hydrogen does present a potential panacea,” Vaidya said.
HPCL to invest Rs. 600 billion in five years on infrastructure development
Hindustan Petroleum Corporation Ltd (HPCL) will invest over Rs. 600 billion for developing infrastructure during the next five years, Chairman Mukesh K Surana said at the company’s 68th annual general meeting on Wednesday. The investments will be made in HPCL’s refinery expansion and augmentation projects to increase the capacity of Mumbai Refinery to 9.5 million metric tonnes per annum (mmtpa) and Visakh Refinery to 15 mmtpa. “These projects will improve the complexity of the refineries and add to the overall Gross Refining Margins,” added Surana. For the current fiscal, HPCL will invest Rs. 120 billion in capital expenditure. The refiner said it has not revised its capex downward despite the COVID-19 impact on the company. Of the Rs. 120 billion, HPCL will spend Rs. 70 billion in refinery and Rs. 50 billion in marketing. The company would also be setting up 500 fuel retail outlets during FY 20-21. Last financial year, HPCL commissioned 1,194 new retail outlets and 245 new liquefied petroleum gas (LPG) distributorships taking the number of total retail outlets to 16,476 and the number of total LPG distributors to 6,110. HPCL is currently exporting petroleum products to 14 countries and through its HPCL Middle East FZCO, a wholly-owned subsidiary set up in Dubai, it is expanding its presence in the Middle East and African markets, Surana said. “We have tied up with State Trading Corporation of Bhutan Limited (STCBL) for setting up of retail outlets and supply of motor fuels in Bhutan. I am delighted to state that your Company commissioned its first retail outlet in Bhutan during 2019-20 under this partnership. The plans are to expand the overseas operation to 20 countries,” said Surana. The company is also building a liquefied natural gasification (LNG) terminal at Chhara, Gujarat as part of its strategy to expand in the clean energy vertical. “Expansion of business portfolio with a greater presence in the clean energy verticals of Natural Gas remains to be the focus area. HPCL along with its Joint Ventures has the authorization for City Gas Distribution in 20
BPCL may buyout Oman Oil stake in Bina refinery before its sale
Sale-bound Bharat Petroleum Corporation Ltd (BPCL) may buy out the entire stake of OQ, the erstwhile Oman Oil Company(OOC), in their Madhya Pradesh joint venture, the Bharat Oman Refineries Ltd (BORL). Government sources said that BORL became a subsidiary of BPCL in March this year and the next step now is to convert it into a 100 per cent subsidiary before government stake in the company is sold to a strategic partner. For this to happen, it is essential that BPCL buys out OQ’s stake in the refinery before its own sale process goes off the ground. This is important as BPCL’s valuation may be impacted if a joint venture remains in its fold even after new owners take control. BPCL and OQ were 50:26 joint venture partners in BORL till March when BPCL converted 13 per cent of its earlier investment made in compulsorily convertible debentures and share warrants of BORL or Bina refinery. This made BORL a subsidiary of BPCL as its stake in the refinery increased to 63 per cent from 50 per cent earlier. The investment in convertible debenture was equivalent to 24 per cent additional equity stake in BORL. Sources said, if BPCL converts the remaining 11 per cent of convertible debentures to equity, its holding in BORL will increase to 74 per cent given that OQ has not shown interest in increasing stake in BORL by putting in additional equity. This will leave 26 per cent equity with OQ that the company will negotiate to buy to complete 100 per cent acquisition of Bina Refinery.
Pandemic cuts marine refuel demand, driving consolidation among bunker suppliers: IBIA
Global demand for marine fuels is expected to fall by up to 17 per cent due to the impact of the coronavirus pandemic on world trade, setting the stage for more consolidation among bunker suppliers, an industry executive told a conference on Wednesday. Banks scaled back on their commodities trade finance after the coronavirus crisis led to defaults by some trading houses and exposed a series of frauds, leaving small and medium sized firms most exposed. Unni Einemo, director of the International Bunker Industry Association (IBIA), said firms were contending with low demand, low margins, ample supplies, increased counter-party risk, and constrained access to capital. “Because of that we might expect further consolidation through mergers and acquisitions or attrition,” Einemo told the virtual Platts APPEC 2020 conference, adding that some firms could be forced to quit the market. “Global bunker demand is expected to decrease significantly in 2020, even if it had held up quite well (in April and May),” Einemo said. IBIA’s members forecast a 7 per cent-17 per cent drop in bunker fuel demand globally in 2020, she said. Global marine fuel demand is estimated at about 300 million tonnes per annum, or about 5.2 million barrels per day (mbpd). In its latest report released on Tuesday, the International Energy Agency said “fuel oil demand, which includes marine bunker as well as power generation and industrial uses, is forecast to decline by only 0.4 mbpd, or 6.3 per cent in 2020,” the IEA said in its monthly report on Tuesday. By comparison, premium transport fuels which include jet fuel, diesel and gasoline, are forecast to have lost about 7.4 mbpd, or 11.6 per cent, of demand in 2020, according to the IEA. Most bunkering markets saw a big drop in June, with some seeing a “staggering” 30 per cent-40 per cent year-on-year contraction, although Singapore has to be among the least affected markets, said Einemo. Singapore, by far the world’s top bunkering hub, saw year-on-year growth in marine fuel sales every month this year with the exception of May and June which contracted by just 2 per cent each, official data showed. Singapore’s resilience has a lot to do with it “having the widest variety of fuels on offer (and) it has become a preferred port because buyers are confident they are going to get the quality and quantity they are buying,” said Einemo. But in other hubs like in the United Arab Emirates’ Fujairah, bunkering demand plummeted as the spreading coronavirus slowed shipping activity.
World’s first CNG terminal to come up in Gujarat’s Bhavnagar
The Gujarat Chief Minister Vijay Rupani on Tuesday said Bhavnagar will become the first Compressed Natural Gas (CNG) terminal in the world, as the government has given its sanction to the Rs 1,900 crore brownfield project. The terminal will have a capacity of 15 lakh tons annually. He said the state government has given the sanction and the Rs 1,900 crore project and will be developed by a Consortium of developers, including the Padmanabh Mafatlal Group and one from the Netherlands. According to the information given by the government, Rs 1,300 will be invested in the first phase of the brownfield port project. The project is a part of an ambitious mega project of developing Bhavnagar, where a liquid cargo terminal having a capacity of 45 lakh Container and White cargo terminal and RO RO ferry services terminal, would be developed. To develop this terminal, dredging and construction of two lock gates will be carried out in the channel and port basin. Infrastructural facilities will be set up on the shore for CNG transportation. Due to the project, Bhavnagar port’s annual cargo capacity will be raised to nine million metric tons (MMT). The Chief Minister informed that Gujarat will be the only state in the country, which will have terminals for both CNG and LNG (with LNG terminals at Dahej and Hazira). According to the state government, the project will create vast employment opportunities for Bhavnagar and adjoining area youth in logistics, transportation and warehousing.