PNGRB plans to allow lenders to replace defaulting city gas companies
Lenders will have a right to replace a defaulting city gas licensee with a new entity in consultation with the downstream regulator, as per a draft proposal by the Petroleum and Natural Gas Regulatory Board (PNGRB). The proposed amendment is aimed at addressing a key regulatory concern of lenders that was holding back financial closure for many city gas licence areas. The regulator, which has distributed 136 licences in the past two years and aims to award licences for another 50 districts this year, expects the proposed changes to help expedite financial closure for current and future licensees and speed up work programme. PNGRB plans to allow lenders to replace defaulting city gas companies The current rules bar transfer of 50 per cent or more stake in a license area to any new party in the first five years of the license or till the completion of promised work programme, giving rise to concerns that lenders may be stuck if a licensee defaulted on servicing loans in early years. The new regulatory proposal would permit lenders to get a new entity to take over the licence and the liabilities that came with it. In case of default by a licensee, lenders are expected to inform the regulator, which would give 90 days to the licensee to cure the default, failing which the licence may be suspended if so desired by the lenders, as per the draft. After the suspension of licence, lenders will have to inform the regulator of their intention to install a substitute for the original licence-holder. Lenders can then select a substitute within 90 days. The regulator would then transfer the city gas licence to the new entity if it meets all license conditions, as per the draft. The new entity will have to assume all the liabilities and responsibilities of the original licensee. In the draft proposal, PNGRB has also described in greater detail on when the financial closure will deem to have been achieved by the licensees. The licensees will now have to offer component-wise detailed cost of project, year-wise spending and financing plan, and approval of the same by the board of directors of the company. In case of borrowings-funded plan, a licensee needs to submit firm sanction order from lenders, legally binding loan agreements.
Three Indonesian LNG cargoes to China delayed on coronavirus outbreak
* Shipments of three liquefied natural gas cargoes from Indonesia’s Tangguh LNG Plant to Fujian province in China have been delayed because of the coronavirus outbreak, Indonesia’s upstream oil and gas regulator SKK Migas said on Thursday * The cargoes were due to depart in the third week of February but shipments have been rescheduled to an unspecified later time, Arief Setiawan Handoko, SKK Migas’ deputy for finance and monetisation told Reuters by text * Indonesia’s Tangguh LNG plant is operated by a unit of BP Plc * Shipments to other destinations, such as Japan and Singapore, are so far not affected by the coronavirus outbreak in China which has now spread to other countries * Handoko said should the shipments be cancelled, Indonesia would prefer to sell the cargoes to a domestic buyer.
Vedanta’s Anil Agarwal says open to Cairn India stake sale
Diversified natural resource company Vedanta’s Anil Agarwal is open to selling stake in Cairn India to make it valuable for investors. Agarwal said that the company is interested in buying stake in BPCL. Agarwal said: “If any foreign company bids for BPCL, I welcome it. We will also do our due diligence and we will see if it is at right price for our shareholders, we will definitely be interested.” On BPCL However, the price of BPCL has jumped by 45 percent which is very high, he added. For a company which can make maximum $1 billion, having a market cap of $15 billion, looks very high, according to him. On Cairn India On Cairn India he said: “Cairn has a market of gas, oil, we have phenomenal infrastructure, we have offshore, we have onshore.” “Whether we do public issue, whether we sell some stake or sell some part of the asset, everybody is interested. I have never seen so much of interest in Cairn. I am open for any kind of stake sale but we are building up a huge fantastic oil and gas company.”
Vedanta interested in BPCL, keeping an eye on valuation
The Vedanta group will seriously evaluate acquiring the government’s stake in BPCL and will bid for commercial coal blocks that will be offered as it will itself need up to 100 million tonnes to generate power but its decisions would depend on the valuation of assets, its chairman Anil Agarwal said. Agarwal also said he expects private investment in India is likely to pick up in a year, and that the business community had a lot to gain from the deepening relationship with India as evident from the warmth between US President Donald Trump and Prime Minister Narendra Modi. He said the Vedanta Group had placed orders worth $4 billion to US companies for work related to its oilfields. “American companies want to invest in India. We have the same value system. Our credibility is very, very high,” he said. The government should quickly offer coal blocks and accelerate the process of disinvestment as “the government has no business to be in business”, he said. “Yes, we are interested in BPCL. There are synergies with our exploration business. We will look at it carefully when the actual offer is made,” he said. Even before the government invites bid, Agarwal has been closely watching the share price movement of BPCL, which have moved in the range of Rs 308 and Rs 550 in the past 52 weeks. “We have to see the valuation. The share price has moved up 40%-50% since the time the government announced its plan to sell stake,” he said. Bankers however expect BPCL’s sale to fetch an even higher price as the buyer would have to pay the control premium and the fact that the replacement value of BPCL’s asset is considered much higher than the market price. Agarwal is eagerly awaiting the opportunity to acquire coal blocks. “We are very keen. We are looking to bring the best international technology and diligently follow environmental norms.”
After Trump’s India visit, Oil and gas imports from United States set to increase
Energy cooperation is emerging as a key pillar of Indo-US strategic partnership that has the potential to surpass bilateral defence agreements. President Donald Trump’s visit saw the conclusion of a pact for the supply of US gas to India. Petroleum minister Dharmendra Pradhan described the energy ties as multifaceted, as India and the US signed the deal for strengthening collaboration between Indian Oil Corporation, Exxon and Chart Industries for supplying liquefied natural gas. The agreement will promote access to gas in areas where the current pipeline infrastructure has not been developed. Till the time that gas pipeline network is developed in the country transportation of gas through container is an efficient alternative. Exxon and Chart have expertise in transporting gas through containers and the agreement will give India expertise and facilities for transporting clean and efficient access to gas to areas yet to be connected through pipeline network. “We jointly reviewed the ongoing strategic energy partnership between our two countries and agreed to take it to the next level,” Pradhan tweeted after meeting US energy secretary Dan Brouillette. “Our energy equation with the US is now a multifaceted one — the Strategic Energy Partnership, established in 2018, has provided an effective institutional structure to align our interests, expectations and synergies. This is evident from the fact that the energy trade touched $7.7 billion last year — this intensity of energy exchange is a story of the last two years. There is much potential for further capital, technology and innovation infusion to develop better ecosystems in both countries. We see the relations only growing more robust and one that will be capable of withstanding the test of time,” Pradhan said. In 2019, India increased its intake of oil from the US to about 1,84,000 barrels per day, four times more than in 2018, and up from zero imports just four years ago. India’s energy imports from the US would reach $10 billion this year.US trade deficit with India declined from more than $22 billion in 2016-17 to around $17 billion in 2018-19 as India started importing oil and gas from America. In 2018-19, India’s crude import from the US stood at $3.6 billion and LNG import was at $527.14 million. In April-December 2019, India imported crude and LNG worth $3.7 billion and $576.28 million, respectively, from the United States, making it the sixth largest supplier of crude oil, and the fifth largest supplier of LNG, to India. Currently, the US-India Energy Strategic Partnership has four pillars — oil and gas; power and energy efficiency; clean and renewable energy and sustainable growth.
India’s import of US oil jumps 10-fold to 2,50,000 bpd
US oil supplies to India have jumped ten-fold to 2,50,000 barrels per day (bpd) in the last few years, visiting US Energy Secretary Dan Brouillette said on Tuesday. Speaking at a business meeting alongside US President Donald Trump, he said Indian imports of US oil were 25,000 bpd a couple of year ago, and have now risen to 2,50,000 bpd. US is India’s sixth largest oil supplier. India began importing crude oil from the US in 2017 as it looked to diversify its import basket beyond the OPEC nations. It bought 1.9 million tonnes (38,000 bpd) of crude oil from the US in 2017-18 and another 6.2 million tonnes (1,24,000 bpd) in 2018-19. In the first six months of current fiscal (2019-20), US supplied 5.4 million tonnes of crude oil to India. Iraq is India’s top crude oil supplier, meeting close to one-fourth of the country’s oil needs. It sold 26 million tonnes of crude oil to India during April to September. India, which is 83 per cent dependent on imports to meet its oil needs, bought 111.4 million tonnes of crude oil from overseas during April-September. Saudi Arabia has traditionally been India’s top oil source, but has been relegated to the second spot, exporting 20.7 million tonnes of crude oil in the first six months.
Coronavirus impact: BPCL snaps up 500 mn barrels of distress crude
Sell-off-bound Bharat Petroleum has procured 500 million barrels of distress crude (five shiploads) at a discount of USD 3-5 per barrel to the already low prevailing price following order cancellations by coronavirus-hit China this month. Since the outbreak of the epidemic, crude prices have plunged over USD 15 a barrel to around USD 50 now as large parts of China, the largest importer and consumer of crude, are under Beijing-ordered lockdown and millions of factories are closed. The deadly virus outbreak in China since mid-January has left more than 2,660 dead and over 77,600 infected in China alone even as it has spread to countries like Korea, Japan, Iran and far-flung nations like Italy and France. “We have bought 500 million barrels of what we call opportunity crudes from distress sale in February. Price is so attractive it is coming at USD 3-5 per barrel cheaper than the already low prices which is trading at under USD 50 a barrel,” R Ramachandran, the director of refineries at BPCL told reporters. When asked whether the company will be snapping up more such crudes, he answered in the negative saying that will only make inventory management unwieldy. “Our inventory cycle is 30-40 days. Just because crude is cheaper now does not make sense for us to ramp up inventory too high as it will invariably lead to inventory losses, something we don’t want to invite upon ourselves,” he said. Meanwhile BPCL has been the biggest customer of US crude since the last two years, when that country lifted the ban on exporting crude for the first in decades. “We imported 1.6 million tonne crude from the US in FY19, and the same has already touched 1.57 million tonne this fiscal so far, making us the largest customer for the US crudes from the country,” he said. He also ruled out contracting Russian crude, unlike IndianOil did last week, saying the landed cost will not cost-effective for them. Meanwhile, a report from New Delhi quoting the visiting US energy secretary Dan Brouillette said in the past two years, Indian imports of crude from the US has jumped 10-folds to 2,50,000 barrels a day. In 2017, the country imported just 25,000 barrels per day from the US. “In the past two years, we’ve seen a remarkable off-take in US oil and gas by India, from 25,000 bpd in 2017 to 250,000 bpd now, a 10-fold spike and we expect it to be better from here,” Brouillette said in the National Capital, adding this makes the US the sixth-largest source market for India. India began importing crude oil from the US in 2017 as it looked to diversify its import basket beyond the Opec block. It bought 1.9 million tonne (38,000 bpd) crude from the US in FY18 and another 6.2 million tonne (1,24,000 bpd) in FY19. In the first six months of FY20, the US supplied 5.4 million tonne crude oil to India. Oil minister Dharmendra Pradhan later said India is the fourth largest export destination for US crude now, while LNG import from the US is also increasing progressively ever since import started in March 2018. India is now the fifth largest destination of US LNG exports. Pradhan said the bilateral hydrocarbon trade has increased exponentially during the past three years touching USD 7.7 billion mark in FY19, accounting for 11 per cent of total two-way trade. Iraq is India’s top crude oil supplier, meeting close to one-fourth of oil needs. It sold 26 million tonne crude to India in April-September, relegating Saudi Arabia to the second spot with 20.7 million tonne. The country meets as much as 83 per cent of oil demand through imports and has shipped in 111.4 million tonne during April-September.
India’s Petronet explores buying LNG under 10-year contract
India’s Petronet LNG , the country’s largest importer of liquefied natural gas (LNG), is looking to buy the super-chilled fuel through a long term contract starting from 2024, according to a document reviewed by Reuters. It has issued a Request for Information (RFI) indicating an interest to buy about 1 million tonnes per annum (mtpa) of LNG for 10 years starting from 2024, with the possibility to extend, according to the Feb. 19 document. A request for information is a common practice to ask for written information about the capabilities of various LNG sellers to help them make more informed buying decisions. Petronet’s Director of Finance Vinod Kumar Mishra declined to comment on the RFI. Petronet’s request comes amid a trend among LNG buyers to move away from long-term contracts with fixed pricing to shorter contracts with lower volumes and more flexible terms. However, Indian companies have sought longer contracts as they expect domestic gas demand to increase. The cargoes will be bought on a price formula linked to both Henry Hub natural gas futures in the United States and Dutch TTF gas futures and shipped on a delivered ex-ship (DES) basis, the document showed. Indian companies typically price their LNG contracts on an oil-linked basis while some are tied to the Henry Hub, two sources familiar with LNG imports into India said. Contracts priced on a TTF basis are rare, the sources added. Petronet is asking for suppliers to provide information related to the delivery and pricing of cargoes as well as flexibility that the suppliers can provide, including volumes and destination, the document stated. Suppliers must respond by Feb. 26 and Petronet will shortlist the five most competitive suppliers. The Indian company will analyse supply offers as well as potential LNG terminal investments if required by the suppliers. Petronet is already in talks with several companies including U.S. based Tellurian and NextDecade Corp to buy LNG. It currently has long-term contracts with Qatar Petroleum [QATPE.UL] and Exxon Mobil Corp to lift about 10 mtpa of supply. India wants to raise the share of gas in its energy mix to 15 per cent by 2030 from the current 6.2 per cent to reduce pollution, including the capital New Delhi. The South Asian country is expanding its pipeline network and building new LNG import terminals to encourage the use of cleaner fuel. Petronet has appointed consultancy Berkeley Research Group as an advisor, the document said.
India’s BPCL seeks LNG cargo for late March delivery
India’s Bharat Petroleum Corp Ltd is seeking a liquefied natural gas (LNG) cargo for delivery in late March, two industry sources said. The cargo is for delivery on March 28, one of them said, adding that offers are due by Feb. 27 and valid until Feb. 28.
GAIL plans to double revenue in five years: Chairman
GAIL is planning to double its revenue and expand profit by 50% in five years, aided by a planned capex of Rs 1 lakh crore in new pipelines, city gas and petrochemicals projects, chairman Manoj Jain has said. GAIL, which recorded a profit of Rs 6,000 crore on a revenue of Rs 75,000 crore in the last fiscal year, expects contributions from transmission and gas marketing to rise in its overall revenue over the next five years. “Transmission should be a larger pie as compared to today because revenue-wise gas prices may not be that high. Marketing, trading will also be slightly bigger, but petrochemicals, we feel that, since other players are also coming, the market will have more capacity and our share in the market may be slightly lower. Within in the company, petchem should be in the range of around 25% or so,” said Jain, who took over as chairman and managing director last week. At present, transmission, gas marketing and petrochemicals contribute almost equally to the company’s revenue. Besides growing the business, the priority would be to raise employee satisfaction so that there is more loyalty and motivation for them to contribute, Jain said. GAIL will need about a year to hive off its pipeline business into a subsidiary once the Cabinet has approved such a proposal, Jain said. Collapsing gas prices in the spot market is the biggest risk today for the company, Jain said. “Gap between spot and long-term is widening and that‘s a risk for those volumes which are not tied yet,” Jain said. GAIL has multiple long-term contracts for gas with suppliers in the US and Russia and a sharp fall in spot market makes it harder to sell expensive long-term gas to customers. GAIL has committed customers for much of its long-term volumes. About 2 million tonnes of its US liquefied natural gas (LNG) volumes aren’t tied yet. So far, GAIL hasn’t faced trouble from any significant customer and is able to sell all its long-term LNG. The company has also been offering spot gas to long-term customers to help them lower overall cost of their fuel. Over the next five years, GAIL plans to spend about Rs 40-45,000 crore in laying 7000 km of new gas pipelines, Rs 10,000 crore in expanding petrochemicals capacity and Rs 40,000 crore in building new city gas infrastructure, Jain said.