Total India head on Adani Gas board
French energy giant Total SA’s India head Alexis Thelemaque has been appointed as a director on the Board of billionaire Gautam Adani’s gas retailing firm Adani Gas Ltd. The appointment follows Total buying a 37.4 per cent stake in Adani Gas Ltd – the firm that retails gas to automobiles and households for an estimated Rs 57 billion. “The Board of Directors of the company have, by way of circular resolution passed on January 14, 2020, appointed Alexis Thelemaque as an Additional Director (Non-Executive, Non-Independent),” Adani Gas said in a regulatory filing. Thelemaque, who joined Total Group in France in 1993, is Chairman and Managing Director of Total Oil India Pvt Ltd. Total, which in August 2018 exited a JV with Royal Dutch Shell in a 5 million tonne liquefied natural gas (LNG) import terminal at Hazira in Gujarat, had in October last year announced the acquisition of the stake in Adani Gas. This followed by a 50:50 joint venture the two had agreed upon in October 2018 for two LNG import terminals of Adani on the east and west coast of India as well as for setting up of 1,500 petrol pumps in the country over 10 years. The French firm is the latest energy major seeking to expand its presence in India, which is the world’s third-largest and the fastest-growing energy consumer. In August 2019, Reliance Industries said Saudi Arabian Oil Co will buy 20 per cent of its oil-to-chemical business at an enterprise value of USD 75 billion. As part of the deal, Total will first make an open offer to buy a 25.2 per cent stake in Adani Gas. Depending upon the success in the open offer, it will buy a stake from Adani to take its holding to 37.4 per cent in the company. Adani family holds a 74.8 per cent stake in Adani Gas and will dilute shares to the public to bring down its holding to 37.4 per cent – at par with Total. Adani family will sell some stake in the open market to meet the listing norm of keeping public holding at 25 per cent. Adani Total joint venture (JV), where the two groups hold 50 per cent stake each, is building a 5 million tonne LNG import terminal at Dhamra in Odisha and will potentially hold a 25 to 50 per cent interest in Gujarat government’s Mundra import facility. This JV would also supply 3 million tonnes per annum of LNG to India and Bangladesh. Adani Gas, wherein Total and Adani would hold 37.4 per cent stake each, is targeting to set up 1,500 CNG stations to retail gas to automobiles and piped cooking gas to 6 million households. It will also set up 1,500 petrol pumps over 10 years. As part of this partnership, Total will bring its LNG and retail expertise and will supply LNG to Adani Gas. Total and Adani will also establish a joint venture to market LNG in India and Bangladesh.
IOC keen to pick up BPCL stake
Indian Oil Corporation is keeping its option open on making an offer for competing public sector oil retailer and refiner Bharat Petroleum Corporation even though the government may baulk at such a move. IOC chairman Sanjiv Singh said the PSU would look at bidding for BPCL as and when the Centre puts it on the block. “Let’s see. Let it (divestment) come. We will take a call as and when it (BPCL) puts up for sale,” Singh said at the sidelines of an event in Calcutta over the weekend. The Centre’s 53.29 per cent stake in BPCL will translate into a market valuation of Rs 543.89 billion according to the closing price of the share (Rs 470.50) on Monday. Oil and steel minister Dharmendra Pradhan had earlier hinted at keeping the BPCL sale limited to the private sector. In November, the minister said the strategic vision of the Modi government was that it has “no business to be in business”. If IOC acquires BPCL, it will continue to remain a public sector unit, which is owned by the government. However, there has been several instances since 2014 when the government did not exactly follow this dictum. Life Insurance Corporation of India, the PSU behemoth, has come forward time and again to bail out several public sector share sales. For instance, it bailed out another PSU, IDBI Bank, by infusing over Rs 210 billion. Singh said there would be merits for and against acquiring. He admitted that there would be a “lot of value” if it comes in terms of synergy. IOC will immensely benefit from wide ranging and nearly identical BPCL assets — refineries, fuel retailing, LPG, gas pipeline and stakes in several prominent ventures such as Petronet LNG and Indraprastha Gas Ltd. However, a possible acquisition will certainly choke IOC’s own expansion as BPCL would fill the requirement, Singh pointed out, adding that India may not benefit in that scenario in terms of fresh investment in the oil sector. In the past, IOC had emerged as the most aggressive bidder for IBP when the retailer was sold in 2002. It beat Reliance Industries, Reliance Petroleum, Royal Dutch Shell, Kuwait Petroleum by a wide margin, paying Rs 11.5368 billion. The then oil minister Ram Naik is believed to have backed IOC to go for the jugular, aiming to keep the company within the central government’s fold. The scenario may be different this time around as the present dispensation would like to see private players, especially from overseas, participating and boosting India’s image to global investors. There has been speculation that Saudi Aramco, the world’s largest company by market cap, may show interest. The Cabinet Committee on Economic Affairs (CCEA) approved the sale of government stake in five major PSUs — BPCL, the Shipping Corporation of India, Container Corporation of India, Tehri Hydro Development THDC India Ltd and Neepco — in November. However, it appears that the government is now going slow on the sale.
India exploring ways to source crude oil from Russia: Pradhan
India is exploring ways to source crude oil from Russia, Oil Minister Dharmendra Pradhan has said. “We are working on the strategy to diversify our crude oil supply sources and we are now exploring ways to import crude from Russia as well,” Pradhan told a Russian media delegation. Indian refiners have been seeking crude oil from different parts of the globe to reduce their dependence on the conflict-prone Middle-East region that currently makes up about 60 percent of its imports. “We are keen to explore the new sea route to source crude oil and LNG through Russia’s Arctic. The route has the potential to cut the cost and time for transporting LNG from Russia to India, ” Pradhan said. Pradhan told the media delegation that relations between Russia and India would reach new heights in times to come. “2019 was a landmark year which boosted the bilateral relations between India and Russia to hitherto unscaled heights, ” he said.
India’s crude oil production may show marginal increase by 2024: IEA
India’s domestic crude oil production is expected to increase marginally by 2024 with the country’s increased reliance on oil imports exposing it further to supply side disruptions, geopolitical uncertainties, and volatile oil prices, according to a report by the International Energy Agency (IEA). “Its oil consumption of 4.4 million barrels per day in 2017 already represents 5 per cent of global consumption, and it is set to grow at a rapid pace of 3.9 per cent a year (well ahead of the global average of 1.2 per cent) in the medium-term, despite the market penetration of alternative fuels like biofuels and gas,” Paris-based IEA said in its report titled ‘India 2019 – Energy Policy Review’. According to the report, the growth is expected to primarily come from government-owned Oil and Natural Gas Corporation’s (ONGC) KG-DWN98/2 deep-water oil and gas project with output starting in 2020 and reaching 78,000 barrels per day of oil at peak production. IEA further added that India’s proven oil reserves are limited compared to the domestic needs and said that production is on a decline. Also, possible new discoveries in Rajasthan are unlikely to fully compensate for the depletion of existing fields. The report citing data sourced from the oil ministry said that India’s proven reserves of crude oil and condensate as of April 2018 were about 595 mt (around 4.4 billion barrels), which could potentially sustain production for about 14 years at current levels. Oil production in India comes primarily from three onshore states, Assam, Gujarat and Rajasthan, which together account for more than 96 per cent of oil from onshore fields, and from the aged offshore Mumbai High Field. The report highlighted that the country’s increasing reliance on imports has left it exposed to various external risks. “India’s strong dependence on oil imports, already at 83 per cent, is expected to increase. With an oil import bill of about 4 per cent of the gross domestic product (GDP) today, and 65 per cent of imports coming from the Middle East through the Strait of Hormuz, the Indian economy is and will become even more exposed to risks of supply disruptions, geopolitical uncertainties and the volatility of oil prices,” IEA said. The report added that the country will have to expand its strategic petroleum reserves if it wants to keep up with its growing demand. “Today’s Indian Strategic Petroleum Reserves storage capacity of 40 million barrels can cover around 10 days of present day net imports. But the same volume will cover only four days of net imports in 2040. It is therefore important to indeed pursue the announced second phase of the strategic stock holding policy and prepare future phases,” IEA said. The report added that India does not have any policy to manage the demand for oil during an oil supply emergency, apart from general provisions under the Essential Commodities Act 1995, to maintain equitable distribution of petroleum products. The agency advised that the existing contingency plan should be reviewed to ensure that in the case of a serious supply disruption, the emergency stocks are available and physically accessible for the large consumption centres across the whole territory. The strategic petroleum reserves are proposed for construction with a capacity of 4 MT at Chandikhol in Odisha and 2.5 MT at Padur in Karnataka. The construction and filling of the reserves are being explored under a public–private partnership model with a tender for building the second-phase stocks to be opened by the end of 2020. If fully-filled, this second phase would add another 11.2 days of net imports, based on the consumption pattern in FY19.
India offers 11 oil and gas blocks in 5th bid round
India on Wednesday announced the opening of the fifth oil and gas block bid round, offering 11 areas for bidding on revamped fiscal terms. So far, the government has awarded 94 blocks under the Hydrocarbon Exploration & Licensing Policy (HELP) regime in a short time span of two and a half years. These 94 blocks cover an exploratory area of about 1,36,800 square kilometers over 16 Indian Sedimentary Basins, the Directorate General of Hydrocarbons (DGH) said in a statement. “In continuation of its aggressive acceleration of exploration and production activities and adhering to the prescribed timelines, the Government has now launched the Bid Round-V for International Competitive Bidding,” it said. “In this bid round 11 blocks, with an area of approximately 19,800 sq km are on offer for bidding to the investor community.” The last bid round saw just eight bids coming in for seven blocks on offer. According to the DGH, seven onland blocks were offered in the fourth round of Open Acreage Licensing Policy (OALP) under HELP regime, with an area of about 18,510 sq km. State-owned Oil and Natural Gas Corporation (ONGC) walked away with all the seven oil and gas blocks on offer. OALP-IV was the first round on revamped terms approved in February 2019. Unlike previous rounds where blocks were awarded to companies offering a maximum share of oil and gas to the government, blocks in little or unexplored category-II and III basins are now awarded to companies offering to do maximum exploration programme. Bidding for OALP-V will close on March 18, the DGH said. The 11 blocks under OALP Round-V are spread across 8 Sedimentary Basins and include eight on land blocks (six in Category-I Basin and one each in Category II and III Basins), two Shallow Water blocks (one each in Category-I and II Basins) and one Ultra Deep Water block (Category I Basin). “It is expected that OALP Round V would generate immediate exploration work commitment of around USD 400-450 million,” the DGH statement said. “An area of 1,36,800 sq km has already been awarded under OALP Bid Round I, II, III and IV. These OALP Bid Round-V Blocks would add further 19,800 sq km. Overall Exploration Acreage of India would then increase to 236,600 sq km.” The DGH said HELP, which adopts the revenue sharing contract model, is a giant step towards improving the ‘Ease of Doing Business’ in the Indian Exploration and Production (E&P) sector. “It comes with attractive and liberal terms like reduced royalty rates, no oil cess, marketing, and pricing freedom, round the year bidding, freedom to investors for carving out blocks of their interest, a single licence to cover both conventional and unconventional hydrocarbon resources, exploration permission during the entire contract period, and an easy, transparent and swift bidding and awarding process.” Under OALP, companies are allowed to carve out areas they want to explore oil and gas in. Companies can put in an expression of interest for any area throughout the year but such interests are accumulated thrice in a year. The areas sought are then put on auction. The fifth cycle of submitting EoIs closed on November 30, 2019, and was followed by the sixth cycle that began on December 1, 2019, and will last till March 31, 2020. It would be followed by the 7th cycle from April 1, 2020, till July 31, 2020. Of the 94 blocks awarded in the first four rounds of OALP, Vedanta has won the maximum at 51. Oil India Ltd has got 21 blocks and ONGC another 17. “All 11 blocks in OALP-V are based on Expressions of Interest received during EoI Window-V from 16th May 2019 to 30th November 2019,” the DGH said.
Indian Oil Corp seeks six LNG cargoes for April-Dec delivery
Indian Oil Corp is seeking 6 liquefied natural gas (LNG) cargoes for delivery over April to December, two industry sources said on Tuesday. The refiner was seeking the cargoes on a delivered ex-ship (DES) basis, one of the sources said. Offers are due by Jan. 15, a second source added.
Natural gas consumption in Kochi touches new high
The natural gas consumption in Kochi has touched an all-time high. The daily consumption of natural gas hit 3.83 million cubic metre on Saturday, beating the earlier record of 3.5 million cubic metres two years ago. The spike is due to the rise in LNG consumption by Bharat Petrochemicals Corporation Ltd (BPCL), which is using up about 2.8 million cubic metres and FACT (0.9 million cubic metres) per day. HOCL, City Gas Distribution company (Indian Oil and Adani Gas Pvt Ltd), Tata Ceramics and Nitta Gelatin India, based here, are among the other major consumers. “The consumption of the natural gas by vehicles and households alone is 34,600 cubic metres, which is likely to go up in the future as the automobile sector experiences major relief when switching over to CNG,” said Tony Mathew, general manager (construction), Gas Authority of India Ltd(GAIL). GAIL is set to commission the Kochi-Koottanad-Bengaluru-Mangaluru natural gas pipeline project (KKBMPL) in March this year. In the industrial sector, there is a saving of Rs 17 for each kg of LPG when switching to natural gas. “That means for a small industry using 1,000 kg of LPG per day, it can save up to Rs 17,000 per day after switching to natural gas,” Mathew said.
State groups from India start investing in a natural gas project in Mozambique
Indian State Oil and Natural Gas Corporation (ONGC), Bharat Petroleum and Oil India have started to pay out their share of around US$2 billion for the natural gas exploration area 1 project in the Rovuma basin, northern Mozambique, reported the Economic Times of India. All three groups have a combined shareholding of 30% in the project which last year has announced the final decision to invest approximately US$15 billion to explore wells and in the processing and liquefaction of the extracted gas. Approximately 60% of that amount is expected to be raised through debt and the remaining 40%, through contributions from the project’s partners, or approximately US$6 billion or, in the case of the Indian groups, just under US$2 billion. ONGC, which controls a 16% stake, will provide US$1 billion, while Bharat Petroleum and Oil India, with 10% and 4.0%, respectively, together will contribute the other US$1 billion. The newspaper reported that the disbursements have already begun, but recalled that the total value will be applied in the project over a four-year period. The Area 1 block is operated by the Total group, with a 26.5% stake, and its partners are ENH Rovuma Área Um, a subsidiary of Mozambican state oil company ENH, with 15%, Mitsui E&P Mozambique Area1 Ltd. (20%), ONGC Videsh Ltd. (10%), Beas Rovuma Energy Mozambique Limited (10%), BPRL Ventures Mozambique B.V. (10%) and PTTEP Mozambique Area 1 Limited (8.5%). The project in its current form includes the exploration of the Golfinho and Atum fields and the construction of two liquefaction units with a combined capacity of 12.9 million tonnes per year.
There’s a new fight in an old, turbulent region, where India has to do business with all
The current crisis in West Asia hangs by a fine balance —and held by the stability of oil prices. That alone makes it possible for several countries like India to hold their nerve for the time being. But will that continue to be the case? The US, as of now, seems to be indicating that it will ensure that it will remain this way. Oddly, this is exactly the sort of guarantee many would have not expected US President Donald Trump to offer, given his political stand against Washington’s burdening global responsibilities that accrue no benefit to the American people. That’s the logic which informs his government’s approach to draw down US military presence across the globe. It forms the basis of his protectionist approach to trade, to China, and develop ‘America First’ options. Yet, we now have a Washington backstopping oil prices. It has done so, quite consistently, throughout Trump’s term largely on the back of record-breaking US domestic crude production. In fact, between the drone attacks on the Saudi Aramco oil facilities in September and until December last year, the US ensured there was hardly any fluctuation in oil prices, with supplies kept available at about the same price. The same trend has followed the US drone strikes near Baghdad International Airport on January 3 that killed Iran’s powerful Quds commander Qasem Soleimani. After the initial shock, the prices have held, much to the relief of big importers like India, Japan and South Korea. The Iranian military response has not moved the price needle either. This is quite unlike the first Gulf War, which saw prices spike by about $15 between August and October 1990. Even in 2003, prices rose quite sharply compared to the recent trend. The big change has been the emergence of the US as a major oil producer. Indian oil imports from the US have quadrupled over the last couple of years. Conventional economic wisdom would suggest that in such a scenario, US companies only stand to benefit if there’s a surge in prices. But then, the price of oil has always been a political question, just as has been its rate of production. Uncle Sam(aritan) Currently, stability of oil prices is in Trump’s political and strategic interest. It reassures other big economies to stay away from any plausible Sino-Russian alternative. Also, it underscores US dominance over West Asia that was being questioned as other countries in the region began to reach out to Iran after the attack on the Aramco oil facilities. That Trump chose reassertion of US power is a clear indication that he doesn’t want his intent to reduce troop presence to translate into commensurate reduction in influence, or the shrinking of strategic footprint. Washington wants supremacy, but through ways that don’t involve boots on the ground. The innovative use of drones has provided the US with a deadly option with precision. The transgression of sovereign territory isn’t any longer an insurmountable question as long as it’s a targeted (read: with the least collateral damage) strike against terrorists. This was exactly how India sought to describe its attack on the terrorist camps in Balakot after the Pulwama attack. These are framed as asymmetric responses to terror attacks, rather than conventional strikes. So, what does this mean politically? It essentially provides a viable military option without having to move up the escalatory ladder. Much like the Pakistani response after Balakot, Iran attacked Iraqi territory with missiles, but looked to de-escalate. Tehran’s matters have complicated immensely after its wrong strike on a Ukrainian commercial plane. The US, too, has sought to de-escalate. There is now a window within the escalatory matrix between two conventional State actors where targeted strikes are politically possible, without the threat of outright escalation to war. For the US, this seems to be a great alternative in exerting authority and supremacy without actually having to make investments on the ground. As for Iran, the battle is truly regional. In West Asia, regardless of political differences, the consensus around oil has usually been largely on the basis of mutual recognition of the high stakes involved. If there’s a country that can be potentially disruptive or unpredictable, it’s Iran. The political urge to harness Shia power spread across Iran, Iraq and in other West Asian countries can be a security threat to the region, which is where the US tilts the balance. On the other hand, action against Iran resonates domestically in the US like no other country in the region. More so, anti-Iran sentiment is bipartisan. Which is why the fact that Trump has been able to bring down Iranian oil exports to almost zero is considered politically significant. Don’t Slip on Spilt Oil India, for its part, will have to reconcile Iranian regional ambitions with a repackaged US idea of global power. And in doing so, it would have to take into account that 65% of its crude comes via the Iran-controlled Strait of Hormuz and about 20-22% of its crude is sourced from Iraq — not to forget the Chabahar project connecting India to Afghanistan via Iran. The truth is, it’s a new fight on a familiar old oil-spilled mosaic, with better technology and weapons to revive historical notions of power in a region where India has to be in business with all, at the cost of none.
Inter-ministerial talks on natural gas sector reforms begin
The petroleum and natural gas ministry has begun interministerial consultations on its proposal to end the power sector’s priority access to cheap domestic gas, setting up a gas trading platform and hiving off GAIL’s pipeline business into a subsidiary. It will send the proposals to the Cabinet after the consultation process, which is expected to take a few weeks, said officials. The ministry has proposed to permit use of cheaper domestic gas by just fertilizer makers, city gas distributors and liquefied petroleum gas (LPG) makers, they said. Power plants and other industries are proposed to be barred from accessing cheap local gas, most of which is priced as per a government-set formula and is cheaper than the imported liquefied natural gas (LNG). The proposal will not initially apply to gas from isolated fields that can’t reach the national pipeline grid. The aim is to free up some local gas that can then be traded on a proposed trading hub, helping discover market rates for the output, said officials. The power sector and other consumers can buy local gas at market rates. The power sector, the biggest consumer of local gas, is expected to fiercely oppose the proposal that would increase its input cost. The power sector consumes about 31% of the local gas while fertilizer and city gas sectors take about 24% and 22%, respectively. India has 25,000 mw of gas-based plants in a total generation capacity of 3,56,000 mw. Some natural gas is also used to make LPG, primarily used for cooking in India. Inter-ministerial talks on natural gas sector reforms begin Setting up a trading platform is necessary for the maturity of local gas market, an official said, adding that it would help discover market rates, increase opportunities for suppliers and boost consumer confidence. The petroleum and natural gas ministry has also proposed that GAIL form a subsidiary to house its pipeline business. The move is aimed at satiating a clamour for level playing field by other gas marketers who have been demanding splitting of GAIL for enhanced third-party access to its pipelines. NITI Aayog and the Department of Investment and Public Asset Management (DIPAM) had suggested sale of GAIL’s pipeline unit to a third party but the ministry did not agree to it. Without the financial support from its gas marketing business, GAIL would not have been able to build 16,000 km of pipelines that it currently operates, according to GAIL executives and ministry officials. It’s necessary for GAIL to keep both gas marketing and pipelines under one parent until some of the proposed pipelines are executed in the next three-four years, they said.