OIL may pick up BPCL’s stake in Numaligarh Refinery
State-owned oil and gas explorer Oil India Ltd (OIL) may take over Bharat Petroleum Corporation’s entire 61 per cent stake in Numaligarh Refinery, retaining the public sector character of the Assam-based entity. Privatisation of Bharat Petroleum Corporation Ltd (BPCL), which currently has majority holding in Numaligarh Refinery, has become a hot political issue in the North-East with voices being raised not to disturb the PSU character of the refinery. NRL was set up as per Assam accord of 1985. All Assam Students Union, which is one of the signatory of Accord, has already protested changes in NRL. BPCL currently holds 61.65 per cent stake in the NRL while OIL has 26 per cent stake. The Assam government has 12.35 per cent stake in the refinery. “OIL best fits the bill to take over NRL due to the synergy arising from their operations largely located in the North-East and its existing investment in NRL. Being the largest shareholder, the government is likely to get OIL board to approve the takeover,” an official source privy to the development said. Though estimates for the acquisition of NRL would be finalized post demerger of the refinery from BPCL as per the cabinet decision, it is expected that OIL may have to invest between Rs 3,000-4,000 crore to pick up BPCL’s stake in the refinery. Sources said that though consolidation among oil sector PSUs has been put on hold as on now, an integrated OIL-NRL operations could later be considered for merger with Indian Oil Corporation (IOC) to create a large integrated oil and gas company on the line of Oil and Natural Gas Corporation (ONGC) that acquired HPCL last year. For OIL, the acquisition of NRL will immediately add 3 million tonnes per annum (mtpa) of refining capacity to its portfolio. NRL also has approved plan to expand its capacity (NRL) to 9 mtpa with an investment of Rs 22,000 crore. NRL recorded highest-ever revenue at Rs 18,511 crore in 2018-19, registering a growth of 16.25 per cent. Its earnings per share (EPS) stood at Rs 27.79 while net worth reached Rs 5,551 crore. For OIL, the acquisition will give opportunity to enter into lucrative fuel refining operations with possible entry into retailing at a later stage. With both companies having operations in the North East, lot of synergies is expected to flow out of the proposed deal. Oil India Limited OIL has over 1 lakh sq km of areas for its exploration and production activities, most of it in the Indian North East, which accounts for its entire crude oil production and majority of gas production. Rajasthan is the other producing area of OIL, contributing 10 per cent of its total gas production. Additionally, OIL’s exploration activities are spread over onshore areas of Ganga Valley and Mahanadi. OIL also has participating interest in NELP exploration blocks in Mahanadi Offshore, Mumbai Deepwater, Krishna Godavari Deepwater as well as various overseas projects in Libya, Gabon, USA, Nigeria and Sudan.
PNGRB constitutes high-level committee to formulate Model CGD Policy
India’s downstream oil sector regulator Petroleum and Natural Gas Regulatory Board (PNGRB) has constituted a high-level committee for creating a draft city gas distribution (CGD) policy, which can act as a reference point for state governments to formulate their own CGD policies for streamlining the process of setting-up CGD networks. “CGD Industry is considered to be the major stakeholder in the exercise. Accordingly, PNGRB has constituted a high-level Committee for a detailed review of all the issues and other aspects for fast development of CGD networks throughout the country and to draft such policy. The Committee includes senior officers from CGD entities as well as PNGRB,” PNGRB said in a notice. The draft CGD policy will include guidelines on setting up a nodal agency by state governments to coordinate to get single-window clearance, procedure to grant time-bound right of way permissions for CGD network, procedure for timely availability of permissions from National Highway Authority of India (NHAI), railways, environment approvals and timely allocation of domestic natural gas, beside others. The regulator said that concerns referred by CGD entities by and large come within the purview of the state governments and it was felt that a CGD Policy for the entire country would work as a guide for the states to formulate their own policy and would also lead to uniform policy to an extent and help in expeditious development of CGD infrastructure. “The entities are required to pay very high charges to the state governments and municipal corporations for permissions to lay pipelines. The policies for CGD sector and single-window clearance mechanism is in-place in a few states. Multiple and time-consuming permissions and clearances are required for starting CNG stations, availability of land for stations is another challenge. Most importantly, GST remains to be applicable on natural gas,” PNGRB Chairman D K Sarraf had recently said on the commencement of work of projects under the tenth CGD round. Post the completion of the tenth CGD round, natural gas will be available in 228 Geographical Areas, covering 27 states and union territories, which will result in access to gas for 70 per cent of the country’s population and 50 per cent of its geographical area. Under the revised 2018 CGD policy, pre-determined penalty will be levied on players within three months from the end of each contract year, if the physical performance target provided by the player is not achieved at the end of one contract year. The regulator will impose a penalty of Rs 750 for shortfall in each piped gas connection, Rs 1,50,000 for missing each inch-kilometer of pipeline, and Rs 20 lakh for each natural gas station not installed. The regulator has invited stakeholder inputs for formulation of draft CGD policy by 30 November.
BPCL chief hails privatisation move
Bharat Petroleum chairman has hailed the government move to privatise the company as ‘tremendous value’ creator, pitting him against union of employees of his company and other state oil firms who are strongly opposing it. In a letter to BPCL employees, Chairman D Rajkumar has tried to address their anxiety on privatisation and sought their support in ensuring that daily business goes ‘without any disruption’ during transition. “As the organisation experiences this transition, I urge all of you to be the ambassador of this change, in your own unique ways,” Rajkumar wrote. “Disinvestment of BPCL is expected to unlock tremendous value by way of enhanced professionalism, access to advanced technologies, newer global market, diversified product portfolio and improved availability of resources, further propelling our growth journey.” Employee unions have been outraged at the government’s decision to sell all its stake in BPCL. “The decision is ill thought, regressive & anti-people and other avenues for raising finances without sale of stake or without transfer of management has not been examined,” the Federation of Oil PSU Officers (FOPO) and Confederation of Maharatna Companies (COMCO) said in a press statement after their executive committee meeting on Friday. “The decision will erode precious wealth, goodwill and working spirit built over the years and is therefore grossly against the interest of common public,” they said.
Oil India incorporates JV firm in Assam
Oil India said it incorporated a joint venture company, Purba Bharati Gas, in Assam on 19 November 2019. The joint venture company was formed pursuant to a joint venture agreement dated 11 July 2019, between Assam Gas Company, Oil India, and GAIL Gas for development of city gas distribution (CGD) network in Kamrup & Kamrup Metropolitan (Guwahati) and Cachar, Hailakandi & Karimganj districts in Assam. The announcement was made post trading hours on Friday, 22 November 2019. The consortium of Assam Gas Company, Oil India and GAIL Gas (48%:26%:26%) won the bids for development of CGD network in Kamrup & Kamrup metropolitan districts and Cachar, Hailakandi and Karimganj districts, under 9th round of CGD bidding. Letter for grant of authorisation from Petroleum and Natural Gas Regulatory Board (PNGRB) was received in September 2018. Shares of Oil India ended 0.68% lower at Rs 153.90 on Friday. Oil India’s consolidated net profit fell by 38% to Rs 6.6153 billion on a 14.3% decline in net sales to Rs 32.2120 billion in Q2 September 2019 over Q2 September 2018. The company is engaged in the business of exploration, development and production of crude oil and natural gas, transportation of crude oil and production of liquid petroleum gas. It is the second largest hydrocarbon exploration and production Indian public sector company with its operational headquarters in Duliajan, Assam, India. The company is a state-owned Navratna under the administrative control of India’s Ministry of Petroleum and Natural Gas. As on 30 September 2019, the Government of India held 59.57% stake in the company. The Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi on Wednesday, 20 November 2019, approved cutting government’s stake in select PSUs below 51% while retaining management control.
Natural gas, false hope in climate change campaign?
Natural gas is cleaner and produces fewer global warming emissions than other fossil fuels, making it key to our transition to a low-carbon future, but it comes with its own serious drawbacks. The International Energy Agency (IEA) said recently that natural gas is crucial to its sustainable development model which requires oil and coal use to fall sharply if we are to get anywhere near the Paris agreement climate change targets. Natural gas is relatively cheap, abundant and produces 50 per cent less CO2 than coal, used widely, especially in Asia to generate electricity for fast growing economies. In its latest annual report, the IEA pencilled in a 10 per cent increase in natural gas use through to the end of the 2020s while oil use would have to return to levels last seen in the 1990s. Some NGOs, however, attack the IEA — set up after the first great oil shock in 1973-74 to advise countries how to manage their energy needs — for being overly beholden to nae-say governments such as the United States, and the huge fossil fuel companies. Rather than recommending an increase in the use of natural gas, the IEA should be calling for a reduction, they say. Murray Worthy at Global Witness said “governments should not be misled… and should rather work on closing down existing oil and gas fields, and halting exploration for new reserves.” Significantly, the European Investment Bank (EIB), the lending arm of the European Union, recently announced that it would halt funding new fossil energy projects, including natural gas, from 2022. For some, natural gas is the ideal transition fuel, with major companies such as Total and Shell producing increasing amounts and launching new projects which stretch for decades into the future. “When it burns, natural gas releases less CO2, nitrous oxide and sulphur than coal or oil,” said Nicholas Browne of energy consultants Wood Mackenzie. “Replacing coal with gas, for example, has had a huge impact on air quality in northern China, with immense benefits in terms of public health,” Browne said. The question however is “if gas and LNG (Liquified Natural Gas) are better, are they good enough?” he added. Extracting and transporting natural gas notably results in significant emissions of methane, a greenhouse gas 30 times more potent than CO2. “Methane emissions linked to… natural gas are largely under-estimated,” said Cecile Marchand of Friends of the Earth. Taken together, it is not necessarily the case that natural gas is so much better than other fossil fuels, Marchand said, and on that basis, it may “not allow us to face up to the climate change challenge.” The gas industry is trying to meet these criticism, committing to reducing methane emissions and developing CO2 capture systems in the hope of keeping global warming at manageable levels.
BPCL asset valuer asked to submit valuation of company in 50 days
In part indication of timelines for privatisation of India’s second biggest state oil refiner, the government has set a 50-day deadline for an outside ‘asset valuer’ to carry out the valuation of all assets of Bharat Petroleum Corp Ltd (BPCL), a process once completed will trigger invitation of price bids from potential acquirers. The Cabinet Committee on Economic Affairs (CCEA) had on November 20 given a go-ahead for sale of government’s entire stake in BPCL, Shipping Corporation of India Ltd (SCI), power generator THDC India Ltd (THDCIL) and North Eastern Electric Power Corp Ltd (NEEPCO) to a strategic investor along with management control. It had also approved sale of 30.8 per cent out of its 54.8 per cent interest in Container Corp of India Ltd (Concor). The stake sale will follow a two-stage process of first inviting expression of interest (EoI) from potential bidders who will after due diligence will be asked to submit price bids in the second part, officials said. In the run-up to the decision, the Department of Investment and Public Asset Management (DIPAM) — the department in finance ministry responsible for disinvestment in PSUs — had on October 11 issued advertisements seeking transaction and legal advisors as well as asset valuers for the stake sale but masked the identity of the state-owned firm by merely saying they operate under administrative control of the Ministry of Petroleum and Natural Gas, or Ministry of Power, or Ministry of Shipping or Ministry of Railways. Soon after the Cabinet approval, DIPAM unmasked the identity of disinvestment targets by issuing ‘corrigendum’ to the October 11 Request for Proposals (RFPs). The RFP wanted Asset Valuer to “identify, describe and list all properties and assets, including intangibles” and value them according to “comparison method, income capitalisation, discounted cash flow, cost approach method or replacement valuation” method. It wanted the asset valuer to complete its “valuation report within a period of 50 days from the date of issue of appointment letter ” in case of BPCL, according to RFP. Last day for submission of bids for appointment as asset valuer was November 4. Official said DIPAM may invite EoI from potential bidders pending receipt of valuation report but price bids will come in only after getting the valuation report. A similar process will be followed for India’s biggest shipping line SCI and country’s largest onland cargo mover Concor, they said. THDCIL and NEEPCO will be sold to state-owned NTPC Ltd based on valuation report of DIPAM advisers. Three separate sets of advisors will be appointed for each of the firms for conducting the transaction, preparing legal documents and doing asset valuation. DIPAM in the corrigendum said: “Strategic disinvestment of state of Government of India in a CPSE may be read as ‘Strategic disinvestment of Government of India shareholding of 53.29 per cent in BPCL (except its equity shareholding of 61.65 per cent in Numaligarh Refinery Ltd (NRL) and management control thereon) along with transfer of management control to a strategic buyer.” The 61.65 percent of BPCL shareholding in NRL along with management control will be transferred to “a central public sector enterprise (CPSE) operating in the oil and gas sector”. It said the government will see 30.8 percent out of 54.8 percent stake in Concor to a strategic buyer along with management control and all of government holding in SCI.
BPCL sale: Workers to go on strike; Firm says output wont be affected
Thousands of workers of Bharat Petroleum will go on strike on November 28 to protest the government’s decision to privatise the company, workers union leaders said. The strike, however, will not affect production or availability of fuel, according to the state-owned oil refining and marketing company. The move to sell the government’s entire majority stake in Bharat Petroleum Corporation Ltd (BPCL) has stoked fears that a change of ownership could lead to job losses and a sharply different working climate unsuitable for many current employees, prompting protests from company workers and executives. “We need to strongly protest as privatisation is not in our interest,” said Praveen Kumar P, general secretary of Cochin Refineries Employees Association, an affiliate of Indian National Trade Union Congress (INTUC). “It’s going to be a daylong strike on November 28. But if the government refuses to withdraw its decision on privatisation, we would be forced to undertake longer strikes, which can spread to several days.” He said all workers unions in BPCL are together in this cause and the proposed strike will hurt production at two refineries. Contract workers, too, will participate in it, he said. BPCL expects no impact on production or fuel availability. “The refineries and marketing locations would be running normal and all arrangements have been made so that there is no impact in refinery production and distribution of petroleum products to retail outlets, plants, installations and filling stations and to customers,” the company said in an emailed response to ET’s query. BPCL sale: Workers to go on strike; Firm says output wont be affected BPCL has more than a dozen workers unions operating at its two refineries in Kochi and Mumbai and its marketing division. The company has about 12,500 permanent employees, almost equally split between executives and workers. Contract workers run into tens of thousands, according to union leaders. The company’s executives, too, are upset at the proposed privatisation but have decided against going on strike. Instead, they have decided to wear black badges to work every Monday and also skip company-provided lunch and dinner on November 27, Anil Medhe of Bharat Petroleum Officers Association said. Multiple workers unions and officers associations have raised concern that privatisation will totally change the character of the company, ending job security for current employees and endanger national energy security. “Indira Gandhi had nationalised BPCL for energy security. And now it is being reversed,” Praveen of Cochin Refineries Employees Association said. “The supply security will be compromised.” Labour leaders also highlighted that BPCL, after privatisation, wouldn’t be required to reserve jobs for weaker sections of the society, making such people more vulnerable.
Energy group Total criticises EIB’s decision not to finance gas
Total’s head of gas, power and renewables said on Thursday that the European Investment Bank (EIB) had made a “poor decision” to stop financing all fossil fuel projects because it ignored the benefits of using gas over coal. “I think it is a poor decision by the European Investment Bank not to finance any new gas project. This decision has been taken on an unfair ground, driven by opinions that are clearly ignoring the benefit of gas compared to coal,” Philippe Sauquet told a gas and power conference in Paris on Thursday. “Gas has never been so much criticised in Europe,” he said.
PSU oil biggies to stay out of BPCL divestment
State-run entities will stay off when the government puts India’s second-largest public sector oil refiner and fuel retailer Bharat Petroleum (BPCL) on the block, a move that is expected to make the offering attractive for foreign majors. “Since 2014, we have a clear vision that the government has no business to be in business … Nitty gritty and details of the disinvestment process will have to be worked out but when I say the government has no business to be in business, it is indicative of possible future course of action,” oil and steel minister Dharmendra Pradhan said on the sidelines of an industry function on Thursday. The cabinet on Wednesday cleared the proposal to privatise BPCL by selling the government’s 53.3% stake with management control to a strategic investor. This will be the first privatisation of an oil company by the Narendra Modi government. BPCL will give the buyer access to 14% of India’s oil refining capacity and about a fourth of the fuel marketing infrastructure in the world’s fastest-growing energy market. PSU oil biggies to stay out of BPCL divestment On Thursday, the decision to sell BPCL drew flak from Congress member and former oil minister Veerappa Moily who described it as “an attempt to sell away an important soul of the public sector”. There is no reason to sell a profitable company managed by excellent professionals, he said in a statement demanding a rollback. Pradhan pointed out that private competition in telecom and aviation sectors led to customers benefiting from price cuts, efficiency and better service.
Fuel shortages push India to build strategic natural gas reserve
After oil, India is set to build strategic reserve of natural gas, to further strengthen country’s energy security and shield itself from supply disruptions coming from perennial political risk in the prime energy supplying countries in the Middle East and Africa. The reserve will also help the country cope with demand spike and price rise in the event of border skirmishes and war like situation that played out with Pakistan recently. For building strategic gas reserve, the plan is to inject depleted gas fields with the fuel or develop storage in large salt caverns. The plan for strategic gas reserves emerges from an official study that suggests that consumption of natural gas would grow two-folds by 2030 resulting in large gap between demand and domestic production. This would increase imports of gas and take it closer to levels of oil imports, where the country has depend on overseas supplies to meet over 80 per cent of domestic consumption. At present, almost of half of domestic consumption of natural gas is met from imports. The suggestion for building strategic gas reserve has also come from Niti Aayog that is finalising a national Energy Policy. The policy draft has made a case for a gas storage required, if consumers have to be assured of un-interrupted supplies. Official sources said that a panel in the petroleum and natural gas ministry is currently studying various suggestions for building the gas reserve and will take a call on the matter soon after report of experts on the issue come. It also plans to hire consultants to evaluate options. It is expected that natural gas reserve would rely more on private sector to build gas storage capacity. In this regard, depleted oil and gas fields of national oil companies (NoCs) will be offered on competitive basis to interested gas marketers, both for strategic and commercial storages. A policy in this regard may be formulated by the oil ministry. Also, other options like salt caverns and aquifers would also be explored to build strategic gas reserve. Once the storage is identified, bids would be invited to use the storage. Overseas gas producing companies may also be offered stake in such storage as is being done in the case of strategic oil reserve. The storage facility may be chosen close to the pipeline infrastructure so that the fuel can be easily used in times of need. “The strategic gas reserve would work well for the country as it would ensure uninterrupted fuel supply to key infrastructure projects. However, the cost structure for storage should be such that fuel price for customers is kept low. Close to 25,000 MW of gas based power projects are either under stress or functioning at very low capacity due to shortage of gas,” said a power sector analyst not willing to be named. For India strategic storage of gas would work well also because the domestic gas production has remained stagnant for past few years. In the current fiscal (FY20), upto September while gas production has declined by 1.5 per cent, LNG imports has risen 7.9 per cent. India already has operational 5.33 million tonne underground strategic oil reserve facility at Vishakhapatnam, Mangalore and Padur. This is also being further expanded to augment strategic oil reserves facility with 90-100 days stock. The idea about strategic gas reserve is not new to India. Several heavy energy consuming countries have build storage to ensure supply security. US has almost a third of global gas storage while Russia, Ukraine, Canada and Germany together account for another big chunk. China, is also a gas storage facilities.