RIL-BP to kick off India’s first gas e-auction next month
ndia’s natural gas market will witness its first e-auction next month when Mukesh Ambani-led Reliance Industries and its partner UK energy major BP, kicks off bidding for gas from their $5-billion offshore project in the east coast. This will be the first time that gas produced from a domestic field will be e-auctioned, a practice the Narendra Modi government had introduced for giving out telecom spectrum and coal blocks after the Supreme Court struck down the allocation methods followed earlier. “We expect the independent agency appointed for conducting the auction will be able to conduct the auction on October 10 once the pre-requisites are completed,” a senior BP executive told TOI. CRISIL Risk and Infrastructure Solutions (CRIS) will conduct the auction online on a web-based platform and the kick-off price will be benchmarked to 9% slope of Brent. RIL-BP is holding the sale under the policy provision of giving producers marketing and pricing freedom for gas from geographically difficult fields. For other fields, the government earmarks the quantity of gas to various industries and the price is set according to a 2014 formula, which the industry says is often non-remunerative. Industry players said the auction by RIL-BP could prove to be a touchstone for the Centre’s proposed gas exchange and indicate whether the domestic gas market is ready for large-scale competitive pricing. The government is working to raise the share of natural gas in the country’s energy basket from 6% to 15%. RIL-BP is initially offering 5 mcmd (million cubic metres per day) of gas expected to flow from mid-2020 from R-Series fields in the KG-D6 block off the Andhra coast. This is part of three sets of discoveries in the block — R-Cluster, Satellites and MJ — being developed for a peak of 30 mcmd.
Torrent Gas acquires 3 firms to expand city gas distribution business
Torrent Gas, a part of the Torrent Pharma Group, is expanding its city gas distribution (CGD) business by acquiring three companies. This is in addition to the 13 geographical areas it won in bidding. The fresh acquisitions take the company’s reach to 16 geographical zones in 32 districts and seven states. The company also plans to invest around `10,000 crore in the business. The company has acquired Mahesh Gas in Pune from the Mahesh Group. It took over Siti Energy in Moradabad and Dholpur CGD from Essel Group. Mahesh Group could not start operations in Pune and exited the business with the sale to Torrent. Mahesh Gas is now an associate company of the Torrent Group and would operate under the brand name, Pune Natural Gas, to supply piped natural gas and compressed natural gas (PNG & CNG) in Pune district, said Utkarsh Bhat, VP, marketing, Torrent Power. Maharashtra Natural Gas Limited (MNGL) is handling the CGD business in Pune City area while the rest of Pune district would be handled by Torrent. The area authorised to Pune Natural Gas includes Ranjangaon, Baramati, Kurkumbh, Indapur, Pirangut, Wagholi, Saswad, Sanaswadi, Khed city, Rajgurunagar, Lonavala, Talegaon Phase II, Shirur, Shikrapur, Jejuri and other talukas of Pune district covering around 15,000 sq km. Pune district would see investments of `600-700 crore. Shridhar Tambrapani, ED, Torrent Gas, said as part of its phase-I network rollout plan, by March 31, 2021 the company intends to set-up over 50 CNG stations and release over one lakh residential PNG connections and also supply natural gas to industries in Pune district. The company will lay 1,800 inch km of gas pipeline network.
Capex plans set to impact OMC profits
INDIA’s three state-run oil marketing companies (OMC) stand the risk of taking substantial hits to profitability over the near term due to a sharp increase in planned capital expenditure (capex) in a weak demand environment. Analysts note that Indian Oil Corporation Ltd (IOCL), Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL) intend to increase their spending on projects by a whopping Rs 1100 billion over the next five years compared to the previous half-decade. The three OMCs have announced plans to invest a cumulative Rs 2900 billion between fiscal years 2020-24, against the Rs 1800 billion they spent between FY15-19. The sharp increase in capex is in line with the Centre’s recent diktat to central public sector enterprises (CPSE), with the finance ministry stating the ministry has held meeting with CPSE chiefs “in order to boost capital expenditure of the government and pump liquidity into the market to boost demand”. With the country’s gross domestic product growth slowing for five consecutive quarters — from 8 per cent in Q1, FY19 to just 5 per cent in Q1, FY20 — the government intends to use increased public sector undertaking (PSU) capex as a tool to boost flagging growth. However, for the three PSU OMCs, this could mean increasing pressure on profitability and a rise in debt levels. The delays in payment of direct benefit transfer (DBT) subsidy dues from the government is also expected to exacerbate the pressure on profit margins.
ONGC to invest Rs 130 billion in Assam to drill over 220 wells
The Oil and Natural Gas Corporation (ONGC) on September 11 announced it will invest more than Rs 130 billion in exploring oil and gas by drilling over 220 wells across Assam in the next five years. The company said in a statement that it has signed an MoU with the Assam government for enhancing its exploration and production activities in the state. This investment is being made for drilling more than 220 oil and gas wells across the state, it said. “ONGC is giving impetus to its activities in alignment with the prime minister’s call for reducing import by 10 per cent by 2022 and Northeast Hydrocarbon Vision 2030,” it added.
IOC, BPCL, NTPC among firms where govt stake to be cut to under 51%
The government proposes to offload substantial stake in at least 10 blue-chip companies this year to meet its higher disinvestment target, even though the exercise will bring down its holding in these state-run firms to below 51 per cent level, official sources said here on Wednesday. The minimum government holding required for an entity to qualify as a central public sector enterprise (CPSE) is 51 per cent. The sources said the Department of Investment and Public Asset Management (DIPAM) would soon start consultations with the Power, Petroleum and Heavy Industries Ministries to initiate the disinvestment process for some CPSEs under their administrative control where government stakes are slightly more than 51 per cent. Though this list of companies is yet to be finalized, the discussions are expected to revolve around companies such as Indian Oil Corporation (IOC), NTPC, Bharat Petroleum Corporation Ltd (BPCL), NALCO, GAIL India, Oil India Ltd (OIL), Engineers India Ltd (EIL), Power Grid Corporation (PGCIL) and Bharat Heavy Electricals (BHEL). In the majority of identified companies, the government’s current holding is just over 51 per cent. Only in BHEL and OIL, the government still holds just over 60 per cent stake. Presenting Budget 2019-20, Finance Minister Nirmala Sitharaman had said that the government could consider bringing down its stake in non-financial CPSEs to below 51 per cent on a case-by-case basis. The current fiscal’s disinvestment target of Rs 1.05 lakh crore has been increased from Rs 90,000 crore proposed in the Interim Budget 2019-20 in February. According to a source, the government is looking at companies that can command high market value and have strong financials and not in all such cases will majority stake be surrendered at one go. While the strategic sale will entail outright privatization in some CPSEs, the government’s direct holding can be brought down below 51 per cent with effective control continuing to remain with the government after taking into account the holding of other state-owned entities in such a divestment-bound CPSE. In 2018-19, the government raised Rs 84,972 crore from CPSE disinvestment, while in 2017-18, the figure was Rs 1,00,056 crore. “Strategic disinvestment of select CPSEs would continue to remain a priority of this government, Sitharaman had said. In all these oil and power CPSEs, government stake ranges from 52 per cent to 62 per cent. The inter-ministerial discussions will centre on the quantum of dilution, timing and method of stake paring, the sources said. Post the Budget presentation, Sitharaman had said: We did announce about government reducing holding (below 51 per cent), but yet there are two or three different government agencies, altogether, holding it over and above 51 per cent.” “We thought it should be opened up. Government still retains its ownership, but if you open it up, you are at least giving opportunity to, let us say, small retail purchasers,” she had said.
Vopak acquires 49% stake in Colombia’s sole LNG import facility
World’s largest independent tank storage company Vopak says it has bought a 49% stake in Colombia’s sole liquefied natural gas (LNG) import facility * “This is another growth step in our LNG portfolio and it fits very well in our ambitions to grow and diversify our service offering in LNG,” Vopak Chairman and CEO Eelco Hoekstra said in a statement, without providing an investment figure * The facility, also known as Sociedad Portuaria el Cayao, or SPEC, is located in Cartagena and consists of an LNG jetty, onshore infrastructure and a 9.2 kilometres gas pipeline which connects SPEC to the national gas grid * SPEC has long-term gas supply contracts with three local gas-fired power plants * Promigas a private company in the natural gas sector in Latin America owns the remaining 51% in SPEC
Punjab slashes VAT on natural gas
The Punjab government on Tuesday slashed value added tax on natural gas to 3.3 per cent from from 14.3 per cent earlier to encourage industries to shift to the eco-friendly fuel. However, the VAT on compressed natural gas, used mainly as auto fuel, will remain at 14.3 per cent, an official statement said here. A decision to this effect was taken by the Punjab cabinet which met here under Chief Minister Amarinder Singh. This was for the first time that the Punjab cabinet meeting was held outside Chandigarh. The chief minister said the move would help cut down on industrial pollution in the state. The major consumer of gas is National Fertilisers Limited (NFL), which uses the gas at its plants at Bathinda and Nangal. Natural Gas is also consumed in very small quantity by select industries and the transport sector. Before March 2015, the VAT rate on natural gas was 6.05 per cent. From March 2015 onwards, it was increased from 6.05 per cent to 14.3 per cent. Due to increase in VAT rate, NFL started interstate billing of natural gas, due to which VAT collection on natural gas decreased. The VAT collection on natural gas from the years 2014-15 to 2018-19 came down considerably – from Rs 105.77 crore to Rs 5.67 crore, which had further shown a steep decline to Rs 1.84 crore till June 2019, during financial year 2019-20. The special meeting of the cabinet was convened here to review the progress of various ongoing projects in the historic city of Sultanpur Lodhi. It also cleared a proposal for declaring Sultanpur Lodhi-Kapurthala-Kartarpur-Beas-Batala (including Batala byepass)-Dera Baba Nanak as ‘Sri Guru Nanak Dev Ji Marg’.
Indian Oil to invest Rs 2,282 crore to set-up second R&D centre in Faridabad
Indian Oil Corporation (IOC), the country’s largest fuel retailer, s planning to open its second Research and Development (R&D) facility adjacent to an existing facility in Faridabad, Haryana, at a cost of Rs 2,282 crore. The proposed facility — to be called IndianOil Technology Development and Deployment Centre — will be spread across 59.32 acres of land in Industrial Model Town in Faridabad, the company said in an application to the environment ministry. It will house facilities which will research on alternative & renewable energy, industrial bio-technology, nanotechnology, refining technology, petrochemicals, applied metallurgy, pipeline research, catalytic interventions for clean energy processes and carbon nanotube & batteries. IOC’s R&D vertical employs over 400 scientists and the completion of the second campus would take the strength to 1,000 scientists, according to an official spokesperson. The project is expected to be completed in 36 months from the date of receiving Environment Clearance (EC). “The available space in the present campus has become limited for any further expansion. The new campus is being envisioned as a next generation technology development and deployment centre and has been named accordingly. The physical possession of the land has been completed and boundary wall for securing the premises is nearing completion,” the company said. R&D initiatives helped Indian Oil save around Rs 440 crore annually since 2014-2015, the firm said in its annual report for last financial year. Also, it has realized Rs 1,576 crore every year in refinery margins from indigenously developed technologies. IOC has so far filed more than 1,000 patents. Its Intellectual Property portfolio currently comprises 794 active patents. Of these, 542 patents were granted abroad and 252 in India.
Goldman Sachs cuts 2019 oil demand growth forecast to 1 million bpd
Goldman Sachs has lowered its forecast on 2019 oil demand growth, citing reduced demand from India, Japan, other non-OECD Asian regions, the Middle East and Latin America. The Wall Street bank revised its forecast down to 1 million barrels per day (bpd), from 1.1 million bpd but left its 2020 demand growth estimate broadly unchanged at 1.4 million bpd. However, it stuck to its 2020 price forecast for Brent crude at $60 a barrel, flagging the willingness of the Organization of the Petroleum Exporting Countries (OPEC) to sacrifice market share. “Our oil supply-demand outlook for 2020 calls for additional OPEC production cuts to keep inventories near normal,” Goldman analysts wrote in a note dated Sept. 9. “We continue to expect OPEC will sacrifice market share in line with leadership commentary at its June meeting, which we believe will lead to Brent prices of around $60/bbl.” Crude oil prices have shed nearly 20% from 2019 highs hit in April, partly because of an escalating trade war between the United States and China, which is expected to hurt the global economy and, in turn, demand for oil. Other banks, including Morgan Stanley and Barclays, have also flagged risks to oil demand as a result of economic uncertainties. Morgan Stanley last month lowered its oil price and demand forecasts for the rest of the year, citing a weaker economic outlook, faltering demand and higher shale oil output.
Oil demand to peak in three years, says energy adviser DNV GL
Global oil demand will peak in three years, plateau until around 2030 and then decline sharply, energy adviser DNV GL said in one of the most aggressive forecasts yet for peak oil. Most oil companies expect demand to peak between the late 2020s and the 2040s. The International Energy Agency (IEA), which advises Western economies on energy policy, does not expect a peak before 2040, with rising petrochemicals and aviation demand more than offsetting declining oil demand for road transportation. Wednesday’s annual report from DNV GL, which operates in more than 100 countries and advises both oil and renewable energy companies, would appear to be at odds with ongoing investment in developing new oil and gas fields. “The main reason for forecasting peak oil demand in the early 2020s is our strong belief in the uptake of electric vehicles, as well as a less bullish belief in the growth of petrochemicals,” Sverre Alvik, head of DNV GL’s Energy Transition Outlook (ETO), said in an email to Reuters. While DNV GL’s latest forecast shows oil demand peaking in 2022, one year sooner than it estimated last year, the difference is marginal and demand is expected to remain relatively flat over the 2020-2028 period, Alvik added. DNG GL expects electric vehicles to reach 50% of global new car sales in 2032, compared with last year’s forecast of the mid-2030s. By the middle of the century 73% of the global passenger car fleet will be electric-powered, up from 2.5% today, the company estimates. In Norway, where the DNV GL has its headquarters, more than 40% of all new cars sold in the first eight months of this year were electric — the highest proportion in the world. The government wants this to reach 100% by 2025. Demand for natural gas, which oil companies say could serve as a bridge in the global transition from fossil fuels to renewable energy, is seen surpassing oil demand in 2026 and plateauing in 2033, DNV GL said. Meanwhile, electricity’s share of the total energy mix is predicted to double by mid-century to 40% of today’s levels, with solar and wind generation accounting for two thirds of electricity output. Annual power grid spending is forecast to more than double to $1.7 trillion to connect thousands of new solar and wind farms and millions of electric vehicles. Meanwhile, upstream fossil fuel investment as a proportion of total energy expenditure is seen dropping to 38% from 68%, DNV GL said.