Petrol, diesel to get costly in Uttar Pradesh from today
Petrol and diesel will cost more in Uttar Pradesh from Tuesday after the state government hiked Value Added Tax (VAT)on both. A litre of petrol will now cost 98 paisa more across the state while a litre of diesel has become dearer by Rs 2.35. The rise in prices of the fuel comes after the state government decided to increase VAT on petrol to 26.80 per cent while that on diesel to 17.48 per cent. The new and hiked prices came into effect at midnight on Monday. The hike in prices is bound to have a cascading effect on the household budgets and the transport sector.
Russia to consider giving Transneft control over oil input points
Russian Prime Minister Dmitry Medvedev will ask the government to consider transferring operational management over oil input points to pipeline monopoly Transneft, according to the government website. Nikolai Tokarev, chief executive at Transneft, the world’s largest pipeline network, said at a meeting with Medvedev that Transneft was continuing talks on compensation for contaminated oil and that major volumes of it are located in Russia. Transneft is working to normalise the quality of the contaminated crude, he added. Flows through the Druzhba pipeline were suspended in late April after contaminated crude was discovered, sending shockwaves through global oil markets.
Aramco reliance deal realpolitick
Saudi Aramco is investing $15bn in India for a 20 per cent stake in Reliance Industries. As per the deal, dubbed as the second-largest Foreign Direct Investment (FDI) in India, Saudi Aramco is to acquire a 20pc stake in Reliance’s oil-to-chemicals (OTC) business at an enterprise value of $75 billion. The oil-to-chemicals division, formed by combining refining and petrochemicals businesses, converts petroleum into chemicals. The deal was made despite, reports late July, that talks between Aramco and Reliance had hit a roadblock as Reliance was keen on a higher valuation. Aramco apparently overpaid for the deal, for obvious reasons, reports now say. $15bn for a 20pc stake is a generous price, Bloomberg opined. When it was first reported in April that a deal might be in the works, the valuation named wasn’t much more than half of that sum. Reliance as a whole has an enterprise value of about $134bn, including phone and retail businesses that brokerages value anywhere between $60bn and $80bn. At the median multiple for oil and gas deals of 6.5 to 7.0 times enterprise value to Ebitda, Reliance’s refining and chemical businesses would collectively be worth about 30pc less than it’s receiving, Bloomberg said. Yet Aramco went ahead. As part of the deal, Saudi Aramco will also supply 500,000 barrels per day (bpd) of crude oil on a long-term basis to the Reliance Industries Jamnagar Refinery, the world’s largest refining facility as per the deal. To Saudi Aramco, this was the most lucrative part of the deal. This is roughly double the volume of crude oil, Reliance currently buys from Saudi Arabia. The refining complex currently has the capacity to process 1.36 million bpd. As per reports, it plans to further expand its refining capacity to 2mbpd by 2030. The just-announced stake in Reliance is beside the 50pc interest Aramco, along with UAE’s ADNOC, is picking up in a planned $ 60bn refinery on the west coast of India. Indeed, besides other reasons, the most important issue behind the deal seemed to be the co-dependent relationship that the world’s biggest oil exporter would develop, courtesy the deal, with India. The country is likely to overtake the US as the world’s biggest net importer of crude. Indian consumption growth is pacing ahead and with virtually little local production and India remains significantly dependent on crude oil imports to meet its needs. These investments are part of Aramco’s plan to double its global oil processing capability to somewhere around 10mbpd by 2030, locking buyers for the Kingdom’s crude on a long term basis. In an era of stiff competition for market share, the strategy seems working for Riyadh. The announcement came at a point in time, when Kashmir is under siege. Many in the country now feel; the Arab world is not putting its weight fully behind Kashmir and Pakistan. A report by AP rightly pointed out that Gulf Arab countries have preferred staying silent on the issue. Regional heavyweight Saudi Arabia urged restraint and expressed concern over the brewing crisis. Other Gulf countries such as Kuwait, Qatar, Bahrain, and Oman do not appear to have issued any statements. The United Arab Emirates has gone a step further by apparently siding with India, calling the decision to downgrade Kashmir’s status an internal matter. Iran has also preferred a balanced position on the issue of Kashmir. This muted response, as per AP, is underwritten by more than $100bn in annual trade with India. The volume of trade makes India one of the Arab world’s most prized economic partners. And the Arab world does not want to ditch it for the sake of Kashmiris. Let’s be fair. We are living in an era of realpolitik. Self-interests are driving policies. We opted not to send our forces to take an active part in Yemen-Saudi politics because our long term national interests did not permit it. Arabs are no different. They have their national interests close to their hearts. The concept of one ummah-standing together-in all respects is dead. We need to learn and live with it.
Shortage of CNG keeps 40 per cent taxis, autos off roads in Mumbai
The CNG shortage crisis continued to affect pumps in Mumbai on Saturday, with nearly 40% autos, kaali-peeli taxis, and some app-based cabs staying off roads in the morning. Public transport too took a hit although BEST buses had been refilled with CNG late night to avoid inconvenience. The problem was brought under control by afternoon, with just a couple of pumps continuing to remain shut. Oil company sources said the “technical” problem at the ONGC gas processing facility in Uran was resolved in the morning. “But it will take some time for operations to be fully restored. The Mahanagar Gas Ltd will also have to clean and restart the systems which were affected due to the technical fault and this could possibly take 12 to 15 hours,” said a source, adding that the situation could normalise by early Sunday morning. But if this did not happen, the source stated that public transport may continue to be affected on Sunday as well. Nearly 0.7 million vehicles in the region depend on CNG for fuel and this mainly comprises 0.3 million private cars and over 0.3 million autos, besides buses, private cabs and taxis. Some state-run buses also depended on CNG for daily run. The situation in the western suburbs was bad early Saturday morning. “At a few pumps in Kandivli-Borivli area, the queue was so long that it took two to four hours to refill CNG,” said Mumbai Rickshawmen’s Union leader Thamby Kurien. A private car owner who had gone to refill CNG at a Sion pump on Friday night said that he was able to do so. “But it was mixed gas and it cost more than CNG,” he said. However, MGL sources said that there was no other gas being distributed at any pump except for CNG.
OPINION: Weak spot LNG prices don’t help Asia much, but boost Europe
The price of spot cargoes of liquefied natural gas (LNG) has ticked up recently in Asia amid tentative signs of some peak summer demand, but the problem remains that for many buyers the cost is still too high. While the market focuses on the spot price as a way of assessing the extent of oversupply, or the strength of demand, it’s worth noting that the market for short-term cargoes is dwarfed by the far greater volumes procured under long-term, mainly crude oil-linked contracts. This means that for many consumers of LNG, especially in the top- and third-ranked buyers Japan and South Korea, the decline in spot prices is largely irrelevant. For weak spot prices to become relevant, demand in those countries has to be so strong that additional cargoes over and above contracted volumes are needed. The spot price for cargoes delivered to North Asia rose to $5 per million British thermal units (mmBtu) in the week ending Aug. 16, the highest since late June and 25% above the $4 trough reached in early August. It’s also worth noting that the spot price reached a northern summer peak last year of $12 in June, and was at $11 in the week to Aug. 17, 2018, more than double the current price. But while spot prices have slumped as producers in Australia and the United States commissioned new plants, the long-term contract price, which accounts for about two-thirds of the global market, has fallen by a considerably smaller margin. South Korea paid $9.40 per mmBtu for its LNG imports in July, which is only 6% less than the $10.01 it paid for them in July 2018, according to customs data. This price would mainly reflect volumes under long-term contract, but would also include cargoes under spot contracts. For the first seven months of the year, South Korea paid an average $10.22 per mmBtu for LNG, which was 6.9% higher than for the same period last year. Japan’s LNG cost an average $9.14 per mmBtu in June this year, down only marginally from $9.79 for the same month a year ago, according to official data. The fact that both Japan and South Korea haven’t seen much benefit from lower spot prices for LNG is largely a reflection of the higher cost of Brent crude oil for much of the first half of 2019, with the price rising from a closing low of $50.47 a barrel in November last year to a peak of $74.57 in late April. While Brent and other crudes have been dropping since the April high, the price is still above the November low, which is reflected in the still relatively high price of contract LNG compared to spot supplies. ASIAN LNG DEMAND STRUGGLES It’s therefore not surprising that LNG imports in both Japan and South Korea have been falling. For the first seven months of the year South Korea’s imports were 22.9 million tonnes, down from 25.4 million in the same period last year. In Japan, imports for the first half were 38.6 million tonnes, a drop of 8.2% compared to the same period last year. China, the world’s second-biggest LNG importer, is still growing imports, but at a far slower pace than before. China’s January to July imports of the super-chilled fuel were 32.8 million tonnes, up 18.8% on 27.6 million in the same period a year ago, according to vessel-tracking and port data compiled by Refinitiv. However, for the whole of 2018, China’s imports were 38.6% higher than for 2017. China also buys a greater percentage of its LNG on the spot market, meaning it has managed to secure some of the benefits of a lower spot price. It also has a fixed, low-priced long-term contract with Australia’s Northwest Shelf venture, which also lowers the cost of LNG supplied to China. The reliance on long-term contracts for much of Asia’s supplies is probably largely responsible for the mediocre growth in demand so far this year, with Refinitiv data showing the continent imported 139.3 million tonnes in the first seven months of the year, up a mere 2.9% from the same period in 2018. In contrast, Europe’s imports of 51.5 million tonnes in the January to July period are up 87% from the 27.5 million in the same period last year, showing the continent’s ability to take greater spot volumes is paying dividends for its natural gas utilities. The problem for LNG producers is that they need to boost demand for their product in order to sell their existing output, not to mention all the future production now in the pipeline. But in order to do so they will have to accept lower prices and more flexible pricing systems, and by doing so they will undermine the economics of existing and new ventures.
IGL to maintain spreads at Rs 6 per SCM if rupee does not depreciate much, says MD
12% growth in CNG was mainly due to conversion of goods vehicles and also taxis because we added more than 59 stations in last one year, says ES Ranganathan, MD, IGL. Excerpts from an interview with ETNOW. Another quarter of a double digit volume growth for you. What were the key drivers beside the push from higher taxi and car conversions and the government thrust of public transport and clean fuel? Actually the 12% growth in CNG was mainly due to conversion of goods vehicles and also taxis because we added more than 59 stations in last one year. That has improved the availability and people have started converting. In the industrial sector, again the ban on petcoke and FO has resulted in lot of customers switching from the polluting fuel to gas. In the PNG segment, industrial as well as commercial volumes were up a good 17% on year on year basis. The recent ban on petcoke and furnace oil turned out to be the highlight for the earnings in the first quarter as well. What is the revenue mix between CNG and PNG now? What kind of growth is expected in both through the year after a strong start to the fiscal? The revenue mix is about the same. We have 75% revenue coming in from CNG and 7% in domestic PNG ; the rest is industrial commercial. Your Q1 spreads stood at about Rs 6 per SCM. Given the kind of benign gas prices, we are seeing a depreciating rupee. Where do you see spreads ranging over the next couple of quarters? If the rupee does not depreciate too much, we will be near about this for the next two quarters. Haryana City Gas hearings are still going on. Valuations have not been finalized. How are you preparing and when is the outcome expected? The valuation is with the Supreme Court. The hearing is expected on the 26th of August. We hope that it will be concluded this way or that way in another one or two months maximum and that will leave one with great growth potential for IGL. It will be positive for investors. Based on the recent geographical area that you have added to your network, what kind of material contribution are you pencilling in over the next couple of ? Any key additions that you are expecting in the coming quarters? Yes, we are putting up more than 59-60 stations this year also. It is in an existing area as well as in the new area and the CNG growth will mainly be driven from our existing area but Rewari and Muzaffarnagar hold some hope for more increase than compared to Karnal and Kaithal. Help us understand what the capex plans would be for FY20-21 and how would it be spread between the widening pipeline infrastructure and expanding the retail distribution network. We have a capex plan of more than Rs 1,000 crore for this year. Out of which, we will be putting up around Rs 600 crore in the existing area and Rs 50-100 crore in new areas of Ajmer, Kanpur, Kaithal and Gurgaon. A total of more than 60 CNG stations and around 100 kilometres of steel pipeline and 1200 kilometres of MDPE pipeline will be added. Recently a concept paper was released by the PNGRB to allow new players in existing geographies given high entry barriers and concerns of course on allocations of subsidised APM gas. Any areas that you feel are lacking clarity and are a potential threat to IGL’s earnings growth if this is implemented despite your strong moat. Yes, we have conveyed our comments to PNGRB. Our considered opinion is that the market is not yet mature enough to bring in such type of competition because most of the ground rules are not yet finalised. There is no clarity on whether they will also get APM price for CNG or they will be only marketing the freely traded. So, the time is not right for opening up such market and that is what we have told them. We expect that it will not be implemented immediately.
Odisha to clear IOCL’s Rs 1 lakh crore investment
Indian Oil Corporation Limited (IOCL) will invest Rs 1,00,300 crore in expanding its Paradip refinery capacity from 15 million tonnes per annum (mtpa) to 25 mtpa and setting up a naphtha cracker unit. A high-level committee, under Chief Minister Naveen Patnaik, will be clearing IOCL’s expansion proposal on Monday. IOCL will add 10mt capacity to its Paradip refinery, and build a dual feed cracker unit of 3-4 mtpa capacity, which will be fed largely (80-90 percent by Naphtha and 10-20 percent Ethane), it will also be setting up a 1.3 mtpa petcoke gasification plant. The investment proposal submitted to the government, through its single window clearance system in July, also consists of a 1.4 mtpa ethylene unit, a 0.65MTPA propylene unit, 650 KTPA Poly Propylene and other related units. Patnaik’s government has been hoping to draw investments into downstream petrochemical sector and IOCL’s petrochemical complex will help sustain them. The expansion will require 4200 acres of government and private and land. The state-owned oil company has already invested Rs 35,000 crore in its crude oil refinery in coastal Paradip.
Ratnagiri Power on revival path as lenders sign inter-creditor pact
Ratnagiri Gas and Power Pvt Ltd, which had turned a non-performing asset (NPA) for banks in the fiscal first quarter ended June after Reserve Bank of India (RBI) insisted to downgrade the account, is now on course for a resolution. Canara Bank, which had taken a dissenting approach from the other lenders and moved the National Company Law Tribunal (NCLT) against the resolution plan of Ratnagiri Gas and Power (RGPPL), has come on board. All the ten lenders in the consortium have buried their differences and signed the inter-creditor agreement that gives RGPPL, which owns an integrated power generation and regassified liquefied natural gas (LNG) facility, a deep restructuring of its Rs 90 billion loan for a repayment cycle of 10 years. The banks have submitted the resolution plan to RBI and are awaiting approval. “Canara Bank was the only one which was yet to sign the agreement. As a result, RBI asked all the banks to downgrade the account and classify it as an NPA in the June quarter. Now with all the banks in agreement, we have submitted the proposal to RBI for its final approval. We will abide by whatever the regulator tells us,” said a banker who is involved in the restructuring process. The Plan Power plant loans will be restructured by the banks LNG business would be demerged into a new company, Konkan LNG Pvt Ltd The demerged entity will be given a loan of Rs 15 billion for a breakwater facility The sustainable part of RGPPL’s loan of Rs 90 billion would be serviced by the company The unsustainable part will be converted into cumulative redeemable preference shares The sustainable loan will be repaid over a 10-year period at a rate of 10% The restructuring will involve bifurcating RGPPL’s business into two parts –Power plant whose loans will be restructured by the banks, and demerger of the LNG business into a new company, Konkan LNG Pvt Ltd (KLPL). This demerged entity will be given an additional loan of Rs 15 billion for a breakwater facility. In March 2018, National Company Law Appellate Tribunal (NCLAT) had approved the demerger of RGPPL’s LNG business into KLPL. The debt restructuring will involve dividing RGPPL’s existing loan of Rs 90 billion into sustainable, which the company will service, and unsustainable, which will be converted into cumulative redeemable preference shares (CRPS). The sustainable loan will be repaid over a 10-year period with an interest rate of 10%, down from the earlier 13%. Canara Bank, which had an exposure of Rs 4 billion, had filed two separate cases against RGPPL and KLPL under Section 7 of the Insolvency and Bankruptcy Code (IBC), which had taken the other banks in the consortium by surprise and delayed the resolution plan. The Dabhol Power company, which is now called RGPPL, was set up in 1992 as a joint venture between Enron as a majority shareholder while GE and Bechtel were minority shareholders. But the construction and operation of the plant were in news for corruption involving political parties, both in India and the US. The central point of the controversy was over the pricing of power, which fixed at Rs 8 per unit was exorbitant compared to the hydroelectricity power, which was at just Rs 0.35 a unit. The power purchase agreement was signed with the Maharashtra State Electricity Board (MSEB). In 1999, the plant began producing energy, but by 2001 MSEB stopped paying for the power and sought to cancel the power purchase agreement. After Enron ran into scandals in the US and finally filed for bankruptcy there, the Dhabhol plant stopped production. In 2005, it was taken over and revived by converting it into RGPPL, a company owned by the government. The loans and equity were later bought by a consortium of lenders and MSEB, GAIL and NTPC in 2005. The Konkan-based power plant ran into trouble in 2013 after lower natural gas output from Reliance Industries’ KG D6 basin hit production. Current shareholders of the RGPPL is National Thermal Power Corporation (25.51% stake), GAIL (25.51%) , MSEB (13%), IDBI Bank (12.50%), SBI (10%) and Canara Bank (2.15%).
Haldia Petrochemicals to invest in a Rs 78,000 crore hydrocarbon processing complex in Odisha
Odisha has cleared a Rs 78,225 crore investment proposal by Haldia Petrochemichals towards a hydrocarbon processing complex in Balasore, an official in the state’s industry department said. The state’s single window system cleared the proposal. It will be given a go-ahead by the state’s High Level Committee chaired by Chief Minister Naveen Patnaik soon. The project, which comprises a light crude refinery, aromatic complex and ethylene crackers complex, is an enhanced investment commitment from HPL, whose initial proposal of Rs 28,700 crore was cleared in March. “HPL had come back to the state on its own with comprehensive and enhanced investment proposal,” the industry department official said. The project, an endorsement for Naveen Patnaik’s Make in Odisha effort, includes a 1.080 polyethlene unit, a 1.6 mtpa unit of paraxylene, and 1.25 mtpa of purified terepthalic acid (PTA). Odisha expects Haldia to anchor downstream processing industries, as the company has done in its plant in East Midnapur, in West Bengal. HPL will work with the state government to develop downstream units and an ecosystem in the region. “It has been agreed to make adequate quantities of ethylene and propylene, and C4 streams such as Butene-1 and butene-2 shall be made available for downstream units. Common utilities such as steam, compressed air, industrial gasses, power etc shall also be made available to downstream players,” said the official. HPL has also promised to rope in “a global oil and petrochemicals company as a strategic partner who will provide the feedstock supply security and be an equity partner.” The project cost of the first phase is pegged at Rs 52,900 crore, with Rs 15,886 crore as equity and Rs 37,014 crore in debt. Odisha Industrial Infrastructure Development Corporation (OIIDCO) has identified 2391.82 acres of land in Balasore, near the upcoming Subarnarekha port that is being developed by Tata Steel. About 900 acres of this is forest land and 300 acres is held privately.
Numaligarh Refinery to foray into crude exploration in Assam
North East India’s largest refiner Numaligarh Refinery Ltd on Thursday said it has firmed up plans to diversify into exploration of crude oil within the next few months. The Mini Ratna PSU’s board has already given its nod for an initial investment of Rs 150 crore for the diversification and the company has sought approvals for commencing exploration in two blocks in Assam along with other partners. “This is the first time NRL is getting into exploration. We have already received our board’s approval for this and in view of initial risk involvement, they have earmarked Rs 150 crore for the initial exploration purposes,” NRL Managing Director S K Barua told in an interview here. The company will pump in more money if oil is found in the two blocks, he said. The company has identified Namrup block in Dibrugarh and Mesaki in Tinsukia districts for foraying into an exploration of crude. “By October this year, we are likely to get government approvals for the two blocks. Then by early next year, we will start exploration works,” Barua said. Asked about the other partners, he said Oil India has 70 percent stake in Namrup block, while NRL has 20 percent and private player Hindustan Oil Exploration Company (HOEC) owns 10 percent. “In Mesaki, Oil India holds 70 percent stake and NRL, Indian Oil Corporation (IOC) and Bharat Petroleum’s wholly-owned subsidiary Bharat PetroResources Ltd (BPRL) own 10 percent each,” Barua said. Oil India will be the operator of the two blocks, he said adding that once oil is detected during the exploration process, drilling will be done. The NRL currently has one refinery in Golaghat district with an installed capacity of three million metric tonne per annum (mmtpa) and is importing crude to make it fully operational due to shortage of the raw material in Assam and north east region. The NRL is expanding its existing capacity to nine mmtpa at an investment of Rs 22,594 crore, which includes a 1,398 km crude oil pipeline from Paradip to Numaligarh and a 654 km product pipeline from Numaligarh to Siliguri. The company was set up in accordance with the provisions made in the historic Assam Accord and has been conceived as a vehicle for speedy industrial and economic development of the North Eastern region. Bharat Petroleum Corporation (BPCL) has 61.65 per cent stake in NRL, while Oil India and Assam government have 26 percent and 12.35 percent holding respectively. The present authorised capital of the company is Rs 1,000 crore and paid up capital is Rs 735.63 crore. The company’s product range includes LPG, naphtha, motor spirit, aviation turbine fuel, superior kerosene oil, high speed diesel, raw petroleum coke, calcined petroleum coke, sulphur, wax, nitrogen, mineral turpentine oil, special boiling point spirit, and liquid sulphur.