BP says quarterly profit sinks on lower oil prices
BP’s profits slumped by 35 percent in the second quarter on the back of sliding crude oil prices, the British energy major said on Tuesday. Profits after taxation tanked to $1.8 billion (1.6 billion euros) in the three months to the end of June from $2.8 billion a year earlier, BP said in a results statement, adding that this partly “reflects lower oil prices”. Weaker crude prices translate into falling profits and revenues for the energy sector. The energy major also took a $634-million impairment charge on the back of asset sales in Egypt and the United States. BP added however that its underlying replacement cost profit — a widely-watched measure which strips out exceptional items and changes in the value of oil inventories — was broadly unchanged at $2.8 billion. That beat the average analyst forecast of $2.48 billion, according to Bloomberg. BP noted that this reflected the company’s “continued good operating performance” thanks to its growth strategy that was launched in 2016. “At the midpoint of our five-year plan, BP is right on target,” said BP Chief Executive Bob Dudley in Tuesday’s earnings release. “Reliable performance and disciplined growth across our businesses are delivering strong earnings, cash flow and returns to shareholders. “And this is also allowing us to grow businesses that can make a significant contribution in the energy transition, helping deliver the energy the world needs with lower carbon.” Revenues dipped four percent to $73.747 billion in the second quarter, but production rose four percent to 3.8 million barrels of oil equivalent per day. Output remains boosted by last year’s vast purchase of US shale oil and gas operations from mining titan BHP. Benchmark Brent crude oil prices averaged $62.63 per barrel in the reporting period. That was down from $67.24 a year earlier. BP added Tuesday that it paid another $1.4 billion for scheduled costs arising from the 2010 Gulf of Mexico oil spill catastrophe. The London-listed energy major’s total bill so far for the Gulf of Mexico disaster stands at about $70 billion.
BP second-quarter profit of $2.8 billion above expectations
BP reported $2.8 billion in second-quarter profit on Tuesday, unchanged from a year earlier, held back by lower oil prices. BP’s underlying replacement cost profit, the company’s definition of net income, exceeded a forecast of $2.46 billion, according to a company-provided survey of analysts. Second-quarter production rose to 3.8 million barrels of oil equivalent per day, 4% higher than a year earlier. BP said it expects third-quarter 2019 reported production to be lower than second-quarter, reflecting maintenance activities as well as the impact of Hurricane Barry on operations in the US Gulf of Mexico.
This decision by government may make petrol cheaper by Rs 25; know how
Discussion to bring petrol and diesel prices under GST is again on the peak. According to reports, trade association Associated Chambers of Commerce and Industry of India or ASSOCHAM has demanded to include petroleum products and stamp duty in GST. If the government considers the recommendation of ASSOCHAM and petroleum products are included in the GST, the price of petrol and diesel can witness a huge reduction. According to Indian Oil Corporation Limited (IOCL), in Delhi, VAT and excise duty cost Rs 35.56 per litre. Apart from this, the average dealer commission costs Rs 3.57 per litre and the VAT on the dealer commission is around Rs 15.58 per litre. Also, Rs 0.31 is charged as freight charges on per litre petrol. If the government imposes GST by directly removing all these taxes, then the petrol price can get cheaper by up to Rs 25. Centre and states tax on Fuel Experts believe that if you pay Rs 72 for a litre of petrol half the amount goes as taxes. Each state has its own excise tax on petrol and then VAT comes into petrol. So if the actual cost of petrol for supplier Is Rs 36 per litre then it these taxes make it Rs 72 per litre by the time it reaches petrol pumps. More Tax on fuel = more income for states The petrol pump dealers also add their commission in the petrol and diesel, Asif Iqbal, Escort Security head, told Zee Business. If you add the centre and state tax, then it is almost equal to the actual price of petrol or diesel. Apart from excise duty, Value-added tax or VAT (additional tax), in which, when the prices of petrol and diesel are increased, the earnings of states also get a hike. This decision by the government may make petrol cheaper by Rs 25 How cheap would be the petrol price If petrol-diesel is brought under the purview of GST, then the central and the state government have to bear a huge loss. If you see the current fuel price then it is clear that if taxes are not applicable to it, then the petrol price can get cheap. With a depreciation of excise duty and VAT of Rs 73.27 per litre will bring down petrol to Rs 37.70 per litre. If 28% of GST is imposed on petrol, then it will cost Rs 48.25 per litre, as per to Escort Security head Asif. However, bringing petroleum products to GST is not an easy task. Because economists believe that the state has not yet appeared in favour of bringing its share of earnings. In such a case, keeping states’ revenue loss in mind, the central government can not take the decision alone as the state a major part of the GST Council meeting.
Malaysia’s Petronas, Japan’s JXTG may buy stake in Bina refinery: Report
Malaysia’s Petroliam Nasional Bhd (Petronas) and a consortium led by Japan’s JXTG Holdings Inc are among the companies interested in buying a stake in India’s Bina oil refinery, a source close to the matter said. The Bina plant in Madhya Pradesh, capable of processing 156,000 barrels per day (bpd) of crude oil, is operated by Bharat Oman Refineries Ltd (BORL), a 50-50 joint venture between Oman Oil Co and state-run Bharat Petroleum Corp (BPCL). “There are a new set of companies who have approached BPCL for a stake in its Bina refinery,” said the source, who asked not to be named as the discussions are private. BPCL plans to double the capacity of the refinery in the next five years and build a petrochemical complex that would require an investment of about 500 billion rupees ($7.24 billion), the source said. Bharat Petroleum did not respond to a request for comment. Petronas and JXTG were not immediately reachable for comment.
GAIL split first step to trading hub
The government plans to set up a natural gas trading hub after unbundling GAIL India into two separate entities — a marketing and a pipeline company. The oil ministry is expected to move a cabinet note to split the state-owned firm soon as its marketing and pipeline businesses should be at arms-length and not provide any advantage. The unbundling process is expected to be completed within this fiscal, officials said. They said the trading hub would be set up after the unbundling which would aid in better price discovery for domestic as well as imported gas with the aim to become a leading hub in Asia, competing with Singapore, Shanghai and Tokyo. The trading exchange, or the hub, will be on the lines of the existing online platforms that trade in power. The hub is tentatively expected to come up in the early part of next fiscal, the officials said. Natural gas can be traded freely at the hub with prices determined by the market and no regulatory intervention. Gas hubs require a highly developed infrastructure, including pipeline networks, regasification and storage capacities to facilitate trading at short notice periods. An effective hub requires interest from both suppliers and consumers along with adequate volumes. Creating a hub is a complex process as it requires time for the market-determined prices to emerge. These hubs are platforms for deregulated prices and therefore, the participants should be assured of no regulatory intervention even if the prices go against the government’s interest. Regulation allowing domestic and foreign participants to trade, and access pipelines and regasification facilities is also essential. An abundant supply of gas is necessary to allow the commodity to be traded in significant volumes. An effective hub would also require transparency, and liquidity, and volatility should be meaningful for all the stakeholders. Analysts pointed out to a number of challenges to set up a hub. There is significant gap in the prices of domestic gas and regassified LNG, which makes it difficult to arrive at a single price. Besides, there is lack of pipeline connectivity across the country, while the product prices of two major consumers — the fertiliser and power sectors — are regulated to a large extent. The unbundling of GAIL India is a pre-condition to set up a trading hub. The hub is more likely to be used for pricing LNG supplies to India as the country has struggled to secure cargoes at acceptable prices. A domestic gas hub could act as a means to deliver more affordable LNG, the analysts added. India, the world’s fourth-biggest importer of liquefied natural gas (LNG), does not have a free market regime for gas. Natural gas is sold on the basis of a government-mandated formula that links the local price to international rates, while most long-term import contracts are linked to crude oil. Cheaper power A large number of discoms are making a beeline for the power supplied by NTPC under the SCED system which facilitates supply of cheaper electricity on priority, reports PTI. Under SCED (Security Constrained Economic Dispatch), implemented over a year ago, power generating companies raise capacity utilisation of more efficient plants, or of those units which are located closer to coal mines and thus have lower freight cost. As a result, the cost of production goes down, which benefits both the distribution companies and end consumers. The mechanism then pools supply from selected stations on a national-level “merit order”, under which power is first dispatched from lower fuel cost units whenever any state seeks electricity from the central pool.
Vedanta’s Cairn Oil and Gas to ramp up oil, gas production to 260-270 kboepd by FY20
Mining giant Vedanta’s upstream arm, Cairn Oil and Gas, expects to ramp up its crude oil and natural gas production to an average of 260-270 thousand barrels of oil equivalent per day (kboepd) by the end of financial year 2019-20 (FY20) from its current production of 180 kboepd, the company informed as part of its investor presentation. According to Srinivasan Venkatakrishnan, group chief executive officer (CEO), Vedanta, the company has increased its production guidance for FY20, as compared to its earlier projection of 200-220 kboepd. The increase in production will primarily take place on account of, “Wells drilled across the projects will be 250 of which 185 will be hooked up for production. Secondly, our processing capacity for both oil and gas shall increase substantially by year-end. The facility up-gradation project at MPT will be completed by year end increasing our liquid handling capacity to 1.3 million barrels of liquid per day. In tight gas RDG the early production facility commissioned earlier is being ramped up to 15,000 barrels in addition the completion of the gas terminal by end of the fiscal year shall add another 15,000 barrels,” Venkatakrishnan told analysts. Venkatakrishnan added that 70 percent of the increase in oil and gas production is expected to come from Rajasthan assets alone. The company has commenced an investment of $3.2 billion to monetize 400 million barrels and has deployed 10 development rigs at site currently. The work program for the fiscal year includes drilling over 500 wells, of which the company has already drilled 139 wells and hooked up around 46 wells. The upstream arm of Vedanta expects to increase its gas processing capacity to 240 million standard cubic feet per day (mmscfd) by the end of FY20, from 84 mmscfd currently. The company’s oil and gas projects are generating an Internal Rate of Return of more than 20 percent at an oil price of $40 per barrel. In order to increase production from all of its assets the company has tied-up with multiple oilfield service companies, including Halliburton, Baker and Hughes GE (BHGE), Schlumberger, Petrofac, Megha Engineering, and Larson and Turbo. The company has appointed Lloyd’s Register for integrated project management for the 41 blocks won under the first round of Open Acreage Licensing Programme and expects to award end-to-end project contracts for the blocks by mid-August.
Ambani, IOC’s Sanjiv Singh, ONGC’s Shashi Shanker in list of world’s top CEOs
Richest Indian Mukesh Ambani, Indian Oil Corporation (IOC) Chairman Sanjiv Singh and ONGC head Shashi Shanker are among the 10 Indian CEOs named in the CEOWORLD magazine’s global ranking of the world’s most-influential chief executives in 2019. ArcelorMittal Chairman and CEO Lakshmi Mittal is the highest-ranked Indian CEO but the ranking lists his company as a Luxembourg-based firm. While Reliance Industries Chairman and Managing Director Ambani was ranked 49th on the list, Singh was ranked 69th. Oil and Natural Gas Corporation (ONGC) Chairman and Managing Director Shashi Shanker was ranked 77th in the list of 121, according to the list published by the magazine. Other Indian CEOs on the list included State Bank of India (SBI) Chairman Rajnish Kumar (ranked 83th), Tata Motors CEO Guenter Butschek (89th), BPCL Chairman and Managing Director D Rajkumar (94th), Rajesh Exports Executive Chairman Rajesh Mehta (99th), Tata Consultancy Services CEO Rajesh Gopinathan and Wipro Chief Executive Abidali Z Neemuchwala (ranked 118th). Oil Minister Dharmendra Pradhan retweeted a link of the CEO ranking. “Unsurprisingly, Walmart CEO Douglas McMillon came first in the CEOWORLD magazine’s global ranking of the best chief executives across all industries for 2019,” the publication said. “He is followed by Royal Dutch Shell’s global chief executive Ben van Beurden, and ArcelorMittal Chairman and CEO Lakshmi Mittal.” Saudi Aramco CEO Amin H Nasser is ranked No. 4. “Sanjiv Singh, @ChairmanIOCL, makes it to the 100 most influential Chief Executives across industries as per @ceoworld magazine,” IOC tweeted. ONGC also tweeted, saying, “Shashi Shanker, @CMD_ONGC, makes it to the 100 Most Influential Chief Executives across industries as per @ceoworld magazine.” The 2019 rankings placed BP’s chief executive, Bob Dudley in fifth ahead of ExxonMobil CEO Darren Woods into sixth; while Volkswagen CEO Herbert Diess ranked seventh, and Toyota Chief Executive Akio Toyoda eighth. Overall, among the top-10 most influential CEOs in the world 2019, the ninth and 10th positions are held by Apple CEO Tim Cook and Berkshire Hathaway CEO Warren Buffet. Amazon CEO Jeff Bezos took the No. 11 spot, followed by the UnitedHealth Group CEO David Wichmann (No.12) and Samsung Electronics Chief Executive Kim Ki-Nam (No.13). Out of 121 best CEOs in the world 2019, Chevron CEO Michael K Wirth ranked No. 20th, it added. “CEOWORLD magazine’s global ranking of the best chief executives for 2019 measured more than 1,200 CEOs across 96 countries. Taking a long view of business performance, the methodology is primarily based on the financial returns for the CEO’s entire tenure, which makes up 60 per cent of the final ranking, as opposed to stock price and the current quarter’s numbers,” the publication said. To calculate the final position, the additional 40 per cent of a CEO’s ranking factors in a company’s track record on environmental, governance, and social issues, as well as market shares, change of market capitalisation, and brand’s newsworthiness and the impact was taken, it added.
IOC, Adani to invest Rs 9,600 cr in city gas projects
Indian Oil Corp (IOC) and its partner Adani Gas Ltd will invest about Rs 9,600 crore in rolling out infrastructure for retailing CNG to automobiles and piped natural gas to household kitchens in 10 cities for which they recently won licences for, the state-owned firm said on Monday. The two firms in 2013 had incorporated a 50:50 joint venture company, IndianOil-Adani Gas Pvt Ltd (IOAGPL), for implementation of city gas distribution (CGD) projects in various cities in the country. Over the years, IOAGPL participated in various bid rounds for city gas licence conducted by Petroleum and Natural Gas Regulatory Board (PNGRB). It as on date has licences for 19 geographical areas (GAs), IOC said in a notice to shareholders. The notice was to seek shareholder nod for providing corporate guarantees to banks on behalf of IOAGPL furnishing of performance bank guarantees to PNGRB to fulfil the licence conditions. “In line with PNGRB regulations, authorization to the successful entity is issued by PNGRB only after the entity submits Performance Bank Guarantee (PBG) from any scheduled bank for a pre-determined amount for specific GA,” IOC said in the notice. Shareholders will vote on the proposal at IOC’s annual general meeting (AGM) in Mumbai on August 28. City gas distribution (CGD) projects, which entail retailing CNG to automobiles and marketing piped natural gas to household kitchens for cooking as well as to industries for use as fuel, are typically long duration projects wherein demand build-up is gradual and revenue generation becomes appreciable only in the later years. “IOAGPL is still in process of development of CGD Projects in its authorized GAs,” IOC said. “Currently, projects in 8 GAs have been commissioned (viz. Chandigarh, Allahabad, Panipat, Daman, Udhamsingh Nagar, Ernakulam, Dharwad, and Bulandshahr) and South Goa GA will be commissioned shortly. During 2018-19, IOAGPL won 10 more GAs and development of CGD Project in these GAs would require capital expenditure of Rs 9,600 crore (approx.) to meet the committed bid numbers.” The funding required for capital expenditure has to be met from equity contribution/debt financing, it said. “The revenue from the commissioned GAs is currently insufficient to handle huge financial commitment in the form of capex to achieve committed targets. IOAGPL would continue to participate in bidding for CGD Projects in the future, and in the event of emerging successful, it may seek promoters’ assistance to provide required corporate guarantees (CGs) in favour of banks for issuance of PBGs to PNGRB on behalf IOAGPL,” the notice said. Considering an estimated average value of Rs 25 crore for PBG per GA, IOAGPL may require promoters’ support for the issuance of CGs worth Rs 200 crore. IOAGPL being a 50:50 JV, IOC’s share for extending such CGs would be Rs 100 crore, the company said. “Considering the anticipated growth in activities of IOAGPL, it is proposed to appoint one of the whole-time Director of IOC as a part-time nominee director on the Board of IOAGPL,” the notice said. As per provisions of Section 185 of the Companies Act, 2013, if a Director on IOC board is also a Director on Board of IOAGPL, which is a private limited company, then the state-owned firm can provide loans or issue CGs in favour of banks on behalf of the joint venture. This, however, is possible only upon approval by the shareholders of IOC through a special resolution passed at a general meeting. “Accordingly, as required under section 185 of the Companies Act 2013, the approval of Members is sought through Special Resolution to provide CGs in future in favour of banks on behalf of IOAGPL for issuance of PBGs in favour of PNGRB for CGD Projects in various GAs, up to a limit of Rs 100 crore,” the notice said.
AG&P Int’l eyes more LNG projects
AGP International Holdings Pte. Ltd. (AG&P) is working to execute multiple liquefied natural gas (LNG) initiatives globally, including the Philippines, after securing a $100-million equity investment from a Japanese consortium. AG&P said Osaka Gas Co. Ltd., through affiliate Osaka Gas Singapore Pte. Ltd. (Osaka Gas) and the Japan Bank for International Cooperation (JBIC), have invested in a minority stake in AG&P. The firm will use the $100-million additional capital to develop and roll out various projects globally. One of which is the City Gas Distribution business in India, where AG&P bagged long-term, exclusive concessions to connect millions of people to compressed natural gas (CNG) for their vehicles and piped natural gas directly into their homes across South India and Rajasthan. AG&P also said it will develop more small- and medium-scale LNG import terminals, such as the pending terminals in Karaikal, India that will provide the vital link to bring commercially attractive, convenient and safe gas to population centers relying on dirtier and more expensive fuels. The company is also developing LNG applications and logistics, such as LNG delivery to end-customers by different transportation options. AG&P also aims to grow its intellectual property which made it and engineering firm Gas Entec leaders in the design, build, testing and commissioning of LNG bunkering vessels, floating storage and regasification (FSRUs, FRUs, FSUs and onshore variations) and LNG, dual-fuel applications for ships and other vehicles. The company also plans to roll out advanced modularization and field construction services to serve global energy and commodity markets in the US, Australia, the South Pacific and Southeast Asian markets. It also eyes to rapidly accelerate domestic infrastructure in the Philippines, where AG&P proudly owns and operates two major yard facilities which employ 4,000 people. “AG&P and Gas Entec, working together, bring innovative, in-house engineering, project management, manufacturing, licensed LNG tank and handling system outfitting, construction, project development, customer marketing and operations management for LNG-related projects and for our modularization, site-work and other customers. We look forward to changing how the LNG industry works,” AG&P chairman Jose Leviste Jr. said. Osaka Gas is one of the world’s foremost gas utilities, supplying natural gas to 5.5 million households and operating over 60,000 km of pipeline, in addition to a wide range of gas, power and renewable assets around the world, including in the US, Europe and Southeast Asia. Its investment in AG&P marks the next step in a long-term relationship where both parties have worked together to develop LNG infrastructure projects in South Asia, Southeast Asia and the Americas, among others. “We strongly believe that this investment in AG&P will provide Osaka Gas with a valuable asset to create and develop new markets for Osaka Gas. AG&P’s single-minded focus in developing solutions with the end-customer in mind has been inspirational to our team,” said Katz Sato, head of South and East Asia Business development for Osaka Gas. Apart from providing growth capital, Osaka Gas will also work with AG&P in other areas, including technical support to various projects, such as AG&P’s major city gas initiatives in India. Meanwhile, JBIC is an institution wholly owned by the Japanese government, intended to support Japanese industry and Japan’s strategic priorities. Its investment in AG&P was made, in line with its policy objectives, to support Osaka Gas’s ongoing collaboration with AG&P in expanding its overseas business.
ONGC’s crucial offshore rig conversion project facing further delays
An age-old project of Oil and Natural Gas Corporation (ONGC), India’s state-owned petroleum explorer, that aims at converting oldest offshore rig Sagar Samrat to a Mobile Offshore Production Unit (MOPU) has been delayed again and is now likely to be commissioned by December this year, a status report by the Ministry of Statistics and Programme Implementation (MOSPI) showed. An ONGC executive confirmed the delay and added that the commissioning time had to be extended due to rains and the company, after terminating the original contract with Mercator last year, has now appointed United Arab Emirate (UAE)-based Gulf Piping Company to undertake the project. The project, crucial for raising output, has been delayed by 79 months so far and is facing cost overruns to the tune of Rs 715 crore, the report showed. The rig is proposed to be deployed in WO-16 cluster fields close to Mumbai High. The conversion of the off-shore rig Sagar Samrat was approved on March 2011 and was intended to be commissioned by May 2013 at an original cost of Rs 861.79 crore. ONGC had originally awarded the rig conversion project to Mumbai-based Mercator Ltd’s oil and gas subsidiary. However, that contract had to be terminated due to delays in execution. Post the award of a contract to Gulf Piping Company, ONGC had projected to commission the project by March 2019. The delay in deployment of MOPU has been one of the main reasons for the company’s shortfall in crude oil production for the financial year 2016-2017 and 2017-2018, according to a report by the oil ministry. ONGC has been under pressure from the government to arrest and increase its domestic crude oil production. Following the recommendations of a high-level committee headed by Niti Aayog Vice Chairman Rajiv Kumar, the company had to invite strategic partners to help enhance production from 64 fields. ONGC’s crude oil production in June this year declined 5 percent to 1,686 Thousand Tonne. Cumulatively, the oil and gas explorer’s domestic oil production during the first three months of the current financial year decreased 5 per cent to 5,137 TMT from 5,392 TMT produced in the corresponding period last fiscal. The company has managed to win 10 oil and gas blocks under the first three rounds of Open Acreage Licensing Programme (OALP).