Reliance topples Indian Oil to become highest-ranked Indian firm on Fortune Global 500 list
Mukesh Ambani-led Reliance Industries has jumped 42 places to become the highest-ranking Indian firm on the Fortune Global 500 list. State-owned Indian Oil Corp (IOC) had been the top-ranked Indian company on the list and was first on the Fortune India 500 list which was started in 2010. “This year, ranked 106, Reliance Industries (RIL) has replaced IOC (117) as the top-ranked Indian company on the Global 500 list,” Fortune said. RIL’s revenue soared 32.1 percent from $62.3 billion in 2018 to $82.3 billion in 2019. In comparison, IOC clocked a 17.7 percent growth in revenue from $65.9 billion to $77.6 billion. “Over the past 10 years, RIL’s revenue rose at a compounded annual growth rate of 7.2 percent from $41.1 billion in 2010, while that of IOC rose at 3.64 percent from $54.3 billion in 2010,” it said. Besides, RIL and IOC, Oil & Natural Gas Corp (ONGC), State Bank of India (SBI), Tata Motors, Bharat Petroleum Petroleum Corp Ltd (BPCL) and Rajesh Exports are the other Indian companies to feature on the list. ONGC has moved up 37 places to 160th rank on the global list, while SBI lost 20 places to 236th rank. Tata Motors slipped 33 places to 265th position. BPCL rose 39 places to rank 275th spot, while Rajesh Exports slipped 90 places to rank 495th. US giant Walmart continues to top the Fortune 500 list followed by Chinese state-owned oil and gas company Sinopec Group, which moved one rank up. Dutch company Royal Dutch Shell was ranked third followed by China National Petroleum and State Grid. Saudi oil giant Saudi Aramco appeared for the first time in top 10 at sixth position, while BP, Exxon Mobil, Volkswagen, and Toyota Motor are ranked 7th, 8th, 9th and 10th position respectively. “The journey of RIL, which marks its 16th year on the Global 500 list this year, to the top position has been interesting. The average difference of its revenues with that of IOC was $9.4 billion in the nine years from 2010 to 2018. The difference was as high as $13.2 billion in 2010. The gap started to narrow after 2016 when RIL’s revenue was $11.3 billion lesser than IOC. The difference further fell to $6.6 billion and $3.6 billion in 2017 and 2018, respectively, and RIL surpassed IOC by $4.7 billion in 2019,” Fortune said. Over the 10-year-period, IOC saw its highest revenue at $86 billion in 2012, which is $9.8 billion higher than its revenue in 2019. Interestingly, 2012 also saw RIL registering its second-highest revenue of $76.1 billion. The absolute increase in RIL’s revenue between 2012 and 2019 is $8.2 billion. At the 2012 peak, IOC and RIL were ranked at 83 and 99 positions, respectively, on the Global 500 list. In 2018, RIL was ranked 148th and IOC was at 137th place, it added.
ADNOC and Pertamina sign oil and gas development agreement
The Abu Dhabi National Oil Company (ADNOC) signed a an agreement with state-owned Indonesian energy company PT Pertamina (Persero) on Wednesday for oil and gas collaboration in both countries and globally, ADNOC said in a statement. The comprehensive strategic framework (CSF) agreement was signed on the sidelines of an official visit to Indonesia by Abu Dhabi Crown Prince Sheikh Mohammed bin Zayed. The scope of projects under consideration includes participation in the United Arab Emirates’ upstream oil and gas sector as well as refining and petrochemicals, LNG, LPG, aviation fuel and fuel retail opportunities in Indonesia. The two parties will also explore collaboration across transportation, trading and storage in the UAE.
Petrobras to privatise Brazil’s top gas seller in $2 bn share sale
Brazilian state-run oil company Petroleo Brasileiro SA is set to relinquish control of the country’s biggest fuel distributor in a share offering due to be priced late on Tuesday, pushing ahead with a privatization drive under new Chief Executive Roberto Castello Branco. Each of Branco’s three predecessors discussed privatizing Petrobras Distribuidora SA. The share offering of the gas station chain underscores the new government’s commitment to an array of public asset sales in industries ranging from energy to finance. Petrobras, as the company is known, plans to sell 25% of shares in Petrobras Distribuidora, which would bring in roughly 7.57 billion reais ($2 billion) at Tuesday’s closing price. Shares rose 2% on Tuesday to 26 reais, ahead of the offering pricing. The stake sale could increase to 33.75% via overallotment provisions, raising up to 10.2 billion reais ($2.7 billion). Supplementary and additional allotments will be allocated by Aug. 28, according to the prospectus. The fuel distributor, also known as BR Distribuidora, owns 17.7% of all gas stations in Brazil, according to oil regulatory agency ANP data. Its closest rival is Ipiranga, controlled by Ultrapar Participacoes SA, with 14% of gas stations. The sale of state-owned assets is expected to drive mergers, acquisitions and share offerings in Brazil in the second half of the year, bankers and investors said, after a slower-than-expected first half. Petrobras management, appointed by President Jair Bolsonaro in January, is aggressively exiting downstream and midstream businesses to sharpen its focus on offshore oil exploration and production. Analysts at UBS AG and Banco Bradesco SA have “buy” and “outperform” ratings on Petrobras Distribuidora, with price targets of 30 and 35 reais, respectively. Both say privatization will free the firm of some onerous legal obligations. “Personnel costs should fall after privatization, as (the company) will be free to follow its own hiring process rather than public-tender hiring and the dismissal process will be significantly less complex than the current one,” wrote UBS analysts led by Luiz Carvalho. The offering will be led by the investment banking units of JPMorgan Chase & Co, Citigroup Inc, Itau Unibanco Holding SA, Bank of America Corp, Credit Suisse Group AG and Banco Santander Brasil SA.
Reliance Industries, Aramco talks on stake sale stall: sources
The Reliance Industries talks to grant a minority stake in its refining assets to Saudi Aramco have hit a roadblock over the valuation and structure of the deal, two people familiar with the matter said. State-owned Aramco, the world’s biggest oil producer, plans to boost investment in refining and petrochemicals to secure new markets for its crude and sees growth in chemicals as central to its downstream strategy to reduce risk as oil demand slows. Reliance initially held talks on offering Aramco at least 20% in the special purpose vehicle covering refining, petrochemicals and marketing, with the focus on next phase expansion as well. “Talks have stalled as Reliance is asking for a higher valuation and wants to transfer debt of the holding company to the new SPV (special purpose vehicle),” said one of the sources. Reliance, controlled by Asia’s richest man, Mukesh Ambani, operates the world’s biggest refining complex with a capacity to process 1.4 million barrels per day (bpd) of oil at Jamnagar in western India. It plans to expand capacity to 2 million bpd by 2030, according to plans shared with the Indian government. No immediate comment was available from Reliance and Saudi Aramco.
French court throws out appeal against Total’s gas power plant
A French court has rejected an appeal by activists against Total’s planned 440 megawatts (MW) capacity Landivisiau gas-fired combined cycle power plant in the Brittany region of northwestern France. The project, which Total took over following its $1.7 billion acquisition of French alternative energy supplier Direct Energie, is over two years behind schedule due to various court appeals by activists trying to stop the project. Judges at the administrative court of appeal in Nantes said late on Monday that the project was not a risk to the environment, nor was it situated on a protected natural area. The court said the Brittany region produces only around 7% of the energy it consumes, and power consumption in the region is increasing faster than the national average due to strong demographic growth, which is increasing electricity demand. Total has made financial commitments to go ahead with the project. French electricity grid operator RTE has said Landivisiau was critical in guaranteeing France’s security of power supply for the winter 2020/2021 period given the planned shutdown France’s last four coal power plants, and the shutdown of the Fessenheim nuclear power plant.
Inventory losses, muted refining margins to weigh on OMCs financial numbers
The state-owned Oil Marketing Companies (OMCs) may post weak financial results for the first quarter ended June on the back of inventory losses, muted refining margins, and lower crack spreads, projections made by equity research firms show. Benchmark Asian petrol and diesel cracks — reflecting price differential between crude and refined products — have come under pressure due to a supply glut in the Asian market. Subdued product cracks had dented Asian refiners’ margins including government-owned OMCs impacting their earnings and net profit in the previous two quarters. Inventory gains or losses occur due to the change in global crude prices during the time of buying the crude oil and refining the petroleum product. Mukesh Ambani-led Reliance Industries’ refining and marketing segment’s performance was impacted during the June quarter due to significantly lower product cracks on a year-on-year basis, the company said in a statement. “Both Singapore gasoline and gasoil cracks over the April-June period were weaker year-on-year by $4.60/Bbl and $2.30/Bbl, respectively, pressured by additional supply from new refineries in the region, coupled with moderating demand growth, particularly from China, with India’s growth also slowing in recent months,” S&P Global Asia Analytics told ETEnergyWorld in an e-mail response. Indian Oil Corporation (IOC) Indian Oil, the country’s largest fuel retailer and one of the most profitable PSUs in the country, is expected to post a 82 per cent decline in net profit at Rs 1,207 crore for the June quarter, as compared to Rs 6,831 crore posted in the corresponding quarter a year ago, Kotak Instituional Equity said in a report. “We expect IOCL to report weak results impacted by the adventitious loss of Rs 22 bn and muted refining margins, which will be partially offset by higher-than-normal (+Rs0.5/liter) blended marketing margins on auto fuels,” Kotak said. Another equity research firm Prabhudas Lilladher estimates the fuel retailers’ net profit to slump 57.6 percent to Rs 2,898 crore during the quarter. “IOCL earnings to be impacted by lower inventory gains. Improved marketing earnings and depreciating exchange rate provide downside support,” it said in a report. Bharat Petroleum Corp (BPCL) Bharat Petroleum, the country’s second-largest fuel retailer, is expected to post a 65 percent decline in net profit at Rs 804 crore for the first quarter ended June. “We expect BPCL to report weak results impacted by the adventitious loss of Rs 7.5 bn and muted refining margins, which will be partially offset by higher-than-normal (+Rs0.5/liter) blended marketing margins on auto fuels,” Kotak said. Prabhudas Lilladher has estimated the company’s net profit to decline 37.7 percent to Rs 1,429 crore for the first quarter ended June 2019. “BPCL earnings to decline sequentially due to inventory loss and muted GRMs. Improved marketing earnings and depreciating exchange rate provide downside support,” the brokerage said. Hindustan Petroleum Corp (HPCL) Hindustan Petroleum, the country’s third-largest fuel retailer is expected to post a 59.2 percent decline in net profit at Rs 701 crore for the first quarter ended June 2019. “We expect HPCL to report weak results impacted by an adventitious loss of Rs 8.5 bn and muted refining margins, which will be partially offset by higher-than-normal (+Rs0.5/liter) blended marketing margins on auto fuels,” Kotak said. Prabhudas Lilladher has estimated the company’s net profit to drop 23.7 percent to Rs 1,311 crore for the first quarter ended June 2019, as compared to the corresponding quarter a year ago. “HPCL earnings to decline sequentially due to inventory loss and muted GRMs. Improved marketing earnings and depreciating exchange rate provide downside support,” Lilladher said in a report. According to S&P Global Asia Analytics, a build-up of demand over the summer driving season in the Northern Hemisphere will provide some support for gasoline cracks. Also, later this year, the preparation for IMO 2020 spec is expected to enhance gasoil cracks and support gasoline cracks as well.
Japan to lose top LNG importer position to China by 2022
Japan could lose its pole position as the world’s top LNG importer to China as early as 2022, according to a new report by Wood Mackenzie. By then, LNG imports in Japan are expected to decline 12 percent to 72.8 million tonnes per annum (mmtpa) compared to 2018, while China’s import volume rises 37.5 percent to 74.1 mmtpa. Despite losing this leadership position, Japanese buyers will continue to take a lead in contracting innovation with developments such as hybrid deals, coal indexation, joint procurement, and carbon-neutral cargoes. As several long-term contracts wind down from the early 2020s and with gas and power market liberalization underway, this innovation will provide buyers more leverage and opportunities in future contracting discussions. Meanwhile, ensuring the security of supply through the diversity of supply sources will remain a primary concern. Japanese buyers should continue to lead the market in sourcing LNG from new supply regions. “While LNG demand is declining, Japanese imports will remain above 70 mmtpa through much of the 2020s. It will remain the second-largest LNG consumer in the world until at least 2040, with demand still exceeding 60 mmtpa. As such Japan still provides ample opportunities for LNG sellers, particularly as existing contracts expire,” WoodMac senior analyst Lucy Cullen said. “The decline in Japanese imports will be driven by competition from coal, nuclear and renewables in the power sector and slow macroeconomic growth,” commented Cullen. Japan has remained an outlier as a developed power market that has still prioritized the construction of new coal capacity. Opinions on coal within Japan vary widely with pro-coal policy targets misaligned with public sentiment and corporate and investment activities. Despite sustained low LNG spot prices, Japan’s electricity market does not favor coal to gas switching on a wide scale. The country remains well-contracted in LNG to the early 2020s as US and Australian supplies ramp-up. As a result, the average cost of gas for Japanese utilities remains well above spot price and coal is still the cheapest form of electricity generation after nuclear and renewables on a short-run marginal cost basis. Under Japan’s 5th Strategic Energy Plan (2018), the government aims to decrease gas and coal generation (down to 27% and 26% shares, respectively) and offset with greater low-carbon nuclear and renewable generation. “The tide appears to be turning with increasing restrictions on the financing and building coal. As such, we expect this policy target and such a robust share of coal in the generation mix will be increasingly difficult to sustain. This would improve the outlook for LNG,” added Cullen. On the nuclear front, Japan restarted five plants in 2018 alone. With next restarts scheduled for the mid-2020 and 2021, this will put downward pressure on LNG import requirements in the early 2020s. Although nuclear outages remain a risk in this period if anti-terrorism measures are not met on time. “We assume 15 reactors will be back online by 2030, accounting for 12% of power generation, much lower than the official target of 20-22%. While nuclear restarts generally dampen gas generation, our lower nuclear number implies a more optimistic view of LNG demand compared to the government,” Cullen said. In line with its pursuit of a low-carbon future, Japan is also targeting 22-24 percent of its 2030 generation mix to come from renewables (including hydro). While Wood Mackenzie forecasts aggressive additions of wind and solar capacities, further investment will also be needed on power grid infrastructure to cope with this level of renewable generation.
India becomes second-fastest growing gas market; $30 billion war chest ready for supply boom
India has become the second-fastest growing natural gas market globally as a result of a sustained policy push by the government that is aided by firm investment plans to the tune of a whopping $30 billion for production, import and distribution infrastructure. “India is second-fastest growing gas markets globally. In recent years, there has been a significant policy push by the Indian government to improve infrastructure, which has included giving new licenses for city gas distribution, raising pipeline tariffs for long-haul pipes, and banning more polluting fuels like fuel oil and pet coke,” Morgan Stanley said today. The multinational investment bank added that India is investing significantly to meet its growing demand. “The county has over $30-billion Capex allocated to the creation of gas import and distribution infrastructure and the revival of domestic gas production from the financial year 2019-20 onward for pipelines, city gas infrastructure, fuelling infrastructure, and doubling its LNG import facilities,” it said in a report. The country has five new terminals under construction with 25.5 million tonne per annum of capacity that are likely to be completed by 2020. These terminals will ease import constraints in the existing western and northern market and also make gas available in the southern and eastern parts of the country. India’s LNG demand is expected to grow from 22 million tonnes (MT) in 2018 to 31 MT in 2025 at a compounded annual growth rate of 4 percent. India, as a gas market, is extremely price-sensitive, with demand fluctuating between LNG, propane, and fuel oil, depending on the economics, especially for power and industrial gas usage. With gas prices set to remain low structurally after nearly 20 years of oil parity economics, the potential for this market to use gas could be as high as $12 billion to $15 billion by 2025, according to the report. The banks also pointed out that cheap gas is a boon for Indian consumers at a time when gas will likely to form a big part of the solution to control fossil fuel pollution, with nearly 177 cities set to have gas networks by 2025. “Gas infrastructure will cover 2.2 times more people or 50 percent of the population in five years, and five times more households will have access to gas. We estimate this will drive investment of about four times the current market cap of listed city gas players. By 2024, we see India’s gas penetration rising two times to about 12 percent, the equivalent of China in 2006,” it said. The report also pointed out that despite significant growth, India is still a decade behind China – the fastest-growing gas market — on gas infrastructure and penetration, with current gas penetration levels similar to China in 2004. China is expected to maintain double-digit growth on gas consumption in 2019-21, supported by the government’s strong initiatives to improve air quality.
French oil and gas group Maurel & Prom eyes UK’s Amerisur
Oil and gas company Maurel & Prom has made a possible offer worth about 210 million pounds ($262.5 million) for UK peer Amerisur Resources, which could help the French firm boost its range of assets in Latin America. Maurel & Prom said on Monday its possible offer was priced at 17 pence per share for Amerisur, whose shares closed at 16.52 pence on Friday. “M&P sees considerable benefit to shareholders from a combination and believes that the enlarged group would offer significant value upside for both Amerisur’s and M&P’s shareholders,” the French company said in a statement. “The combination would result in a balanced portfolio of producing assets, with a wide range of high-impact exploration and development opportunities across Latin America and Africa,” added Maurel & Prom.
High stakes in natural gas standoff between Cyprus and Turkey
Longtime adversaries Cyprus and Turkey are locked in a tense “game of chicken” over the prospect of a multi-billion-dollar Mediterranean gas bonanza with neither side willing to capitulate, analysts say. Turkey vowed to escalate its activities in waters around the island after the European Union on Monday agreed measures to punish Ankara for pursuing “illegal” drilling in Cyprus’s exclusive economic zone. “This is a tit-for-tat game where nobody is ready to back down, with Turkey willing to go one step further,” Hubert Faustmann, professor of history and political science at the University of Nicosia, told AFP. Turkey “will continue to drill, they may even decide to drill in blocks licensed by the Cypriot government… it’s a game of chicken,” he added. The discovery of huge gas reserves in the eastern Mediterranean has stoked long-standing tensions between EU member Cyprus and Turkey. The island is divided between the internationally recognised Republic of Cyprus and a breakaway state set up after a Turkish invasion launched on July 20, 1974 in response to a coup sponsored by the military junta then ruling Greece. Turkey, the only country to recognise the Turkish Republic of Northern Cyprus, has sent three ships to carry out drilling off the Cypriot coast despite EU condemnation and strong words from Washington. In response EU foreign ministers agreed measures including cutting 145.8 million euros ($164 million) in pre-accession funds to Turkey allocated for 2020. Turkey, which does not recognise Cyprus as a sovereign or EU member state, says its actions abide by international law and that it is drilling inside its continental shelf. – ‘Turkey won’t step down’ – While negotiations to reunify the island remain on hold, Cyprus has moved to start gas and oil exploration by issuing licences to international companies. That has angered Ankara which argues that such exploration deprives the Turkish Cypriot minority of benefiting from the island’s natural wealth. “Turkey won’t step down and EU sanctions are mild, the sanctions are not painful, and Turkey knows there is no determination for a confrontation,” said Faustmann. He argued that Cyprus needs to find more gas to make it commercially viable to extract. “Unless there’s a big find, it might be a lot of noise over nothing, there isn’t enough extractable gas at the moment.” Experts also argue that if the escalation continues it will be difficult for energy companies to explore off Cyprus due to the risk. “Interest in operations is there, however tensions with Turkey are not helping. If tensions subside then there will be a lot of interest because there is support from the markets and the EU too,” said energy analyst Cyril Widdershoven, founder of the consultancy firm Verocy. Cyprus on Tuesday rejected as “unacceptable” a Turkish Cypriot proposal on energy revenue sharing to help de-escalate tensions. Nicosia argues that jointly managing the island’s untapped energy resources can only be workable once an elusive peace settlement has been agreed, while assuring Turkish Cypriots will get their equal share. – Challenging market – Atlantic Council senior associate Charles Ellinas said the rising tensions will make the waters choppier for energy companies when they resume drilling in blocks licensed by the Cyprus government, especially in areas disputed by Turkey. “Turkey will not back off unless the EU and the US apply serious sanctions that hurt its economy. But I do not see that happening… NATO, trade and refugees are important to them,” he told AFP. “Turkey will maintain aggression until Cyprus agrees to put hydrocarbons on the negotiating table.” The waters off Cyprus have attracted international giants such as ExxonMobil of the United States, France’s Total and Italy’s Eni. Sizeable natural gas deposits have been discovered in three areas but have yet to be extracted. Last month Cyprus said it expected to earn $9.3 billion over 18 years from exploiting a gas field in the Aphrodite block under a renegotiated contract with Royal Dutch Shell, US-based Noble and Israel’s Delek. In February US energy giant ExxonMobil announced the discovery of a huge natural gas reserve off the island’s coast which Cyprus hailed as one of the biggest worldwide in recent years. Ellinas estimates Cyprus’s discovered reserves so far are around 10 trillion cubic feet and “there is probably as much still to be discovered and possibly more.” He estimates total gas revenue could be about $160 billion, which could generate profits of $30 billion over 20 years, but finding buyers may be tough in a competitive international market. “Cyprus’s share could be $17 billion. But first, sales need to be secured, and there lies the challenge, in a market inexorably moving towards renewables and clean energy. The longer it takes the more difficult it becomes.”