Amlekhgunj oil pipeline to be extended to Chitwan
Nepal Oil Corporation has decided to extend the Motihari-Amlekhgunj oil pipeline to Chitwan with the construction of the country’s first pipeline being built with Indian assistance nearing completion. According to the corporation, the pipeline being laid from Motihari, India to Amlekhgunj is expected to be finished next month. Only 5 km of the pipeline passing through Parsa National Park, out of the total length of 36.2 km that falls within Nepal, remains to be built. Officials of the state-owned oil monopoly said tenders would be invited to conduct a detailed project report to extend the pipeline to Lothar of Chitwan district. “The corporation is likely to call for bids in May.”The source said that Nepal Oil Corporation had already conducted a pre-feasibility study for the Amlekhgunj-Chitwan pipeline. India has expressed its willingness to help Nepal extend the pipeline. Birendra Kumar Goit, the spokesperson for Nepal Oil Corporation, said the corporation had started groundwork to finalize whether to adopt a government-to-government (G2G) or business-to-business (B2B) modality for the construction of the pipeline. The government has given priority to building the pipeline in a bid to reduce the import costs of petroleum products and check gasoline theft in transit. Following the construction of the cross-border pipeline, Nepal Oil Corporation is expected to save more than Rs2 billion being spent on gasoline imports. Goit said the corporation was working on determining the distribution modality of the fuel imported via the pipeline. According to him, the enterprise has upgraded three out of its four fuel storage tanks at the Amlekhgunj depot. These tanks can stock 16,000 kilolitres of fuel. Nepal Oil Corporation has decided to import diesel first after the pipeline is ready. It has the capacity to transport fuel at a rate of 291 kilolitres per hour. “Later on, we will be using the system to import petrol too,” said Goit. The construction of the pipeline was proposed in 1995, but the project gained shape only after the two governments signed an agreement on August 25, 2015. Nepal has identified the Amlekhgunj-Raxaul-Motihari oil pipeline as a national priority project. The estimated cost of the project is Rs4.4 billion. Of the total outlay, India is spending Rs3.2 billion while Nepal is putting up the rest of the money, mainly to build the related infrastructure of the project, according to the bilateral agreement.
India’s new thrust on oil and gas hunting: Prospects and challenges
After opening almost entire sedimentary basins in India for oil and gas exploration in 2017, India came out with far-reaching policy reforms notification in February this year. This may turn out to be a game changer in the oil and gas sector in India if implemented in its true spirit. It makes drastic changes in the Hydrocarbon Exploration Licensing Policy (HELP) and the Open Acreage Licensing Policy (OALP) in order to attract more domestic and foreign investment in exploration of oil and gas. Let us have a close look at some of its salient features. First, all the 26 sedimentary basins have been classified into three categories based on the current status of exploration and production in the respective basins. Seven basins having commercial production have been put in category-I. Five basins where hydrocarbon discoveries are there but yet to be converted to recoverable reserves and commercial production are in Category-II and 14 basins having no discovery but have prospective resources are in category-III. Second, as the different categories of basins carry a different level of risk and reward, the licence for exploration and production will be awarded on differential fiscal and contractual terms. In categories II and III, the contractors will not have to share with the Government any revenue or production from the blocks. This is a significant departure from the existing terms of an award under the HELP. Only royalty and statutory levies will be payable. However, the revenue sharing with the Government will commence only in case of a windfall gain on a graded scale ranging from 10% to 50% on incremental revenue over US$ 2.5 billion in a financial year. Third, in order to encourage investment in new blocks in producing basins also, a maximum cap of 50 per cent have been imposed for revenue sharing with the government. More emphasis has been given on investment. The biddable parameters for category-I blocks would carry 70% weight to the minimum work programme (MWP) and 30% weight to Revenue share as against the current ratio of 50:50. This will eliminate the tendency to put unviable bids to win the award of blocks. Such biases were seen in Discovered Small Fields (DSF) Bidding Round I and II. Some Bidders got the blocks awarded without committing any investment but by bidding to share even 99% of revenue with the Government, an unrealistic obligation. Fourth, to expedite exploration and production, the exploration period has been reduced to 3 years for on-land/shallow water blocks and 4 years for deep-water blocks. To incentivize early production, concessions in royalty will be given if production is commenced within 4 years in on-land and shallow water blocks, and 5 years for deep or ultra-deep water. The fiscal incentives may result in early monetisation of discoveries. Fifth, the Contractor will have full marketing and pricing freedom to sell on arm’s length basis. There will be no allocation of the output by the Government. Discovery of prices will be on the basis of transparent and competitive bidding. However, the new Policy does not address the oil companies’ demand for permission to export oil. The exports have not been opened up. Sixth, ONGC and Oil India have been allowed to retain the fields where oil/gas discovery has been made. NOCs may also induct private sector partners including by farming out, joint venture and bidding out. In earlier DSF Rounds I and II, the oilfields discovered by National Oil Companies (NOCs) were put on biddings. The successful bidders were not have to make any payment to the ONGC or OIL against the exploration expenses incurred by them in past. Moreover, the assets created at the site such as production facilities and development/ production wells by the NOCs were handed over to the Contractors without any payment. There was also no signature, discovery or production bonus and no carried interest by National Oil Companies or State participation. The new policy addresses the NOCs’ concerns on the rewards for the value additions done through discoveries after extensive exploration. Though these changes make the investment in Indian oil and gas Sector more attractive, some challenges remain both for the entrepreneurs and the government. First, 37 blocks with acreages measuring 60,000 square km are on offer in the ongoing OALP Bidding Rounds II and III. Policy Reforms in Exploration and Licensing Policy announced in Feb have not been made applicable for these blocks, though bidding is still open and yet to be closed. Why wait for future rounds? It would be prudent to go for speeding implementation of the new policy by modifying the terms of Notice Inviting Offer (NIO) and Model Revenue Sharing Contract (MRSC) incorporating changes made in the new policy. This will require extending the closing date by a month or so. Otherwise, there may be a poor response to the Rounds-II and III, as the prospective bidders would prefer to wait for Round- IV with liberal terms. Second, as stipulated in the contract, the exploration MWP has to be completed within three years of award of onshore and shallow water blocks and four years for deep water in offshore. Speedy environment and other statutory clearance would be needed. Third, to be eligible for early production incentives, production is required to commence within four years for on land and shallow water blocks, and five years for deep-water and ultra deep water blocks. Bringing oil and gas on the surface within reduced period require concerted efforts of the promoters and the government. Fourth, the policy changes introduced earlier through the HELP, OALP and DSF could not boost foreign investment in Indian oil and gas exploration. Out of 55 blocks awarded in OALP-I and 53 blocks in DSF Rounds I and II, not a single block went to the foreign companies; virtually there was almost no participation by them in the bidding. Even some of the existing domestic companies in oil and gas such as Reliance or Tata skipped it. This calls for an in-depth analysis of the obstacles faced by
General Elections 2019: How has the oil & gas sector fared under Modi govt
Oil and gas industry is among the core industries in India and contributes close to 15-16 percent to India’s total gross domestic product (GDP). In our series – Election and Market – SC Tripathi, former oil secretary and RS Sharma, former chairman of Oil and Natural Gas Corp (ONGC) discussed how oil and gas sector has fared under the National Democratic Party (NDA) rule and the ONGC-HPCL deal. Talking about the government’s efforts to boost the oil and gas space, Tripathi said, “The government has done well in the short-term aided by the global economic factors.” “Government was able to reduce the inflation, manage rupee, current account deficit, fiscal deficit and therefore emboldened to come up with price deregulation although the previous government had started moving in that direction but the situation became so easy that this government was able to do that,” he added. On the ONGC-HPCL, Sharma said, “The reason for ONGC acquiring Hindustan Petroleum Corporation (HPCL) was for increasing synergies. ONGC-HPCL deal is positive for both the companies.”
Saudi Aramco eyes up to 25% in RIL refining & petrochemical business
In what is shaping up into a mega-deal between two corporate behemoths, Saudi Aramco, the world’s most profitable company in history, is learned to be in “serious discussions” to acquire up to 25% in the refining and petrochemicals businesses of Reliance Industries Ltd, India’s largest company. While Saudi Aramco, which is also the world’s largest oil exporter, is known to have first shown interest in Reliance about four months ago, talks gathered momentum following the visit of Saudi crown prince Mohammed bin Salman (MBS) to India in February, during which he met RIL chairman and India’s richest man, Mukesh Ambani. There might be an agreement on valuation around June this year, people with knowledge of the development said. A minority stake sale could fetch around $10-15 billion, valuing RIL’s refining and petrochemicals businesses at around $55-60 billion. At Tuesday’s share price, RIL has a market capitalisation topping $122 billion (or Rs 8500 billion). Goldman Sachs, the storied investment banker, is said to have been mandated to advise on the proposed deal. “RIL has grown too big – from energy to retail to telecom. It needs to compartmentalize. It makes sense to spin off some of itsverticals. It’ll help raise funds and unlock shareholder value,” said a highly placed person in the financial sector who didn’t wish to be quoted since he didn’t have direct knowledge of the matter. RIL has financed Reliance Jio’s high-voltage entry into telecom even as gross debt soared to about Rs 3000 billion. Deleveraging would also allow Jio to pursue its aggressive expansion plans, according to corporate finance specialists. “It’s sensible market policy,” said one of them. TOI has in the past reported about share sale plans in telecom infra and retail. “But Jio is still some way away from being spun off, it’ll take more time,” said a source. RIL may create standalone vertical for downstream biz It was after he attended Mukesh Ambani’s daughter Isha’s pre-wedding festivities in Udaipur in December that Saudi oil minister Khalid al-Falih publicly signaled Aramco’s interest in forming joint ventures, including with RIL, to expand India’s refining capacity, which is currently straining at around 4.6 bpd. Domestic crude oil consumption is expected to more than double to 10 million bpd by the year 2040. India is the world’s third largest consumer of crude oil after the US and China, with daily use topping 4 million barrels per day (bpd). “As a policy, we do not comment on media speculation and rumours. Our company evaluates various opportunities on an ongoing basis,” said a RIL spokesperson in response to emailed queries. A Saudi Aramco spokesperson said he would respond at the earliest but had not reverted till the time of going to press. Sources said RIL would likely look at creating a standalone vertical for its downstream businesses – refining and petrochemicals – in which Aramco would participate. This is somewhat similar to BP’s deal to buy a $7 billion stake in RIL’s upstream natural gas and exploration businesses in 2011. In February, Aramco said it and Indian state oil companies were planning to build a greenfield refinery on the west coast in Maharashtra with a 1.2-million bpd capacity. It is not clear if a big stake purchase in RIL’s downstream assets would alter its broader India plans. MBS wants Saudi to steer away from domestic oil money and look for a meaningful overseas footprint, especially in value-added petrochemicals business. Aramco on Monday announced plans to pick up a 13% stake in Hyundai Oilbank as part of its expansion into South Korea, another large Asian energy consumer.
Japan’s Mitsui OSK Lines beefs up ship fleet with Reliance Industries deal
Japanese shipping group Mitsui OSK Lines Ltd will add six very large ethane carriers (VLECs) to its fleet through an investment deal with Reliance Industries Ltd, the Indian conglomerate said on Wednesday. Mitsui OSK, which has a fleet of over 850 vessels, and a minority investor signed an agreement to buy stakes in six special purpose companies of Reliance Industries which own a VLEC each, Reliance Industries said in a statement https://www.bseindia.com/xml-data/corpfiling/AttachLive/be3c0267-5889-4635-8db4-6e47ba2cba4e.pdf. Given Mitsui OSK is currently the operator of all the six VLECs, the investment will ensure continued safe and efficient operations of these carriers, Reliance Industries said. It did not disclose the value of the deal.
Gas supply issues keep ceramic units from resuming production
After temporarily shutting down operations to switch over to natural gas, over 450 ceramic tile making units in Morbi had last month decided to resume production from April 15. However, 250-odd plants, mainly wall tile making units, could not commence production on Monday because of gas supply issues. Soon after the National Green Tribunal (NGT) ordered closure of units running on coal-gasifiers, half of the 900 ceramic manufacturing units in Morbi had shut operations to change over to cleaner fuel. Around 325 wall tile manufacturing units had unanimously resolved to restart operations after mid-April. Some floor and vitrified tile makers, too had voluntarily chose to resume production from April 15. “While many floor and vitrified tile units have started production after switching over to natural gas. Around 75 wall tile units could resume operations and remaining 250 have been stuck due to issues related to gas supply,” claimed Nilesh Jetpariya, president, Wall Tiles Division, Morbi Ceramics Association (MCA). According to Jetpariya, Morbi ceramic industry’s natural gas requirement is estimated to be 65 to 68 lakh cubic meter per day. Gujarat Gas Limited (GGL), that supplies gas to the industrial units, with its current gas distribution infrastructure is able to provide 42-43 lakh cubic meter of gas every day. “Even some of the regular gas users have been facing problems over the last 5-6 six days as they are not getting the required gas pressure needed for smooth operations,” he added. When contacted, a GGL official said, “Currently, GGL is catering to demand of around 650 plus ceramic units including the new additions. To further boost the supply, it (GGL) is working closely with its gas transporter GSPL (Gujarat State Petronet Ltd). Additionally, for debottlenecking of the network, GGL has already started laying of a pipeline on a war footing basis from nearest transmission terminal at Gala Village. This three-month project is likely to be completed in less than a month for which a special team has been deployed under the on-ground supervision of the company’s CEO.”
Vedanta’s Cairn Oil and Gas names Ajay Kumar Dixit as new CEO
Vedanta’s Cairn oil and gas has appointed Ajay Kumar Dixit as its new Chief Executive Officer, the company said in a statement today. Dixit will succeed Sudhir Mathur who had resigned earlier this month. “Ajay succeeds Sudhir Mathur, who after seven successful years with the company, moves on to pursue personal endeavours,” the company said in a statement. Prior to his appointment, Dixit served as the acting CEO of Vedanta’s Aluminium and Power business Srinivasan Venkatakrishnan, CEO, Vedanta in a statement said, “Ajay has a deep understanding of our business and the markets we operate in. He is a dynamic and values-driven leader with an impressive track record of delivering consistent high quality performance in a safe and sustainable way. We are confident that he will play a stellar role in further increasing the operational efficiency and growth of our oil and gas business.” Both Mathur and the company’s Chief Financial Officer (CFO) Pankaj Kalra resigned from their positions recently. The company had last week said in a statement the resignations were unrelated. The resignations holds significance as Mathur would be the fourth CEO moving out of Cairn Oil and Gas post its acquisition by Vedanta in 2011. According to people privy of the development, Kalra resigned as the CFO of Cairn in mid-February, while Mathur tendered his resignation last week.
IndianOil sets up trading desk in Delhi to buy crude on real-time basis
India’s top refiner Indian Oil Corp (IOC) has set up a trading desk at its office here to buy crude oil from international market on a real-time basis, helping it cut import price by locking in best price and quality, its Director (Finance) A K Sharma said. IOC, which buys 30 per cent (15 million tonne) of its oil requirement from spot or current market, had set up a trading office in Singapore in 2017 but has now developed in-house software and trading team to buy crude oil on a real-time basis. It made the first purchase through the desk on March 25 when it bought one million barrel of Nigeria’s Agbami crude, he said. While private sector firms like Reliance Industries have had a local trading desk for buying of crude and exporting fuel it produces, IOC would be the first state-owned refiner to set up such a desk. Sharma said the Singapore desk was used to buy crude oil on a short-tender basis where the purchase was decided in two-hour time after receipt of offers from an international seller. This is compared to 10 hours taken to decide on purchase in traditional tenders. But with a trading desk at its office in the national capital, IOC is deciding on purchases on a real-time basis, he said. “This helps us get the best price and most suitable, value giving crude,” he said. In traditional tenders as well as short tenders floated through the Singapore office, IOC would seek quotations from international sellers for a particular grade and quantity of crude oil. It would decide on the price based on the lowest bid rate with no scope of any negotiations on the offer. However, with the trading desk now, it on a real-time basis negotiates with crude traders, often pitching price of one with another to get the best rate. “We have set up a compliance process,” he said. “We have established an in-house process where four traders, without interacting with one another, lock in best available price. A supervisor, who does not have the benefit of the identity of the seller, then instructs for further negotiations on an offer based on offers from other sellers. The traders then negotiate with the seller to bring down the price.” IOC plans to transfer the trading desk once it stabilises in Singapore to do the real-time purchase of quantities of crude oil it buys from the spot market. Also, it could trade on fuel its refineries would export, he said. The company buys about 70 per cent of its crude needs from oil companies such as Saudi Aramco of Saudi Arabia and SOMO of Iraq on annual term contracts. The rest is bought from the spot market through tenders. Sharma said ultimately most of the spot purchases would be done through the trading desk. He, however, did not give a timeframe for moving to that. Currently, one cargo of 1 million barrels are bought through trading desks at Singapore or at New Delhi. Sharma said IOCL Singapore Pvt Ltd – the company’s Singapore subsidiary – will ultimately handle the trading desk. IOCL Singapore has two officers as compared to four traders plus supervisor and compliance officer at the trading desk in the national capital, he said adding the company will gradually increase its workforce in line with transactions. Singapore is the trading hub for the world’s biggest consumer region and an office there will help it have better access to information and speedier decision making. Before 2017, public sector oil companies would often lose out on opportunities to buy cheaper crude from the international spot markets as their sourcing policies required them to float a tender and obtain approvals from the oil ministry before they could place an order. The process used to take up to two months. While these companies had board approvals to set up offices abroad, they could not go ahead due to policy constraints and concerns over transparency in the public procurement policy. The trading desk is part of progression IOC has seen in crude procurement policy since 2016 when the government gave flexibility to state refiners to devise their own crude import policies. Prior to that, IOC used to take 26 hours to decide on a tender for import of crude oil from spot or current market. In April 2016, after the Cabinet gave state-owned oil refiners freedom to devise their own crude import policies, the time has been shrunk to 12 hours. Time for deciding on tenders for export of petroleum products or fuel was cut to just 9 hours from the previous 35 hours. “Earlier, we had a three-member committee comprising two company executives and one senior official of the ministry of petroleum and natural gas to decide on awarding tenders for import of crude oil from the spot market. Now we have an internal committee which can take decisions quickly,” he said.
BPCL to build 3m tonne/yr PRFCC at Mumbai complex
India’s Bharat Petroleum Corp Ltd (BPCL) plans to build a 3m tonne/year petrochemical residual fluidized catalytic cracking plant (PRFCC) at its Mumbai complex in western Maharashtra state by 2022, a company source said on Monday. The Indian rupee (Rs) 68.8bn ($993m) project, which is part of BPCL’s refinery modernization plan, will replace the refinery’s catalytic cracking unit (CCU) commissioned in 1955 and the fluidized catalytic cracking unit (FCCU) commissioned in 1985. The PRFCC project will include a main fractionator and unsaturated gas plant (USGP); a regenerator flue gas scrubber; an unsaturated liquefied petroleum gas (LPG) treating unit (LTU); a propylene recovery unit (PRU); and a sulphur recovery unit. BPCL expects to receive required environmental clearances for the project soon, the source said. The PRFCC will help maximize the company’s polymer-grade propylene production, which will feed its upcoming polypropylene (PP) unit at Rasayani in Maharashtra, the source said. The Mumbai refinery will supply propylene feedstock to BPCL’s planned 450,000 tonne/year PP plant, which is expected to be commissioned by 2022-23.
CCEA extends duration of new urea policy for natural gas-based units
The government Monday decided to extend the duration of the New Urea Policy from April 1 this year till further orders to ensure smooth supply of nutrients to farmers. “Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi has approved the proposal of the Department of fertilisers to extend the duration of New Urea Policy-2015 from April 1, 2019 till further orders, except for the provisions which stand already amended vide notification dated March 28, 2018,” an official statement said. The energy norms of urea plants were revised in March last year. The extension of the policy would facilitate in continuation of operations of urea plants and ensure regular supply of urea to the farmers. In 2015, the Union Cabinet approved a comprehensive New Urea Policy-2015 for the next four financial years. The policy is aimed at maximising indigenous urea production and promoting energy efficiency in urea units to reduce the subsidy burden on the government. India imported around 59.75 lakh tonnes of urea in 2017-18 fiscal year to meet the domestic demand. The country produces around 250 lakh tonnes of urea annually.