India targets oil traders for $1.5 billion emergency oil reserve
India is seeking $1.5 billion of investments from global oil producers and traders to build additional emergency crude reserves that will act as a buffer against volatility in oil prices. The plan is to build underground caverns that can hold a combined 6.5 million tons of crude at two locations, Indian Strategic Petroleum Reserves Ltd. Chief Executive Officer H P S Ahuja said. The state-run ISPRL will collaborate with private entities, who will invest in the project, he said. Getting investors to build the storage facilities will lessen the strain on state finances and help Prime Minister Narendra Modi’s government meet its budget goals, while expanding strategic petroleum reserves to shield the economy from oil-price volatility. India, which meets almost 85 per cent of its crude needs through imports, this month cut taxes on fuel sales to lower the burden of high oil prices on consumers. “We are taking the commercial model for building and filling the caverns, which will provide opportunity to the investor to make some profits,” Ahuja said. “India will continue to reserve first right over the crude stored in these caverns.” The two new reserves include 4 million tons of storage at Chandikhol in the eastern state of Odisha and a 2.5 million-ton facility at Padur in southern India’s Karnataka. India has built 5.33 million tons of underground reserves in three locations, including Padur, under an earlier phase that can meet 9.5 days of the country’s oil needs. The government purchased crude to fill the caverns in Visakhapatnam in Andhra Pradesh and half of another facility in Mangalore in Karnataka, while leasing out the other half to Abu Dhabi National Oil Co. Indian Strategic Petroleum Reserves, which was formed in 2006, is scouting investors to fill the caverns at Padur. It will hold roadshows in New Delhi, Singapore and London this month to draw investors for the new caverns as well as filling the Padur facility. “Strategic reserves are crucial for a growing consumer like India,” Ahuja said. “The new SPRs will be sufficient to cover the country’s oil needs for another 12 days.”
India’s decision on buying oil from Iran, defence system from Russia not helpful: US
India’s decision to continue buying oil from Iran after November 4 and purchase the S-400 Triumf air defence system from Russia is “not helpful” and the US is reviewing it “very carefully”, the State Department has said. The US is trying to cut off all oil imports from Iran following President Donald Trump’s decision in May to pull out of the 2015 multilateral deal that eased global sanctions in exchange for curbs on Iran’s suspect nuclear programmes and malign activities. It has given a November 4 deadline to its allies to bring down their import of Iranian oil to zero. Responding to questions on reports that India will continue to purchase oil from Iran after November 4, State Department spokesperson Heather Nauert said this was not helpful. India’s Oil Minister Dharmendra Pradhan on Monday said that two state refiners have placed orders for importing crude oil from Iran in November. “Overall with regard to those sanctions that will take effect on November 4th – and you’re referring to the oil sanctions for Iran and countries that choose to continue purchasing oil from Iran – we have conversations with many partners and allies around the world about those sanctions,” she said on Thursday. “We make our policies very clear to those countries. We continue to have conversations with the government of Iraq about that particular issue and the implications for the reimposition of sanctions that were previously lifted or even waived under the Joint Comprehensive Plan of Action (JCPOA),” Nauert said. The Trump administration has given the same message to all countries around the world, and the president has said that the United States is committed to re-enforcing all of its sanctions. “We believe that countries coming together and recognising the malign influence that Iran has had around the world is important. We know that Iran and the government of Iran has taken the benefits that it received under the JCPOA and they’ve poured that money not into their own population, not into the good of the people, not into its medical hospitals and things of that nature, but rather they’ve used it for its own nefarious programmes,” Nauert said. Noting that she has seen reports of India continuing to buy oil from Iran after November 4, she said this was a topic of conversation with the Indian government when Secretary of State Mike Pompeo was in India last month for the first 2+2 Dialogue. “The President had addressed it – I believe it was just earlier today – which he was asked about that question about whether or not India would buy oil from Iran after sanctions are reimposed. And the President said – and I’m not going to get ahead of the President, certainly – but he said we’ll take care of that,” she said. On the implication of the Countering America’s Adversaries Through Sanctions Act or CAATSA on India after it inked the USD 5 billion deal with Russia to purchase the S-400 Triumf air defence system, Nauert said, “He (the president) was asked also about CAATSA sanctions and possible imposition of CAATSA sanctions. And he said, you know, India is going to find out. “And India will find out. We’ll see. So I’m not going to get ahead of him, but certainly when we hear about things such as purchasing oil or the S-400 systems, it’s not helpful. The United States government just reviews that very carefully,” Nauert said.
International Energy Agency sees world oil market ‘adequately supplied’
Oil markets look “adequately supplied for now” after a big increase in production over the last six months but the oil industry is coming under strain as it copes with increasing global demand, the West’s energy watchdog said on Friday. The International Energy Agency said in its monthly report that the world’s spare oil production capacity was already down to only 2 percent of global demand, with further reductions likely to come. “This strain could be with us for some time and it will likely be accompanied by higher prices, however much we regret them and their potential negative impact on the global economy,” the Paris-based IEA said. Members of the Organization of the Petroleum Exporting Countries and other exporters such as Russia and U.S. shale producers had increased oil production sharply since May, the IEA said, raising output by 1.4 million barrels per day (bpd). Overall OPEC had boosted production by 735,000 bpd since May as Middle East Gulf producers such as Saudi Arabia and the UAE more than compensated for declining output in Venezuela and Iran, which is facing U.S. sanctions from next month. And the outlook for world oil consumption was faltering. The IEA cut its forecast of global oil demand growth by 0.11 million bpd for both this year and next to 1.28 million bpd and 1.36 million bpd respectively. “This is due to a weaker economic outlook, trade concerns, higher oil prices and a revision to Chinese data,” said the IEA, which advises major oil consumers on energy policy. OECD commercial stocks rose by 15.7 million barrels in August to 2.854 billion barrels, their highest level since February, on strong refinery output and liquefied petroleum gas restocking, the IEA said. It added that OECD inventories were likely to have risen by 43 million barrels in the third quarter, the largest quarterly increase in stocks since the first quarter of 2016. “The increase in net production from key suppliers since May of approximately 1.4 million bpd, led by Saudi Arabia, and the fact that oil stocks built by 0.5 million bpd in 2Q18 and look likely to have done the same in 3Q18, lends weight to the argument that the oil market is adequately supplied for now,” the IEA said.
Big Oil still reluctant to open spending taps: Goldman
Energy companies and investors are focused on profits and reluctant to boost spending even after crude prices surged to four-year highs, a senior Goldman Sachs banker said on Thursday. Rattled by the recent downturn in the sector and long-term concerns over oil demand and the switch to renewables, Big Oil is facing an unprecedented challenge. “We’re firmly through that survival phase and the better capitalized players are now positioned to do well on the other side of it,” Andrew Fry, global head of energy at Goldman said at the Oil & Money conference in London. Companies typically seek to increase spending as they emerge from a downturn in order to capture low drilling costs and an expected supply shortage. But this time round, the barriers for investments are high, with investors seeking returns of as much as 15 to 20 percent from multi-billion dollar oil and gas projects, Fry said. “In the near term the focus is on returns as opposed to growth for the sake of growth,” he said. As a result, companies are currently focusing on buying back shares and paying dividends to investors with the excess cash they generate. “For the first time since the downturn, the oil companies now have their balance sheets in order. They are all starting to think about growth but it is very conservative,” James Janoskey, global co-head of oil and gas at JPMorgan, said. “When we came out of downturns in the past, we didn’t have energy transition issues and there probably wasn’t that much pressure from investors.” M&A Capital expenditure among the world’s top oil companies is expected to rise to $140 billion by 2021, from the current $100 billion, but will remain well below the $200 billion before the 2014 oil price collapse, according to Adam Brett, HSBC global head of natural resources advisory. That means oil majors will show very healthy returns on capital invested, he added. He said that even in the United States, where oil output has resumed spectacular growth on the back of high oil prices, large companies will try to maintain capital discipline and focus on returns rather than pure production growth. “For Big Oil, value will prevail over volume,” Brett said, adding that most remuneration reports now made clear that top executives at oil majors are being rewarded for delivering robust cash flows rather than production increases. Acquisitions, another way to boost production and reserves, are also expected to be constrained and focused. Energy mergers and acquisitions amounted to $360 billion last year and stand at $280 billion so far this year, said Brett. Although the volume of M&A has been relatively stable in recent years, the structure has changed since China largely suspended its buying spree over the past three years, he said. An anti-corruption drive and revisions of overly expensive deals have prompted China to cut down on buying resources around the world in the past three years. Brett said that M&A were currently dominated by downstream and mid-stream transactions with the share of upstream declining to 35-40 percent, from as high as 60-70 percent when China was an active asset buyer. “You see much more downstream M&A activity. And I expect this to continue in the years ahead,” Brett said.
ONGC Flexes Its Muscles: Plans Purchase Of 27 Oil Rigs To Replace Old Ones For Rs 35 billion
In a bid to improve the quality of operations and increase efficiency, the state-run Oil and Natural Gas Corporation of India has decided to purchase 27 rigs to replace the existing on-load rigs reports The Economic Times. The investment is reported to cost the company around Rs 30 to Rs 35 billion. ONGC has initially planned to buy 50 rigs, reports suggest that they settled for 27. The newly bought rigs will help replacement of 67 ageing one involved in onshore operations. Drilling rigs are mostly massive mobile structures which house equipment used to penetrate the earth’s surface to allow extraction of oil and gas from underground reservoirs. ONGC had already drilled 503 wells in 2017-2018, the highest in 27 years in a bid to boost the production which has been stagnant for the past years. India’s production of crude oil has been falling for more than six years, increasing its dependence on imports as local consumption expands with the rapidly growing economy. Domestic oil production contracted 3.3 per cent from a year earlier to 14.6 million metric tons in the April-August period this year, thereby raising dependence on imports for 83.2 per cent of the country’s oil requirement.
India asks Aramco for another 4 Mmbbl of crude: sources
Saudi Arabia appears to be filling the Iranian crude oil supply gap to Indian refineries, with reports suggesting the world’s top oil exporter will add another 4 million barrels (Mmbbl) of crude to India’s supply in November, Kallanish Energy learns. Refineries Reliance Industries, Bharat Petroleum Corp, Hindustan Petroleum Corp. and Mangalore Refinery Petrochemicals have asked Saudi Aramco for an extra 1 Mmbbl each next month, Reuters reported Wednesday, citing unnamed market sources. Last week, Saudi crown prince Mohammed Bin Salman said in an interview with Bloomberg that Trump’s request that Saudi Arabia and other Opec countries ensure they meet any loss of supply from Iran, has been fulfilled. “We export as much as two barrels for any barrel that disappeared from Iran recently,” the prince said. “So we did our job and more.” With Saudi Arabia and Russia publically committing to add some 1 Mmbpd of crude to the market, in light of current market conditions, there are fears a supply crunch due to the Nov. 4 implementation of sanctions on Iran, will continue to lift crude prices. There are rumors the Saudis and the Russians have privately agreed to boost their output further. But Saudi oil minister Khalid Al-Falih said last week Riyadh’s 1.3 Mmbpd spare capacity will only be used if demand materializes, adding the market seems to be well-supplied and there’s no need for further input.
PetroChina plans full operations at LNG terminals this winter
China’s largest oil and gas group PetroChina plans to operate its three receiving terminals at full rates and boost purchases from the spot market to meet a demand spike in winter, according to a report on an official government website on Thursday * For the first eight months of 2018, PetroChina’s gas imports via central Asian pipeline, with supplies primarily sourced from Turkmenistan, reached 33.9 billion cubic metres (bcm), equivalent to 66 per cent of the annual plan, according to the report on www.sasac.gov.c http://www.sasac.gov.cn * Pipeline gas imports from Myanmar amounted to 3 bcm, or 59 per cent of the annual plan for the January to August period * Its Jiangsu terminal aims to supply 3.3 bcm gas via pipeline and Tangshan terminal 4.1 bcm during the winter period between November and March, said the report, without giving details on its third terminal in Dalian * The state energy giant has also stepped up winter drilling at domestic fields such as Tarim, Changqing and Sichuan. Its largest gas field will pump at a record 38 bcm for this year * PetroChina makes up 70 per cent of the country’s total output
ONGC Videsh sells December Russian Sokol crude at lower premium after exports rise
India’s ONGC Videsh (OVL) has sold a cargo of Russian Sokol crude for December loading at a lower premium than its previous deal after supplies of the oil rose, three trade sources said on Thursday * The oil producer sold the cargo for loading on Dec. 6 to 12 at a premium of about $5.40 a barrel to Dubai quotes to Shell, they said * ONGC last sold a cargo loading on Nov. 29 to Dec. 5 at a premium of $5.85 a barrel * Sokol crude exports are expected to rise by 200,000 tonnes per month to 1.3 million tonnes per month from October, according to loading schedules
Govt will not ask OMCs to further subsidise petrol, diesel prices: Official
Allaying concerns about the return of fuel subsidy regime, a top Finance Ministry official on Thursday said the government asking oil PSUs to subsidise petrol and diesel prices by Re 1 per litre was a “one-time thing” and it does not intend to ask them to do it again. While oil marketing companies (OMCs) will continue to enjoy marketing freedom, upstream oil producers like ONGC would not be asked to share fuel subsidy burden, he added. Just last week, the government had cut excise duty on petrol and diesel by Rs 1.50 per litre and asked state-owned oil marketing companies (OMCs) to subsidise the two fuels by another Re 1 a litre. But most of the Rs 2.50 per litre reduction in rates effected from October 5 has been lost in increases in selling prices on subsequent days, giving rise to the suspicion that the government may again ask OMCs to subsidise fuel. “The Re 1 absorption by OMCs in their pricing was a one-time thing,” the official said. The government, he said, has no intention of asking them to do that again. Following the comments, shares of OMCs surged by as much as 19 per cent intra-day, defying the broader market trends. Shares of HPCL surged 19 per cent to hit a high of Rs 215.40, BPCL jumped 7 per cent to Rs 284.80 and IOC gained nearly 8 per cent to Rs 134 in intra-day trade. The benchmark BSE Sensex fell 759.74 points to close at 34,001. The cut in excise duty and OMCs absorbing some prices had led to a drop in the price of petrol from a record high of Rs 84 per litre to Rs 81.50 in Delhi and that of diesel from an all-time high of Rs 75.45 to Rs 72.95 a litre on October 5. But rate hikes on subsequent days have pushed prices up. Petrol has risen by 86 paise per litre since then and diesel by Rs 1.67, negating the entire excise duty reduction in less than a week. Petrol price in Delhi Thursday stood at Rs 82.36 per cent while diesel was priced at Rs 74.62. The official said the government is also not looking at bringing back the subsidy sharing mechanism where upstream firms like ONGC subsidised cooking fuels LPG and kerosene by giving discounts on crude oil they sold to refiners. Oil and Natural Gas Corp (ONGC) shares surged to Rs 159.60 during intra-day trade on the BSE before ending at Rs 152.90, up 2.86 per cent. Oil producers ONGC and Oil India Ltd had till June 2015 made good as much as 40 per cent of the under-recoveries or subsidy arising out of selling fuel at below market price. It was speculated that the same subsidy sharing in some form may be brought back. According to Moody’s Investors Service, share prices of state-owned oil companies have declined around 20 per cent on average since the government on October 4 announced a reduction in the country’s fuel prices. The aggregate market capitalisation of the six largest listed government owned/linked oil companies had fallen by Rs 1.2 lakh crore since then, it said. “The share price decline is credit negative for the oil companies because of the high level of cross-shareholdings in one another. The market values of their respective investments have declined, reducing their financial flexibility,” it said in a report Thursday. Shares of HPCL closed up 14.70 per cent at Rs 207.15. BPCL was up 5.11 per cent at Rs 278.65 and IOC ended 5.39 per cent higher at Rs 131 on the BSE.
IOC to invest Rs 5,463 crore in city gas network in 7 districts
State-owned Indian Oil Corp (IOC) on Thursday said it will invest Rs 5,463 crore in setting up city gas distribution network for retailing CNG to automobiles and piped cooking gas to households in seven districts. IOC had, in the recently concluded 9th bid round for city gas licences, won permits for seven cities on its own and another nine in a joint venture with Adani Gas. The company, in a regulatory filing, said its board in a meeting Wednesday approved investments in seven cities it has won on its own. “IOC has won the bidding for implementation of city gas distribution (CGD) for seven geographical areas viz Coimbatore district, Salem district (Tamil Nadu), Bokaro district (Jharkhand), Rewa district (Madhya Pradesh), Aurangabad district (Maharashtra), Guna district (Madhya Pradesh) and Jagtial district (Telangana). The Board has approved the estimated total capital investment of Rs 5463 crore on the implementation of the CGD projects. The investment in CGD business will help IOC to expand and consolidate its gas business,” it said. The company, however, did not specify the investments to be made in the nine cities it had won in the joint venture with Adani. IOC said its board also approved a Rs 520 crore investment for production of ethanol using LanzaTech gas fermentation technology at Panipat refinery in Haryana. The proposed ethanol plant is designed to produce 33.5-kilotonnes per annum of anhydrous ethanol for use in automotive fuel. “The project has the potential of greenhouse gas reduction required to limit global climate change,” it said. The board approved “installation of facilities for production of ethanol from PSA Off Gas of Hydrogen Generation Unit (HGU) at Panipat refinery using gas fermentation technology of LanzaTech USA at an estimated cost of Rs 520 crore,” it said. The board also approved a Rs 1,332 crore investment in laying a pipeline from Paradip in Odisha to Haldia in West Bengal. The Paradip-Somnathpur-Haldia pipeline “would enable placement of products from Paradip Refinery, Odisha to Somnathpur, Odisha for meeting the local demand as well as to Haldia, West Bengal for onward movement through other pipelines,” the company said.