GAIL under CCI scanner for breaching competition norms
The Competition Commission is investigating at least seven cases of alleged abuse of dominance by GAIL in dealing with its customers, the outcome of which could potentially redraw the rules of the gas marketing business in India. The Commission has clubbed for investigation two cases from this year and five from the previous year in which customers – Rathi Steel, Mohan Meakin, Rico Auto, Omax Autos and Rico Castings -have alleged GAIL abused its dominant position by incorporating unfair terms and condition in the Gas Sale Agreement (GSA) and imposing take-or-pay (ToP) liability. ToP requires customers to pay for 90% of the contracted volume even if it lifts less in a year although the unlifted amount can be taken later. GAIL has denied allegations by customers. “GAIL reiterates that obligation of contract termination and other contractual terms under the GSA reflect the obligation entered into by GAIL under its upstream contracts. Therefore, it is not correct to allege that GAIL has imposed arbitrary/unfair terms & conditions and/or abused dominant position,” GAIL said in an emailed response to ET. The investigation would examine almost every aspect of GAIL’s procurement, price determination, the way company imposed take-or-pay liability on all customers in 2015, and how it commits ToP liability to its upstream customers. The complainants have alleged that many of the provisions related to the quality of gas or the purchase terms favour GAIL more than customers. The most important dispute is linked to the imposition of the take-or-pay liabilities on customers for the year 2015, when changes in the global market had made long-term gas more expensive than spot, encouraging more consumers to switch to spot where possible. “The conduct of Opposite Party (GAIL) in implementing such Take or Pay liability from the year 2015 appears to be a modus to ensure de facto exclusivity of the contractual arrangement. This, besides prohibiting the buyers from shifting to alternatives or terminating the GSA in the event of closure of their business, also appears to create entry barriers for alternative suppliers to enter the market or build up a viable customer base,” the Commission has said in its order in the case filed by Rathi Steel. “While imposition of ToP liability as per contractual terms cannot per se be regarded as abuse of dominant position, the same being imposed in an exploitative manner without justification or to ensure de facto exclusivity thereby hurdling potential entries or expansion of competitors warrants investigation under the provisions of the Act prohibiting abuse of dominant position,” the commission said. It would make sense to have norms to separate cross-country gas supply from distribution. We need to overhaul market design in natural gas. To have a system of competitive prices, we require gas hubs to better match demand with supply. And pending a more extensive pipeline network, what’s required is forward-looking price regulation to incentivise supply in a scenario of huge, unmet gas demand. The downstream oil and gas regulator needs to be suitably empowered. Delon Wright Womens Jersey
India refiners outshine Asia peers with new output, rising local demand
Indian refiners are outperforming their competitors in South Korea and Thailand as they have ramped up output from new fuel and chemical capacities to meet rising domestic demand that could further lift their earnings over the next two years. Asia is adding net refining capacity of 360,000 barrels per day (bpd) this year, according to Wood Mackenzie, with units coming online in China and Vietnam that could keep most of Asia well-supplied and weigh on refining margins for export-oriented refiners in South Korea and Thailand. India, though, where refiners have already ramped up capacity that has come online, will likely be shielded from the pressure on margins by strong local demand, analysts said. “Indian refiners are a bright spot in Asia because of rising fuel demand,” Hindustan Petroleum Corp Ltd’s Chairman M K Surana told Reuters. Surana expects Indian demand growth of about 5 percent a year up to 2030 as a rising population and increasing affluence drive up oil use in the world’s third-largest crude importer. Indian oil minister Dharmendra Pradhan on Monday indicated a slower growth pace, but still said the country would consume 226 million tonnes (4.95 million bpd) of refined products in fiscal year 2021/22, up from 205 million tonnes in 2017-2018. “We expect India to lead global oil demand growth, contributing to one-third of the growth expected in 2017-2030,” Goldman Sachs analysts told clients last week. Indian refiners Bharat Petroleum Corp Ltd, HPCL and Reliance Industries could see their shares rising, with gains between 11 percent for Reliance and 25 percent for BPCL over the next year, the analysts said. Among the refiners that have recently added capacity are BPCL, which is ramping up output after an expansion at its Kochi refinery, and Indian Oil Corp, which is planning to run its Paradip refinery at full capacity this year. Indian oil refiners are being undervalued, the Goldman Sachs analysts said. “Multiple re-rating could continue as investors give more credit for diminishing regulatory headwinds and sustainable earnings growth,” the analysts said. Regulatory changes in India that allow refiners to charge market rates for fuels, they said, have also improved the profitability at domestic refiners. Analysts at Japanese investment bank Nomura said in July that their top investment recommendations for Asian refineries were IOC, BPCL and HPCL, “owing to refinery volume increase, deregulated petrol and diesel prices, and undemanding valuations.” In contrast, Goldman said added capacities across Asia could dampen gross refining margins. The bank expects Singapore complex refining margins to drop to $7.70 and $7.30 in 2018 and 2019, respectively, from $8 this year. That means valuations for Asian refiners are stretched, it said, and recommended investors sell SK Innovation, owner of South Korea’s largest refiner, S-Oil Corp, and Thailand’s Thai Oil PCL and IRPC PCL. With low oil prices helping to drive India’s demand, though, and capacity additions slowing, its market is likely to remain snug, said Tushar Tarun Bansal, director at consultancy Ivy Global Energy. “Only a few secondary units are expected to come onstream in the next five years,” he said, while India’s strong economic growth will continue to drive rising oil demand going forward. Jamal Adams Authentic Jersey
India’s LPG imports likely to rise 10% in fiscal 2017-18: traders
India’s LPG imports are expected to rebound from July onwards and is on track for a 10% annual increase in the current fiscal 2017-2018 (April-March), after plunging to the lowest in two years in June, trade sources from four oil and gas companies in India said recently. India, which is competing with China and Japan to be the world’s largest importer of LPG, imported 597,000 mt in June, down about 25% year on year, the lowest since June 2015, data from India’s Petroleum Planning and Analysis Cell, showed. “India’s domestic LPG production is not rising at the same pace as consumption; hence, imports will go up by at least 10% this fiscal,” one of the trade sources said. The other trade sources agreed with his projection. Domestic LPG production in April-June 2017 increased 0.2 million from April-June 2016, but domestic consumption over the same period rose 0.5 million mt, data published by PPAC showed. Half of India’s LPG demand last year was met by imports, S&P Global Platts data showed. The June LPG imports were 20% less than the imports of 748,000 mt in May, as domestic production rose 10% from June last year to 1 million mt this June, PPAC data showed. Traders also attributed the dip in June to healthy imports in the months before, which led to congestion at the ports. Indian buyers looked to first dispose of their cargoes, due to the backlog of ships waiting to discharge at Indian ports, before taking in fresh imports. “The ships standing in Indian ports for more than 15-20 days did not make economic sense”, an Indian oil company source said. India is one of the biggest buyers of butane in Asia. The lower imports in June has led to a narrowing of the propane-butane in April when June cargoes were traded. The propane-butane spread narrowed to minus $3/mt on April 26, the narrowest in eight months due to little demand for butane. The spread was last narrower on August 1, 2016, when it was at parity, Platts data showed. The propane-butane spread widened again to minus $26/mt on June 28, as buyers sought bargains for butane. The recovering butane market had also prompted Saudi Aramco to set its latest contract prices for August with a wider propane-butane spread at minus $40/mt, as Indian buyers emerged before the market recovered further at the onset of the North Asian winter in Q4. “[The] spread was quite low in June, so many people bought butane,” a South Korean trader said. The spot price of FOB Arabian Gulf butane came off from this year’s peak of $611/mt on February 2 to $351/mt on June 23, the lowest in nine months. The price for CFR Japan butane plunged from this year’s high of $643/mt on February 2 to $374.5/mt on June 23, the lowest since September 29 last year. The FOB Arabian Gulf and CFR Japan butane prices have since increased to $466/mt and $487/mt respectively, on Monday. India’s imports of LPG, which is mainly used for cooking, rose by 23% year on year in fiscal 2016-2017 to about 11 million mt, the PPAC data showed. The propane-butane-mix in India’s LPG consumption is now about even, compared to 60% butane and 40% propane in earlier. In April 2017, India overtook Japan as the world’s second-largest importer of LPG, as Prime Minister Narendra Modi pledged in May last year to provide cooking-gas cylinders to every household. The Prime Minister’s ambitious scheme, Pradhan Mantri Ujjwala Yojana, led to a record 31.6 million new cooking-gas connections during fiscal 2015-2016, Indian oil minister Dharmendra Pradhan said. Total LPG consumption in India has increased for 46 months in a row, with a 15.9% rise in June from May, the PPAC data showed. Guy Lafleur Jersey
Pakistan interim PM-designate faces NAB inquiry over LNG contract
The Pakistan Muslim League-Nawaz (PML-N) nominee for the post of interim Prime Minister, Shahid Khaqan Abbasi, is facing a Rs 220 billion corruption inquiry by the National Accountability Bureau (NAB) over a liquefied natural gas (LNG) import contract. Abbasi, the former Petroleum Minister, is a principal accused in a NAB case registered in 2015, Dawn newspaper reported. The other suspects in the case are former Petroleum Secretary Abid Saeed, Inter State Gas Systems (ISGS) Managing Director Mobin Saulut, private firm Engro’s Chief Executive officer Emranul Haq and the Sui Southern Gas Company’s (SSGC) ex-MD Zuhair Ahmed Siddiqui. According to NAB documents, the contract for the LNG import and distribution was awarded to the Elengy Terminal, a subsidiary of Engro, in 2013 in violation of the Public Procurement Regulatory Authority (PPRA) rules and relevant laws. The case was registered on the complaint of Shahid Sattar, an energy expert and former member of the Planning Commission and the SSGC board of directors. It is still under an investigation contrary to NAB Chairman Qamar Zaman Chaudhry’s claim that he had introduced a new strategy under which the process of complaint verification, inquiry, investigation and filing of reference took 10 months, said the newspaper. Sattar had accused Abbasi of misusing his authority and causing a potential $2 billion loss to the national exchequer in 15 years. The NAB documents said that it had been recommended that the names of all accused in the case, including Abbasi, should be placed on the Exit Control List. After the removal of Nawaz Sharif by the apex court in the Panama Papers corruption case, the PML-N has nominated Abbasi as its candidate for the Prime Minister’s post for an interim period before Punjab Chief Minister Shahbaz Sharif replaces him for the remaining 10 months of the government’s term. The election of the new Prime Minister will be held on Tuesday and Abbasi is set to be elected in view of his party’s comprehensive majority in the National Assembly, said the report. Talking to reporters on Sunday, Abbasi said he was not afraid of any reference, adding that those levelling allegations against him should search their own souls and be ashamed of their deeds. “Not only one case but get registered 10 references against me,” he said in reply to a question about Awami Muslim League chief Sheikh Rashid Ahmed’s decision to approach the Supreme Court against him regarding the NAB proceedings. Jordan Bell Womens Jersey
IOC’s new concept SAS to come back to company’s priority list
After remaining in low key for long, Indian Oil Corporation’s Servo Agro Spray(SAS) is coming back in priority planning of the company to penetrate deeper into Rs 10,000 crore sized national agro oil market. “IOC is now putting serious thought on SAS for better utilization of the potential lying in the agro oil sector. There is huge demand for the product. But our present production level cannot match that. We are planning to improve the situation,” said Ranjan Kumar Mahapatra, IOCBSE 0.00 % Executive Director cum State Level Co-ordinator, West Bengal. According to IOC technical experts, SAS is a paraffin based mineral oil and environment friendly additive. The non-toxic and biodegradable spray oil forms a thin wax film over the pests killing them by just suffocating without exerting any toxic effect on soil or plant. This new concept product has certificates from major research institutes like, Central institute for Cotton Research, Nagpur, Horticultural Research Station, Shimla, UPASI Tea Research Foundation etc. “Though launched over a decade back, SAS is yet to become well known among farmers throughout the country,” they agreed. But, “It is highly liked in high value premium quality Apple orchards in Himachal Pradesh though we cannot meet the demand. Moreover, huge potential is lying untapped in sectors like tea, Mango, Pineapple in northern Bengal or Rubber in NE region. We are trying to prepare production augmentation plan through indigenization to address the situation,” said Mahapatra. “Beside production, to ensure its wide availability, other than using IOC’s own retail points, we are considering many options including joining hands with E-Portals like Amazon as we are doing for our lubricant products,” Mahapatra added. However, “In Indian rural agro fields, knowledgebase dissemination upto the farmer’s level still takes place largely through pesticide, fertiliser or seed dealers. Major FMCGs have huge rural level dealer’s networks. Thus, handshaking with them could give IOC an additional advantage to develop farmer’s confidence on SAS as well as in ensuring its availability,” said Mainul Alam, a veteran Pineapple farmer and trader at Bidhannagar. Zach Hyman Authentic Jersey
LPG prices to be hiked by Rs 4 per month as Centre pushes to end subsidies
The government has ordered state-run oil companies to raise subsidised cooking gas (LPG) prices by Rs 4 per cylinder every month to eliminate all the subsidies by March next year, Oil Minister Dharmendra Pradhan said today. The government had previously asked Indian Oil (IOC), Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL) to raise rates of subsidised domestic LPG (liquefied petroleum gas) by Rs 2 per 14.2-kg cylinder per month (excluding VAT). Now, the quantum has been doubled so as to bring down the subsidy to nil, he said in a written reply in the Lok Sabha here. Every household is entitled to 12 cylinders of 14.2-kg each at subsidised rates in a year. Any requirement beyond that is to be purchased at market price. “Public sector oil marketing companies (OMCs) were authorised to increase price of subsidised domestic LPG cylinder by Rs 2 per cylinder (14.2-kg) per month (excluding VAT) with effect from July 1, 2016,” he said. Oil companies had hiked LPG rates on 10 occasions since that go-ahead. “The government vide its order dated May 30, 2017, has again authorised OMCs to continue to increase the effective price of subsidised domestic LPG by Rs 4 per cylinder effective June 1, 2017, per month (excluding VAT) till the reduction of government subsidy to ‘nil’, or till March 2018, or till further orders, whichever is earliest,” he said. Oil companies have raised rates twice since then, the last being on July 1 when rates were up by a steep Rs 32 per cylinder — the steepest increase in six years. This hike was because of the May 30 order as well as reflection of hiked tax rates under the Goods and Services Tax (GST) regime. Subsidised LPG now costs Rs 477.46 per 14.2-kg cylinder in Delhi. It was priced at Rs 419.18 in June last year. The rate of non-subsidised LPG, which consumers pay after exhausting their quota of below-market priced bottles, costs Rs 564. “The price for the other subsidised cylinders (i.e. 5 kg) would be increased proportionately by the OMCs,” Pradhan said. The subsidy on LPG was Rs 86.54 per cylinder for July, he said. There are as many as 18.11 crore customers of subsidised LPG in the country. These include 2.5 crore poor women who were given free connections during the last one year under the Pradhan Mantri Ujjwala Yojna. There are another 2.66 crore users of non-subsidised cooking gas. T. J. Oshie Authentic Jersey
Farzad B gas field row: Not obligated to give deal to India, says Iran
Despite India willing to invest as much as $11 billion to develop Iran’s Farzad B gas field, the war of words between the two countries has only intensified with Tehran now saying that it is under no obligation to award the contract to India. Iran has also made light of India’s threat to import less crude oil from it, with its Parliament Energy Commission chief saying Iran could find other customers for its oil. In May, Iran signed a basic agreement with Russia’s Gazprom for development of the gas field which was discovered by a consortium of Indian state-run companies. This was seen as a retaliation against what Iran saw as a threat from India to cut purchase of Iranian oil if the commercial contract for Farzad B didn’t happen. India officially said last month that it wants Tehran to reciprocate the faith shown by New Delhi in it as reflected in India’s decision to buy substantial crude from Iran even when it faced international sanctions. This was followed by a fresh offer earlier this month to invest $11 billion for development of the gas field. Iranian lawmaker and spokesperson of Iran’s Majlis Energy Commission Asadollah Gharekhani said last week that while India had been allowed to conduct technical surveys on Farzad B, giving India development rights was never a part of any agreement. “In the past, it was decided that Iran and India jointly carry out (feasibility) studies on the Farzad B oil field. The studies have been conducted and have finished. However, no decision was made that would suggest the project to develop the field should necessarily be contracted out to India,” Gharekhani was quoted as having told Iranian government’s ICANA news agency. “Under equal circumstances, this company (Indian consortium) could take priority. However, if there is a difference between the Indian company and other firms in terms of technology, technical knowhow and investment, Iran will, based on the independence and freedom that is has, choose the company which would best serve the country’s national interests,” he added. On India’s decision to buy less crude from Iran, the official said Iran had actually suffered losses by allowing New Delhi to pay for the purchase in Indian rupees. India and Iran have failed to finalise a commercial contract for Farzad despite the optimism expressed by PM Narendra Modi and President Hassan Rouhani for the same when they met in Tehran last year. Calle Rosen Womens Jersey
Govt in talks to revise policy on petroleum industrial regions
With some of the petrochemical industrial regions such as Paradip and Tamil Nadu not generating expected results unlike Dahej in Gujarat, the Government of India is in discussions of revising the Petroleum, Chemicals and Petrochemicals Industrial Region (PCPIR) policy. Speaking at the sixth Petrochemicals Conclave at Gandhinagar, Rajeev Kapoor, secretary, department of chemicals and petrochemicals, Government of India said, “There is expected to be a shortage of petrochemical intermediates by 20 million tonnes by 2025. There is also lack of R&D and innovation in the sector. Except for Dahej, nothing much has happened in Paradip and Tamil Nadu PCPIRs. Hence, there is a need to relook at the policy for revision and the government is in discussions for the same.” Minister of State for Chemicals and Fertilizers, Mansukh Mandaviya said that the petrochemical complexes need strengthening in order to boost country’s exports. “Chemical and petrochemical imports today stand at 10 million metric tonnes which is set to grow to 46 million metric tonnes by 2030. Import substitution of certain petrochemicals is the key requirement for sustainable development of the industry in the next 5-10 years. We have to look at ways to reverse the trend for India to become a net exporter of the same,” said Mandaviya. Mandaviya urged the petrochemicals industry to focus on effective recycling and management of plastic waste for building a positive perception on the use of plastics. Union minister for petroleum and natural gas, Dharmendra Pradhan said that setting up of petrochemical clusters could help boost both consumption and marketing of end products. “Currently, the petrochemicals value chain is spread across various regions which could be brought together into clusters to boost consumption and marketing. Already, with increase in the per capita income and discretionary spending, there has been a steady change in spending patterns, from products made of metals to those made of fibres and plastics, which are both economical and long-lasting,” Pradhan added. While India’s per capita consumption of plastics at 10 kg per person is lower than the global average of 32 kg, the country’s aggregated demand for petrochemicals stands at 38 million metric tonnes per annum (mmtpa), Pradhan. Between 2000 and 2016, India grew at nearly 14 per cent in polymers to stand at a 10 mmtpa. The current petrochemicals market in India is estimated to be about 30 mmtpa while the average domestic per capita consumption of petrochemicals is about 22 kg per person. The total petrochemicals market in India is currently valued at approximately $ 50 billion. Driven by the rise in polymer demand, it is expected to grow at the rate of nine per cent annually to reach 40 mmtpa in consumption and $65-70 billion in revenues by FY 2019-20. Out of India’s petrochemicals demand of 30 mmtpa, the demand for polyolefins, used in industrial packaging and household plastic products, is estimated to be around 10 mmt. Expected to grow at a CAGR of almost 8-9 per cent, polyolefin demand in India is expected to reach 22 mmt by 2026. Overall, the petrochemicals market in India is expected to grow at a CAGR of 1.5 times that of GDP in the next 10 years. Meanwhile, speaking at the conclave, Nitin Patel, deputy chief minister of Gujarat said that petrochemicals had a big share in making Gujarat a model state with a high growth rate. “The annual turnover of the petrochemicals industry in Gujarat is Rs 5000 billion, supporting about 500 big industries, 1,600 medium and many small industries,” Patel added. Ryan Kerrigan Womens Jersey
India’s first ever U.S. crude purchase to arrive in Sept.
India’s first ever purchase of crude oil from the U.S. will be delivered in September, according to an Indian Oil Corporation (IOC) official, who added that the company’s deal with the U.S. resulted in cheaper oil for India than even Basra Light because the U.S. could sell at highly competitive rates, and the company transporting the shipment — PetroChina — had provided ‘very favourable’ terms of trade. High-sulfur grade IOC reportedly bought 1.6 million barrels of high-sulfur grade U.S. Mars crude oil and 400,000 barrels of Western Canadian Select. “The prices we are getting from America are very competitive, even when compared to the prices of Basra Light,” the IOC official told The Hindu on the condition of anonymity. “Added to that, this deal has PetroChina as the trader, which will transport the oil to India and the price of transport is also very low. Each order has specific dimensions to it, and this order has a Chinese company doing the transport. The delivery of the order is around September.” The deal with the U.S., signed earlier this month, comes at a time when India’s oil imports from Iran have fallen to their lowest levels in more than a year due to tensions between the two countries over the awarding of the Iranian Farzab B gas field. Iran has also cut short the credit period it offers Indian companies for oil they buy, from 90 days to 60 days. The IOC officials, however, did not mention Iran as the reason why Indian companies are now looking to other sources for their oil imports. “As long as the price is low from these other sources, we will continue considering them for supply,” he said. Bharat Petroleum Corporation also announced in July that it had become the second Indian company to buy oil from the U.S. Nevin Lawson Womens Jersey
ONGC seeks market freedom to open India’s 8th sedimentary basin
Oil and Natural Gas Corp (ONGC) has sought pricing and marketing freedom to help bring to production a one-trillion cubic feet gas discovery that will open up a new sedimentary basin after over three decades. ONGC, which has opened for commercial production six out of India’s seven producing basins, has made a significant natural gas discovery in the Gulf of Kutch of Gujarat coast that can produce about three million standard cubic meters per day, a senior company official said. This will open up the country’s eighth sedimentary basin – the first in over three decades – for oil and gas production in two years. “We can bring to production the find in 2-3 years time,” he said. ONGC reviewed the project with Oil Minister Dharmendra Pradhan last week and set out conditions that will help monetise the gas reserves. “The present government-mandated gas price of USD 2.48 per million British thermal unit does not make the discovery commercially viable. Since the find is in shallow waters, it does not qualify to get the USD 5.56 per mmBtu cap price set for difficult fields,” the official said. The current rates of gas are uneconomic, he added. “We have asked the government to give us pricing and marketing freedom. What sense does it make to use precious foreign exchange to pay USD 6-7 for importing gas and not pay an equivalent amount to domestic producers. Afterall, any domestic production would only aid government’s Make-in-India initiative,” he said. India has 26 sedimentary basins, of which only seven have commercial production of oil and gas. Except for the Assam shelf, ONGC opened up for commercial production all the other six basins, including Cambay, Mumbai Offshore, Rajasthan, Krishna Godavari, Cauvery and Assam-Arakan Fold Belt. The official said the discovery made in the Gulf of Kutch is in shallow waters, but cannot be tied to either the production facilities in Mumbai High fields or Hazira and may require a new landfall point. The BJP-led government had in October 2014 evolved a new pricing formula using rates prevalent in gas surplus nations like the US, Canada and Russia to determine rates in a net importing country. Prices have halved to USD 2.48 per mmBtu since the formula was implemented. India’s largest natural gas producer is demanding a floor or minimum price of natural gas be fixed at USD 4.2 per mmBtu and rates freed in a years time. “We hope the government listens to us,” the official said. “We should be able to bring the new find to production within 2-3 years from the date they give us for the requisite approvals,” he said.