HPCL May Buy 2 ONGC Units Before Merger
Hindustan Petroleum Corp (HPCL) may acquire two subsidiaries of Oil and Natural Gas Corp (ONGC) before the explorer takes over the refiner, a senior government official said. The two ONGC units are Mangalore Refinery and Petrochemicals (MRPL) and ONGC Petro Additions (OPaL). Such a move would consolidate all of ONGC’s downstream operations in HPCL, leaving it free to focus on exploration and production. HPCL will look after refining and marketing, according to this line of reasoning. HPCL already has a 16.96% stake in MRPL, in which ONGC holds 71.63%. ONGC has a 49.36% stake in OPaL with GAIL holding 49.21%. The government has already begun the process of appointing transaction advisors for the ONGC-HPCL deal and will seek an independent valuation of its stake in the refiner. The government currently holds a 51.1 % stake in HPCL. Earlier this week, the Cabinet Committee on Economic Affairs (CCEA) accorded “in principle approval” for the strategic sale of its stake, “along with transfer of management control” to ONGC. HPCL will become a subsidiary of ONGC once this deal takes place. Department of investment and public asset management (DIPAM) secretary Neeraj Gupta said any proposal related to HPCL taking over the ONGC units has to come from the companies. Mergers and acquisitions are driven by economic considerations and fiscal prudence, he said. “Government by announcement in the budget has explicitly supported such merger and acquisition which improvise economies of scale, value addition, vertical and horizontal integration, and value of investment in the company,” he said. The government will support any move that strengthens staterun companies and creates value for investors. The government’s ONGCHPCL strategy is aimed at creating the first fully integrated oil company in India with exposure to upstream (exploration, production), midstream (refining) and downstream (retail) segments alongside petrochemicals, said the official cited above. “The HPCL distribution network is underutilised. They are buying oil from outside and by acquiring MRPL they will be augmenting their refining capacity. This mega merger will ensure value addition to the whole chain,” the official said. DIPAM secretary Gupta said: “We will do all due diligence and appoint transaction advisors and valuation advisors to independently evaluate the value of the holding through the established process for such divestment.” Market capitalisation is one of the factors that will be taken into consideration, he said, adding, “interest of all stakeholders shall be protected.” An alternative mechanism under finance minister Arun Jaitley has been set up to fast track the process.
India launches first R&D facility for high-end fuels, gas
India has launched its first petroleum Research & Development (R&D) facility for testing high-end BS-VI quality fuel emissions, according to an official here. Operated by state-run Indian Oil Corp, the R&D facility is designed to test all types of fuel including petrol, diesel, ethanol-blended petrol, bio-diesel, CNG, LNG, hydrogen-CNG and 2G-ethanol blends to ensure they meet the superior BS-VI norms that are to be implemented across the country by April 2020, a Petroleum Ministry statement said. This “first-of-its kind” facility was inaugurated by Petroleum Minister Dharmendra Pradhan in Faridabad in the National Capital Region (NCR) on Saturday. “In addition to generating emission data, the facility will also evaluate the fuel blends for energy-efficiency and engine durability,” it said. “In addition to generating emission data, the facility will also evaluate the fuel blends for energy-efficiency and engine durability,” it said. On the occasion, Pradhan complimented the IOC scientists for developing a “nano-additised battery for use in e-rickshaws, with better efficiency and longer life than commercially available batteries.” “The minister also lauded the efforts of Indian Oil R&D in commercialising Indane Nanocut — the industrial version. David Johnson Authentic Jersey
ONGC not to make open offer post HPCL acquisition: Official
ONGC will not be required to make an open offer to minority shareholders of HPCL after buying out government’s 51.11 per cent stake as the deal won’t trigger takeover norms as did the IOC-IBP merger in 2002, a senior government official said. The Cabinet Committee on Economic Affairs (CCEA) last week gave in-principal approval of Oil and Natural Gas Corp (ONGC) buying out government’s entire 51.11 per cent stake in fuel retailing and marketing company Hindustan Petroleum Corp Ltd. HPCL will continue to be a separate listed company. ONGC will not have to make an open offer to minority shareholders of HPCL as the government’s holding is being transferred to another state-run firm and the ownership isn’t really changing. “Open offer is not required because the management complexion is not changing. So it is a related party transaction,” the officer said. As per Sebi’s takeover code, if a company acquires more than 25 per cent in another listed company, it has to make an open offer to minority shareholders to buy at least 26 per cent more in the target firm. Way back in February 2002, state-owned Indian Oil Corp (IOC) had acquired government’s 33.58 per cent stake in fuel retailer IBP Co Ltd for Rs 1,153.68 crore and had to make an open offer for additional shares. “IOC and IBP merger had happened through bidding route. Reliance Industries was among the bidders. That time, IBP was being offered for outright sale, so when management chose to sell through bidding, the open offer got triggered,” the official said, requesting anonymity. In the present case, “in ONGC, I am transferring from direct government control to indirect holding,” he said. Government is 51 per cent owner of HPCL and 68 per cent owner of ONGC. “So, if one of the companies keeps the shares of the other, it is a related party transaction. But that does not mean government has sold the company. Government will indirectly hold stake in the company. “It is a related party transaction which should not trigger takeover code unless the valuations are absurd. If those conditions are satisfied, it will never happen. We have kept in mind interest of both ONGC and HPCL,” the official said. The deal, which flows from Finance Minister Arun Jaitley’s Budget announcement of creating an integrated oil company, will help ONGC spread its risks. From being a mere oil and gas producer, it will also have downstream oil refining and fuel retailing business. “When upstream business is down, downstream does great and vice versa. So now ONGC will be able to better manage its risks,” he said. “Through this vertical integration, what private sector could not achieve, the government has achieved,” he added. HPCL will add 23.8 million tonnes of annual oil refining capacity to ONGC’s portfolio, making it the third-largest refiner in the country after IOC and Reliance Industries. ONGC already is majority owner of MRPL, which has a 15- million tons refinery. Patrick Onwuasor Authentic Jersey
Oil gains ahead of producer meeting; Nigeria, Libya output in focus
Oil prices gained on Monday after a steep fall the session before, buoyed by expectations that a joint OPEC and non-OPEC meeting later in the day may address rising output in Nigeria and Libya, two OPEC members so far exempt from a push to cut production. Ministers from the Organization of the Petroleum Exporting Countries (OPEC) and other non-OPEC producers gather in the Russian city of St Petersburg on Monday to discuss the pact to curb output by 1.8 million bpd through the end of March 2018. The committee may recommend a conditional cap on Nigerian and Libyan oil production, sources familiar with the talks said, although some analysts were deeply sceptical the group would make such a move. “The committee may issue a statement on cooperation in production cuts, but output cuts by Libya and Nigeria would be next to impossible considering Libya was just re-emerging from the civil war, for example,” said Kaname Gokon, strategist for commodities brokerage Okato Shoji in Japan. Russian Energy Minister Alexander Novak said Libya and Nigeria should cap output when their output stabilizes, the Financial Times reported. London Brent crude for September delivery was up 24 cents at $48.30 a barrel by 0316 GMT on Monday. The contract settled down $1.24, or 2.5 percent, on Friday after a consultancy forecast a rise in OPEC production for July despite the pledge to rein in output. NYMEX crude for September delivery was up 17 cents at $45.94. Kuwait’s oil minister, Essam al-Marzouq, said on Saturday that compliance was good with oil production cuts by OPEC and non-OPEC countries and that deeper curbs were possible. Meanwhile, OPEC Secretary General Mohammad Barkindo said on Sunday that a rebalancing of the oil market is progressing more slowly than expected, but will speed up in the second half of 2017. Elsewhere, Turkish President Tayyip Erdogan travelled to Saudi Arabia and Kuwait on Sunday, the Gulf states’ official news agencies reported, as part of a diplomatic tour aimed at healing an Arab rift with Ankara’s ally Qatar. U.S. oil drillers cut one rig in the week to July 21, according to data from Baker Hughes. The United States is considering financial sanctions on Venezuela that would halt dollar payments for the country’s oil, sources told Reuters, which could severely restrict the OPEC nation’s crude exports. Aledmys Diaz Womens Jersey
RIL paying 6 per cent more to buy CBM gas from own block in MP
Reliance Industries is paying 6 per cent more price to buy coal-bed methane gas from its own block in Madhya Pradesh in the second quarter of current fiscal, the company said in an investor presentation. RIL had in May become the first buyer of gas it produced from its own coal-bed methane (CBM) block after agreeing to pay the highest price for the fuel. It paid USD 4.23 per million British thermal unit for the CBM produced during May-June. “For 2Q (July-September) FY18 supplies discovered price is USD 4.50 per mmBtu,” the company said in an investor presentation after announcing first quarter earnings. “RIL is the successful bidder.” RIL said it began CBM production from its Sohagpur blocks in Madhya Pradesh in March this year. “205 wells are flowing and production ramp up is in progress. Produced 8.6 million standard cubic meters of gas in 1Q FY18,” it said. Following the April decision of the government to give coal bed methane (CBM) producers freedom to discover market price, RIL invited bids from users of gas. The price discovered in the process was USD 4.23 for May-June and USD 4.5 for July-September. The rate is almost double the USD 2.48 per mmBtu price RIL gets for natural gas produced from its eastern offshore KG-D6 block. RIL said average production of gas from KG-D6 was 6.4 million standard cubic meters per per day and oil and condensate at 2,791 barrels per day during April-June quarter. This compares to 7.4 mmscmd of average gas production and 3,749 bdp of oil and condensate production during January- March. “Production continues to decline due to natural decline in the fields,” it said. “Currently eight wells in D1-D3 and three wells in MA field (in KG-D6 block) are under production.” RIL has invested about USD 500 million in CBM and laying a 300-km pipeline from Sohagpur to Phulpur in Uttar Pradesh to connect to the national gas grid. Through the April 13 notification, the oil ministry had stated that a CBM producer has to call for open bids for sale of coal gas and seek price quotes to discover the market price. The process prescribed was the same as the one RIL had run in 2012 to discover a price for CBM gas it is to produce in Madhya Pradesh. Back in 2012, it had sought bids for 3.5 mmscmd (as against 0.40 mmscmd put on offer this time) of coal gas from its Sohagpur CBM block in Madhya Pradesh at a benchmarked rate at 12.67 per cent of JCC, or Japan Customs- Cleared Crude, plus USD 0.26 per million British thermal unit. The formula was the same at which Petronet LNG, a joint venture of public sector oil companies, whose chairman is the oil secretary, used to buy long-term liquefied natural gas (LNG) from Qatar. At USD 100 per barrel oil price prevalent that year, CBM from RIL’s Madhya Pradesh block was to cost USD 12.93 per mmBtu. At USD 55 a barrel rate currently, it would cost USD 7.2. That formula was, however, rejected by the ministry even though 59 valid bids seeking about 70 mmscmd of gas were received in the open tender. This time, RIL sought bids in form of a deductible from Platts DES West India price of USD 7.659 per MMBtu. Roger Staubach Womens Jersey
Oil India submits report to Centre for gas pipeline to Assam
PSU major Oil India said it has submitted a feasibility report to the Central government for laying gas pipeline from Barauni in Bihar to Numaligarh in Assam to tackle shortage of gas in the North Eastern state. “Last week, we submitted the feasibility report to the Petroleum Ministry regarding laying of pipelines from Barauni to Numaligarh. We have addressed various aspects of gas transportation and its economic viability in the report,” Oil India Ltd (OIL) Chairman and MD Utpal Bora said here. The distance between the two points will be about 750 km, and currently OIL has two pipelines transporting crude and oil between Barauni and Naharkatia in Assam, he added. “If we want to have a complete new line, then the entire project will have to start from the scratch like acquiring land. But, as we already have Rights of Use (RoU) agreement with land owners and two pipelines are operational, so the Assam government wants us to implement the project,” Bora said, adding ideally GAIL should carry out the work. He said if the government gives nod to the report, OIL may form a joint venture with GAIL as they have the expertise in this field. Giving details about the feasibility report, Bora said it studied the possibility of setting up a third pipeline in the route, which has 18 metres of width as per the RoU. “The economic viability option has also been looked at in the report. It takes Rs 4 crore for laying one kilometre of pipeline. So, if it is not economically viable for any entity, then we have suggested the government to provide us assistance in terms of viability gap funding, which would be about Rs 40 crore,” he added. The report also dealt with other consumer related issues with availability of gas in Assam like setting up CNG fuel stations and providing pipe LPG to each household, Bora said. Also, some portions of the land have been encroached by people at different places and these have to be cleared before starting any work, he added. “The current requirement is 10 mmcmd (million cubic meter per day) and there is a shortage of 2 mmcmd. So, this project is very important to Assam. As we already have the RoU, it is easier. However, there are some challenges as well,” Bora said without elaborating further. James White Authentic Jersey
Cabinet may take up sale of HPCL to ONGC on Wednesday
The Cabinet is likely to take up flagship explorer ONGC’s proposal to acquire the government’s entire 51.1% stake in the country’s third largest refiner-retailer Hindustan Petroleum (HPCL) on Wednesday in a deal size estimated at over Rs 28,000 crore. The deal size could rise by another Rs 14,600 crore or so if the government does not waive the need for making an open offer to acquire an additional 26% from the market as required under norms. The move is in line with the government’s intention to create integrated Indian oil companies of global size and heft through mergers and acquisitions among existing state-run players. The stake sale in HPCL will also help the government meet some 38% of its disinvestment target of Rs 72,500 crore for this fiscal. “We see opportunities to strengthen our CPSEs (central public sector enterprises) through consolidation, mergers and acquisitions. By these methods, the CPSEs can be integrated across the value chain of an industry. It will give them capacity to bear higher risks, avail economies of scale, take higher investment decisions and create more value for stakeholders. Possibilities of such restructuring are visible in the oil and gas sector. We propose to create an integrated public sector ‘oil major’ which will be able to match the performance of international and domestic private sector oil and gas companies,” finance minister Arun Jaitley had said in his budget speech. Deciphering the Budget proposal, oil minister Dharmendra Pradhan had told TOI, “The Budget has laid the policy. Integration is the need of the hour. Globally, M&As (mergers and acquisitions) are the trend in the oil industry. With the policy in place, companies will chalk out mergers and acquisitions in accordance to their strength and weaknesses. We will see M&A activities in the public sector oil industry in coming days.” Soon after the Budget announcement, ONGC examined the proposals to acquire HPCL or the country’s secondlargest refiner retailer Bharat Petroleum (BPCL) — which also has an attractive exploration portfolio — and settled for the former as a more reasonable acquisition target. But don’t expect to see HPCL’s 14,000-odd petrol pumps — roughly a quarter of outlets operated by state-run companies — to change colours after acquisition by ONGC, which is unlikely to merge it and would retain the company as a subsidiary and carry on with the brand. ONGC could, as part of the entire transaction, shift its refining subsidiary MRPL under HPCL’s umbrella. ONGC holds 71.6% in MRPL, while HPCL owns 16.9% in the Mangalore-based company that runs a refinery with an annual capacity of processing 15 million tonnes of crude. HPCL has two refineries at Mumbai and Visakhapatnam in Andhra Pradesh with a collective refining capacity of over 14 million tonnes per year. HPCL will add 23.8 million tonnes of annual oil refining capacity to ONGC’s portfolio, making it the third-largest refiner in the country after IOC and Reliance Industries. Patrick Omameh Authentic Jersey
BHP Billiton to ramp up US shale rigs despite divestment calls
BHP said Wednesday it would double the number of onshore US shale rigs, despite a major shareholder pushing for the commodities giant to divest its American oil and gas assets. The Anglo-Australian firm said in an annual operational review ending June 30 that it increased the rig count to five during the April-June quarter, with plans to boost that to 10 in the 2018 financial year. The ramp up came even as BHP said it would sell-off non-core shale assets in Hawkville, Texas, in the September quarter. New York-based Elliott Advisors, a significant shareholder in the company, is pushing for BHP to restructure the business, including spinning off its US oil and gas operations and dissolving its costly dual stock market listing. The world’s biggest miner rejected Elliott’s proposal in April, while Canberra has warned that removing BHP from the Australian Stock Exchange was not in the national interest. Apart from iron ore and energy coal, annual production for BHP’s other assets — petroleum, copper and metallurgical coal — all fell, pushing shares down 1.67 percent to Aus$24.68 in Sydney Wednesday. Total iron ore production for the 2017 financial year rose four percent to 231 million metric tons after record output from its Western Australia operations. The lift also came during a period where prices for the metal surged following a slump from a supply glut and softening Chinese demand. Copper output eased 16 percent for the year to 1,326 kilotonnes, hurt by a strike in Chile at the world’s largest copper mine Escondida, with the industrial action also costing BHP US$546 million in costs. But copper production was “expected to rebound strongly in the 2018 financial year”, BHP chief executive Andrew Mackenzie said, on the back of a new water project and an extension programme at Escondida. Rio Tinto, the world’s second-largest miner, said Tuesday in its second-quarter production report that shipments and production for iron ore, its main commodity, slipped slightly for the period owing to “adverse weather conditions”. Michael Raffl Womens Jersey
Italy’s Saipem set for Novatek’s Arctic LNG 2 platform contract – sources
Russian gas producer Novatek is expected to select Italy’s Saipem to build offshore platforms for its second liquefied natural gas (LNG) facility in the Arctic, four sources said. Novatek is aiming to produce as much LNG as the world’s biggest exporter Qatar and is drawing up plans to build a second plant, known as Arctic LNG 2, on the Gydan Peninsula that juts into the Kara Sea. “The contract is not signed yet, (but Saipem) are expected to become a subcontracting party for the Technip-Linde-NIPIGas consortium,” one source close to the project said. A second source familiar with the details confirmed that Saipem was expected to work as a subcontractor to build the LNG units, which will be gravity-based platforms near the coast held in place on the seabed with ballast. Novatek and Saipem did not respond to requests for comment. In May, Novatek signed an agreement with Technip, Linde and the Russian Research and Design Institute for Gas Processing (NIPIGas) to design and develop gravity-based LNG facilities for Arctic LNG 2. Novatek has also agreed to buy Linde’s licence for gas liquefaction technology for the plant. The fact that Novatek has now chosen all four main contractors suggests the Russian company is serious about proceeding with the project, which is expected to start operating in the early 2020s. One source with direct knowledge of the matter said Novatek would start drilling its first exploratory gas wells in 2018. Two more sources, one close to Saipem and a Western energy source, said the gravity-based structures should allow Novatek to build the plant more cheaply than its first Arctic LNG project at Yamal. They did not give an estimate of the savings. Arctic LNG 2 is expected to have an output matching or exceeding Yamal. Its first line, which will produce 5.5 million tonnes of LNG a year, is expected to be launched later this year and Yamal will be producing 16.5 million tonnes by 2019. For now, Russia has just one operational LNG facility, run by Gazprom on the Pacific island of Sakhalin. Novatek is under U.S. sanctions over Moscow’s role in the Ukraine crisis, which limits the company’s ability to deal with U.S. financial entities. Novatek raised financing for Yamal from China, Russia and some European lenders. A source close to Saipem and a source close to the project said the company was expected to build the platforms in the northwestern region of Murmansk. They would then be delivered by sea to Gydan, some 2,000 kilometres (1,245 miles) away. A.J. Klein Authentic Jersey
Second Indian Company Buys U.S. Crude
Bharat Petroleum has become the second Indian refiner to start buying U.S. crude oil, after Bharat purchased 500,000 bpd of Mars and the same amount of Poseidon crude, to be delivered between late September and early October, according to Reuters. Indian Oil Corp., the country’s top refiner, was the first Indian company to purchase US crude, purchasing 1.6 million barrels of Mars crude last week. An unnamed source said that the seller was Shell, the operator of the Mars field and the Poseidon pipeline system. Both deals follow a visit last month by India’s PM Narendra Modi to the U.S., at which President Trump said that the U.S. is looking to expand its international reach by starting oil and gas exports to India. The price of the U.S. sour crude blends that Indian refineries are showing an appetite for is “reasonably competitive,” according the Bharat Petroleum’s head of refineries, R Ramachandran. So far, India’s biggest suppliers of crude have been Middle Eastern producers, Asian ones, and producers from Africa, but now the world’s third-largest consumer of the commodity is looking to diversify its sources of crude as U.S. and Canadian crude become more competitive after an overhaul at Indian refineries that made heavier crude blends a new favorite since they are cheaper than lighter ones. The US-India energy cooperation doesn’t stop there—it also includes Indian energy companies signing more than US$30 billion in long-term contracts for U.S.-produced liquefied natural gas, including from Louisiana and Maryland, and an upcoming trade mission of U.S. technologies that can optimize the performance of India’s oil refineries. U.S. crude oil exports have been on the rise, hitting a record-high 1.3 million bpd in the last week of May, with the average for that month at 1.02 million bpd. Besides Asian nations, European countries and a few South American ones were among the importers of American crude. Canada was the top importer, buying 372,000 bpd from its southern neighbor in May. Jake Ryan Womens Jersey