Cabinet okays sale of IOC’s 24% stake in Lubrizol India
The Cabinet today approved sale of state-owned Indian Oil Corp’s (IOC) 24 per cent stake in Lubrizol India Pvt Ltd to Lubrizol Corporation, USA for an undisclosed sum. “The sale will enable IOC to have long term association with its joint venture partner and … Lubrizol India Pvt Ltd (LIPL) to have access to the latest global additive technologies developed by Lubrizol Corporation, USA,” an official statement said. LIPL, where the US firm holds the remaining 76 per cent stake, is in the lube additives business. “The Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi, today gave its in-principle approval to permit IOC to sell its 24 per cent equity in one of its joint venture companies, Lubrizol India Private Limited (LIPL) to Lubrizol Corporation, USA (LC), the other joint venture partner,” the statement said. Kris Draper Authentic Jersey
Centre made Rs 1.99 lakh crore from levies on petrol, diesel in 2015-16
The massive jump in excise duty on petrol and high speed diesel helped the government mop up nearly 40% of its indirect tax kitty from the two auto fuels in 2015-16, compared to 34% in the previous financial year. A study by the Comptroller and Auditor General (CAG) showed that Union excise duty collection shot up almost 70% from Rs 1.69 lakh crore during 2013-14 to Rs 2.87 lakh crore in 2015-16, with a majority of the contribution being from petrol, diesel, cigarettes and gutka. The indirect tax kitty includes duties from customs, central excise and service tax. Excise revenue from petroleum products, which made up for 52% of collections in 2013-14, went up to almost 69% during 2015-16 as the government resorted to a massive increase in levies in the wake of falling global prices. The central excise duty on petrol and high speed diesel increased from Rs 1.2 per litre and Rs 1.46 per litre to Rs 8.95 per litre and Rs 7.96 per litre respectively during the last two financial years. Revenue from petroleum products went up from Rs 88,000 crore in 2013-14 to Rs 1.99 lakh crore in 2015-16. Tax on sin goods (mainly tobacco products) at Rs 21,000 crore was second highest contributor to indirect taxes. Compared to countries like Pakistan and Sri Lanka, India has one of the highest retail prices of fuel oil in the subcontinent. The high price of petrol and diesel in India was contrary to the international trend in crude oil prices that crashed from a high of $112 a barrel in 2014 to as low as $30. Though the lower oil prices substantially reduced India’s oil bill as the country depends on 80% imports, domestic prices were kept high by increasing central excise duties. The excess revenue earned was meant to fund government’s social sector schemes. The CAG, which tabled its report in Parliament on Friday, however, highlighted the issue by pointing out how the government has been losing major revenue by giving exemptions to industry. The revenue forgone on account of different exemptions come up to more than Rs 2 lakh crore a year which the auditor has said need to be rationalised. The revenue forgone for FY2016 on excise duties was Rs 2.25 lakh crore — Rs 2.06 lakh crore as general exemptions and Rs 19,000 crore as area-based exemptions. This was over 78% of total revenue earning from central excise. The auditor has observed that though the main objective behind issue of exemption orders is to deal with circumstances of exceptional nature, but this objective was not properly defined. “As such, the duty forgone on account of issue of special exemption orders is not being calculated towards revenue forgone figures,” it noted. Paul Hornung Jersey
ONGC to invest Rs 21,500-cr in India’s deepest gas find
State-owned ONGC will invest over Rs 21,500 crore to develop India’s deepest gas discovery by 2022-23, helping it more than double output from its prime KG basin block. Oil and Natural Gas Corp (ONGC), which had last year firmed up an investment of Rs 34,012 crore (USD 5.076.37 billion) in bringing to production 10 oil and gas discoveries in its Bay of Bengal block KG-DWN-98/2 (KG-D5), plans to invest another Rs 21,528.10 crore (USD 3.2 billion) in developing the ultra-deepsea UD-1 find. “We have submitted to the Directorate General of Hydrocarbons a declaration of commerciaility (DoC) for the UD-1 find. We will submit a final investment plan, called the field development plan, by end-2017 and hope to bring the discovery to production by 2022-23,” ONGC Director (Offshore) Tapas Kumar Sengupta told PTI. ONGC plans to drill nine wells on the discovery that lies in water depths of 2,400-3,200 metres and will produce a peak output of 19 million standard cubic metres per day. The company had previously decided to develop other discoveries in KG-D5 block and leave the UD-1 find in the same block for a later date as it thought there was no technology available to produce gas from such water depths. Sengupta said that there are consultants who have showed to ONGC that discoveries deeper than UD-1 have been put to production in recent times, particularly in Gulf of Mexico. “A recent expression of interest (EoI) meeting we had for developing the KG finds saw several consultants offering solutions for such water depths,” he said. ONGC is in the process of appointing a consultant who will assist in developing the UD-1 discovery. The 7,294.6 sq km deepsea KG-D5 block, which sits next to Reliance Industries’ flagging KG-D6 fields, has been broadly categorised into Northern Discovery Area (NDA – 3,800.6 sq km) and Southern Discovery Area (SDA – 3,494 sq km). The NDA has 11 oil and gas discoveries while SDA has the nation’s only ultra-deepsea gas find of UD-1. These finds have been clubbed into three groups – Cluster-1, Cluster-II and Cluster-III. Last year, the company finalised a USD 5.07 billion plan for developing the Cluster-II finds by 2019-20. First gas production is envisaged by June 2019 and oil would start flowing from March 2020, he said. From Cluster-II, a peak oil output of 77,305 barrels per day is envisaged within two years of start of production. Gas output is slated to peak to 16.56 million standard cubic metres per day by end-2021. Sengupta also said that Culster-1 field will be developed at an additional investment of Rs 4,259.59 crore and will produce about 3 mmscmd of gas. Cluster-2A mainly comprises oil finds of A2, P1, M3, M1 and G-2-2 in NDA which can produce 77,305 bpd (3.86 million tonnes per annum) and 3.81 mmscmd of gas. Cluster 2B, which is made up of four gas finds — R1, U3, U1, and A1 in NDA — envisages a peak output of 12.75 mmscmd of gas. Peak output is likely to last seven years, he said. Sam Bradford Womens Jersey
Oil Ministry moves Cabinet to get RIL, ONGC pricing freedom
In a boost to firms like Reliance Industries and ONGC, the oil ministry has moved a proposal to the Cabinet for allowing pricing freedom for natural gas produced from coal seams. The ministry has proposed to the Cabinet that coal-bed methane (CBM) gas producers be given pricing freedom and allowed to price the fuel at market rates, sources privy to the development said. This will help operators quickly put in production the CBM blocks they hold and reverse the trend of investors relinquishing coal-seam blocks due to viability issues of current pricing. Of the 33 CBM bearing blocks awarded so far in four auction rounds and on a nomination basis, gas is being produced from only four. The proposal put to the Cabinet is for allowing CBM operators to sell the gas at market rate determined through an arms-length process, they said, adding that operators are also proposed to be allowed marketing freedom. The move will benefit Reliance which has two blocks in Madhya Pradesh that are in the process of starting production. ONGC and Essar OilBSE -0.15 % too will benefit from the new policy as it will help them put their acreage into production quickly. The four CBM blocks in production have a combined output of 1.17 million standard cubic metres per day. As many as 18 blocks have either been relinquished or are in the process as operators found that it did not make economic sense to produce gas at the prevailing rates. Most of the natural gas produced in the country is priced at an average of rates prevailing in gas surplus nations like the US, Russia and Canada. The current price comes to $2.5 per million British thermal unit, a rate considered unviable by many operators. Sources said pricing freedom is enshrined in the CBM contracts. These contracts, they say, are based on fixed revenue that the government will get from sale of CBM gas, and higher the rate of gas, the higher the government revenue. Unlike contracts for exploration and production of conventional natural gas, those of CBMs do not provide for cost recovery. According to the Directorate General of Hydrocarbons (DGH), India has the 5th largest proven coal reserves in the world and holds significant prospects for exploration and exploitation of CBM. The estimated CBM resources in the country are about 92 trillion cubic feet. The 33 CBM blocks awarded so far hold a total of 62.4 tcf of the estimated CBM resource, of which, so far, 9.9 Tcf has been established as Gas in Place (GIP). The sources said the CBM gas pricing policy proposed to the Cabinet is in line with the recently unveiled regime governing small and marginal oil and natural gas blocks. The government had recently auctioned small and marginal discovered oil and gas fields by promising investors complete pricing, marketing and production freedom under a revenue sharing contract agreement. Pricing freedom would help quickly ramp up CBM gas production to targeted 5.77 mmscmd within a year, they said. Logan Thomas Jersey
Disruptive changes to alter oil & gas industry dynamics: ICRA
The crude oil era is set for a structural slowdown leading to significant implications for different stakeholders in the oil & gas, said ICRA in a recent study. In its report, ICRA said crude oil, since its emergence in early 1900s, is witnessing a steady rise in usage to about 45% of global energy consumption by mid-1970s. Subsequently it reduced to 30% due to the emergence of other energy sources notably natural gas, it continues to be a fuel to reckon with among policy makers. At present disruptive potential for oil consumption levels comes from environmental concerns, car-pooling, electric cars, solar power, LNG based commercial vehicles, advent of e-rickshaws, e-bikes and driver-less cars. K Ravichandran, senior vice president and group head, corporate sector ratings said: “Electric or battery-driven vehicles are a key threat for demand of auto-fuels. The battery cost of an electric vehicle, accounting for almost one-third of the total cost of such vehicles will remain a key determinant in the rate of acceptance of electric vehicles.” “With anticipated material fall in battery costs, the break-even crude price for electric cars is expected to decrease from $185 per barrel to to $75per ICRA’s estimates,” he said. LNG based trucks and buses are likely to make a large dent in crude usage. Such vehicles would help reduce pollution from diesel leading to lower operating expenses offsetting higher capital costs. “As per ICRA estimates, break-even period for a truck would range 1-2.5 years depending upon taxation on LNG. However, developing an LNG-based transport fuel market shall have its own challenges, especially in building a network of fuelling stations to ensure the supply of LNG, when most of the trucks and buses on the road are powered by diesel or petrol engines.” said Ravichandran. Additionally, consistent fall in solar module prices leading to material fall in solar power tariffs have led to material increase in competitiveness against power plants based on liquid fuels, and the trend is likely to continue. Besides, replacement of diesel, by natural gas or LNG primarily for back-up power generation would also impact the demand of petroleum products. Dwayne Allen Jersey
Oil field leases may be extended 4 years before expiry
The government will extend the lease for oil or gas fields four years before the initial 20-year term expires, failing which an extension plea would be deemed to have been rejected, says a draft proposal on the new exploration policy aimed at eliminating extension uncertainties faced by contractors. Billionaire Anil Agarwal-owned Cairn India has been lobbying the government for years to extend the contract to operate the oil and gas block in Barmer, Rajasthan, by 10 years after the initial 20-year agreement runs out in 2020. Cairn contributes nearly 30% of India’s domestic output and has urged the court for more than a year to direct the government to quickly decide on an extension. The draft rules, when formalised, will not apply to the Barmer block but will end the kind of uncertainty Cairn faces today for blocks awarded under the new exploration policy. According to the draft contract under the new Hydrocarbon Exploration and Licensing Policy (HELP), the lease has to be granted for an initial period of 20 years, which can be extended by mutual agreement between the government and contractors for “five years or beyond as may be mutually agreed, or as per extant government policies.” The previous policy provided for an extension of five years for an oilfield and 10 years for a gas field, or such period as was mutually agreed upon. The draft contract, open to stake holder consultation, requires the contractor to submit a request for extension ‘no later than 5 years before the expiry of the existing contract’. “The Government reserves the right to approve the request for extension no later than 4 years before the expiry of the existing contract. If not approved within the stipulated time, such a request would be deemed to be rejected,” as per the draft contract. Last year, the government had announced a policy on extension of the so-called Pre-NELP ‘discovered’ fields, or 28 small, medium sized fields discovered by Oil and natural Gas Corp (ONGC) and Oil India Ltd and awarded to private joint ventures between 1994 and 1998. The policy, most importantly, required the government share of profit to increase by ten percentage point during the period of extension. Cairn’s Barmer field is not covered by this policy. Indian oil and gas fields are guided by different contracts, depending on the specific policies prevalent at the time they were awarded. Robert Hagg Jersey
ONGC’s proposed HPCL acquisition needs more thought
The Government had announced in this year’s Budget its intention to strengthen its oil PSUs through a mega merger so that they could ostensibly compete with some of the largest global petroleum companies. Such a merger would ostensibly increase their capacity in terms of risk taking, availing economies of scale, creating better value for the stakeholders, improving efficiency etc. More recently, it appears that the acquisition of Oil Marketing Company (OMC) HPCL is being considered by the flagship upstream PSU ONGC. This might be the easiest of the possible combinations given the Government’s share in HPCL is just a tad over 50 percent and the firm was earlier considered for divestment (before the Supreme Court put a spanner in the works). However, the question to be asked is whether such a development would help the companies in question and help achieve the objectives outlined by the Finance Minister.This is especially relevant as the acquisition will be expensive for ONGC. It is expected, for example, that the Government could get around $4-4.5 billion; and ONGC will also likely have to fork out funds to pay the public for an open offer besides what it pays the Government for its stake (or part of it). The Government, while propounding the idea of a merger, drew reference to the global oil majors such as Exxon, Shell, BP etc besides the large Chinese firms which have out-competed ONGC in the past while acquiring assets outside India. But whether ONGC would be left with the financial muscle to compete with these firms after paying billions of dollars to acquire HPCL and consequently witnessing very substantial increase in its debt, remains to be seen. It is quite likely that after paying for HPCL, it could struggle to raise funds for any other major acquisition, or have to pay higher interest rates in line with a lower credit rating given the higher debt on its Balance Sheet. The bottom line is whether ONGC would actually be strengthened to take on the might of Chinese firms or an Exxon post the proposed acquisition is certainly questionable. ONGC would be far better served by instead acquiring a technically competent mid-sized foreign upstream player. This would help it get more from existing fields, some of in which it is struggling (Imperial comes to mind), or bid for higher stakes and operatorship when it makes acquisitions abroad (currently it has largely taken minority stakes and is not the operator; its technical competence in deepwater fields needs to be better). It is also worth noting that ONGC will have to grapple with the acquisition of the ‘Deendayal’ gas field from GSPC. ONGC’s energy and funds could well end up being spent into managing and integrating these two acquisitions instead of focusing and growing its core business, where its production has been stagnating. It is true that a downstream firm such as HPCL would be somewhat insulated from higher oil prices through a combination with an upstream firm (although the Government was compensating it earlier and with the recent reforms in pricing of petrol, diesel, LPG and kerosene, it should be already in a better position to tide over commodity cycles than earlier). In that case, one may say that since it would be the beneficiary, it should be leading the acquisition. Therefore, should not HPCL be looking to acquire an upstream firm itself rather than be acquired? The time is right because HPCL’s balance sheet is looking far better after the recent few years of relatively subdued oil prices. There is upside potential for HPCL should crude oil prices rise- it could pay relatively less at present for an acquisition and see the value of the acquired firm rise with a possible increase in crude prices. Following this line of thought, while HPCL could look to acquire PSU firm Oil India Ltd (OIL), it seems a better strategy for it to acquire a mid-sized foreign crude oil producer to diversify its risks. All in all, the Government needs to perhaps think more carefully before pushing ahead with the plans announced in the Budget regarding combining one or more of its PSUs. Size may matter, but the right combinations also do. Else, far from meeting the objectives, the Government may find its flagship PSUs weakened rather than strengthened. Joe Looney Authentic Jersey
Why Oil Demand Forecasts Have Become A Guessing Game
Get yourself a ruler, a pencil and a piece of paper. Place the ruler at about 45 degrees and draw a line upward across the page. That was easy. Now think about how to draw oil consumption over the next three decades. Plenty of pundits are scrubbing their spreadsheets and fidgeting with their rulers to show us the answer. Some forecasters are economists who work for multinational oil and gas companies and government agencies. Most of their oil outlooks extend upward. The biggest uncertainty is the angle of their rulers. The steepest slope assumes that our prevailing consumption habits and government policies are extended out a few more decades. Oil demand reaches nearly 120 MMB/d at the top of this cluster, up almost 25 percent from today. More moderate trajectories in the group are based on pledges made pursuant to the November 2015 Paris Climate Change Conference; but tallying up country commitments still suggests modest growth to between 100 and 105 MMB/d by 2040. A group of weaker outlooks tilt downward like a loosely held hockey stick. Clustering between 73 and 80 MMB/d by 2040, this collection of prognostications assumes more aggressive global efforts to limit carbon loading in the atmosphere and the faster adoption of innovations like electric vehicles. The International Energy Agency’s 450 Scenario is the most bearish demand outlook among these peers. Environmental groups don’t equate fossil energy usage to classroom instruments or clichéd sports equipment. Slick oil charts from naysayers with green-coloured glasses look more like a BASE jump gone badly. The most catastrophic scenario appears to come from Greenpeace, which proposes that pipelines will trickle in the range of 35 MMB/d by 2040. What and whom to believe? The range of consumption estimates 25-years out is wider than the tailgate of a Ford F350; on one end is 35 MMB/d, on the other 120 MMB/d. Even the top cluster varies by 20 percent Given the 80 MMB/d range in opinions and analyses (each convincing on their own), stakeholders in the oil business may feel a tendency to adopt a, “the truth lies in the middle,” forecast. This method instructs us to believe a midpoint somewhere between denial and exuberance. Taking the median of all expert opinions and calling it the “consensus” of wisdom suggests oil demand will drop by 20 percent over the next quarter century. I don’t find this approach satisfying. Looking through a row of ten cloudy crystal balls doesn’t yield a new one of greater clarity. For over 100 years, the oil industry and its stakeholders have believed that the market for their products will continue to grow ad infinitum without competitive challenges. Today, that thesis is about as useful as a bent ruler and a broken pencil. Never in my 35-year career following energy markets has there been so much widespread disagreement about future demand for oil. And it’s a relatively recent confusion, one that’s been emerging over the past decade, but heightened in the past couple of years due to the potential forces of technological change and carbon regulation. An 80 MMB/d disagreement in various outlooks says to me that there is little value to add by uploading yet another spreadsheet into an already foggy cloud of forecast charts. I’m only confident in one fact and one forecast. Fact: There is widespread ambiguity in expert outlooks for oil consumption, one of the world’s most vital commodities. Forecast: The uncertainty is not going to diminish over the next five years at least. In other words, trends in technology, policy, economy and social factors are going to put wider and wider error bars on every pundit’s numbers. In my mind, the fuzzy question of, “How much oil is the world going to consume by 2030 and beyond?” must now yield to sharper, qualitative thinking. Pencils and rulers down, the questions going forward are, “What type of decisions will be made—relating to investment, corporate strategy, government policy and so on—under unprecedented uncertainty, and how will these near-term decisions affect the world’s long-term energy future?” I’ll be pondering answers to these questions during my commute to work and back – in my new electric vehicle. DaQuan Jones Womens Jersey
OIL signs MoU with Houston univ to augment reserves base
Oil India Limited (OIL) has signed an MoU with the University of Houston in a bid to augment its reserves base and maximise recovery from its ageing oilfields. The MoU was inked on Tuesday in the presence of Petroleum and Natural Gas Minister Dharmendra Pradhan. The MoU was signed by Utpal Bora, CMD, OIL, and University of Houston (UH), represented by Chancellor and President Renu Khator. Terming the MoU as historic, Pradhan said this will go a long way for the pilot study of CO2 capture technology application in Assam oil fields. “Innovation, institutional hand-holding and scientific temperament is the way ahead for oil and gas sector’s growth,” Pradhan said. “If there is (a) good strategy, innovative technology and willpower, a good ecosystem can be formed that will help in more oil recovery from the oilfields,” Pradhan said. The major focus of the MoU is collaboration in the areas of improved oil recovery and enhanced oil recovery (EOR) for augmenting the production from matured fields, improvement in drilling and well intervention practices, seismic interpretation and reservoir characterisation studies, and unconventional hydrocarbon studies. “I hope that the benefits of this partnership between these two institutions would trickle down to the Indian E&P sector and help increase our domestic production of oil and gas, thereby strengthening India’s energy mix and securing India’s energy needs to fuel the desired economic growth in the medium to long term,” Pradhan said. It is believed that this collaboration will help OIL to further consolidate and upgrade the various initiatives the company has undertaken to improve production and contribute significantly to the energy security of the country. This will also contribute towards national obligation set by Prime Minister Modi to reduce import dependency of oil and gas by 10 per cent by 2022. “OIL is also in talks with NRG (NRG Energy Inc.), a leading power company in the US and world leader in de-carbonisation, who along with its partners completed construction on the world’s largest post-combustion carbon capture system on-budget and on-schedule for using it for EOR project,” OIL spokesperson said. “NRG can help OIL to assess CO2 availability from the nearby industry sources and support as well as advise viability of Carbon Capture and Sequestration pilot project,” the spokesperson said. Robert Griffin III Womens Jersey
Dharmendra Pradhan meets US energy secretary, discusses LNG deal
Minister of State for Petroleum and Natural Gas Dharmendra Pradhan has discussed with new Energy Secretary Rick Perry the possibility of importing LNG from the US and Indian investment in the energy sector there. Pradhan met Perry during an unscheduled trip to the US Capitol and discussed energy cooperation between India and the US, Indian investment in Liquefied natural gas (LNG) and Shale sectors, and the possibility of the US exporting LNG to India from early next year. Perry said co-operation between India and the US in the energy sector is in mutual interest as India’s energy need is set to see a rapid increase as the economy expands. Pradhan arrived in Washington DC from Houston, a city located near the Gulf of Mexico, where he attended the influential CERAWeek energy conference and launched the new Hydrocarbon Exploration and Licensing Policy (HELP). On the sidelines of the conference, Pradhan had bilateral meetings with counterparts from Russia, Sri Lanka, Canada and Saudi Arabia. The Saudi Energy Minister Khalid Al-Falih is expected to visit India soon. Pradhan also met the CEO of state-owned Abu Dhabi National Oil Company; Bob Dudley, CEO of British Petroleum; and International Energy Agency Executive Director Fatih Birol. In Washington, Perry, who took over the department last week, strongly pushed for a Houston visit of Prime Minister Narendra Modi later this year. He said Modi’s meeting with the strong energy community in Houston could add a new dimension to bilateral ties. Dates of Modi’s US visit is still being worked out. Pradhan, who invited Perry to India for the next round of India-US Energy Dialogue later this year, said he would convey his message to the prime minister. Pradhan said the US energy secretary believes energy is the next frontier for India-US relationship. On Tuesday, the Union minister met Texas Governor Greg Abbott, who appreciated the Indian-American community and said that he is planning to lead a trade delegation to India soon. During the visit, Oil India signed a MoU with Houston University to work on CO2 injection technology to enhance production in Assam. Pradhan started his US tour from Boston, where he interacted with students and faculty members of MIT, Harvard Kennedy School and Fletcher School of Law & Diplomacy at Tufts University. At MIT, he also met former US Energy Secretary Prof Ernest Muniz. Both in Boston and Houston, Pradhan met members from the Indian community, including scientists of Indian origin. Eric Hosmer Womens Jersey