IndianOil plans Rs 400 billion mega refinery at Nagapattinam
Indian Oil Corporation (IOC) plans to come up with a 15-million-tonne (mt) refinery, with an investment of about Rs 400 billion, at Nagapattinam in Tamil Nadu. Currently, Nagapattinam has a 1-mt plant operated by Chennai Petroleum Corporation (CPCL), an IOC subsidiary. “We are planning to expand the 1-mt plant to 9 mt during the first phase, and will later expand it to a 15-mt mega refinery,” said an official source close to the development. National Iranian Oil Company (NIOC) has a 15.4 per cent stake in CPCL, which runs two refineries — 10.5-mt Manali plant in Chennai and Nagapattinam refinery in Cauvery Basin. Though there was a plan to merge CPCL with its parent company, a decision is yet to be taken by the government on what will happen to the Iranian stake in the firm. CPCL has a huge land bank in Nagapattinam, which prompted the company to plan such mega investments. This comes at a time when the viability of another 15-mt refinery of IOC in Odisha is under cloud. The Odisha government has decided to withdraw the fiscal incentives for the Rs 340 billion plant. According to the state government, it would lose Rs 22,745-crore revenue, at present value, if it allowed the company to defer paying value-added tax on the refinery’s produce sold in the state for the first 11 years. On the other hand, the company claims it to be in the range of Rs 80-90 billion. However, this decision is likely to have an impact on IOC’s other planned investments worth Rs 500 billion in the state. The state government is of the view that the project that was initially planned for 9 mt was later expanded to 15 mt, which increased the company’s profitability. According to the Odisha government, the profitability of the refinery increased because of low crude oil prices too. Prime Minister Narendra Modi dedicated the refinery to the nation in February 2016 and it is now operating at 90 per cent capacity. Including the 15-mt capacity at Paradip, India has a total of 230-mtpa refining capacity. Of this, public sector majors hold the majority share with 150 mt, while private sector players have a capacity of around 80 mt. CPCL was formed as a joint venture between the government of India, Amoco and National Iranian Oil Company (NIOC) in 1965. The government later divested its stake in the company over the years and IOC took over the government equity in the company in 2000-01 as part of the restructuring. The state-run major currently holds about 52 per cent stake in the company. Jerry Rice Authentic Jersey
Dharmendra Pradhan to showcase India’s oil, gas field discoveries in US
Petroleum Minister Dharmendra Pradhan will showcase India’s oil and gas field discoveries at a global energy conference beginning here next week. Pradhan and Russia’s energy minister Alexander Novak will be among those to address the international gathering of industry, policy and financial leaders at CERA Week 2017, organised by the UK-based IHS Markit from March 6 to 10. “We look forward to Novak’s perspectives on behalf of Russia, the world’s largest oil producer and those of Pradhan’s on behalf of India, the world’s fastest-growing major energy market as well as future prospects for its domestic oil and gas production,” said Daniel Yergin, conference chair and vice chairman of IHS Markit. Pradhan and senior officials from Oil and Gas sector will showcase India’s small and marginal oil and gas field discoveries at the conference. Representatives from Saudi Arabia, Organization of Petroleum Exporting Countries (OPEC), International Energy Agency, Canada, Bangladesh, Nigeria, the UAE, Rwanda, the UK, Sri Lanka would also address the conference. The annual Energy Innovation Pioneers (EIP) programme aims to identify the most innovative and distinctive new technologies across the energy spectrum including advanced analytics, distributed generation, energy storage, the Internet of Things, robotics and transportation. Judging criteria has included creativity, feasibility of plan, scalability of technology and leadership team. “Technology is at the heart of the energy business all across the energy spectrum, and these creative and dedicated problem-solvers highlight the critical role of innovation in shaping the energy future. It is innovation that will determine the pace of change,” said James Rosenfield, co- chairman of CERAWeek and founder of the EIP program. “Through their entrepreneurial spirit, this year’s class of Energy Innovation Pioneers represents technology start-ups that see the challenges of competing energy supplies, shifting policies and emerging technologies as opportunities,” said Carolyn Seto, the programme’s director and co-chair. Alex Klaessig, associate director and program co-chair said, “The increased penetration of renewables and storage at a time of low wholesale power prices challenge traditional utility practices. “The innovative ideas, technologies, and business models of this year’s class of Pioneers show how innovation conquers those challenges, and also demonstrate how their solutions draw from and contribute to progress in other sectors”. The conference will feature more than 350 speakers from around the world. Albert Wilson Womens Jersey
‘Government looking at creating 2-3 integrated oil, gas units’
Towards realising a proposal contained in the Union Budget for 2017-18 for merging state-run oil and gas companies into a single entity, the government is looking at creating two to three integrated units according to an energy expert here. “The government seems to be moving in the direction of one ONGC (Oil and Natural Gas Corp)-led integrated player. Indian Oil Corp (IOC) can be the other integrated player. GAIL should be encouraged to be the integrated player in the gas segment,” Narendra Taneja told BTVi in an interview. Following Finance Minister Arun Jaitley’s budget proposal in February of a merger, reports said explorer ONGC may acquire state-run fuel refiner HPCLBSE -3.61 % for about Rs 44,000 crore. “The idea is to strengthen the balance sheet of ONGC, where it has to compete with global oil giants. With this integration ONGC will become a $100 billion company,” Taneja said. The government thinking is that a much bigger entity will give bigger negotiating power in activities globally such as the purchase of crude, technology, R&D expertise, as well as faster decision making and economies of scale. Petroleum Minister Dharmendra Pradhan has clarified that Budget 2017-18’s bare announcement of the government intent to merge state-run oil companies into a single entity will actually mean creation of multiple entities. “If the government goes for the merger of their balance sheets, it will be a good move. But HPCL, being very different in working culture from ONGC, should be allowed autonomy to maintain its own culture,” Taneja said. The American rating Fitch has said in recent report in this regard that there would be considerable difficulties involved in merging a number of entities “with differing structures, operational systems, and cultures”. “ONGC would be in a better position to help HPCL, so that the latter becomes an asset, and not a drag… So that they can then go on to acquire integrated assets abroad ranging from upstream to downstream companies,” the expert said. “Where the world over, downstream companies are facing challenges, ONGC, with its strong fundamentals, would be better able to mobilise funds for HPCL,” he added. Taneja underlined that such a merger would benefit minority stakeholders. “First focus should be on protecting the interest of minority stakeholders. Following that, the consumers interests should be safeguarded,” he said. The creation of two large vertically integrated oil companies would also mean limiting the choice for consumers of fuel to two companies only. Jalin Marshall Authentic Jersey
BP lifts outlook for core oil business after cost cuts
British oil major BP lifted the outlook for its core oil and gas divisions on Tuesday, saying it would be able to balance its books with crude prices as low as $35 to $40 a barrel by 2021 thanks to its tough spending cuts. BP said its upstream business, which includes its main oil and gas production fields, is expected to generate free cash flow of $13 billion to $14 billion by 2021, nearly double an outlook presented last year of $7 billion to $8 billion by 2020. The refining and marketing business, known as downstream, is expected to generate $9 billion to $10 billion of free cash flow by 2021, BP said. The oil major, which was forced to raise billions of dollars from asset sales to pay for the clean-up of its 2010 Gulf of Mexico oil spill, made around $7 billion in cost cuts last year by tightening investments, cutting staff numbers and through depreciation in service costs. “We expect this combination of continued cost discipline with the growing cash flow from our core businesses will steadily drive down the cash balance point of the business,” BP Chief Financial Officer Brian Gilvary said. “Over the next five years we expect this to fall to around $35-40 a barrel for the group overall.” Earlier this month, BP lifted this year’s break-even oil price to $60 a barrel because it is investing more in new projects. LaDainian Tomlinson Authentic Jersey
Sanjiv Singh appointed IOCL chief
Sanjiv Singh was today appointed Chairman of the Indian Oil Corporation Ltd (IOCL), the country’s largest commercial enterprise. The Appointments Committee of Cabinet approved his appointment to the post for a period of five years, an order issued by the Personnel Ministry said. Singh is at present the Director of Refineries at the IOCL. He was selected for the top job after government headhunters Public Enterprise Selection Board (PESB) interviewed eight candidates. He will be assuming the charge on or after June 1, the order said. Thomas Hickey Womens Jersey
TN gas project safe, will generate Rs 300 crore, 500 jobs, says Centre
The proposed hydrocarbon projects in Neduvasal and Karaikal, which have run into rough weather, are not the first in Tamil Nadu, and they are as safe as three similar projects operating in the state, the Centre has said. The projects would generate 500 direct jobs and Rs 300 crore, the Union ministry of petroleum and natural gas said in a statement on Monday, and Tamil Nadu can earn `40 crore in royalty by implementing them. Seeking to dispel fears of environmental contamination and health hazards, ministry officials said misconceptions were fuelling protests in the state. There are three similar operational exploration blocks of approximately 1,461sqkm in the state. “Under nomination regime, 31 mining leases (approximately 3,500sqkm) have been granted in the state from where 600 tonnes of oil and 30 lakh cubic metres of natural gas are produced per day. Till date, more than 700 wells have been drilled for extraction of oil and gas in Tamil Nadu. These active operations are not hampering agriculture in nearby areas and do not pose any known environmental impact or health hazards on living beings of the operational area,“ the ministry statement said. It said extraction of oil and gas is a well-established practice and the industry uses state-of-the-art technology and takes maximum care to protect the environment. “The operators also get environment impact assessment done before carrying out any drilling and other activities.“ The statement said oil and gas ex traction were being carried out from deeper earth area (generally 1,000m) and thus does not affect groundwater aquifers located at much shallower levels. Drilling and production of oil or gas require very limited surface land area (generally 120X120 sqm) which does not affect farming or the soil of the entire lease area. Additionally, operators are required to follow strict environmental norms for use of operational land, the statement said. Allaying fears on methane being a dangerous gas, the government note said this gas was being used as household fuel globally as piped natural gas (PNG). Others concerns about adverse environmental impact on nearby areas and people living there are also misplaced, as all petroleum operations require clearance from the environment and forests ministry , wherein public hearing is an integral part. The ministry note also trashed allegations of irregularities in the process of awarding contracts to Gem Laboratories, saying these fields were offered through an open and transparent international competitive bidding process. Neduvasal has been home to protests in the past few days, with agitators alleging that besides the impact on soil and underground water table, production of methane gas would impact the health of people living in the area. Gem Laboratories won the block, identified as CYONDSF Neduvasal 2016, in the first oil field auction conducted by the Narendra Modi government, in December. But protesters are mainly targeting ONGC since it remains the largest driller in the Cauvery basin, while others are small players, said an officer. Andrei Mironov Womens Jersey
Jaitley’s Plans For Oil And Gas Require Caution And Review
Finance Minister Arun Jaitley has revived through his budget speech a proposal first made in the mid-90s, and then in the early 2000s, that our public sector undertakings in the oil and gas sector be merged into one giant oil behemoth whose market value would top $100 billion, close to that of Exxon. In arguing for “an integrated public sector oil major to match the performance of international and domestic private sector oil and gas companies”, Jaitley succinctly summed up his reasons for such a move: “It will give them the capacity to bear higher risks, avail economies of scale, take higher investment decisions and create market value for shareholders”. Those who opposed the proposal in its earlier avatars are in the forefront of again raising a resounding “No”. They say competition will be stifled; monopolistic tendencies will be reinforced in marketing practices; inefficiencies will increase because Indians cannot effectively manage mega-enterprises, especially in the public sector; that funds can be found in partnerships rather than mergers; that mergers will lead to lay-offs; and that ripe old chestnut – that the “culture” of nationalized companies is radically different to that of the companies born in the womb of the public sector. A word by way of background is, I think, necessary to appreciate the argument on both sides of the divide. The oil sector essentially comprises two segments: upstream and downstream. “Upstream” refers to exploration and exploitation of crude oil and gas; “downstream” to refining, transportation, marketing and imports-exports. As for “upstream”, oil was discovered at Digboiin upper Assam in the 1860s, second only to the first discovery at Pennsylvania in 1859. Then, over the next 100 years or so, no world oil major found any crude anywhere else in the country. By independence, therefore, the conventional wisdom was that India was hydrocarbons-deficient and there was nothing anyone could do about that except import whatever was required. One man disagreed: K D Malaviya, a junior minister for Mines in the Nehru government. Determined to prove that an indigenous Indian effort could succeed where foreign endeavours had failed, he persuaded the cabinet to let him set up the Oil and Natural Gas Commission (ONGC) in Patiala House, Dehradun. ONGC struck gas in Ankleshwar, Gujarat, and began its saga towards emerging as India’s own giant, the discovery of Bombay High off-shore, operationalized in the early ’70s, being its single most important find. The principal reason behind ONGC succeeding where others had failed was the primacy given to intensive innovative research by the ONG Commission. But once ONGC was converted from a Commission into a Corporation, its eye got firmly fixed on the financial bottom-line. And after it got a guaranteed rentier income by being allowed under the reforms of the ’90s to sell its crude oil in the domestic market at international prices, it has grown enormously wealthy because crude prices have gone through the roof – but without a single path-breaking oil discovery to its credit. Instead of technological breakthroughs, ONGC has moved its huge unearned income downstream into oil refining at Mangalore and miscellaneous other projects. R&D and “knowledge networking” with technology innovators the world over have been given the go-by. Worse, ONGC have set the example for each oil PSU to seek upstream-downstream integration, leading to a wide dispersal of national resources, instead of concentrating these scarce and precious resources in one mega-entity. Downstream, when war broke out with Pakistan in 1965, the Western powers directed their private oil multinationals operating in India to stop making any oil available to the government of India with a view to starving our armed forces of the fuel essential to the prosecution of the war. An infuriated Indira Gandhi decided to nationalize these companies as a measure of crucial national security. And so were born a plethora of smaller oil PSUs (Bharat Petroleum, Hindustan Petroleum, etc) to join the Indian Oil Corporation, by far the biggest corporation of the lot, in the downstream public sector. The division of work was clear: ONGC and a few smaller PSUs upstream; IOC and its smaller sisters downstream; and the Gas Authority of India Ltd (GAIL), with one or two others, to look after the natural gas segment, both upstream and downstream. The well-intentioned economic reforms of the ’90s found their reflection in the petroleum sector. The New Exploration Licensing Policy (NELP) was the key reform measure. It threw open upstream exploration to multinationals and Indian private sector companies. It also enabled the extant oil sector PSUs to start encroaching on each other’s territory, upstream entities going downstream, and downstream entities sailing upstream. Liberalization also meant Indian companies being encouraged to acquire, explore and exploit foreign properties to give a new dimension to India’s search for energy security. NELP’s specific policy innovation was that upstream crude discovered in India would be marketed in India at international prices, while the domestic price of petroleum products (like petrol) and gas would be market-determined. It worked beautifully for a while. Foreign majors started taking an interest in both upstream and downstream investment, as did Indian private sector enterprises like Reliance and state-owned start-ups like the Gujarat State Petroleum Corporation (GSPC). For upstream India, 2003 was the golden year. On-shore, Cairn struck oil in Barmer (where both ONGC and Shell hadfailed) and, off-shore, Reliance and GSPC announced such huge finds off-shore the Krishna-Godavari basin that informed observers began asking whether India was not likely to become self-sufficient in its energy requirements. Abroad, our participation in the oil and gas find in Sakhalin, at the eastern outreach of the Russian Federation, threw us in the company of the Big Boys. We were now in competition with China and would beat the problem of “peak oil” by throwing Indian multinationals, public and private, into the international arena. At the stage when these reforms were being undertaken, the late ’90s, oil was selling internationally at $10 a barrel. Price controls on petrol and other products could be relaxed or even abolished. As
Bangladesh’s Petrobangla seeks $1.4 billion government funding for LNG imports
Petrobangla has sought $1.4 billion from the government to foot LNG imports in 2018, which was around 77.77% of the estimated total cost of importing, LNG cell chief Mohammed Quamrumman said Tuesday. “We sought the funding from the government as subsidy as we would not be able to realize the LNG import costs through sales to consumers in the domestic market,” he said. The domestic price of gas is $2.50-3/Mcf, which is much lower than international levels, Quamrumman said. Petrobangla has estimated the total cost of LNG imports at around $1.8 billion/year from 2018 when Bangladesh’s first floating storage and regasification unit that is being developed by US-based Excelerate at Maheshkhali island in the Bay of Bengal, is expected to be ready. The FSRU will have an initial handling capacity of around 500,000 Mcf/d and ultimately up to 700,000 Mcf/d of LNG. Petrobangla planned to start importing around 500,000 Mcf/d of LNG from next year to cater to rising domestic demand, Quamrumman said. It expects to get around $400 million/year through domestic sales of regasified LNG. The proposal was now pending approval by the Ministry of Finance, Quamrumman said. In December, officials said that Bangladesh was set to announce the selection of India’s Reliance Power to build a 500,000 Mcf/d FSRU at Maheshkhali island. Petrobangla has also signed a contract with Summit LNG Terminal Company Pte. Ltd. for a second FSRU at Maheshkhali. It signed a memorandum of understanding last year with India’s Petronet to build an onshore LNG import terminal at Kutubdia island with the capacity to handle around 5 million mt/year of imported LNG.
Saudi Aramco to buy $7 billion stake in Petronas’ RAPID refinery project
The deal signing was witnessed by Malaysian Prime Minister Najib Razak and Saudi King Salman, currently on a state visit to Malaysia – the first in over a decade. “Malaysia offers tremendous growth opportunities and today’s agreement further strengthens Saudi Aramco’s position as the leading supplier of petroleum feedstock to Malaysia and Southeast Asia,” Aramco Chief Executive Officer Amin Nasser said. “With RAPID’s strategic location in a prolific hub, it would also serve to enhance energy security in the Asia-Pacific region.” Petronas’ Chief Executive Officer Wan Zulkiflee Wan Ariffin told reporters Aramco will take a 50 percent stake in RAPID’s refinery and cracker project. Aramco will supply up to 70 percent of the crude feedstock requirement of the refinery, with natural gas, power and other utilities to be supplied by Petronas. “To my knowledge, it is the largest single downstream investment made by Saudi Aramco outside the kingdom,” said Sadad al-Husseini, a former Aramco executive. RAPID, part of the Pengerang Integrated Complex (PIC) in the southern Malaysian state of Johor, will contain a 300,000 barrel-per-day oil refinery and a petrochemical complex with a production capacity of 7.7 million metric tonnes. The total development cost has been estimated at $27 billion. Like neighboring Singapore, Malaysia’s Pengerang peninsula sits between the Malacca Strait and the South China Sea, through which almost all the Middle East oil and gas bound for northern Asia’s industrial powerhouses of China, Japan and South Korea is shipped. Petronas on Tuesday said almost 60 percent of the PIC development is complete, and that it is on track for refinery start-up in 2019. Petronas CEO Wan Zulkiflee said the idea for a partnership on RAPID was first mooted in 2014 when he met the then Aramco Chief Executive Khalid al-Falih, now the Saudi energy minister, in Geneva. Sources had told Reuters in January that Aramco had pulled back from a planned partnership with Petronas on RAPID over concerns about returns from the project. But the deal was back on within a month in time for King Salman’s visit to Malaysia. “We started negotiations three years ago. There was not any plans to break out of the agreement… From the beginning we came with the intention to stay,” Aramco CEO Nasser said on Tuesday. The Aramco investment comes as a relief for Petronas which has cut expenditures in the past year as oil prices have slumped from over $100 a barrel in 2014. In early 2016, Petronas said it would cut spending by up to 50 billion ringgit ($11.27 billion) over the next four years. Dividends to the government coffers have also been slashed. Saudi Energy Minister Falih echoed Nasser’s comments, saying Saudi Arabia would use the Malaysian investment as a platform to other investments in southeast Asia. “We will encourage the private sector of Saudi Arabia to come and look at Malaysia as an investment for its own market and also to address the needs for the broader region,” he said. Jaromir Jagr Jersey
BJD joins Paradip battle – IOCL making huge profits, no need for concession
The BJD today justified state government’s decision to withdraw tax concession extended to the Indian Oil Corporation Limited (IOCL)’s Paradip oil refinery on the ground that the project had started making profit. The BJD articulated its stand on the issue, now the focus of a verbal war with the BJP, after Union petroleum minister Dharmendra Pradhan accused the state government of violating the spirit of the MoU with the IOCL by reneging on its earlier promise with an ulterior motive in mind. The state government on February 23 had withdrawn the tax concession given to the 15-million tonne public sector refinery raising the hackles of BJP leaders. Pradhan said: “Odisha had agreed on the tax deferment for 11 years in 2004. Now, upset with their debacle in the panchayat polls and their grudge against me they have violated the spirit of the MoU.” Pradhan said the ministry of petroleum has an ambition plan to invest Rs 1250 billion in the state. “But by withdrawing tax concession the state government is blocking the investments coming to the state. This will affect job opportunities of Odia youths,” he said. Denying the allegation, BJD spokesperson Pratap Keshari Deb said: “The MoU has two operative parts. The main objective of the state was to provide all facilities to make the refinery viable. But after petroleum products were de-regularised and the subsidy to them withdrawn. There is no need to provide tax exemption to the refinery.” The state government had signed the agreement for the refinery in 2004 when the oil market was not favourable. To make the project viable, the state government had agreed to provide all sorts of tax exemptions including interest-free loan. “The refinery was to commence operation in 2008-09. But the work was delayed and it started its commercial production in 2015-16 only,” he said adding that the refinery had made a profit of Rs 158 billion last year. “When it is making such huge profits, where is the need for concessions like tax exemption?” asked Deb. Besides, the IOCL had unilaterally enhanced the refinery’s production capacity from nine million tonnes to 15 million tonnes. However, according to the agreement the concession had been given on a production capacity of nine million tonnes. Deb said that by extending tax concessions to the project the state government would be incurring a loss of Rs 227.45 billion, which would be much higher than the loss of Rs 44.12 billion on account of these concessions that was projected when the MoU was signed. He said: “The state continues to extend support to the project in the form of waiving taxes like octroi. They got concessions to the tune of Rs 5.76 billion last year. They should not ask for more.” The party also raised questions over the claims about the employment opportunities that the project would generate. Taking on the Union minister, Deb said: “The refinery has been constructed using modern technology. It has created only a few white-collar jobs. Pradhan should tell people how many Odias have got jobs at the oil refinery?” Deb clarified that the decision to withdraw was an administrative decision. “The state government had issued a noticed to the IOCL in December 29, 2016, seeking a reply as to why the provision of tax exemption should not be withdrawn. The IOCL replied to the notice on January 17, 2017, and the state government took up the issue on February 9, 2017. Later, the state cabinet took the decision to withdraw concession on February 22, 2017,” he said. The issue may find an echo in the Assembly tomorrow when finance minister Pradip Amat presents the budget in the House. The size of the budget that is expected to reflect state government’s larger planning as well its financial constraints may be in the order of Rs 1060 billion. Kareem Martin Jersey