Work Begins On TAPI Gas Pipeline This Month
TAPI gas pipeline is expected to begin in Pakistan this month. The Tapi Company, a special purpose company created to run the pipeline project, has awarded the project management consultant (PMC) contract to the multinational engineering and consulting firm, the ILF Group. The ILF consultant team is ready to conduct route survey, detailed engineering and feasibility study in the ongoing month. The team will be collecting local data or conduct survey for keeping track of various project development status. A senior government official told media: “A team from Turkmenistan will reach Islamabad on February 14 to begin work on the route survey, engineering and feasibility study to implement the Tapi pipeline project.” The team will first start operations this month in Pakistan and then it will move to India and Afghanistan. Mobin Saulat, Managing Director at Inter State Gas Systems, said while speaking to media persons in Islamabad: “Pipeline construction and gas-field development has started in Turkmenistan and we appreciate efforts of Turkmenistan authorities to expedite the project.” He further noted, “Pakistan had reiterated its firm commitment and continued to provide full support for the Tapi pipeline. Efforts to achieve financial close were going on and the project would be commissioned as per schedule.” About TAPI Gas Pipeline TAPI is a natural gas pipeline being constructed by the Asian Development Bank (ADB). The TAPI Pipeline Project of ADB aims to export up to 33 billion cubic meters of natural gas per year through a roughly 1,800-kilometer long proposed pipeline from Turkmenistan to Afghanistan, Pakistan, and India. TAPI presents an opportunity for regional cooperation on an unprecedented scale, linking the economies of the four countries. Afghanistan, Pakistan, and India will gain a steady supply of affordable gas to power their growing economies. Pakistan and India will receive 1.325 bcfd (billion cubic feet/day) of gas each, however, Afghanistan will get 500 mmcfd (million cubic feet/day). A gas price agreement had already been reached in 2013 to set the pricing mechanism under which the gas price at Turkmenistan borderline would be around 20% lower than the standard price of a light crude oil that serves as a standard for purchases of oil worldwide. According to the accord, Turkmenistan will invest around $25 billion to supply 3.2 bcfd of gas to energy-deficient Pakistan, Afghanistan, and India. Paul Martin Authentic Jersey
Foreign oil companies exempt from paying tax on sale of storage leftover
Encouraging foreign firms to take capacity in India’s strategic oil reserves, Budget 2017-18 has exempted them from paying income tax on sale of oil left after the contract for storage in underground caverns has ended. Finance Minister Arun Jaitley in the Budget presented yesterday exempted income of foreign company, which books capacity in the strategic storages, from sale of leftover stock. Till now, exemption from payment of income tax was available only during the duration of the contract a company entered into for hiring the storage caverns. “Tax exemption on the sale of leftover crude oil stock will encourage foreign companies to invest in setting up Strategic Reserves in India,” Oil Minister Dharmendra Pradhan said in a tweet. In a bid to insulate the country from volatility in global oil market, the government will build two more underground crude oil storages in Odisha and Rajasthan. Jaitley said the new facilities at Chandikhol in Odisha and Bikaner in Rajasthan will have a capacity to stock 12 million tons of oil. India has already built underground storages in rock caverns at Visakhapatnam (1.33 million tonnes), Mangalore (1.5 MT) and Padur (2.5 MT). “For strengthening our energy sector, Government has decided to set up Strategic Crude Oil Reserves. In the first phase, three such Reserves facilities have been set up. Now in the second phase, it is proposed to set up caverns at two more locations, namely, Chandikhole in Odisha and Bikaner in Rajasthan. This will take our strategic reserve capacity to 15.33 million tons,” Jaitley said in his Budget speech. Strategic storages provide a country with two-fold advantage. Firstly it ensures utilisation of reserves in times of high oil and gas prices and secondly they can be used in the event of supply disruptions following unforeseen events like a natural disasters or a war like situation. The storage at Chandikhol will be an underground rock cavern while the one at Bikaner will be an underground salt caverns. “With this, India will move to the high energy table of the world,” Pradhan told PTI here. “We have a lot of learning from the first phase construction. We plan to do the second phase in 3-4 years.” Last week, UAE’s national oil company ADNOC signed an agreement to hire half of the capacity of India’s maiden strategic oil storage at Mangalore. India is 81 per cent dependent on imports to meet its crude oil needs. Abu Dhabi National Oil Company (ADNOC) will hire half of the 1.5 million tonnes Mangalore facility, officials said. An agreement to this effect was signed between Indian Strategic Petroleum Reserves Ltd (ISPRL) – the special purpose vehicle building the oil storages, and ADNOC after talks between Prime Minister Narendra Modi and Abu Dhabi’s Crown Prince Sheikh Mohamed bin Zayed al-Nahyan. Under the agreement, India will have first right to use the stored oil in case of an emergency, while ADNOC would use the facility to store oil for trading purposes. ADNOC will stock 0.75 MT or 6 million barrels of oil in one compartment of Mangalore facility. Of this, 0.5 MT will belong to India and it can use it in emergencies. ADNOC will use the facility as a warehouse for trading its oil. The 1.33 MT Visakhapatnam storage and 2.5 MT Padur stockpile together with 1.5 MT Mangalore storage will be enough to meet nation’s oil requirement of about 10 days. Pradhan said Congress-ruled Karnataka government has agreed on waiving VAT on the crude oil imported for the strategic storage, which UAE wants to use to stock oil when prices are low and supply to its customers when rates are good. Leonard Floyd Womens Jersey
M&A is buzzword of oil industry now, says Dharmendra Pradhan
he grand plan to merge state oil companies will be executed in a time-bound manner but the outcome may not be one giant company that absorbs all firms. Each new entity will straddle the entire value chain — from exploration & production to refining and marketing, oil minister Dharmendra Pradhan said. In an interview with ET, he said the government would leave it to the companies to pick their match instead of micro-managing the commercial aspects of the deal. Edited excerpts: What is the idea behind proposing a merger of state oil companies? Their bargaining and risk-taking capacity will increase. The industry is changing very fast. Merger and acquisition is the buzzword. Look at all oil majors, they are diversifying, synergising and integrating themselves. So you expect Indian companies to get into the league of BP and Shell? Yes, exactly. Will the merger result in one giant company? It will not be one company. It will not be wise to put all eggs in one basket. There will be multiple companies. But all these will be integrated (with E&P, refinery and marketing in each company). The government will not micro manage (the merger). Its role is to create policy, to facilitate that (merger). Who will merge with whom, who will acquire whom is up to the company. Their boards will take decision. Besides obtaining size and financial firepower, what is the kind of ambition we have for the oil firms? There are two things. One is to fortify the position of Indian players in the domestic market. Foreign players are welcome but Indian companies should not lose out. They should compete, upgrade themselves. Second, Indian companies should also be able to enhance their presence in the global market. Our consortium of state oil companies has done a good deal in Russia (acquisition of stakes in Vankor fields). Had Oil India or BPRL or Indian Oil tried that alone, they may not have been able to do such a deal. When will the merger start? It has already started. The FM’s statement in the Budget is not a knee-jerk statement. It’s well thought out. It will happen in a time-bound manner. All oil companies have different culture and multiple stakeholders. Mergers are not always easy… These are no big issues. No company is making a loss. There is heartburn when a loss-making company is purchased. There will be no heartburn if a profit-making company acquires another profit-making company. The merger will only enhance their competitiveness. Many CEOs and CFOs will lose jobs. Will the managements let the merger happen? These are government companies. How will they deviate from the government policy. And then, instead of 6 directors, there can be 12 directors in a company (to accommodate more people). Is it an issue? A bigger company will offer bigger opportunity. Customs duty on LNG has been halved to 2.5%. This can help boost gas consumption… Yes. The strategy is to create more consumption. This is a big incentive. The government will build two more strategic petroleum reserves. How much will it invest? It would take Rs 10,000 crore. It can get completed in three to four years. Has any policy framework been finalised for private players? We will keep a provision for the private sector and if someone shows interest we will allow him to work on this. There are two things: some people will be interested in long-term investments, others will be interested in using the reserves to store crude. Right now, we are seeking private players to use the three ready facilities. Abu Dhabi National Oil Company (ADNOC) and some Indian companies have shown interest. What are the terms for ADNOC which has agreed to partly fill one of the reserves that’s ready? There is a broader agreement and terms are still being finalized. Does the government plan to cut excise duty on petrol and diesel since prices have risen sharply in the past few months? There is no need right now. We expect prices to stay in the $55-60/barrel range, and as long as prices stay there, a cut in duty won’t be necessary. Ronnie Stanley Authentic Jersey
Petroleum Minister welcomes the Budget 2017 -18 proposals to boost Oil and Gas Sector
Minister of State (I/C) for Petroleum and Natural Gas, Shri Dharmendra Pradhan welcomed the Budget 2017-18 proposals announced by Union Minister for Finance and Corporate Affairs, Shri ArunJaitley in the Parliament today. Budget 2017-18 aims to Transform the quality of governance and quality of life, Energise various sections of society and Clean the country from the evils of corruption and black money. With an aim to give a fillip to Oil and Gas Industry, the Finance Minister announced several measures in Budget 2017 -18. The key initiatives include: 1. Reduction in the basic customs duty on LNG from 5% to 2.5%. 2. Setting up of two more strategic oil reserves at Chandikhole in Odisha and Bikaner in Rajasthan to enhance country’s energy security taking our strategic reserve capacity to 15.33 MMT. This will increase our storage capacity to meet the consumption requirement of about 90 days which is at par with the international benchmarks. 3. Foreign companies shall not be liable to tax in India in case of sale of leftover stock of crude oil in case of strategic petroleum reserve after the expiry of agreement or the arrangement, subject to fulfilment of certain conditions. 4. Creation of an integrated public sector ‘oil major’ to integrate the oil sector PSUs across the value chain and to enhance capacity of Oil PSUs to bear higher risks, avail economies of scale, take higher investment decisions and create more value for the stakeholders. 5. Encouraging digital payments through creation of digital payment infrastructure across all fuel stations by setting up facilities for digital payments including BHIM app. The Finance Minister has also praised the Direct Benefit Transfer scheme for LPG and kerosene of the Ministry of Petroleum and Natural Gas which is underway across states in his Budget speech. Alexander Kerfoot Womens Jersey
Has FM Jaitley done enough for the energy sector?
he Union Budget 2017-18 has come as a mixed bag for the energy sector. While Finance Minister Arun Jaitley has retained the government’s focus on rural electrification, renewable energy and a push for the oil and gas industry, there were no major provisions for other crucial areas of thermal power, wind, hydro and nuclear energy. Key announcements: One of the major energy related announcements in today’s budget was the merger of Indian state oil companies to create a global behemoth. Jaitley said the government will 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. The FM also announced a reduction in basic customs duty for liquefied natural gas (LNG) to 2.5 per cent from 5 per cent. He also said two additional strategic crude oil reserves will be created at Chandikhole in Odisha and Bikaner in Rajasthan to ramp up domestic reserves to 15 MT. Significantly, this budget also maintains the last year’s allocation for the oil ministry’s flagship scheme to provide LPG connections to poor households at Rs 2,500 crore. Also, in an indication of things to come, Jaitley identified the ongoing rise in global crude oil prices as one of the key three factors that will be major challenges for the emerging economies, including India. This year’s budget also attempts to maintain focus on rural electrification flowing from Prime Minister Narendra Modi’s vision. Jaitley said India was confident of meeting its 100 per rural electrification target by May 2018 and allocated a sum of Rs 4,814 to its flagship scheme Deen Dayal Upadhyaya Gram Jyoti Yojana. On the front of renewable energy, the FM said the government would add 20,000 Megawatt by taking up the second phase of solar park development in the country. Stressing on the government’s seriousness to focus more on solar energy, he said around 7,000 railway stations would be fed through solar power in the medium term and work has already begun in that respect in 300 stations. Major misses While the government maintained its push for the renewable sector, the lack of any relief provision for private thermal generators struggling with huge investments stuck for want of long term PPAs left a part of the domestic industry disappointed. there was not even a mention on thermal power and coal apart from Jaitley’s announcement on rural electrification. The Economic Survey, released on Jan 31, had pointed out to the difficulties being faced by the private power generation sector due to falling tariffs. The survey said private firms were reeling under cost-overrun pressure and PLFs and tariffs in the short-term market are not likely to rise in the near term. The industry had expected some, if not major, relief in terms of corporate tax and minimum alternate tax (MAT) for the power sector. But there was no such mention in the FM’s budget speech. Thermal power producers had also expected some relief in terms of the Rs 400 per tonne clean energy cess that was imposed last year. Experts also flagged the lack of major provisions for hydro or nuclear energy. The wind power sector had also hoped for a revision of the generation based incentive (GBI) for wind generators which is expiring on 31 March. The oil and gas industry had also demanded a revision of the high crude oil cess — another demand that remained unheeded in this budget. Overall, experts said the budget was a mixed bag for the energy sector. Research and ratings agency ICRA said the budget has several favourable proposals such as creation of two more strategic oil reserves projects, reduction in basic customs duty (BCD) on LNG and creation of an integrated oil PSU major. “The creation of additional strategic oil reserves will boost the energy security of the nation. Reduction in BCD on LNG will make LNG more affordable to end users. This is a credit positive for existing regasification terminal owners such as PLL, GAIL and Shell India,” ICRA said in a statement. Experts also said the idea of creation of an integrated oil major is laudable as it will strengthen the business and financial risk profile of the combined entity but integration issues, especially on the HR side, will e key challenges. Globally, the concept of stated-owned oil majors is a well established one, which confers advantages to the stakeholders. Vince Williams Jersey
LNG custom duty halved to 2.5 per cent
India has halved custom duty of liquefied natural gas (LNG) to 2.5 per cent from 5 per cent earlier at terminals as a part of its strategy to become a “gas-based economy”. Finance Minister Arun Jaitley announced the measure to cut the duty to make gas imports cheaper in Union Budget 2017-18 which may help LNG consumers, especially power and fertiliser companies, given the drop in domestic production. The government had earlier stated its intent to more than double its annual LNG import capacity to 50 million tonnes in the next few years India’s natural gas demand is expected to rise from 473 million standard cubic meter per day (mmscmd) now to 494 mmscmd in 2017-18 and 523 mmscmd in 2018-19. Matt Judon Jersey
Shell offloads $4.7 billion of energy assets after BG deal to become leaner
Royal Dutch Shell has sold North Sea and Thai energy assets for $4.7 billion (3.7 billion euros) to become leaner and reduce debt after buying rival BG Group, it said Tuesday. Shell offloaded its stake in Bongkot, an offshore Thai gas field, to Kuwait Petroleum Corp for $900 million, the Anglo-Dutch group said in a statement. The energy major that last year bought BG Group for $69 billion agreed also to sell some North Sea assets to oil exploring minnow Chrysaor for up to $3.8 billion. Royal Dutch Shell’s ‘A’ share price climbed 1.4 percent on the London stock market, which was up overall in afternoon deals. The Chrysaor deal more than halves Shell’s production in the North Sea, where resources are fast declining. But it allows Shell to focus on larger and more profitable fields, according to Platts analyst Nick Coleman. “The oil majors have other fish to fry in Brazil or Abu Dhabi — with big projects which will make a difference in their balance sheets,” Coleman told AFP. “They don’t have the time nor dedication for smaller oil fields projects” like those being sold in the North Sea. Shell last year said it would seek to sell 10 percent of group oil and gas output under a plan to sell $30 billion of assets. “The (latest) sale helps Shell focus on newer growth projects in the North Sea and gives away smaller, older fields and this makes it more focused,” Brewin Dolphin analyst Iain Armstrong told Bloomberg News. “It’s money in the bank for Shell which helps reduce debt. They are well on their way to meet the big $30 billion target,” he added. Shell will sell its entire holdings in nine North Sea oil fields plus a smaller stake in a tenth field to Chrysaor. The package comprises Shell’s interests in Buzzard, Beryl, Bressay, Elgin-Franklin, J-Block, the Greater Armada cluster, Everest, Lomond and Erskine, plus a 10 percent stake in the Schiehallion field. – ‘Clear momentum’ – “This deal shows the clear momentum behind Shell’s global, value-driven $30bn divestment programme,” said Shell’s Chief Financial Officer Simon Henry. “It builds on recent upstream divestments in the Gulf of Mexico and Canada. It is also consistent with Shell’s strategy to high-grade and simplify our portfolio following the acquisition of BG, to ensure the company represents a world-class investment case.” The total price tag consists of an initial sum of $3.0 billion, plus a payment of up to $600 million between 2018-2021 subject to commodity prices, with potential further payments of up to $180 million for future discoveries. Shell’s share of total production from the fields comprised about 115,000 barrels of oil equivalent per day (boepd) in 2016. That was 54 percent of its total North Sea daily oil and gas output of 211,000 boepd. The company added Tuesday it would retain a “significant, more focused and strengthened presence” in the UK North Sea, as it re-shapes its business. John Matuszak Womens Jersey
India to merge state oil companies to create global behemoth
India will merge the existing state-owned oil and gas companies to set up a global behemoth that would compete with some of the largest global petroleum companies, Finance Minister Arun Jaitley said in his Budget speech in Parliament. ET had recently reported the Cabinet Secretariat had referred the idea of the integrated giant company which would also absorb various institutions related to safety, development and analysis, to the oil ministry. The oil ministry had last year begun the process of evaluating the prospects of creating the conglomerate, which will have a bigger market value than Russian state oil giant Rosneft and India’s Reliance Industries Ltd. A similar proposal was considered more than a decade ago. But the government in July 2005 said that the official committee that studied the matter felt that a merger or formation of the holding company “may not be advisable for the present”. State-owned Oil and Natural Gas Corporation (ONGC), the top oil producer and one of the largest companies in the country, leads the pack of 13 state oil companies that are being considered for the merger. Other companies include Indian Oil Corporation, the nation’s largest refiner and fuel retailer, Bharat Petroleum Corporation, Hindustan Petroleum, GAIL, Mangalore Refinery and Petrochemicals (MRPL), Chennai Petroleum and Numaligarh Refinery and Oil India. The consolidated entity could rival the likes of Russia’s Rosneft ($55 billion in market cap) and UK’s BP Plc ($112 billion) in market value and financial power, according to sources. Denis Malgin Authentic Jersey
FM says rising crude oil prices will impact fiscal health
Unveiling the union budget for 2017-18, Finance minister Arun Jaitley stated that uncertainty of commodity prices, especially crude oil prices, may have far reaching implications for the fiscal situation of various economies including India. He was talking about the major challenges for emerging economies setting the tone for the Budget. The FM, however, added that the prices of crude oil may be checked by quick response from international producers of shale oil and gas. “Uncertainty around commodity prices, especially crude oil, has implications for the fiscal situation in emerging economies. It is however expected to be tempered by a quick response from producers of shale oil and gas. This would have a sobering impact on prices of crude and petroleum,” Arun Jaitley said. While talking about securing India’s energy needs the finance minister stated the government plans to set-up an additional two strategic crude oil reserves in Chandikhole in Odhisha and Bikaner in Rajasthan taking the country’s strategic oil reserve capacity to 15.33 million tonne. The FM also announced a reduction in the Basic Customs Duty on Liquefied Natural Gas (LNG) from the existing 5 per cent to 2.5 per cent in order to promote clean fuel. He also added the government will merge existing state-run oil companies to create a global behemoth that would compete with some of the largest global oil and gas players. Joe Namath Authentic Jersey
HPCL, GAIL Sign Pact With Andhra Pradesh For Rs 400 billion Petrochemicals Project
Hindustan Petroleum Corp Ltd. (HPCL) and gas utility GAIL India Ltd. signed a pact with Andhra Government for setting up a Rs 400 billion petrochemical plant in the state. The 50:50 joint venture will set up a 1.5 million tons Ethylene Derivatives plant, which will produce a wide range of petrochemical raw materials for the manufacture of detergents, paints and coatings, cosmetics, textiles and adhesives. “What we have signed is an MoU expressing intent for setting up the petrochemical plant,” GAIL Chairman and Managing Director B C Tripathi told PTI. Andhra Pradesh government will support the project by providing infrastructure, power, roads and other clearances. The plant will be set up at the Petroleum, Chemical and Petrochemicals Investment Region (PCPIR) sites identified by the state government at Kakinada. The MoU was signed by Tripathi, HPCL Chairman and Managing Director Mukesh K Surana and Kartikeya Misra, Director, Industries in Government of Andhra Pradesh. GAIL-HPCL combine may divest half of the project stake in favour of a strategic partner at a later date. Some global petrochem companies have shown interest in the project but talks are at preliminary stages currently, Tripathi said without disclosing details. The project is a truncated version of the earlier proposed refinery-cum-petrochemicals complex in Andhra Pradesh. HPCL has for the time being shelved plans to build a new refinery and is only pursuing petrochemical project. HPCL and GAIL decided to do the petrochem plan together after their plans to team up with France’s Total, Lakshmi N Mittal Group and Oil India Ltd. (OIL) for a 15 million tonnes a year refinery-cum-petrochemical plant at Visakhapatnam in Andhra Pradesh fell through. Tripathi said currently detailed feasibility report (DFR) is being prepared and details will work out following that. HPCL had in 2007-08 planned an only—for—exports refinery to target demand in South East Asia and the Middle East. The five-way alliance of HPCL, explorer OIL, gas utility GAIL India, Mittal Investment Sarl and Total had in October 2007 signed a memorandum of understanding to look at the feasibility of setting up the Vizag project. In 2009, the Rs 500 billion project was put on hold as petrochemical demand then was seen as too weak to justify the investment. Total did pre-feasibility for the refinery project and demand studies, while GAIL was in charge of the study of the petrochemical unit. But the project was in 2010 put on back burner before equity structure could be decided Oil slides as strong U.S. drilling activity weakens deal to cut output Oil prices fell on Monday as news of another increase in U.S. drilling activity spread concern over rising oil output just as many of the world’s oil producers are trying to comply with a deal to pump less in an attempt to prop up prices. The number of active U.S. oil rigs rose to the highest since November 2015 last week, according to Baker Hughes data, showing that drillers are taking advantage of oil prices above $50 a barrel. Global benchmark Brent crude oil prices were down 25 cents at $55.26 a barrel at 1010 GMT, while U.S. crude futures slipped 8 cents to $53.09. “Oil prices are down because of the rise in the U.S. rig count,” said Tamas Varga, analyst at PVM Oil Associates in London. He also added that Petro-Logistics’ report that OPEC members had cut production by 900,000 barrels per day (bpd) in January was “not very encouraging” because it implied that only 75 percent of the OPEC production cut target was being met. The Organization of the Petroleum Exporting Countries and other producers including Russia agreed to cut output by almost 1.8 million barrels per day (bpd) in the first half of 2017 to relieve a two-year supply overhang. Oil prices have remained above $50 a barrel since producers agreed the deal in December, incentivising drillers in low-cost U.S. shale producing regions to ramp up activity. “In our view the strong rise in U.S. shale oil rigs is a good thing because it will be needed over the next three years as non-OPEC, non-U.S. crude production continues to be hurt by the deep capex cuts both past and present in that segment,” said Bjarne Schieldrop, chief commodities analyst at SEB Markets in Oslo. He estimates the U.S. rig count will continue rising at a rate of seven rigs per week over the first half of the year. Golden Tate III Authentic Jersey