Cairn Energy says it has the funds to fuel its projects through to production
The independent oil and gas explorer expects first oil from its Catcher and Kraken developments east of the Shetland Islands this year. The wells are expected to produce 25,000 barrels of oil equivalent per day. Simon Thomson, Chief Executive, Cairn Energy PLC said: “Cairn is fully-funded in respect of all of our capital commitments and we continue to actively assess and pursue new ventures”. The Edinburgh based company will also begin its third drilling program in Senegal later this month. Shannon Sharpe Jersey
Why oil can spoil India’s budget math
One of the biggest drivers of India’s superlative macro-economic performance in the recent past has been a relatively under-appreciated element: oil. Since 2014, the dramatic fall in crude oil prices has helped India contain her twin deficits, and tame inflation. But with oil exporting countries planning to curtail oil supply, raising the possibility of a rise in oil prices, the Indian economy might soon have to deal with another pain point besides demonetisation. The extent of the gains from lower oil prices since mid-2014 is under-appreciated as the benefits have not been evident in the retail prices of petrol or diesel. However, the government did improve its finances, using the opportunity to increase the amount of taxes collected on petroleum products, as the charts below illustrate. The excise duty collected by the Union government on petrol and diesel has been hiked nine times since November 2014. The Union government’s tax collection from petrol and diesel has increased from 0.4% of GDP in 2013-14 to 1.1% in 2015-16, i.e. an increase of 70 basis points (bps) in two years. To put this in perspective, this is more than the 60 bps reduction achieved in gross fiscal deficit (from 4.5% of GDP to 3.9% of GDP) over the same period. One basis point is one-hundredth of a percentage point. In other words, the entire reduction in India’s fiscal deficit could be attributed to the increase in Centre’s tax revenue from petrol and diesel alone. Hence, it is fair to say that falling crude oil prices have driven the improvements in India’s public finances over the past couple of years. Looking at more recent data for the first half of the fiscal year ending March 2017 (April-September 2016), and combining taxes with other oil-linked receipts such as dividends from public sector petroleum companies and states’ VAT collection on petroleum products, we find that the total receipts of the Centre and state governments’ from the petroleum sector have risen by about 50 bps since fiscal 2015 to 3.14%. Even the above-mentioned gains from the petroleum sector might be an underestimate because besides the increase in taxes, the Centre also gained from reduced subsidy burden owing to the fall in crude prices. Diesel prices were deregulated in 2014 and the diesel subsidy was eliminated in the last fiscal year (2015-16) itself. Previously, subsidy on diesel would cost 0.6% of GDP (FY14), jointly borne by the government and the public sector petroleum companies. Besides, subsidies on PDS kerosene and LPG have also reduced; however these reductions could also be attributed to government initiative to reform rather than a fall in petroleum prices per se. The upcoming Union Budget 2017 is likely to assume an average crude oil price of $55-$60 per barrel, as reported by the Hindustan Times. However, there remain risks that oil prices, which are already near $55 per barrel, could shoot up if the Organization of Petroleum Exporting Countries (Opec) and other oil exporters make good on their pledge to cut global oil supply by around 1.8%. Such a scenario, according to the International Energy Agency, would move the global oil market into deficit in the first half of 2017, i.e. demand would outstrip supply, after more than two years of comfortable surplus. In such a scenario, if oil rises above the government’s comfort zone to say around $70 per barrel, then the government could lose tax revenues equivalent to about 0.4% of GDP which would jeopardize the government’s plan to cut the fiscal deficit to 3% of GDP next year. To illustrate, in a hypothetical scenario where the global crude oil price is $70 per barrel in the coming fiscal year (2017-18) and the USD/INR exchange rate remains stable at 68, the government could either allow the petrol price (Delhi) to rise by another Rs10 to over Rs80 per litre, or reduce its excise tax duty from currently Rs21.48 per litre to Rs11.48 (if it wishes to keep prices same). If the government decides to reduce excise duties on petrol and diesel in similar fashion, then the Centre’s revenue from petrol and diesel could shrink to 0.7% of GDP in fiscal year 2018 compared to 1.1% in fiscal year 2016, back-of-the-envelope calculations show (assuming annual growth of 11.4% and 4.1% in demand for petrol and diesel respectively, as has been observed in the year so far). Thus, a spike in oil price to around $70 per barrel is enough to strain our public finances and add 0.4% to the Centre’s fiscal deficit. This would be over and above the increasing expenditure obligations on interest, salaries and pensions, compounded by Seventh Pay Commission recommendations and OROP. If the government wishes to keep petrol and diesel prices unchanged, without sacrificing its tax revenues, then it would have to resort to subsidies (or under-recoveries) as used to be the case in yesteryears. Thus, no matter the recourse adopted, government finances will most likely be hit severely if oil prices rise, unless the government allows the prices of petroleum products to rise. Besides posing risks for the government’s finances and stoking the fires of inflation, a rise in oil prices would also worsen the current account deficit. Assuming crude oil prices at $70/barrel and pencilling a constant pace of rise in volumes in oil imports and exports, as seen in the current fiscal year so far, and keeping all other things constant, India’s current account deficit could widen to 1.7% of GDP in fiscal 2018 compared to 1.1% of GDP in fiscal 2016. India’s net oil and gas import bill, i.e. adjusting for exports of petroleum products, amounts to around 2.5% of GDP, higher than India’s overall current account deficit and hence plays a big role in determining the dynamics related to the balance of payments. Thus, if there is one commodity to watch out for in 2017, it is likely to be oil. Glover Quin Authentic Jersey
ONGC’s KG basin gas field all set to touch peak in July
State-owned Oil and Natural Gas Corp expects to scale peak output of about 5 million standard cubic meters per day from its Vashishta gas field in KG basin by July this year. Vashishta and S1 gas fields, located in the Krishna- Godavari (KG) Offshore Basin off the east coast of India, began operations in September last year. “We are producing 1.1 million standard cubic meters per day from the fields currently and hope to reach about 5 mmscmd by July,” a senior company official said. The fields were developed under a greenfield deepwater development project at an investment of $751.65 million. The Vashishta field is estimated to produce 9.56 billion cubic metres (bcm) over a period of nine years with peak production reaching 3.55 million metric standard cubic metres a day (mmscmd) during the first five years. The S1 field is expected to deliver 6.22 bcm over a period of eight years with a peak production of 2.2 mmscmd for the first five years. As part of the Vashishta and S1 field development, ONGC is drilling four wells and shipping the gas from them through a sub-sea pipeline to an onshore terminal at Odalarevu in Andhra Pradesh, he said. The Vashishta field lies in water depths varying between 500 meters and 700 meters and about between 31-35 km from the Amalapuram coast. The S1 field is located in water depths of between 250 meters and 600 meters, and approximately between 26k-29 km from the Amalapuram coast. While the Vashishta field is a free gas field with estimated reserves of 12.92 bcm, the S1 field lies to the east of G-1 field and is a free gas field with estimated reserves of 10.37 bcm. The official said Vashishta is the first field in the country to get the premium price of gas. In March last year, the government had allowed higher price for new gas production from difficulties areas like deep sea, ultra deepwater and high pressure, high temperature areas. When ONGC started production the premium price was $6.61 per million British thermal unit as against a cap price of $3.06 per mmBut for regular fields. “We got $6.61 per mmBtu for about a month,” he said. The premium price for period between October 2016 and March 2017 was cut to $5.3 per mmBtu based on benchmark rates in gas surplus economies. The rate for regular gas price also declined to $2.50 per mmBtu. The official said the gas was sold to state gas utility GAIL. “We have pricing and marketing freedom and we will auction the incremental production. Whosoever pays us the best price, subject to the government prescribed ceiling, will get the gas,” he added. Govt lets Cairn India drill 64 KG Basin exploratory, appraisal wells A committee under the Ministry of Environment, Forests and Climate Change has given a green signal to Cairn India for undertaking drilling works of 64 exploratory and appraisal wells in KG-OSN-2009/3 block in KG basin at Prakasam and Guntur districts of Andhra Pradesh. The Expert Appraisal Committee (EAC) while according to environmental clearance set a few conditions along with other specific and general environmental conditions relevant to the project proposal. After examining the facts and detailed deliberations the committee decided to recommend the proposal for grant of environmental clearance subject to compliance of following conditions along with other specific and general environmental conditions relevant to the project proposal, the EAC said in the minutes of the meeting held recently. Cairn India Limited has proposed for drilling of 55 exploratory and 11 appraisal wells in KG-OSN-2009/3 block in Offshore KG Basin. The offshore block in the Bay of Bengal along the coast of Andhra Pradesh is spread over an area of about 1988 km. The block covers partly the offshore areas of Prakasam and Guntur districts. Cairn India had earlier said it declared force majeure of two of its oil and gas blocks including KG-OSN-2009/3 due to the objections raised by the Ministry of Defence for taking up exploratory works. However, the company, in 2014, got necessary clearance from the Ministries concerned. The block was awarded to Cairn India on 30 June 2010 as part of the NELP-VIII round for exploration of hydrocarbons and production. The company has 100 per cent stake in the Block, according to the last year s annual report. Exploratory/Appraisal drilling is carried out in the identified sub-surface structures to find out if there is presence of hydrocarbons in commercially exploitable quantities, an expert in oil and gas filed said. Denver Broncos Jersey
Centre agrees to supply LNG to households in Yanam: Pondy CM
Chief Minister V Narayanasamy today said the Centre has acceded to the Puducherry government’s plea to supply cooking gas to every household through pipelines in Yanam region, an enclave of Puducherry in Andhra Pradesh. The announcement was made at the inauguration of the month-long ‘Oil and Gas conservation mass awareness programme’ organised by Petroleum Conservation Research Association (PCRA) here today. Narayanasamy said the natural gas available in the Godavari basin off the coast of Kakinada would be used for supply of Liquefied natural gas (LNG) to every house hold in Yanam region. “Necessary work to get infrastructures in place would begin soon,” he said adding supply of LNG through pipelines was also being contemplated for Karaikal and Puducherry regions. A terminal would come up in Karaikal as per the assurance given by the Ministry for Petroleum and Natural gas. Narayansamy also noted that the Indian Oil Corporation (IOC) had under its corporate social responsibility programme installed a dialysis equipment in the Indira Gandhi Government Medical college hospital here. The territorial government had also decided to show considerable concessions in the sales tax for sale of the fuel by the IOC for the flights that would be operating soon from Puducherry airport, he said. Welfare Minister M Kandasamy and Parliamentary Secretary to Chief Minister K Lakshminarayanan were among those who spoke. Students from various institutions took a pledge to conserve energy. Mark Gastineau Womens Jersey
RIL writes down $6 billion for New Accounting Standards
Reliance Industries (RIL) has written down almost $6 billion (Rs 39,570 crore) of investments in its Krishna Godavari Basin D6 block and US shale gas assets attributing it to change in accounting policy. In the past, the billionaire Mukesh Ambani-led company had to write down investments in the KGD6 block on account of steep declines in output and also in its shale gas assets in the US as prices plummeted. But the write-down reported by the company is believed to be significantly higher in the December quarter due to its transition from Indian Generally Accepted Accounting Principles (IGAAP) to Indian Accounting Standards (Ind-AS). RIL said that while IGAAP recognises two methods of accounting for oil and gas activities, namely, full cost method and successful efforts method, the new method under Ind-AS only recognises the successful efforts method which resulted in the huge write-down. “RIL and its subsidiaries have adopted Ind-AS with effect from April 1, 2016 pursuant to the notification issued by the Ministry of Corporate Affairs. The impact of Rs 39,570 crore is entirely on account of change in accounting policy from full cost method to successful efforts method (SEM),” an RIL spokesperson said in response to an ET query . The write-down constitutes Rs 20,114 crore on domestic oil and gas assets, mainly the KG-D6 fields. “Major differences impacting such change are in the areas of expenditure on surrendered blocks, unproved wells, abandoned wells and expired leases and licences and seismic cost which has been expensed under SEM; and depletion on producing property is calculated using Rs Proved Developed Reserve, as against Rs Proved Reserve’ in full cost method,“ the company explained. RIL’s upstream business has been a drag on the company as it remains a “low volume-low price“ business. The company’s flagging KG-D6 field produced 0.26 barrels of crude oil and 24.4 billion cubic feet of natural gas in the third quarter of FY17, a reduction of almost 30% year-on-year. Its shale gas production in the US also declined 9% sequentially. Realisations, though, witnessed some improvement. In a result review report, JM Financials said, “We roll forward to December 2017 to arrive at a target price of Rs 1,155 as we believe long-term investments into upgrading the refining complex and increasing the petrochemicals capacity based on refinery flue gases are long-term positives; while in the near-term the stock performance will depend on news flow on telecom.“ RIL’s consolidated net profit rose 3.6% to Rs 7,506 crore in the December quarter driven by petrochemicals business. Its consolidated turnover grew 16% to Rs 84,189 crore, aided by a growth in other income that rose due to profit from the sale of investments in fixed asset instruments. Emmanuel Sanders Womens Jersey
India, China to fuel demand for natural resources, says Saudi energy minister
India is set to play a bigger role in shaping the energy policies of the Middle East due to its growing hunger for oil. Saudi energy minister Khalid al-Falih, during the 2017 Abu Dhabi Sustainability Week being held at Abu Dhabi in UAE, said fossil fuels cannot be just wished away since rising car ownership in India and China will fuel the demand for natural resources. Although al-Falih, who is also the chairman of Saudi Aramco, Saudi Arabia’s petroleum and natural gas giant, pledged $30-50 billion investment by Saudi Arabia in renewable energy by 2023, he appeared bullish on oil and gas. “We are going to need clean oil and gas for generations to come,” he said. “We have seen bio fuels create more pollution than fossil fuel. Poor people using bio fuels are more likely to pollute than people who have access to clean oil and gas.” Passenger car ownership in India is estimated to grow by 775% over the next 24 years, according to the International Energy Agency (IEA). Phil Dawson Womens Jersey
Cairn India gets nod for drilling 64 exploratory, appraisal wells in KG-Basin
A committee under the Ministry of Environment, Forests and Climate Change has given a green signal to Cairn India for undertaking drilling works of 64 exploratory and appraisal wells in KG-OSN-2009/3 block in KG basin at Prakasam and Guntur districts of Andhra Pradesh. The Expert Appraisal Committee (EAC) while according to environmental clearance set a few conditions along with other specific and general environmental conditions relevant to the project proposal. “After examining the facts and detailed deliberations the committee decided to recommend the proposal for grant of environmental clearance subject to compliance of following conditions along with other specific and general environmental conditions relevant to the project proposal,” the EAC said in the minutes of the meeting held recently. Cairn India Limited has proposed for drilling of 55 exploratory and 11 appraisal wells in KG-OSN-2009/3 block in Offshore KG Basin. The offshore block in the Bay of Bengal along the coast of Andhra Pradesh is spread over an area of about 1988 km. The block covers partly the offshore areas of Prakasam and Guntur districts. Cairn India had earlier said it declared force majeure of two of its oil and gas blocks including KG-OSN-2009/3 due to the objections raised by the Ministry of Defence for taking up exploratory works. However, the company, in 2014, got necessary clearance from the Ministries concerned. The block was awarded to Cairn India on 30 June 2010 as part of the NELP-VIII round for exploration of hydrocarbons and production. The company has 100 per cent stake in the Block, according to the last year’s annual report. Exploratory/Appraisal drilling is carried out in the identified sub-surface structures to find out if there is presence of hydrocarbons in commercially exploitable quantities, an expert in oil and gas filed said. Cam Talbot Jersey
No returning to subsidies on petrol, diesel: Government
The government today ruled out reverting to the system of subsidising auto fuel but said it may resort to cut in excise duties if rate hike “pinches hard” even as there has been Rs 5.21 per litre hike in petrol price and Rs 4.45 in diesel rates since December. “There will be no subsidy regime in petrol and diesel,” Oil Minister Dharmendra Pradhan said. “Petrol price was deregulated in June 2010 and diesel in October 2014 and the same will continue.” The surge in international oil prices has led to petrol prices being hiked for the fourth time since December and thrice in case of diesel. Petrol price was hiked by 42 paisa and diesel by Rs 1.03 a litre (excluding local levies), effective last midnight. Petrol in Delhi now costs Rs 71.14 a litre as against Rs 65.93 in end November. Similarly, diesel rates have gone up from Rs 54.57 a litre to Rs 59.02. “There will be no going back to subsidisation. Subsidies are anti-poor. Subsidy should be given only to needy persons and not to people who can afford,” he said, indicating that auto fuels are being mostly consumed by people who can afford them. Asked if the government will look at cutting excise duty, he said no developed country had passed on the entire slump in global oil prices that began in second half of 2014 to take crude to more than a decade low, to consumers. Even oil producing nations like Saudi Arabia and UAE used it as an opportunity to cut subsidies, he said, adding that India raised excise duty to take away part of the gain arising from slump in global oil prices then. “We passed on 50 per cent of the benefit of oil prices slump to consumers and the rest 50 per cent we recouped by way of raising excise duty. This additional revenue was used to fund infrastructure and social projects,” he said. When oil prices slumped in the second half of 2014 and early 2015, the government hiked excise duty on petrol and diesel nine times to mop up additional revenues that helped it meet its revenue and fiscal deficit targets. In all, it raised excise duty on petrol by Rs 11.77 a litre and that on diesel by Rs 13.47. But global oil prices have been moving up since oil cartel OPEC last month agreed to cut output for the first time in eight years. India, which depends on imports to meet 80 per cent of its oil needs, will have to spend Rs 9,126 crore (USD 1.36 billion) more every year for one dollar per barrel increase in crude oil. Besides, the rising crude oil trajectory impacts inflation and growth. India spent USD 63.96 billion on crude oil import in 2015-16, about half of USD 112.7 billion outgo in the previous fiscal and USD 143 billion in 2013-14. For the current fiscal, the import bill has been pegged at USD 66 billion at an average import price of USD 48 per barrel. International oil prices currently are trading above USD 52 per barrel. Every rupee per litre increase in petrol price leads to 0.02 per cent rise in WPI inflation and 0.07 per cent for the same amount of increase in diesel rates. Nathan Noel Authentic Jersey
UAE beats India as top exporter of petroleum to Kenya
India has lost ground to the United Arab Emirates (UAE) as Kenya’s top supplier of petroleum amid a shrinking oil import bill linked to lower global prices. Kenya’s fuel imports from New Delhi shrunk to Sh51.3 billion in the first 10 months of last year, from Sh89.1 billion in a similar period of 2015, representing a 42 per cent drop or a cutback of Sh37.8 billion. Over the period, petroleum imports from UAE jumped 18 per cent to Sh58.1 billion in the review period, overtaking India as the single largest supplier of fuel consumed in Kenya, the Kenya National Bureau of Statistics (KNBS) data shows. The Middle East nation has made a comeback on Kenya’s top import table for petroleum, having lost the position to India after the closure of Kenya’s only refinery in Mombasa in 2013. Kenya now imports all of its refined products with the defunct refinery turned into a storage facility. The country’s petroleum import bill narrowed by Sh30 billion to Sh167.8 billion in the year to October 2016, despite a sharp rise in consumption, official data shows. This was helped by lower global prices which are, however, on the rebound following a recent pact by oil producers to cut production. India had in recent years ramped up oil supply to Kenya on the strength of Gulf Africa Petroleum Corporation’s (Gapco) operations in Kenya, which is 76 per cent owned by Indian billionaire Mukesh Ambani’s Reliance Industries. Gapco is now set to be acquired by French firm Total. The firm has been Kenya’s largest oil importer for the past three years under the open tenders system (OTS) floated by the Ministry of Energy. Under OTS, one marketer buys oil consignment in bulk to supply the rest of the industry, entitling the country to huge discounts. The system also made it possible for the energy regulator to introduce maximum price controls at the pump in December 2010, to cushion consumers from cartels in the industry. The KNBS data shows that Kenya took in Sh34.7 billion worth of petroleum from Saudi Arabia in the year to October 2016, up from Sh25 billion a year earlier, making the Arab nation the third supplier of Nairobi’s fuel needs. Bahrain comes in fourth with Sh4.2 billion worth of supplies, followed by Oman (Sh4.1 billion) and Sh3 billion for Netherlands. The UAE was once Kenya’s top exporter of goods, mainly oil, but lost the pole position to India in 2012, which has since been overtaken by the bullish China. The KNBS data shows that Abu Dhabi is now the third seller of goods to Nairobi at Sh79.6 billion in the year to October 2016, behind India (Sh170 billion) and China (Sh275 billion). Gilbert Perreault Womens Jersey
HPCL in talks with six foreign suppliers for gas at LNG terminal
Hindustan Petroleum Corp. Ltd (HPCL) is in talks with six foreign suppliers to source liquefied natural gas (LNG) for its Rs 54 billion LNG terminal coming up at the Chhara Port in Gujarat. The company also plans to enter the spot LNG market this year, said two officials aware of the development. HPCL has an equal joint venture agreement with Shapoorji Pallonji Port Pvt. Ltd to build the 5 million tonnes per annum (mtpa) LNG terminal at Chhara Port. The terminal is expected to be commissioned by 2019. “HPCL is in dialogue with at least six parties internationally to source gas for the Chhara LNG terminal that it will complete by 2019. Currently, it is studying the segments and catchment areas where it can market its gas,” said the first of the two people mentioned above, speaking on the condition of anonymity as he is not allowed to speak to the media. Stephen Hauschka Jersey