ONGC gets price guarantee from GSPC in $1 billion KG basin deal
Gujarat State Petroleum Corp (GSPC) will buy entire output at a predetermined price from the KG Basin gas field that it has agreed to sell to Oil and Natural Gas Corp (ONGC) for $1billion, a key provision that addressed gas pricing concerns of India’s largest crude producer and helped seal the deal, senior executives at the two firms said. “There is an initial understanding that we will support a particular price for five years,” said JN Singh, managing director of GSPC. “We have enough capacity in the system to absorb the gas from that field.” Late last month, ONGC agreed to acquire the entire 80% participating interest of GSPC along with the operatorship in the Deen Dayal West field where geological challenges have delayed the commercial production by several years while mounting the Gujarat firm’s development cost and overall debt. Senior executives at ONGC, who requested not to be named, said the agreement provides for GSPC buying gas for the field’s lifetime at a price linked to forward prices, which are available for next five years. The forward prices for the fifth year have been taken for the remaining life of the field, they said. The government publishes the maximum price producers can charge for gas from difficult fields such as Deen Dayal West twice a year. If government prices were to slide below the forward prices, GSPC will compensate ONGC for the deficit, executives said. Price of gas and the reserves GSPC’s field held were the two prickly issues between the two companies. The government ceiling for the gas price today is $5.30/unit. ONGC needed $6/unit to make the acquisition return 14% on investment, the state firm’s expectation of internal rate of return from its projects, sources said. This is when GSPC offered price support, sources said, adding that GSPC’s liability has been guaranteed by the Gujarat government. Before the two companies started talking prices, they spent more than a year squabbling over the amount of gas that can be recovered from the Deen Dayal West field, an issue that opposition parties also used to criticize the takeover talks, portraying it as an effort by ONGC to bail out GSPC burdened with a debt of about $3 billion. ONGC’s technical experts estimated the recoverable reserves at about 27.8 billion cubic meters (BCM) while GSPC’s estimate was 42 bcm, sources said. The two firms finally agreed on 29.9 bcm, a figure the Directorate General of Hydrocarbons (DGH) had estimated years ago. The estimate of Ryder Scott, appointed by ONGC for the job, was lower than ONGC’s inhouse estimate, sources said. GSPC’s debt will not come to ONGC following the deal, said D K Sarraf, chairman of ONGC. The Deen Dayal West field and its future income are hypothecated with lenders. “GSPC has to give us an unencumbered asset,” Sarraf said. The board of ONGC took almost 11 hours over two days to study the deal before signalling green. “We wanted to explain everything to every member on the board. The deliberation took long and in the end there was a unanimous decision,” said Sarraf. When the two companies had signed a preliminary pact in November, they also formed a three-member panel of retired bureaucrats to help resolve differences over valuation. “Since we agreed on a valuation on our own, their intervention wasn’t required,” Sarraf said. Demarcus Walker Jersey
Essar Ports plans Rs 106 billion greenfield port in Gujarat
Essar Ports Ltd, one of the leading port companies in the country, is exploring the option of setting up a greenfield commercial port in Gujarat, according to three officials close to the development. The company has recently given a project proposal to the state’s maritime regulator Gujarat Maritime Board (GMB) for the same. If it materializes, this would be the company’s first all commercial port in the country. Currently, the company operates five ports, all of which are largely for captive purpose although they handle some amount of third party commercial cargo as well. According to the investment proposal made to GMB, the company has proposed an investment of Rs 106 billion for the port project and it plans to employ about 1,000 people, according to two of the three officials quoted. The company aims to develop a commercial multi-purpose port preferably in Devbhoomi Dwarka district with facilities capable of handling bulk, general cargo, liquid including petroleum and oil lubricants, chemicals and LPG. A senior GMB official in the know of the development said that the Essar Ports wants to develop a commercial port with a draft of about 18 metres with a cargo handling capacity of 100 million tonnes per annum (MTPA). Presently, there are only two commercial ports in India that handle a cargo of 100 MTPA or more including the Adani group run Mundra port in Kutch and Kandla Port Trust run government port in Kandla, Kutch. Reliance Industries’ captive port at Sikka near Jamnagar handles close to 125 MMTPA, which is mainly used for its refinery and petrochemical projects at nearby Moti Khavdi. Apart from cargo, Essar Ports has also proposed to set up a 5 MMTPA liquefied LNG import and re-gasification facilities for the proposed project. “The state maritime board has already identified locations for greenfield ports like Kacchigadh and Maroli for private development and these would be offered to Essar for their new port. However, since this is not a captive project, as the per the state’s policy for private ports, the regulator might call for bidding,” said the same senior GMB official quoted earlier. Essar officials when contacted refused to comment on the development. It was not immediately clear if Essar Ports and the state government would sign a memorandum of understanding (MoU) at the upcoming Vibrant Gujarat Global Summit 2017, where a lot of companies are expected to sign such non-binding pacts. “Essar Ports had volumes but it could not get value for commercial cargo due to limitations of a captive port. With their expertise in handling port business, a multi-purpose greenfield port in south Gujarat would be more viable as GMB has already identified few good sites in the region. Also, it has good connectivity to northern hinterland and many industries have also set up there,” according to Ramesh Singhal, chief executive, i-Maritime Consultancy, which tracks the port and shipping sector. In October, the Essar group promoters Ruia family signed a deal with Russia’s Rosneft and partner consortium to sell their 98% stake in Essar Oil. The $12.9 billion deal included the 20 MTPA Vadinar refinery and Vadinar Port in Gujarat. It is likely to close by March. The company had said in a 15 October statement that the deal would help Essar deleverage almost 50% of its Rs 880 billion debt and substantially reduce interest costs. Essar Ports current has a cargo handling capacity of 140 MMTPA which it plans to expand to 194 MMTPA over the next few years. Essar Ports has five operational port terminals at Hazira, Vadinar, Paradip, Salaya and Vizag Iron Ore and is estimated to handle approximately 90 MMT of cargo during FY17.
Sixth LPG bottling plant for Telangana proposed
Union Minister assures to convene a meeting of oil companies to discuss the issue A serious attempt to secure the sixth cooking gas bottling plant in Telangana was initiated last week with a request to Union Petroleum Minister Dharmendra Pradhan to sanction one for the Bharat Petroleum Corporation Limited along the railway track in Karimnagar-Warangal. The BPCL is the only one among the three LPG cylinder-supplying oil companies not to have a second bottling plant in the State. The Hindustan Petroleum Corporation was sanctioned its own second project at Jammikunta in Karimnagar district two years ago and is set to complete the same in 18 months from sometime next week when it takes possession of the entire land required. Both companies have plants presently at Cherlapalli here while the Indian Oil Corporation is also located there and at Timmapur in Mahabubnagar district. Installed capacity The three companies together have an installed capacity of 628 thousand metric tonnes (tmt) per annum but it has still left a gap of about 2 million families without LPG connections. The new HPCL unit at Jammikunta with a capacity of 60 tmt will partly meet the fresh demand but not cover the future requirements entirely, sources in the oil industry said. In this context, the TRS led by its Karimnagar MP B. Vinod Kumar met the Union Minister last week seeking a bottling plant for the BPCL at Kamalapur, Jammikunta, Elkaturthi or Uppal in Karimnagar-Warangal to cater to north Telangana districts. Mr. Pradhan promised to convene a meeting of all three oil companies as early as possible to take stock of their infrastructure and requirements of their regional offices in the State, Mr. Vinod Kumar said. There are about 10 million LPG connections in Telangana but only 9.1 million of them were active. Though there were no constraints of supply as the companies delivered refill in two days in towns and Hyderabad and three to four days in rural areas, they set their sights on expansion to meet future requirements. Also, the companies were able to give new connections across counters on demand. Augmentation The BPCL’s lone plant at Cherlapalli with a capacity of 170 tmt per annum produced 40,000 cylinders per day and met 2.3 million connections across the State. The IOC is going for augmentation of its Cherlapalli unit from 120 tmt to 250 tmt by March-end. This would take its overall capacity to 370 tmt per annum while the HPCL which is producing 218 tmt per annum at Cherlapalli will add 60 tmt per annum when its second unit at Jammikunta is commissioned. There are about 10 million LPG connections in Telangana, but only 9.1 million are active
Union Budget 2017-18: Oil industry demands exemption of GST, ST on LNG transportation, re-gasification
With the Union Budget for the next fiscal close on the heels, the oil and gas industry has made a slew of suggestions to the finance ministry ranging from exempting transportation of LNG from a foreign country as well as its re-gasification from levy of GST and service tax, changing the income tax norms governing tax holiday and incentivising the shift towards cleaner fuel for downstream companies. “In order to promote gas-based industry in India, it is suggested that transportation of LNG by a vessel from a place outside India under voyage charter basis may be exempted from levy of Service Tax. Similarly, the activity of re-gasification of LNG also needs to be exempted from levy of Service Tax,” Federation of Indian Petroleum Industry (FIPI) said in its pre-budget memorandum. India’s domestic production of natural gas is not enough to cater to the increasing demand and large scale imports are required to augment the supply of natural gas for use in priority sectors such as Fertilizer, CNG, LPG and PNG. Currently, service tax (15%) is applicable on the transportation of LNG by vessel from a place outside India to the first customs station of landing in India. Also, imported LNG has to be re-gasified and converted into natural gas for transportation and consumption in India. The activity of re-gasification of LNG attracts Service Tax. “It is also suggested that the activity of transportation of LNG by a vessel from outside India to India may be exempted with status of ‘zero rated supply’ under GST regime. Similarly, the activity of re-gasification of LNG also needs to be exempted from levy of GST,” FIPI added. The industry body has also stressed on changing the various income tax norms pertaining to tax holiday for companies. Income tax provision of section 80 IB (9) provides a seven year tax holiday for profits derived by an undertaking from the production of mineral oils in India. However, the Finance Act, 2016, had introduced a sun set clause in the provisions of section 80-IB (9), which provide that no tax holiday would be available if commercial production is started after 31st March, 2017. “Cut-off criteria for the phasing out of tax holiday under section 80-IB (9) may be kept as the intimation of discovery on or before 31.03.2017 rather than the start of commercial production by that date. Alternatively, it should be made applicable on Production Sharing Contract (PSC) signed after that date and not on the PSC already signed and in operation,” FIPI said. With a view to boost the much needed investments in the oil and gas sector, the industry body has also demanded extending the tax holiday benefit from the existing seven years to 15 years or for a period of at least 10 consecutive years within a 15 year period from the year of commercial production. FIPI also said the government needs to clear the air on the definition of the term “Mineral Oil” by including both crude oil and natural gas under it for the purpose of section 80 IB (9) retrospectively irrespective of NELP rounds. The recommendation assumes importance at a time when frequent changes on the status of tax holiday applicable to oil and gas as per budget notification (NELP VII to NELP IX), has created an uncertainty affecting upstream investments in the natural gas segment. The domestic industry also flags concerns about the implementation of BS-VI emission norms by April, 2020 and the need to incentivise the shift for downstream companies. Hence, the industry body has suggested that 100 percent depreciation allowance be provided for projects undertaken for up-gradation of fuel quality. The industry seems confident that many of its key recommendations will be accepted by the government. New measures to boost the sector will be keenly watched in the budget with the recent hardening of global crude oil prices. In order to promote the import of LNG, the industry has also demanded inclusion of LNG facility at port location in the definition of “industrial infrastructure” in section 80-IA of Income Tax Act. Mikko Koivu Authentic Jersey
Bad news for fuel consumers: Get ready to pay more for petrol, diesel soon
You will have to pay more for fuel in the new year. Opec powerhouses Saudi Arabia and Iraq, which supply nearly 40% of oil India imports from West Asia, on Thursday initiated steps to bring the world’s honeymoon with low oil prices to an end. Saudi Arabia, the world’s largest oil exporter which two years ago sparked the oil price crash with hefty discounts, raised premium on grades of crude shipped to Asia and the US and initiated talks with buyers to cut supplies by 3-7% in February . Simultaneously, news agency reports said Iraq, the second major Opec exporter and currently among India’s top two oil suppliers, has initiated steps to pare output.Both the developments indicate the November agreement among Opec members and other major oil exporters such as Russia is well on its way to being implemented, proving sceptics wrong. The target is to cut output by 1.8 million barrels a day, nearly equal to India’s daily import of 1.9 million barrels, with a view to sucking out stockpiles and rebalance market. This is bad news for fuel consumers in a country such as India which imports nearly 80% of its oil needs. Through much of 2015 and 2016, fuel bill shrunk for consumers as oil prices tumbled some 70% from 2014 high of $112 a barrel. Lower oil prices reduced India’s import bill and eased subsidy burden on the government giving it legroom to mop up additional money for social sector spending by raising excise on fuels five times. But the good times appear to be coming to an end. Already, petrol prices were raised thrice and diesel prices twice in December as the cost of Indian Basket–the mix of crude bought by India–rose 21% from its November level. Any upward movement in global crude, combined with the rupee’s weakness against the greenback, invariably accentuates the impact on pump prices. International Energy Agency and Opec have projected oil prices to remain in the region of $60 a barrel through 2017 and go higher in 201820. If that is so, the government may be forced to reduce excise duty, which it had hiked to deny consumers the full benefit of low prices, to avoid popular anger as it heads for the general elections in 2019. Until then, keep paying more for fuel. Kyle Singler Womens Jersey
Innovation & Technology to be the key drivers for IndianOil in coming years,” Director (Refineries), IOC
Safety, Sustainability and Environment Protection shall continue to be a top priority in all our business operations, Sanjiv Singh, Director (Refineries), IndianOil said. Team IndianOil is fervently embracing technological advancements in its refineries and building capabilities of its people to be in readiness to seize promising opportunities in the changing energy landscape. Innovation & technology shall be the key drivers for the Corporation in the coming years, said Singh in his New Year address. Singh reiterated the team’s commitment for efficient, smooth and cost-effective supplies for meeting the energy demands of the country. He said that IndianOil Refineries are making steady progress towards ensuring 100 percent supply of BS-IV grade fuels from 1 April 2017 onwards. Singh also shared that India has made an ambitious and very challenging plan to leapfrog directly from BS-IV to BS-VI emission norms by April 1, 2020 i.e., within a span of just three years, a feat being attempted perhaps for the first time by any country in the world. The IndianOil Refineries are also gearing up for its timely implementation. Alejandro Villanueva Womens Jersey
Hindustan Petroleum Corp Ltd mulls 25% stake in 60 million tpa refinery
Hindustan Petroleum Corp Ltd (HPCL) is planning to pick a 25% stake in a US$30 billion mega refinery and petrochemical complex being set up in Maharashtra, India. Indian Oil Corporation (IOC) will hold 50% stake and Bharat Petroleum Corp Ltd (BPCL) will hold the balance 25%, in the 60 million tpa refinery and petrochemical facility- India’s biggest refinery. The refinery and petrochemical complex will be set up in two phases, of which the first phase will have a capacity of 40 million tpa and will have a naphtha cracker; and an aromatics and polymers production facility. While the first phase will cost between Rs 1.2 and 1500 billion and will be started in 5-6 years from the date, land is acquired, the second phase will have a 20 million tons refinery costing between Rs 500 and 600 billion
Global companies offer ONGC deepsea drilling rigs for KG gas find
As many as 10 international offshore drilling contractors including Transocean Inc have offered best-in-class deepsea drilling rigs to Oil and Natural Gas Corp (ONGC) for its KG-D5 gas field developments. As many as 10 international offshore drilling contractors including Transocean Inc have offered best-in-class deepsea drilling rigs to Oil and Natural Gas Corp (ONGC) for its KG-D5 gas field developments. ONGC had floated a tender to charter hire two deepwater drilling rigs and one anchor moored rig for bringing gas in Bay of Bengal block KG-DWN-98/2 or KG-D5, which sits next to Reliance Industries’ flagging KG-D6 fields, to production. “We have received tremendous response to the tender. International drilling contractors have bid very aggressively,” an official said. ONGC is among the very few explorers around the world who are actually going ahead with the development campaign despite low oil prices. “And naturally, contractors have no new job outside and so they are queueing up here,” he said. Transocean Offshore International Ventures Ltd offered Deepwater Millenium, Discoverer India and Discoverer Luanda deepwater rigs while Ensco Maritime Ltd offered two of its rigs, Ensco 8500 and Ensco 8501. Other bidders include Seadrill Orion Ltd, Drillship Kythnos Owners Inc, Dupont Maritime LLC, Dynamic Drilling & Services, Ensco Maritime Ltd, Queiroz Galvano Leo Gas, Seadrill Orion, Universial Energy Resources Ind, Vantage International management Co and Japan Drilling Co. ONGC is investing USD 5.07 billion for developing Cluster-II discoveries in KG-D5 block to flow natural gas from June 2019 and oil by March 2020. The 7,294.6-sq-km deepsea KG-D5 block 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 in three groups Cluster-1, Cluster-II and Cluster-III. Gas discovery in Cluster-I is to be tied up with finds in neighbouring G-4 block for production but this is not being taken up currently because of a dispute with RIL over migration of gas from ONGC blocks, the official 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 meters per day by end-2021. Cluster-2A mainly comprises of 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, the official said, adding that peak output is likely to last 7 years. Cluster-III is the UD-1 gas discovery in SDA in ultra- deepsea that poses technological challenges. A.J. Klein Authentic Jersey
Summit Group to develop $500m LNG terminal in offshore Bangladesh
Summit Group has secured a contract from Petrobangla to build a floating liquefied natural gas terminal at offshore Moheshkhali Island within Chittagong division of Bangladesh. Under the contract, Summit Group’s Summit LNG Terminal Company will set-up floating facilities within 18 months after the entering a final agreement. The floating terminals will have a daily supply capacity of 500 million cubic feet of natural gas, reported Thedailystar.net. For every 1,000ft³ of natural gas, the LNG will cost the Bangladeshi Government $0.45. Summit Group will transfer the terminals to Petrobangla after operating them for 15 years. “We want to ensure constant supply of primary energy for the country by implementing this project.” The project will be developed in collaboration with US-based GE, which will serve as an equity investment partner. Facilities will also contain floating storage and re-gasification unit, reported Thefinancialexpress-bd.com. Summit Group chairman Muhammed Aziz Khan was quoted by Thedailystar.net as saying: “We want to ensure constant supply of primary energy for the country by implementing this project.” Khan claimed that LNG is not only cost-effective, but also a more eco-friendly alternative. Last month, Petrobangla signed an agreement with India-based Petronet to construct a LNG re-gasification terminal on Kutubdia Island, as well as a pipeline. This project is estimated to be $950m. The country is exploring new ventures as it is facing shortage in gas supply. The current supply is around 2,700Mcfd, while it requires 3,300Mcfd. Michael Irvin Authentic Jersey
Mongolia to build oil refinery from India’s $1 billion credit
Mongolia intends to stop importing petroleum products when its new oil refinery begins operation. The country plans to spend $ 1 billion credit from India’s Export-Import Bank for construction of the oil refinery, news.mn reports. The landlocked central Asian country hopes to save hundreds of millions US dollars by producing its own petroleum products. Every year the country spends nearly $ 1 billion on imports, practically all from Russian refineries. In December alone, the country imported diesel for $219 million and petrol for $172 million. The refinery is expected to be a ‘game changer’ and will help the currently floundering Mongolian tugrik against foreign currency as well as drastically lowering the retail price of petroleum products. Mongolia will also become energy independent from its neighbours; at present 90 percent of all processed petroleum products used in Mongolia are imported from Russia and the crude from the domestic oil fields is all sent to China for refining. The refinery will provide a stimulus for the development of the country’s extensive hydrocarbon resources, mostly located in the east of the country. Another economic possibility would be the creation of a domestic chemical industry and producing plastics. Assuming that the refinery will be able to provide high levels of refining, Mongolia could produce aviation fuel, which, in turn, would reduce ticket costs and boost tourism. Finally, the refinery and all its spin-off enterprises would generate jobs for thousands of people. The new refinery is expected to have an annual processing capacity of 1.5 million tonnes; the crude oil will be transformed into 560 million tonnes of Euro Standard 4.5 fuel, 670 million tons of diesel fuel and 107 million tonnes of liquefied gas. The oil refinery is forecast to generate $1.2 billion in production revenue annually and will have a $43 million net worth. It is expected that the refinery will cover the investment costs within 8-10 years. Seth Roberts Womens Jersey