Acquisition of loss-making stakes worries ONGC officials
The series of acquisitions of loss-making stakes from the private players in the Krishna-Godavari Basin by the Oil and Natural Gas Corporation (ONGC) have remained a major cause for concern among the officials who have been associated with the public sector major for several decades and played a key role in its successful expansion. They are terming the deals as “forcible purchases” by the ONGC and seeing it as the result of intended involvement of politicians to benefit the private players. Cairn India and the Gujarat State Petroleum Corporation (GSPC) have already offloaded their assets to the ONGC, while the buzz is that another corporate giant is to follow suit. According to highly placed sources, the corporate major is all set to transfer its assets in the KG Basin to the ONGC. Deliberations are in progress at the high-level with regard to the price fixation and the very recent GSPC acquisition deal has given a boost to those negotiations. The ONGC, which has already been developing the Ravva oil and gas field in the KG Basin in association with Cairn India, is now acquiring a major share in the GSPC’s Deen Dayal West field block located near Mallavaram, about 35 km from here. Despite severe criticism from different quarters, the Central government has prompted the firm to acquire 80 per cent participating interest of the GSPC along with operatorship rights, at a purchase consideration of $995.26 million. The code of conduct is deterring the officials from expressing their views in public and their efforts to discourage the ONGC Board from clinching such deals are in vain. “Decisions on acquisitions should be taken by the board of directors basing on expert opinion, but not by the political leaders. The forcible acquisitions of loss-making assets will have an adverse impact on the overall performance of the ONGC very soon,” a senior official associated with the ONGC has told The Hindu. “Assets belonged to the private and corporate majors in the KG Basin are nothing but the off-shoots of the ONGC, as we are the foremost explorers of oil and natural gas here. After thoroughly enjoying profits from the assets, the firms are offloading them to the ONGC for a maximum price following drop in the revenues,” another senior official has pointed out. “The deal in progress is much bigger than that of the Cairn India and the GSPC and it may be pushing the ONGC into heavy losses soon,” lamented another official, who has been transferred from the KG Basin. Though there is an instance of the ONGC turning the fortunes for the loss-making Mangalore Refineries and Petrochemicals Limited following its acquisition, the officials term it as “rarest of the rare” case. Pittsburgh Steelers Authentic Jersey
Petronet LNG: Rising LNG prices a concern
Rising spot prices of liquefied natural gas (LNG) could spoil the party for Petronet LNG (Petronet), which has been a favourite of the street post delivering healthy volumes in the latest September quarter. The fact that spot LNG prices are trading closer to its two-year high levels could weigh on LNG demand in India, believe analysts. This in turn could impact Petronet’s volumes as well as financial performance going ahead. Rising LNG prices reduces its competitiveness versus other fuels such as Naphtha and have already started hitting consumption demand. LNG consumption from the power sector, for instance, has declined 41 per cent on a month-on-month basis in October. “With the restart of Dabhol capacity post monsoons, ShellHazira’s additional freed up capacity and imminent commissioning of the Mundra LNG terminal in FY18, near term upsides to capacity utilisation for Petronet’s Dahej terminal is constrained, in our view,” says Amit Rustagi, analyst at IDFC Securities. Notably, most analysts covering the stock are factoring in 100 per cent capacity utilisation at Petronet’s Dahej terminal in FY18, which could now be at risk. With gains of about 59 per cent in the past one year, the Petronet scrip has been on a roll so far and commands rich valuation of 17 times FY18 estimated earnings. The valuation does not adequately factor in the risks emanating from rising spot LNG prices, and hence is susceptible to downsides from here on. On the flip side, ramp up in use or pay contracts could provide some support to Petronet’s earnings and cap the earnings downside thereof. Amongst Petronet’s key expansions, its Kochi pipelines should take another two years at least to complete and could see lower losses once Bharat Petroleum’s Kochi refinery ramps up. Petronet expects its Gorgon (Western Australia) facility to witness full ramp up in July 2017. Analysts at Credit Suisse though believe that given that Gorgon prices are 50-60 per cent higher than spot LNG it will be challenging to sell in the Indian market. In this backdrop, investors would keenly watch out for management commentary on the demand trends and the outlook from here on. The use or pay contracts lends visibility to Petronet’s earnings and drive expectations of 22-25 per cent compounded annual growth in its earnings over the next couple of years. These expectations, however could be toned down to factor in the recent weakness in consumption demand and weigh on Petronet’s stock price and valuations, believe analysts. A.J. Green Womens Jersey
Sukhbir Badal lays foundation of Rs 600 crore ethanol refinery in Punjab
With elections round the corner and the model code of conduct expected to be enforced soon, Punjab deputy CM and SAD president Sukhbir Badal and his Union minister wife, Harsimrat Kaur Badal, laid the foundation stone of a Rs 600-crore, seocnd-generation ethanol bio-refinery at Tarkhanwala village in Bathinda. The two SAD heavyweights conducted the state government even after Union minister of state for petroleum and natural gas Dharmendra Pradhan could not make it to the event. Pradhan addressed the event through a video conference. To produce 100 kilo litres of ethanol every day, the plant will be using 400 metric tonnes of bio mass, including farm stubble. The SAD-BJP alliance turned the official function into a political rally, as BJP Bathinda district president Mohit Gupta, SAD’s Bathinda Rural candidate Amit Rattan, Sukhbir, and Harsimrat asked people to give another chance to the SAD-BJP tie-up, while speaking at the event. Harsimrat had on Saturday inaugurated a skill centre at Industrial Training Institute, Bathinda, and upgraded six government high schools to the senior secondary level. Marcus Foligno Jersey
Price hikes give oil companies’ investors reason to expect a better third quarter
The stocks of state-owned oil marketing companies (OMCs) are likely to end their sideways movement following expectations of good third-quarter results. OMCs have been able to increase fuel prices in higher steps in tandem with rising global crude oil prices during the quarter. This reassures investors that OMCs have sustained pricing power. The international price of crude oil rose by $6 per barrel in the period considered for a price hike on November 29, which necessitated a steep rise in petrol and diesel prices in India. Market trackers were closely watching whether OMCs were in a position to implement such a high increase in prices. The fact that such a steep rise was passed on to consumers shows the pricing power of OMCs and their ability to protect marketing margins. After the re cent price increase, marketing margins in December 2016 quarter averaged at Rs 2.1 per li tre on diesel compared with Rs 1.9 per litre in the previous quarter. For petrol, the margin was more or less stable at Rs 1.8 per litre. Every Rs 1 change in petrol margin expands projected EPS by 6-15% for OMCs, while every 5% growth in petrol volume expands EPS by as much as 2%. In addition, India’s fuel consumption growth remained robust at 7% and 12% in the first two months of the December quarter.This augurs well for OMCs. On the refining side, OMCs are likely to benefit from inventory gains due to rising oil prices during the December quarter and $1.8 per barrel improvement in the Singapore gross refining margin (GRM). Crude oil has surged nearly $8barrel in the December quarter so far. In the June quarter, when crude had inched up $10barrel, Indian Oil had reported $6.4barrel of inventory gain, while HPCL and BPCL recorded $2barrel gain each. IOC is likely to be the key beneficiary since it has higher inventory days due to more number of inland refineries compared with other OMCs which have refineries closer to coastal areas. OMCs trade between 9.3x and 9.5x the FY18E earnings -less than 10% premium to their long-term average multiple. The expansion of valuations hinges on their ability to control prices. Also, the extent of earnings upgrades will depend on who will bear the burden of 0.75% cash discount offered by the government on digital payments at petrol pumps. Marcell Dareus Womens Jersey
Pipeline uncertainty illustrates broader concerns for tribes
For hundreds of protesters, it was cause to cheer when the Obama administration this month declined to issue an easement for the Dakota Access pipeline’s final segment. But that elation was dampened by the uncertainty of what comes next: a Donald Trump-led White House that might be far less attuned to issues affecting Native Americans. “With Trump coming into office, you just can’t celebrate,” said Laundi Germaine Keepseagle, who is 28 and from the Standing Rock Sioux Reservation, where the demonstrators have been camped out near the North Dakota-South Dakota border. Anxiety over the 1,200-mile pipeline illustrates a broader uncertainty over how tribes will fare under Trump following what many in Indian Country consider a landmark eight years. President Barack Obama has won accolades among Native Americans for breaking through a gridlock of inaction on tribal issues and for putting a spotlight on their concerns with yearly meetings with tribal leaders. Under his administration, lawmakers cemented a tribal health care law that includes more preventive care and mental health resources and addresses recruiting and retaining physicians throughout Indian Country. The Interior Department restored tribal homelands by placing more than 500,000 acres under tribes’ control – more than any other recent administration – while the Justice Department charted a process approved by Congress for tribes to prosecute and sentence more cases involving non-Native Americans who assault Native American women. Before Obama, a gin the laws allowed for such crimes to go unpunished. In addition, the federal government settled decades-old lawsuits involving Native Americans, including class-action cases over the government’s mismanagement of royalties for oil, gas, timber and grazing leases and its discrimination against tribal members seeking farm loans. “In my opinion, President Obama has been the greatest president in dealing with Native Americans,” said Brian Cladoosby, chairman of the Swinomish Tribe north of Seattle and president of the nonpartisan National Congress of American Indians, based in Washington, D.C. “The last eight years give us hope going forward with the relationships we have on both sides of the aisle.” Trump, meanwhile, rarely acknowledged Native Americans during his campaign and hasn’t publicly outlined how he would improve or manage the United States’ longstanding relationships with tribes. His Interior secretary pick, Republican Rep. Ryan Zinke of Montana, sponsored legislation that he says would have given tribes more control over coal and other fossil fuel development on their lands. But some of Trump’s biggest campaign pledges – including repealing health care legislation and building a wall along the U.S.-Mexico border – would collide with tribal interests. In Arizona, Tohono O’odham Nation leaders have vowed to oppose any plans for a wall along the 75-mile portion of the border that runs parallel to their reservation. And the nonprofit National Indian Health Board in Washington says it’s aiming to work with lawmakers to ensure the Indian Health Care Improvement Act remains intact. The law, which guarantees funding for care through the federal Indian Health Services agency, was embedded in Obama’s health care overhaul after consultation with tribes. The government’s role figures prominently in Native Americans’ daily lives because treaties and other binding agreements often require the U.S. to manage tribal health care, law enforcement and education. Some tribal members say they’re unsure how much Trump understands or cares about their unique relationship with the federal government. “I think there was a great hope that we had here in Indian Country with the direct dialogue that President Obama had established with tribal nations,” said Duane “Chili” Yazzie, president of the Navajo Nation’s Shiprock Chapter. “If a similar effort to communicate with us were carried on by the Trump administration, I would be surprised.” Though most reservations lean Democratic in presidential elections, Trump does have some supporters in Indian Country. They hope the businessman can turn around lagging economies in rural reservations, such as the 27,000-square-mile Navajo Nation, which covers parts of Utah, New Mexico and Arizona. “Trump is pro-job growth, and tribes need a healthy dose of business creation,” said Deswood Tome, a former spokesman for the tribe from Window Rock, Arizona. “To do that, a lot of federal barriers must be removed. We’re the only ethnic group who have so much federal control in our lives.” The Dakota Access pipeline illustrates another chasm between Obama and Trump. This fall, the pipeline dispute led Obama’s administration to begin tackling a final piece of its Indian Country agenda: guidelines for how cabinet departments should consult with tribes on major infrastructure projects. A top complaint from the Standing Rock Sioux was that the U.S. Army Corps of Engineers failed to properly consult with them before initially approving a pipeline route that ran beneath Lake Oahe, the tribe’s primary source of drinking water. After the administration halted construction on the project in September to review the complaint, it held seven meetings with tribal leaders and began drafting a report on how federal officials should consult with tribes. U.S. Interior Secretary Sally Jewell said the report will be completed before Obama leaves office, and she expects it to have a lasting impact, even with an incoming administration that promises to undo some of the president’s policies. What’s unclear is whether Trump, who once owned stock in the pipeline builder, will seek to reverse the Army’s decision this month to explore alternate routes. A spokesman said only that the president-elect plans to review the move after he takes office. However, Trump’s transition team said in a recent memo to campaign supporters and congressional staff that he supports the pipeline’s completion. In the meantime, Standing Rock Sioux Chairman David Archambault has begun lobbying for a meeting with Trump to make a case for his tribe’s opposition to the project, which the chairman says threatens not just water but sacred cultural sites. “You have to respect Mother Earth; she’s precious,” Archambault said. “You can still believe in capitalism, and you can still invest in infrastructure projects, but these infrastructure projects should be focused toward renewable energy rather than fossil fuel development.” Orlando Scandrick Womens Jersey
Bhatinda Refinery eyes Rs 50 billion for expansion
The Guru Gobind Singh refinery at Bhatinda in Punjab will increase its refining capacity to 18 million metric tonnes per annum (mmtpa) and set up a petrochemical complex, people aware of the development said. The unit, also known as Bhatinda Refinery, is run by HPCL-Mittal Energy Ltd (HMEL), a joint venture between Hindustan Petroleum Corp. Ltd and Mittal Energy Investments Pvt. Ltd, Singapore. HPCL and Mittal Energy Investments hold 49% stake each in the venture, with financial investors owning the rest. “Expansion plan for the refinery is in the process and we would be setting up a petrochemical complex as part of the refinery expansion. We are working on the plan and would be shortly finalising details,” said a senior official at one of the partner companies, requesting anonymity. A banker aware of the development said on condition of anonymity that the company would be funding expansion through a combination of equity and debt syndication by banks to the tune of Rs 50-60 billion. In an emailed response, HMEL said, “We continue to evaluate various opportunities to enhance and expand our business; however, as a matter of policy we do not comment on future plans.” The petrochemical unit is part of the expansion that the refinery would undertake. HMEL is currently expanding the capacity of the refinery from 9 mmtpa to 11.5 mmtpa, raising refinery throughput by about 25%. The expansion could cost over Rs 50 billion. After the target is reached, the capacity would be eventually raised to 18 mmtpa. The expansion could cost the company Rs 200-300 billion, added the banker. “The petrochemical complex would include a new naphtha cracker,” said the second official aware of the development, also on condition of anonymity. Engineers India Ltd, an engineering consultancy and engineering, procurement and construction (EPC) service provider, is working on a feasibility report on the refinery’s expansion and the petrochemical unit, the first official cited above said. Ryan Johansen Authentic Jersey
ONGC’s stake buy in GSPC: Some call it a rescue act, others a sweet deal
The decision by government-run Oil and Natural Gas Corporation (ONGC) to buy stake in Gujarat State Petroleum Corporation’s (GSPC’s) Krishna-Godavari basin block has raised eyebrows, with some seeing it a bail-out for the latter entity. Late last week, the latter’s board of directors had approved the plan to acquire 80 per cent participating interest of GSPC in KG-OSN-2001/3 for $995.26 million. However, there are those who contend the sweetening of the deal would make it an exciting buy for ONGC. “The contract between the two public sector undertakings is good for the industry, as it would create a synergy. As far as ONGC is concerned, they have negotiated the prices well and it is much better placed to develop the resource than GSPC. More, ONGC will be able to use the vast infrastructure that GSPC has built, including the pipelines,” said R S Sharma, chairman of business chamber Ficci’s hydrocarbon wing and a former chairman of ONGC. The deal size was initially expected to be $2-2.5 billion. ONGC was successful in bringing it down to $995 million, with another $200 million towards future consideration for six discoveries other than the Deen Dayal West Field. Consultancy firm Gaffiney, Cline and Associates had estimated the potential of the block to be higher but ONGC did not think so. The Centre’s exploration giant contended the deep-water block’s recoverable reserves were much less than the estimate of 7.6 trillion cubic feet (tcf) to somewhere in the range of 3 tcf. “This will help us in developing nearby discoveries on a faster track in the Yanam and Godavari PML areas, and the KG-DWN-98/2 Block and adjacent nomination blocks,” said an official. NGC officials remained formally tight-lipped about the development. Regarding the deal, petroleum minister Dharmendra Pradhan had recently told the media, “If two exploration companies competing against each other can work together in the Gulf of Mexico and cut their cost of production, why can’t it happen in India? At least, the cost of the product will come down. Are they India and Pakistan?” The deal came to the limelight after the preliminary agreement, when the two companies opted for a dispute resolution mechanism, that differences over issues like valuation of natural gas reserves would be referred to a three-member committee of outside experts. Okay or not? Many believe the advantage for ONGC will be that GSPC has already built production facilities like wellhead platforms, process-cum-living quarter platforms, onshore gas terminal and export pipeline for transporting treated well-fluid to the onshore terminal in the area. “One needs more clarity on the debt component and how much gets transferred to ONGC’s books. If ONGC has a viable commercial plan in place for both the block and also utilisation of the existing GSPC infrastructure for its own block, it might be a reasonable deal,” said an analyst with a domestic brokerage, who did not wish to be identified. A GSPC-led consortium has spent close to Rs 200 billion on the project, including borrowing costs of nearly Rs 60 billion. “This is nothing other than a bailout for GSPC. There would have been no other takers. This is like getting some money back rather than having nothing. In addition, GSPC has also exhausted their borrowing limits, a hindrance in developing the block further,” said an industry source, who does not want to be named. To develop the Deen Dayal West field further, ONGC might need another $1-1.5 bn. “It is a bailout for GSPC but whether it is a good pricing will depend on the commercial aspects. It is difficult to have a benchmark price for upstream assets,” said an official from a consultancy firm, who did not wish to be identified. Joey Rickard Authentic Jersey
Congress demands ONGC move to buy stake in Gujarat PSU be put on hold
Congress in Gujarat has demanded a judicial inquiry into ONGC’s decision to acquire 80 per cent stake in Gujarat State Petrochemicals Corporation’s KG basin gas block and that the company’s move be put on hold. The state-run Oil and Natural Gas Corporation (ONGC) yesterday announced that it will acquire 80 per cent stake in debt-laden GSPC’s KG basin gas block for $995.26 billion. Under the deal, ONGC will also acquire operatorship of the block KG-OSN-2001/3 in Krishna Godavari (KG) Basin offshore. Addressing a press conference, state unit Congress president Bharatsinh Solanki alleged the ONGC-GSPC deal is “an attempt to paper over corruption”. Solanki also claimed that a CAG report, tabled in the Assembly in April this year, had questioned the state PSU GSPC’s investment of Rs 19,576 crore in its KG block project, stating that “future prospects” of the block remain shrouded in “uncertainty.” Rodney Hudson Jersey
Dilip Shanghvi’s Sun Oil buys out Niko stake in Hazira field
Billionaire Dilip Shanghvi’s Sun Oil and Natural Gas has bought a 33.3% stake in the Hazira oil and gas field from Canada’s Niko Resources Ltd and is in talks to buy the rest from Gujarat State Petroleum Corp. Ltd (GSPC), two officials aware of the development said. The deal value, however, could not be ascertained. Niko has operated the field for 22 years. Sun Oil and Natural Gas is a unit of Shanghvi’s Sun Petrochemicals Pvt. Ltd while GSPC is 87% owned by the Gujarat government. The Hazira field is part of 16 hydrocarbon assets in Gujarat’s Cambay basin where GSPC holds stakes. Niko Resources has sold its stake to Sun Oil and Natural Gas. If GSPC decides to sell its stake to Sun too, then Sun will be the 100% operator of the field,” said an official aware of the development, one of the two cited earlier. He spoke on condition of anonymity as he is not allowed to speak to reporters. Niko Resources and Sun Oil and Natural Gas did not reply to questions emailed on Monday. On 22 November, Mint had reported that Sun Oil was in talks with Niko Resources and GSPC to acquire their stakes. Currently, the Hazira field produces 1,300-1,400 barrels of oil per day (bopd) and 7-9 million standard cubic feet of gas per day . Niko is also a 10% partner in Reliance Industries Ltd’s (RIL) and BP Plc’s D6 block in the Krishna-Godavari (KG) basin. It has been facing financial headwinds owing to which on 9 November it said it would sell its stake. Last November, Niko relinquished its 10% stake in another block, NEC-25, off the Odisha coast, to its existing partners RIL (60%) and BP. An official from GSPC, the second person, said the company will be able to decide on selling its stake in a few days. “Sun Oil and Natural Gas has bid for our stake in the Hazira field. However, we are yet to open the technical bids and decide on who should the field go to,” the official added. GSPC has hired consulting firm EY to re-evaluate its onshore exploration and production assets as part of a business restructuring exercise. In addition to Hazira, GSPC has also signed agreements to sell stakes in some other assets including the Deen Dayal field, GSPC’s primary asset, located off the Niko Clarifies Article in Indian Press Niko Resources Ltd. (“Niko” or the “Company”) (NKO.TO) provides the following clarification with respect to various articles that appeared earlier today in the Indian press regarding the Company stake sale in Hazira Field. The Company has signed an asset purchase agreement with Sun Petrochemicals Pvt. Ltd. for divesting its 33.33% operating interest in Hazira Field. The sale is subject to various approvals including from the Government of India and Niko’s joint operating partner in the Hazira Field, Gujarat State Petroleum Corporation Limited. Niko does not consider the operations from Hazira Field to be material as Hazira Field was nearing the end of its life and an abandonment program was being planned for the near future. Marcus Martin Jersey
Producers’ output-cut pact was year’s defining moment for oil sector
The defining moment for the oil sector came towards the end of the year with the deal between OPEC and non-OPEC countries on cutting production, which immediately boosted crude prices, while in a move designed to increase domestic production, India unveiled a new revenue-sharing regime for producers looking to explore hydrocarbons. As the world’s third-largest oil consumer, which imports over 80 per cent of its requirements, India was naturally concerned about producers talking of cutting output to halt the continuous fall in crude prices that had gone on for nearly two years. Earlier this month, oil producers outside the Organisation of the Petroleum Exporting Countries (OPEC), led by Russia, agreed to reduce output by 558,000 barrels per day (bpd). This came in the wake of the 13-nation OPEC cartel’s November 30 decision to cut output by 1.2 million bpd for six months effective from January 1. This is the first time since 2001 that OPEC and some of its rivals have reached a deal to jointly reduce output to tackle the global oil glut. As a result, the Indian basket of crude oils gained more than $3 a barrel at $54.42 per barrel over the weekend of December 11-12, even as global prices surged to an 18-month high. The price on Wednesday, December 21, was $53.47. OPEC Secretary General Mohammed Sanusi Barkindo, who was here earlier this month, was conveyed India’s viewpoint by Petroleum Minister Dharmendra Pradhan that the interests of consuming countries should be kept in mind when the cartel decides on issues of output cut and pricing. Oil prices have fallen by more than 50 percent in less than two years, from levels of over $120 a barrel. “The fall in oil prices in the last two years came as a timely relief for the Indian economy and consumers, which has helped us increase the penetration of cleaner fuel,” Pradhan said, inaugurating the 12th Petrotech conference here earlier this month. “For the sustainability of the oil markets, we must strike a balance of interest between producers and consumers. In June last year at an OPEC event, I had submitted the viewpoint of India,” he said. Meanwhile, the government last month received 134 e-bids from 42 companies for exploring small oil and gas fields under the Discovered Small Fields Bid Round 2016. The government had put up 67 small oil and gas fields for auction under the new Hydrocarbon Exploration and Licensing Policy (HELP) approved in March, which is based on a revenue-sharing model as opposed to cost-and-output-based norms earlier. The new model will replace the controversial production-sharing contract (PSC) that has governed the bidding under nine earlier NELP rounds. The PSC regime, which allows operators to recover all investments made from sale of oil and gas before profits are shared with the government, was criticised by India’s official auditor, who said it encouraged companies to keep inflating costs so as to postpone sharing of profits. Now under HELP, eventual operators will be issued a single licence for exploration of conventional and non-conventional hydrocarbons and will have the freedom to sell oil and gas at “arms length” market prices. The year also witnessed renewed emphasis on taking the country towards a gas-based economy. The government announced it plans to double India’s natural gas consumption from the current 120 million standard cubic metres a day (mscmd) to 240 mscmd in five years in a bid to boost India’s low gas consumption of six per cent in the energy mix, as compared to a world average of 24 per cent. “The biggest bottleneck in boosting India’s low gas consumption was the issue of who will decide the pricing. So the biggest policy measure in this sector has been the deregulation of gas pricing by our government,” Pradhan said here earlier this month. On the back of a major fall in global prices, the government, in October, cut the price to be paid to producers of natural gas by 18 per cent to $2.5 per million British thermal unit (mbtu) on gross calorific value (GCV). On net calorific value basis, the price is $2.78. The rate compares to an average cost of production of about $3.59 per mbtu for state-run explorer ONGC and $3.06 for Oil India. The Petroleum Ministry also announced a sharp reduction in cap price for undeveloped gas finds in difficult zones like deep-sea, high-temperature, high-pressure areas. The cap for October 1, 2016, to March 31, 2017, for gas from difficult areas will be $5.3 per mbtu, down from $6.61 in the preceding six-month period. A caveat to this decision said the gas price for difficult areas will not apply to Reliance Industries” (RIL) discoveries in their KG-D6 block unless the company withdrew its legal suit over gas pricing. Besides seeking arbitration on the gas price, RIL has sought arbitration over the government disallowing costs of $2.3 billion on grounds of shortfall in production by the company. While the demand-supply situation has been a factor in falling oil prices, the other is financial market equations. The oil market in recent years has been sustained by cheap dollars flowing out in response to US Federal Reserve’s quantitative easing programme. This situation, however, looks set to change as we move towards the new year, with the Federal Reserve increasing its key interest rate by 25 basis points in December, in the first rate hike in 2016 and just the second in a decade. Jack Doyle Authentic Jersey