India could add to global glut of oil products
With India playing an increasingly important role in the global oil market, concerns are growing that its refining capacity may exceed demand. This could force it to export surplus oil products and dampen an already soft global market. India is expected to overtake Japan as the world’s third-thirstiest gulper of oil. And there seems to be significant potential for demand to surge, considering there are still only 21 passenger cars per 1,000 people in the country. In China, the ratio is 87-to-1,000. Many in the oil industry expect the world’s second-most-populous nation to drive the global oil demand from 2020. India’s crude imports have largely continued to grow in recent years. According to the BP Statistical Review of World Energy, the country in 2015 imported 195.1 million tons, up roughly 60% from 2008. Demand is estimated to grow about 4% annually until 2020, when the country is expected to need 900,000 barrels per day more than it did in 2014. That would represent 15% of the 6.1 million barrels per day in global growth during the same period, according to OPEC’s medium-term estimates in 2015. A sign of promise in India’s oil market came on Oct. 15, when a group of companies including Russia’s state-owned Rosneft announced a plan to acquire Essar Oil, a major Indian oil refiner and retailer. The expected demand growth is also prompting Indian refiners to expand capacity. State-owned Indian Oil has announced a plan to double its refining capacity in the next 14 years, according to Ito Mashino of Japan Oil, Gas and Metals National Corp., or Jogmec. “Many oil producers have announced expansion strategies, such as bolstering and updating equipment on the back of the growing demand for oil products,” said Mashino at the Japanese government affiliated corporation. Hindustan Petroleum and Bharat Petroleum also plan to build large refineries, sources say. “Refining margins remain wide now that crude oil prices have fallen,” Mashino said, referring to the difference between the prices of oil products and the cost of the crude they are made from. “Refiners are having a field day.” Sylvester Williams Womens Jersey
Shipping fuel change to upend refining – and threaten OPEC crudes
A switch to cleaner fuels in the world’s ships in 2020 could double the profits of the world’s most advanced oil refineries – but threatens to put older ones out of business and punish those countries, including prominent OPEC members, that produce the wrong kind of crude. In less than four years, ships worldwide will have to cut their sulphur emissions to 0.5 percent from 3.5 percent now. Many had expected a five-year extension, but the now on-target deadline has floored some ship owners and refiners, and left a scramble to determine what to use in vessel engines – and what to do with the some 3 million barrels per day (bpd) of sulphur-laden fuel oil that powers most ships today. It is effectively a windfall for advanced refineries, which produce larger amounts of the low sulphur fuel that many ships will use, but is an ominous signal for others, including countries such as Saudi Arabia, Iraq, Venezuela, Mexico and Brazil that produce oil with high amounts of sulphur. “That is going to increase the advantage that we have over time,” Thomas Nimbley, chief executive of PBF, which owns five refineries in the United States, said of the change. Ship owners have several choices in order to comply with the new rules, but the easiest is to burn middle distillates, which are lower in sulphur, but far more expensive. FGE analysts estimate that in 2020, the new rules could shift 700,000 barrels per day of demand from fuel oil to distillates, though the International Energy Agency has put it as high as 2 million bpd. Refineries like PBF’s produce very little fuel oil, and brand new complexes such as Saudi Aramco’s Jubail or Reliance’s Jamnagar in India produce virtually none. That is because they have equipment that transforms high-sulphur products into asphalt for roads, or enable them to simply make less fuel oil and more of the more valuable fuels such as diesel and gasoline. Wood Mackenzie estimates that by 2020, middle distillate margins could average as much as $25 per barrel, nearly triple this year’s average of just over $9 per barrel. But this will come mostly at the expense of fuel oil profits, which will slide dramatically as the barrels seek a new outlet. “You’ll see a huge uplift for those refineries,” said Alan Gelder, head of refining and marketing for consulting firm Wood Mackenzie, adding they will see “all the uplift and no downside.” Fuel oil used today by the marine sector currently accounts for almost 4 percent of global refined product demand, according to UBS. At older, less complex units, mostly in the Mediterranean, Asia and the developing world, fuel oil can account for as much as 40 percent of output. “If you are making fuel oil today … you better have a plan to figure out how to deal with that,” Nimbey said. Investing in upgrades is not an easy fix. Adding a residual hydrocracker, which could strip fuel of sulphur, costs close to $1 billion, according to Wood Mackenzie, and the entire process can take as long as a decade. Added to the problem is that if ships move to cleaner fuels such as liquefied natural gas, or add “scrubbers” – pieces of equipment that enable them to burn fuel oil and capture the sulphur emitted – investments in refinery upgrades may not pay off. The sulphur cap “is like the final nail in the coffin for them,” Energy Aspects product analyst Nevyn Nah said of the worst-off refineries. “So I think we’ll see a lot of refinery rationalisation before 2020.” A CRUDE PROBLEM The quickest route for cutting fuel oil output is changing the crude fed into a refinery – an unfortunate fact for producers of heavier oil that has more sulphur. Typically, running light sweet North Sea crude through a refinery will make 12 percent fuel oil, while a heavy crude such as Iraq’s Basra Heavy, can make as much as 50 percent fuel oil. “It will drastically change the crude diet of refiners,” said HPCL’s former head of refineries, BK Namdeo, said of the shipping change. Sources in South Korean and Japanese refining industries said companies are examining a shift toward lower sulphur crude, while European refineries will eschew heavier grades for lighter North Sea and West African crudes that are readily available. Still, as the oil market rushes to prepare, the shipping industry could crush their best-laid plans; scrubbers, which cost $3-$10 million to retrofit onto existing vessels, are becoming more standard on new ships. And the expected sharp drop in fuel oil prices could make the investment worthwhile. “If the shipping industry invests quickly, by 2025 the demand for fuel oil could be back,” Gelder said. Jessie Bates III Jersey
Brazil could pay Petrobras up to $16 billion over rights, Itaú BBA says
The Brazilian government could pay as much as $16 billion to state-controlled oil company Petroleo Brasileiro SA in renegotiating a $43 billion deal in 2010 to develop vast offshore crude deposits, Itau BBA said on Monday. In a client note, analysts estimated that based on a price of $60 per barrel, the government would have to return to the company about $16 billion, given the drop in prices of oil from about $100 in 2010. In 2010 Petrobras, as the company is commonly known, paid the government $43 billion for the rights to develop deposits holding 5 billion barrels of crude buried under a layer of salt beneath the ocean floor. Terms of the deal to the so-called Transfer of Rights Area could be renegotiated after five years. “The renegotiation of the barrels was perceived as a risk by investors,” the note said. “Following the latest comments by government officials, the revaluation could actually be positive for Petrobras due to the low oil prices.” Given government efforts to narrow a record budget deficit, the Itau BBA analysts expect the payment to be made in barrels of oil instead of cash. Newspaper Folha de S.Paulo said last week Petrobras could receive as much as $20 billion in compensation, without saying how it obtained the information. In a securities filing later in the day, Petrobras said no decision had yet been made on the subject. Preferred shares in Petrobras rose 6 percent to 16.97 reais on Monday, extending gains to over 150 percent so far this year. Itau BBA holds an “outperform” recommendation on the stock, arguing that the prospect of strong global supply of oil will help Petrobras, the world’s most indebted oil company, cut costs and sell assets. Jarran Reed Jersey
KTC ties up with IOC for high speed diesel supplies
Kadamba Transport Corporation (KTC) has entered into a long-term agreement with Indian Oil Corporation (IOC), on Thursday, for high speed diesel supplies in Goa. This association is a first-of-its-kind in the country, where IOC has tied up with a government body, said corporation chairman and Vasco MLA Carlos Almeida. With this agreement, IOC will be introducing automation at the KTC depots. IOC will provide tags and readers on all KTC buses and dispensing units, which will ensure fuelling of authorized vehicles only. KTC chairperson Carlos Almeida said, “If we have to sustain ourselves, we cannot just depend on revenue. We have to control our expenditure and IOC’s offer to help us has come as a huge blessing.” Almeida said that KTC has sent a proposal to the chief minister to start its own petrol pump at Margao. Senior divisional consumer sales manager, Pune divisional officer, Zubeen Garg, said, “Automation will have immense benefits, such as no misuse or loss of fuel, real time information on fleet’s fuel utilization, alerts on irregular behaviour and abnormal fuel consumption, no leakage, better safety, etc”. The project is estimated to cost 1 crore, which will be borne by IOC. Luis Aparicio Authentic Jersey
ONGC seeks complete autonomy on pricing of natural gas to boost output
State-run Oil and Natural Gas Corporation (ONGC) is seeking total pricing freedom for natural gas produced in the country, arguing it would help boost local output and develop India into a vibrant gas market. “We are making the case before the government that the gas prices could be deregulated,” Chairman Dinesh Sarraf said. “Some regulatory mechanism can be put in place to protect the interest of the consumers. But let the prices be deregulated. Let it be determined by the buyers and sellers collectively through the market forces.” With this ONGC has given a new thrust to the demand from Reliance Industries, BP Plc, and other private sector gas producers in the country to free up pricing. The government has kept a lid on prices through a formula worked out two years ago that aligns local with international rates, and a gas allocation policy that prioritises sectors for receiving local supply. The government has allowed pricing freedom to gas blocks that will be auctioned under new exploration and production policies. Sarraf said “the point has been made in brief ” to the government and a detailed note would soon be sent. He said he was optimistic the government would consider the company’s plea of pricing freedom because the company’s aim behind this was to help raise domestic gas output, the same as that of the government. A few months back, ONGC had also written to the government that a floor price be fixed for the domestic prices. “The markets are what they are and prices are coming down. And price which we get today is $2.5 only. So we believe that government needs to reconsider this because new exploration and development can get encouraged if prices are better. So we have taken up the matter with the government,” said Sarraf. Domestic gas prices have halved to $2.5/unit in two years, tracking global decline, dropping lower than ONGC’s average gas production cost of $3.5/unit. ONGC loses Rs 4200 crore in revenue and Rs 2400 crore in profit annually for each dollar’s drop in local gas price. “Ultimately we want higher dollars. If it is a formula or a price, that they (government) will decide,” Sarraf said. He added that “If gas prices are increased in general, many of the gas discoveries which are not otherwise viable would become viable.” Josh Bailey Jersey
Oil investor impatience grows over global surplus
Oil investors are growing increasingly disgruntled with the pace at which supply and demand are rebalancing, cutting their bullish bets and pushing the benchmark price to its biggest discount relative to future prices in nine months. The premium of Brent crude futures for delivery in six months over those for prompt delivery, one measure of confidence in the market outlook, on Monday shot to its largest since February, the point at which OPEC first floated the idea of a possible deal on output to erode a two-year-old global surplus. The spread, or contango, is now at $3.51 a barrel , up from $2.30 at the end of September, when OPEC announced its intention to strike a deal to cut production when it meets in Vienna later this month. Generally, a widening in this spread can indicate one of two things: either investors have grown more pessimistic over the prospect of a rally in prices for prompt delivery, or they are more optimistic over the likelihood of a longer-term rally. In this case, the prompt Brent contract has led the move, having fallen by 5.2 percent since the end of September, compared with a fall of 2.6 percent in the price of oil for delivery in six months. “The increasing contango is really about the physical side of the market,” SEB chief commodities strategist Bjarne Schieldrop said. “We’ve had an increase in inventories rather than a decrease that has coincided with refinery outages. It’s not a pretty sight.” The most recent Reuters survey estimated OPEC supply hit a record high of 33.82 million barrels per day (bpd) in October, up 130,000 bpd from September and up 2.2 million bpd from October last year. Since announcing their intention to cut production to a range of 32.5 to 33 million bpd following a meeting in Algiers, the discord among the world’s largest exporters has grown. Libya, Nigeria, Iraq and Iran have clamoured to be exempt from any reduction as they recover market share lost to civil unrest and, in the case of Tehran, international sanctions. Those four already represent a third of OPEC output and an exemption would increase the pressure on Saudi Arabia and its Gulf neighbours to deliver the bulk of the cuts. UPHILL DIPLOMACY Highlighting the increasingly uphill battle to achieve consensus, OPEC sources told Reuters last week that Saudi Arabia had warned it could raise output steeply if rival Iran refused to limit supply. Despite OPEC Secretary-General Mohammed Barkindo attempting to soothe concerns about the group’s ability to cut meaningfully, oil prices are at their lowest in nearly two months, having unwound the gains made since late September. “The problem in a nutshell is that too many members want higher prices without making any sacrifices and the market is losing patience,” PVM Oil Associates analyst David Hufton said in a report on Monday. “Confidence in a successful OPEC outcome has evaporated.” Investors have cut their net long holdings of crude oil futures and options by around 100 million barrels in just two weeks. Another question hangs over non-OPEC members, specifically Russia, the world’s largest producer of crude, and their willingness to join in an effort to freeze or cut output. Russia set a new post-Soviet record high in October of 11.2 million bpd, underscoring the challenge the government might face in agreeing to freeze output. Mike Ditka Womens Jersey
$1.55 billion penalty sought from RIL exaggerated, say analysts
Mukesh Ambani led Reliance Industries Ltd (RIL) may have to shell out roughly $1.15 billion a s net value of the $1.55 billion penalty that the government imposed on it on Friday. “The $.1 55 Billion imposed by the government is admittedly a gross number, which should be $1.15bn net to RIL, in our view,” said Saurabh Handa, analyst with CitiResearch in a 6th November dated report. The government slapped a $1.55 billion penalty on RIL for producing ONGC’s share of natural gas in the Krishna Godavari basin. The letter was sent to RIL on Thursday asking it to pay the penalty amount. RIL in its media statement issued on Friday said it plans to issue arbitration notice to the government. The company said it proposes to invoke the dispute resolution mechanism in the production sharing contract (PSC). “RILremains convinced of being able to fully justify and vindicate its position that the government’s claim is not sustainable. The contractor’s liability has not been established by any process known to law and the quantification of the purported claim is without any basis and arbitrary,” it said. The $1.55 billion (approx Rs 103.38 billion) penalty is also higher than the annual oil and gas segment revenue of the company. Besides, it would erode nearly one third of the profit of Rs 27,630 RIL made in 2015-16. The Citi analyst in his report further said the penalty almost equals the total revenues earned from the sale of these gas volumes without allowing operating expenditure and capital expenditure to be deducted. “.Even without getting into the merits & justification of the govt’s action, the calculation itself in our view appears flawed and the resultant penalty appears grossly exaggerated,” the report said. The brokerage had earlier estimated the penalty at $0.25 billion. Kumar Anish, analyst with HSBC Global Research in his 7th November report said the penalty lacks commercial, technical and contractual justification. “The KG-D6 consortium has just about managed to achieve a payback of its expenditure in financial year 2015-2016, 15 years after first expenditure and seven years after first revenue from the KG-D6 block. Taking the time value of money into account, the present value of all expenditure exceeds the present value of all revenue from the block,” he said. “Therefore, no case of a windfall gain can be made out, in our view. In fact, there is no profit from the block in present value terms, either,” he further added. Even while the two foreign brokerage firms termed the penalty to be on the higher side, various other analysts expect the company to be able to absorb it. Analysts expect the penalty to be legally contested further, leaving less room for any immediate impact. Edinson Volquez Womens Jersey
Government Gets 2 Months To Firm Up View On Cairn India’s Rajasthan Block Extension Plea
The government on Monday sought more time from the Delhi High Court to arrive at a final decision on Cairn India’s plea for extension of the production sharing contract (PSC) for the Barmer oil fields in Rajasthan. State-run Oil and Natural Gas Corporation Ltd. (ONGC) had in July notified the ministry of petroleum and natural gas about its decision to extend the 25-year contract. The high court had thereafter given the Centre three months to firm up its view on the matter. However, the Centre on Monday sought more time from the Delhi High Court, saying it is mulling a uniform policy to grant extensions to existing contracts for oil and gas fields. In response, the court asked the Centre to decide on Cairn India’s plea without linking it to the proposed final policy. The Centre has to submit its final decision by January 6. ONGC has agreed to a 10-year extension of the contract with Cairn India after the original contract expires in 2020. The company’s counsel Shashi Prabhu had told the court in July that the public sector unit (PSU) had sent its approval for extension to the ministry of petroleum and natural gas. In September, Cairn India’s counsel had argued that the company needs clarity on its extension plea, as it had already begun talks with international lenders to raise over Rs 300 billion which will be invested in the Rajasthan block – provided the licence is extended – and that investors cannot be kept in abeyance for long. Cairn India plans to invest in additional infrastructure after the original contract expires on 2020. The government was supposed to take a decision in June but it’s September now and nine months since the high court’s order. The company supplies 27 percent of oil and gas required by India. CA Sundaram, Cairn India’s Counsel to Delhi High Court. The government had earlier informed the court that the contract may not necessarily be extended on the same terms and conditions as the existing one. Cairn India’s Rajasthan block comprises Mangala, Bhagyam, Aishwariya and Raageshwari oil fields. The high court will hear the case on January 9, 2017 after the Centre submits its final decision. Cassius Marsh Authentic Jersey
PDVSA, India reach agreement on joint oil production ventures
Venezuela’s state-owned oil and natural gas company PDVSA and India have signed accords worth $1.45 billion whereby oil production is expected to increase from 430,000 barrels per day to 855,000 in less than a year. Exports in mind, there is a natiowide shortage of fuel. India’s ONGC Videsh Limited will disemburse $318 million for Indovenezolana, a joint venture in the San Cristobal Field in the Orinoco Oil Belt, where PDVSA remains a majority stakeholder, while Delta Finance BV will provide $1.13 billion for the joint venture Petrodelta, in which PDVSA will also hold a majority stake. “Those joint ventures together are currently producing 430,000 barrels. With investments in the next year or year and a half we are going to have a production of 855,000 bpd; in other words, an increase of 435,000 bpd,” said Venezuelan Oil Minister Eulogio Del Pino said during the signing of the agreements. One of the world’s main exporters of crude is trying to recover froma drastic price drop that has worsened the country’s trade deficit over the past three years. Meanhile, shortages in fuel supply have memories of queues three kilometres long or worse like during the oil strike 14 years ago haunting drivers in regions like Valencia and Maracay and the situation is getting worse in Aragua and Carabobo, where people have been forced to endure lineups of more than five hours to fill up a tank. “The thing is the price will go up next week,” explained a disgusted customer. Many petrol stations were already closed to change prices at the pump. The situation does not seem to be any less discouraging in Guarico, Cojedes, Lara, Portuguesa and Yaracuy, it was reported. Aragua Governor Tarek El Aissami has explained that the problems were due to a delay in importing a chemical necessary to processing derived fuel, while sources for the oil workers’ union have said that the Amuay refinery still does not reach full operation capacity after the accident four years ago, while the one at El Palito (Carabobo) has yet to complete some maintenance started earlier this year. Torey Krug Authentic Jersey
Abu Dhabi firm wins $141 million project from ONGC
An Abu Dhabi-based company has won a $141 million contract from India’s Oil and Natural Gas Corporation Ltd (ONGC) to provide engineering, procurement and construction services for two of its projects. National Petroleum Construction Company (NPCC) will be involved in the replacement of 10 wellhead platform topsides at ONGC’s Mumbai High North and South fields, MHN and MHS, respectively, a statement released by the UAE’s official news agency Wam said. Out of these 10, four are on the MHN field while six are located on MHS. The decommissioning and removal of the existing topsides are part of the engineering, procurement and construction (EPC) contract. The project is scheduled to be completed on April 30, 2018. According to the statement, Aqeel Madhi, CEO of NPCC, and Manas Chakraborty, Group General Manager (MM)-ES of ONGC, signed the contract. NPCC is owned by Senaat, an Abu Dhabi Government Holding Company, and has successfully executed several mega EPC projects for ONGC over the past three decades. “ONGC has been a valued client of NPCC for decades and we take pride in winning and executing ONGC projects. Outside GCC, India is a key market for us and our long-term commitment to ONGC speaks for itself. As always, we will deliver this project adhering to the highest standards and as per client’s expectations,” Madhi said. Denzel Perryman Womens Jersey