Petrobras cuts spending, raises asset sales goal in five-year plan
Brazil’s state-led oil company Petrobras on Tuesday cut planned investments by 25 percent in a drive to reduce the largest debt burden among global petroleum producers and revive investor confidence battered by a corruption scandal. Petrobras contributes about 10 percent of the nation’s economic output and Brazil’s government, the company’s controlling shareholder, is counting on it to help pull the economy out of its worst recession in decades. Petroleo Brasileiro SA, as Petrobras is formally known, pledged up to $74.1 billion in capital spending for the 2017-2021 period compared with a $98.4 billion target in the prior four-year 2015-2019 plan, according to a securities filing. This program outlines Petrobras’ smallest capital budget since 2006 and fell short of the $82.7 billion average forecast of eight analysts surveyed by Reuters. Petrobras reaffirmed its goal of $15.1 billion in asset sales for the 2015-2016 period and plans to raise an additional $19.5 billion through divestments and partnerships between 2017 and 2018. The company said it could sell as much as $40 billion of assets over the next 10 years. Chief Executive Officer Pedro Parente is seeking to cut the company’s $125 billion of debt, amassed after years of state-directed policies overstretched the company. Parente faces several obstacles including the lowest oil prices in a decade, a corruption scandal highlighting governance flaws, and its struggle to recover from huge losses incurred over many years because of government-mandated fuel subsidies. Petrobras’s stock rose 2.68 percent in afternoon trading in Sao Paulo. Its U.S.-traded common stock rose 1.31 percent in New York. Speaking to reporters in Rio de Janeiro, Parente vowed to cut costs and sharpen the focus on high-return activities to restore profitability. “This plan should start bearing fruit within two years, when we expect to have strong metrics that will allow us to return to the good situation of a few years back,” said Parente, who was appointed in May to turn around the struggling oil giant. In line with focusing on oil and gas production, Petrobras said it will exit the biofuels business by selling ethanol and biodiesel production assets. The plan shows how far Parente, appointed by new President Michel Temer, is prepared to go to reverse the policies of former Brazilian President Dilma Rousseff, removed from office in August for breaking budget laws. OUTPUT MAINTAINED “Lower capital spending makes absolute sense as the company aims at decreasing cash burn to accommodate interest and debt payments and to avoid stretching even further its balance sheet,” said Rodolfo de Angele, an analyst with JPMorgan Securities in Sao Paulo, in a note to clients. Exploration and production will get 82 percent of the investment budget. Spending on “downstream” refining, natural gas distribution and electricity generation will see spending cut 24 percent to $12.4 billion. While investment cuts were bigger than analysts expected, production targets were largely unchanged. Petrobras expects crude output in Brazil to fall in 2017 to 2.07 million barrels per day (bpd) from an average 2.22 million bpd in August. However, the company maintained its target of 2.70 million bpd for 2020, 16 percent above the median estimate of analysts surveyed by Reuters. The company expects to produce 2.77 million bpd in 2021. Total output of domestic and international oil and natural gas equivalent is expected to rise 19 percent in the 2017-2021 period to an average of 3.41 million bpd. Before the plan was released, Luana Siegfried, oil and gas analyst at Raymond James in Houston, said failure to cut the outlook for 2020 Brazil crude oil production in the face of significant budget cuts raises the risk Petrobras will fall short of its promises. In the past 14 years Petrobras has met its annual oil output target only once, in 2015. Parente said that big efficiency gains and higher-than-expected output from new offshore wells will allow Petrobras to meet its targets in the years ahead. The business plan is based on a price of Brent crude oil averaging $48 a barrel in 2017 rising to $71 a barrel in 2021. The plan expects the U.S. dollar to be worth an average of 3.55 reais in 2017, strengthening to 3.71 reais in 2021. Ryan Ramczyk Authentic Jersey
Bad days for national oil companies to continue, Fitch says
The National Oil Companies (NOCs) in South and South-East Asia unlikely to return to positive free cash generation in the next two years, said a Fitch Ratings report. Most of the NOCs reported poor financial result for the first half or first quarter ended on June 30 due to a fall in average oil and gas prices from a year ago. Revenue and EBITDA declined over this period for Malaysia’s Petroliam Nasional Berhad (PETRONAS); Thailand’s PTT Public Company Limited; and India’s Oil and Natural Gas Corporation Limited (ONGC) and Oil India Limited. “Revenue fell for Indonesia’s PT Pertamina (Persero), but it was the only NOC with higher EBITDA because its downstream businesses performed strongly due to state fuel pricing policies”, the report said. The rating agency predicts that the leverage of these companies to remain high in 2016 and in 2017, based on their earlier forecast of lower operating cash flows and high capex. It also expect the 2016 performance of these NOCs to remain weak under the agency’s average Brent price assumption of $42 per barrel of oil equivalent. To counter the weaker earnings, the NOCs have started reducing costs, but there is very limited room for further opex cuts, the report said. The rating agency mentioned that the ability to sustain lower capex will vary among these issuers. For instance, Thailand’s PTT has limited capex flexibility because it has the weakest reserve replacement ratio (RRR), which is a metric used by investors to judge the operating performance of an oil & gas companies, among Asian investment-grade NOCs. Muralidharan R, Director, APAC Energy & Utilities, Fitch Ratings, in a report titled ‘South & South-East Asia National Oil Cos Dashboard’, said that the NOCs’ exploration and production businesses will remain weak on the back of lower realised prices, although production volumes will remain largely stable. Further, on the prices front, Muralidharan said, “Oil prices improved in 2Q16 from a year earlier, which boosted performance. However, we do not expect the price growth to be sustained in 2H16.” Commenting on the Indonesia’s Pertamina, Malaysia’s PETRONAS and Thailand’s PTT, the report said that the standalone credit profiles of these companies will benefit from their integrated businesses- cash generation from mid- and downstream operations offset the weaker upstream segments. Energy price reforms in India, Thailand and Malaysia have been largely positive for NOCs, but implications of reforms in Indonesia are mixed for Pertamina. Its downstream margins may narrow in 2H16, given government-directed changes to retail prices have not so far adjusted for higher crude oil prices”, Muralidharan said. However, the rating agency expects NOCs to continue to have low rating headroom due to weak earnings from low prices which will put pressure on their standalone financial profiles in 2016. Ryan Groy Jersey
ONGC’s Kutch offshore block to start gas production after a year
In what may help India’s plan to move towards a gas-based economy, state-run Oil and Natural Gas Corp. Ltd’s (ONGC) Kutch offshore project is expected to start gas production after a year, said A.K. Dwivedi, director-exploration. This comes at a time when production is declining from ONGC’s assets. Its crude oil output fell to 6.34 million ton (MT) in the June quarter compared with 6.48 MT last year. Similarly, its gas production was down 5.6% to 5.49 billion cu. meters (bcm). “ONGC made gas discovery in exploratory well GK-28#10 (GK-28-L) in GK-28 PML in Kutch Offshore of Western Offshore Basin. This is the first gas pool discovered in Deccan basalts in entire Western Offshore and may prove significant in terms of adding much needed critical gas volumes to GK-28/GK-42 development project,” ONGC said in a 11 February statement. “We are assessing the potential of this project, this shall continue for a year after which we intend to begin production which shall primarily consist of gas,” said Dwivedi. India has set a target of natural gas contributing 15% to India’s energy mix from the current level of 6.5%. This will involve the public sector unit ramping up its production. However, domestic production is falling. India’s domestic gas production fell by 4.7% to 31.14 bcm in financial year 2015-16 from 32.69 bcm a year ago. According to the 2015-16 annual report of ONGC, the public sector unit’s oil and gas production accounts for 70% of country’s hydrocarbon output. India has 26 sedimentary basins covering an area of 3.14 million sq. km. out of which 7 basins have established commercial productions in progress. India has total reserves of 763.476 MT of crude oil and 1,488.73 bcm of natural gas. “We are working on it (project) through cluster development and currently there are appraisal drillings going on,” added Dwivedi. Experts believe that given India’s target for clean fuel sources, natural gas production has to be exponentially increased. “To reach the target of 15%, current production has to be more than doubled. While it is early to judge the contribution of the project to India’s energy mix, it is surely a step in the right direction,” said R.S. Sharma, former chairman and managing director, ONGC. According to ONGC’s Perspective Plan 2030, it plans to produce 130 MT of oil and natural gas with 70 MT coming from its domestic production and the rest from its overseas subsidiary, ONGC Videsh Ltd. New England Patriots Jersey
RGU wins funds to draw up training programme for Indian oil and gas workers
The UK Government has awarded Robert Gordon University (RGU) funding to identify and close skills gaps in India’s energy sector. As part of the six month project, RGU will come up with a programme for training workers in India, a country which is looking to become more energy independent. Today’s announcement from RGU comes a week after Indian Petroleum and Natural Gas Minister Dharmendra Pradhan and his delegation visited the university. Also last week, RGU revealed plans to carry out a similar project in Mexico. The university secured funding for both initiatives from the government’s £1.3billion Prosperity Fund, which was set up to promote economic reform and development in “partner countries”. Indian authorities are currently planning to develop a deep water block in the Krishna-Godavari Basin, which lies off the country’s east coast. Professor Paul de Leeuw, director of RGU’s Oil and Gas Institute, said: “India has an ambitious and exciting agenda for its oil and gas industry, which will require significant investment in local skills development to ensure the country can meet its growing energy demand. “We are delighted to undertake this important project, which will help build the foundations upon which India can grow its skill base to fully exploit and benefit from its hydrocarbon reserves, strengthen its economy, drive innovation and provide increased employability prospects for its people.” Pat Elflein Jersey
India wants to add UAE, Saudi oil for strategic reserve
ndia is talking to the United Arab Emirates (UAE) and Saudi Arabia to fill half of the 1.5 million tons (mt) of the Mangalore strategic storage, along with Iranian crude, Minister for Petroleum and Natural Gas said on Wednesday. Dharmendra Pradhan told a news conference India is exploring two to three other models for sourcing oil to fill the remainder of the storage. During Saudi Arabia Energy Minister Kahlid A. Al-Falih’s visit to New Delhi in October, India plans to discuss the filling of the Mangalore strategic storage, and investments in refinery and petrochemical projects. Globally, most of the biggest crude oil consuming countries have a strategic storage capacity of at least 50 days, but India currently stands less than 10 days. In 2005, the Oil Ministry had set up Indian Strategic Petroleum Reserves Ltd (ISPRL) to build strategic storages in India. Under phase I of development, the company has built a total of 5.33 mt of storage capacity in three locations – Vizag (1.33 mt), Mangalore (1.5 mt) and Padur (2.5 mt). Only Vizag is currently operational. Kevin Faulk Womens Jersey
Cabinet approves 40% funding for gas pipeline project, city gas distribution in east India
In what may boost the infrastructure development of eastern India and help the country move towards a gas-based economy, the government has decided to provide a viability gap funding of 40% to GAIL (India) Ltd to construct the Jagdishpur-Haldia and Bokaro-Dhamra gas pipeline project. The Cabinet Committee on Economic Affairs (CCEA) on Wednesday approved grant of around Rs.51.76 billion for the project which has an estimated cost of Rs.129.40 billion. The project will encompass five states—Uttar Pradesh, Bihar, Jharkhand, West Bengal and Odisha—and connect them to the national gas grid. “The gas pipeline that seemed a distant reality was taken up by the Cabinet today and the government has worked on its economic framework,” said minister for petroleum and natural gas Dharmendra Pradhan in New Delhi while addressing a press conference. He added that this is for the first time after a long gap that the government plans to invest in oil infrastructure. As part of the National Democratic Alliance government’s plans to move towards clean energy sources, Pradhan has set a target of natural gas contributing 15% to India’s energy mix. The country is also planning a natural gas hub for market pricing discovery, as reported by InfraCircle on 14 September. The 2,539km long pipeline will also cater to the three urea production units, which the government is reviving at present, and they will act as the anchor customers of gas, required in the production of fertilisers, from these pipelines. The units are at Barauni in Bihar, Sindri in Jharkhand and Gorakhpur in Uttar Pradesh. The Cabinet had on 13 July approved the revival of these units with an overall investment of Rs. 180 billion through the special purpose vehicle route. The pipeline will also service refineries at Haldia (West Bengal), Barauni and Paradip (Odisha). The ministry estimates that the pipeline, which is being constructed by GAIL under three phases, should be completed in about two-and-a-half years. Experts say the decision opens up the window for future viability funding in the pipeline circuit. “It portrays the positive attitude of the government. It surely is looking at expanding its pursuits,” said R.S. Butola, former head of Indian Oil Corp. Ltd. Pradhan also said that gas pipeline will also aid the food processing units in 25 industrial towns which require gas. “Though foreign direct investment (FDI) has been allowed in food processing business, lack of infrastructure and facilities was hurting,” added Pradhan. The government had allowed 100% FDI in marketing of food products produced and manufactured in India in the general budget of 2016-17. In a related decision, the CCEA also approved development of city gas distribution (CGD) pipeline in eight cities—Varanasi, Patna, Ranchi, Jamshedpur, Kolkata, Bhubaneshwar and Cuttack—which have a combined population of 12.5 million. Pradhan said that a total of Rs.190 billion will be spent on the CGD project. This shall help provide piped natural gas in east India which till date was available in other parts of the country, added Pradhan. As per the Petroleum Planning Analysis Cell, part of the ministry of petroleum and natural gas, India’s gas pipeline grid length is 16,250km. The country’s domestic gas production fell by 4.7% to 31.14 billion cu. metres (bcm) in financial year 2015-16 from 32.69 bcm in the previous year. Janoris Jenkins Womens Jersey
Government looks to change rules to boost piped gas consumption
The government looks to overhaul its city gas distribution policy to clear major hurdles holding back expansion of piped cooking gas in the country. The government has started work on reviewing rules, which companies say need to be changed to encourage them to take up gas distribution in cities and set up gas stations on highways without time-consuming procedures and unnecessary costs. The government aims to treble its domestic piped gas consumer base to one crore by 2019, a target set by Prime Minister Narendra Modi who presided over a deeper penetration of piped gas in Gujarat during his term as chief minister of the state. But at the current pace — the country added barely 3 lakh new domestic piped gas consumers in 2015-16 — the target is unlikely to be met, oil ministry officials said. At the beginning of the current fiscal year, the number of domestic piped gas consumers stood at 31.6 lakh. This has driven the oil ministry to set up two committees, with members from small and big city gas companies and Petroleum and Natural Gas Regulatory Board (PNGRB), the downstream regulator. One committee will look at making the bidding process more effective by suggesting a replacement of the current process where fewer cities attract bid in auctions and all bids offer the same tariff, the key competing criterion. The other panel will suggest ways to deal with key obstacles city gas companies face such as high restoration charges levied by local authorities, and delays in obtaining permissions. The panels are to submit their reports by the end of this month, following which the oil ministry will initiate changes. “The current bidding parameters are not working well. So the panel will look at other possible parameters,” said an oil ministry official. In the sixth round of city gas distribution auction at the beginning of 2016, 14 of the total 34 geographical areas, or districts, received no bid while six attracted just one bid each. Similarly, last year, of the 20 districts, eight got no bid and two got just a single bid each. A scan of some bids in previous auctions shows all gas companies offered Rs 0.01 per unit as network tariff bid and also as charges for compressing natural gas, the two key price bid criteria, forcing the regulator to pick winners on the basis of the bid bond value. Bidders submit a bank guarantee that’s forfeited if the winner does not take on the job in time. Some gas companies have suggested switching to viability gap funding model with the company seeking the lowest support getting the contract. Besides this, another key impediment is the way areas are defined for auction: A geographically large district with mainly rural population makes a project less attractive. Some gas companies consider the minimum targets on laying pipelines and connecting households also challenging. Missing targets result in companies losing their bank guarantees. The government is also separately figuring out a framework to allow gas pumps on highways that can make it easier for gas-run vehicles to go to other cities. Nick Perry Womens Jersey
ONGC plan to increase oil production
In line with North East Hydrocarbon Vision-2030, ONGC’s management is concentrating on augmentation of oil and gas production from the region. In this connection, the newest asset of ONGC was visited by director (onshore) VP Mahawar recently. Mahawar inaugurated two 400 m3-capacity tanks and one bachelor accommodation named after river Dayang. Mahawar appreciated the efforts of the asset team headed by ED asset manager RK Vij to increase the production up to 400 tpd (tons/day). Expressing satisfaction over the progress of the asset in a very short period of time, he said, “The two new tanks will improve the process of management at Borholla GGS. The new accommodation facility will improve the quality of life of ONGC field personnel working near the Assam-Nagaland Border,” said a press statement. Latrell Sprewell Authentic Jersey
India to ferry more petroleum products to Tripura via Bangladesh
After the first round of shipment of diesel and cooking gas to Tripura via Bangladesh on September 10, India will ferry more petroleum products through the same route over the next two weeks, officials here said on Tuesday. “Twelve LPG (Liquefied Petroleum Gas)-laden trucks would carry the cooking gas from Guwahati to northern Tripura via Bangladesh on September 23. This would be the second consignment of petroleum products being carried through Bangladesh,” an official of the Indian Oil Corporation Ltd (IOCL) said. “On September 10, nine tank trucks carrying 108 kilolitres of diesel and kerosene, along with one LPG truck, travelled from Betkutchi near Guwahati via Dawki, Meghalaya’s border point with Bangladesh, to Tamabil and Chatlapur in Bangladesh, and reached Kailasahar and Dharmanagar in northern Tripura, plying 136 km through Bangladesh territory.” Bangladesh had earlier allowed India to ferry heavy machinery of the Oil & Natural Gas Corporation (ONGC) and carry foodgrains to Tripura. “The special arrangement of carrying petroleum products was made due to the difficulties faced in carrying petrol, diesel, kerosene and cooking gas through the National Highways linking Tripura,” the official added. To carry these products, IOCL, under the Ministry of Petroleum & Natural Gas of India, and the Roads & Highways Department (RHD) of Bangladesh had signed a Memorandum of Understanding (MoU) in Dhaka on August 18. The IOCL official said this route via Bangladesh would save time and cost in carrying petroleum products from Assam to Tripura, as the existing over 400km mountainous route requires many hours to carry these essential items. “Besides, the condition of National Highways in Meghalaya and southern Assam is horrifying. Between May and August, Tripura was almost cut off and road transportation in southern Assam, Mizoram and western Manipur was badly disrupted due to damaged roads in the region,” the official said. Speaking on the new arrangement in Guwahati, IOCL Executive Director Dipankar Ray said: “This move by IOCL not only paves the way for future logistics management but also exemplifies its commitment to ensuring energy accessibility in the country.” A statement from the Indian High Commission in Dhaka said Bangladesh has granted permission for the movement of petroleum goods through its territory on humanitarian grounds. The short-term India-Bangladesh deal on the shipping of petroleum products is valid until September 30. The MoU paves way for India to carry petroleum goods (motor spirit, high-speed diesel, superior kerosene oil and LPG) from Assam to Tripura through Bangladesh to create a buffer stock in the northeastern state. The Food Corporation of India (FCI) has transported 23,000 tons of rice in three phases since 2014 from Kolkata to Tripura via Bangladesh using that country’s Ashuganj River Port, which is about 50 km from Tripura. In 2012, Bangladesh had allowed state-owned ONGC to ferry heavy machinery, turbines and over-dimensional cargoes through Ashuganj port for the 726 MW Palatana Mega Power Project in southern Tripura. There is only a narrow land corridor to the northeastern region through Assam and West Bengal that passes through hilly terrain with steep gradients and multiple hairpin bends, making transportation, especially of loaded trucks, very difficult. Agartala via Guwahati is 1,650 km from Kolkata by road, and 2,637 km from New Delhi. But the distance between Agartala and Kolkata via Bangladesh is just 620 km. Adolphus Washington Jersey
IOC, GAIL to sign pact to take 49% stake in Adani project
Indian Oil Corporation (IOC) and GAIL India will sign a pact on Wednesday to take 49 per cent stake in Adani Group’s Rs 5,000-crore Dhamra LNG project in Odisha. While IOC will take 38 per cent, GAIL will pick 11 per cent stake in the proposed 5-million ton a year liquefied natural gas (LNG) import terminal at Dhamra by financial year 2018-19. Adani Petroleum Terminal will hold 49 per cent in Dhamra LNG Terminal — the firm setting up the LNG plant. The remaining 2 per cent interest will be held by financial institutions. Sources said a formal agreement signing ceremony is planned on Wednesday where Oil Minister Dharmendra Pradhan, who also hails from Odisha, will also be present. IOC had last year signed up to use 60 per cent of the terminal capacity for importing gas for its refineries at Haldia in West Bengal and Paradip in Odisha. GAIL too had signed up for 1.5 million tons of the terminal’s regassification capacity. GAIL and IOC were initially bargaining for 50 per cent stake in the project, but Adani wanted to retain controlling interest. Equity in the Adani terminal follows GAIL dropping plans in March last year to set up a floating LNG import terminal at Paradip. IOC too had in 2012 signed an memorandum of understanding (MoU) with Dhamra LNG Port Corp (DPCL) to develop an LNG terminal at the port. After shelving their respective plans, the firms in May last year signed a pact with Dhamra LNG Terminal, a firm owned by Adani Enterprises. Dhamra will be the sixth LNG project announced on the east coast. While GAIL has dropped plans of a 4-mt project at Paradip, Petronet LNG, a firm in which GAIL and IOC are promoters, has shelved plans to set up a 5-mt a year LNG import facility at Gangavaram in Andhra Pradesh. GAIL, along with GdF and Shell, has proposed a 3.5-mt floating LNG terminal at Kakinada while IOC is building a 5-mt facility at Ennore in Tamil Nadu. Real estate player Hiranandani Group is looking to set up a Rs 24 billion, 4-mt floating LNG import terminal off Haldia in West Bengal. With GAIL, which owns and operates bulk of the nation’s cross-country pipelines, and IOC, whose refineries are a big user of gas, joining Dhamra, the fate of LNG terminals in Andhra Pradesh is uncertain. Dhamra can meet all of the demand in Odisha and Andhra Pradesh. Dhamra port in Bhadrak district of Odisha is an all- weather deep water port, sources said. GAIL in October 2013 had signed an MoU with the Paradip Port Trust for setting up of the LNG import terminal. While the port was to invest Rs 6.50 billion in breakwater and dredging, GAIL was to invest Rs 24.58 billion for the 4-mt terminal which can be expanded to 10 mt. The plan was, however, dropped in March last year. Brandon Williams Authentic Jersey