GAIL’s polyethylene facility in UP goes on stream
GAIL (India) Ltd said on Tuesday the company has started its first UNIPOL PE process line to produce 400,000 tonnes of polyethylene (PE) annually. With this, the total production capacity at the company’s petrochemical plant at Pata, Uttar Pradesh, is now 810,000 tonne per annum. “GAIL’s flexible high-density polyethylene (HDPE)/ linear low-density polyethylene (LLDPE) swing plant provides access to a full range of resin applications which will allow GAIL and its customers to capture new market opportunities as the PE market’s demands are changing,” the company said in a statement. “Introduction of UNIPOL PE Resin products in the Indian market has started receiving positive feedback from customers. The GAIL team at the project site appreciated the US-based Univation Technologies team for providing good support to the commissioning of the project, right from the hook up and start-up of the new plant,” the statement added. Tie Domi Jersey
India set to buy Iran oil for emergency reserves: Sources
India is set to buy 6 million barrels of Iranian crude for its strategic oil reserves as negotiations with the United Arab Emirates’ national oil company for supplies are stuck over commercial terms, industry sources said. Such purchases by the world’s No.3 crude importer would boost Iran’s drive to ramp up its oil shipments as it looks to regain market share following the lifting of sanctions over its disputed nuclear programme. Oil markets have been keenly focused on Iranian export volumes over the last few weeks as they get closer to pre-sanction levels – a milestone that Tehran has said is a precondition for discussing a global output freeze to boost crude prices. India, seeking to hedge against energy security risks as it imports about 80 percent of its oil needs, is building emergency storage in vast underground caverns to hold a total of 36.87 million barrels of crude, enough to cover almost two weeks of demand. Three industry sources with direct knowledge of the matter said India would buy 6 million barrels of Iranian Mix crude from the National Iranian Oil Co in October and November to fill half the Managlore storage facility in the southwestern state of Karnataka. They declined to be identified as they were not authorised to speak with media. State firm Bharat Petroleum Corp will buy 4 million barrels in two very large crude carriers (VLCCs) and Mangalore Refineries and Petrochemicals Ltd will import 2 million barrels, the three sources said. They did not give pricing details. “The two refiners decided to buy Iranian Mix as it suits their refineries,” said one of the sources. The step comes as Iran’s daily crude exports to India surged to the highest level in 15 years in August. India in 2014 began talks to lease part of its strategic storage to Abu Dhabi National Oil Co (ADNOC). Under such a deal, India would have first rights to the stored crude in case of emergency, while ADNOC would be able to move cargoes to meet any shift in demand. “Talks have not moved forward with ADNOC despite several rounds of discussion. We (India and the UAE) are stuck on commercial terms,” said one of the sources. ADNOC, India’s oil ministry, BPCL and MRPL did not immediately respond to requests for comment. To take advantage of falling oil prices pending the conclusion of a deal with the UAE, India’s oil ministry instructed BPCL and MRPL to select a grade to fill half the Mangalore facility, the sources said. They chose Iranian Mix. The Indian side last week discussed Iranian oil purchases with Safar Ali Keramati, Deputy Director at National Iranian Oil Company (NIOC) for Crude Marketing and Operations. “If (Indian customers) come to us for extra barrels, then we will do our best to accommodate their demand,” Keramati told Reuters. The 9.75 million-barrel Vizag storage facility in east India is being filled with Iraqi Basra oil. The start of operations at a third facility, at Padur in Karnataka, has been pushed back due to problems in acquiring land to lay a pipeline link to the local port. Elgin Baylor Womens Jersey
ONGC Videsh slapped with service tax demand of Rs 6,100 crore
The Tax Department has slapped a service tax demand of over Rs 6,100 crore on the overseas arm of state-owned Oil and Natural Gas Corp (ONGC), a move that may potentially render its investments in oil and gas fields abroad infructuous. ONGC Videsh Ltd (OVL) has stakes in 37 oil and gas projects in 17 countries around the world. These stakes are held through subsidiaries, branches and joint ventures. For operations of these projects, those units and joint ventures would raise a demand for money on the parent, OVL, which would transmit the investments. The Service Tax Department now contends that the overseas units are rendering a service to OVL and as such the company is liable to pay service tax at the full rate, sources said. The department first issued a demand cum show-cause notice on October 11, 2011 requiring OVL to show cause why service tax amounting to Rs 2,816.31 crore plus interest on such amount and penalty should not be demanded and recovered. The tax amount was calculated based on foreign currency expenditure reported in the company’s financial statements covering period from April 1, 2006 to March 31, 2010. Subsequently, five more demand-cum-show cause notices were issued covering period up to March 31, 2015 to show cause why service tax amounting to Rs 3,286.36 crore, the interest on such amount and penalty should not be demanded and recovered from the company. The Service Tax Department, sources said, has contended that the expenses represent business auxiliary services rendered by the company’s foreign branches and operator of joint venture/consortium to the company. OVL however has contended that service tax is not payable and is contesting the same legally. According to OVL, investments made overseas through subsidiaries or branches or joint ventures do not constitute availing of any service. The company operates the projects at an internal rate of return on investments of 12-13 per cent and if it has to pay 14-15 per cent service tax on such investments, the projects will give negative returns and would become infructuous. Also, it contends that service tax by law can be levied on services rendered within the country. And even if one were to assume that its branches or subsidiaries were rendering any service, they were all overseas and not within India and so cannot be subject to any service tax, sources said. OVL had reported a net loss of Rs 2,093.5 crore in 2015- 16 fiscal on a turnover of Rs 12,772 crore. It had a net profit of Rs 1,904.2 crore on a turnover of Rs 19,148.9 crore in the previous fiscal. It produced 8.916 million tonnes of oil and oil equivalent gas in 2015-16 as compared to 8.874 million tonnes in the previous year. The overall gas production slightly increased from 3.341 billion cubic meters during 2014-15 to 3.406 bcm in 2015-16 and oil production was almost flat at 5.51 million tonnes. Dallas Stars Jersey
BP looking to sell 8.5% stake in Castrol India
BP is looking to sell 8.5% stake in Indian subsidiary Castrol India through a block deal worth Rs1,750 crore on Tuesday. The share sale is happening at an indicative range of Rs 408 – Rs 422.50 per share, a discount of up to 3.5% to Castrol’s Monday closing price. Shares of Castrol India declined 4.5% to Rs 422.45 on Monday. In May UK’s BP sold 11.5% stake in the lubricant maker to reduce its holding in the company from 70.92% to 59.42% for about Rs 2072 crore. Shares of Castrol have declined 5% so far this year as against 9.5% rise in Sensex. Early this year, BP reported its record annual loss of $ 6.5 billion and revealed it is cutting thousands of jobs in an attempt to cope with the oil price slump. BP’s business has also been dealing with the fall-out from the 2010 Gulf of Mexico disaster. For the quarter ended June 2016, Castrol reported a 12% jump in net profit to Rs 207 crore over the same period last year. In May, Castrol said that BP has undertaken a strategic portfolio review to optimise the deployment of capital across different businesses. “BP believes this option is a good opportunity to release capital while maintaining its commitment to our lubricant business in India and continuing to have strategic control of Castrol India,” it said. Ken Crawley Womens Jersey
Centre’s 22.5% ethanol in petrol plan causes alarm
The central government’s plan to increase blending of ethanol with petrol to 22.5% from existing 10% is causing alarm among petroleum dealers and also vehicle users. City’s dry and high temperature weather is said to be not suitable for using ethanol blended petrol. TOI on Saturday had highlighted ethanol in petrol converting into water. Vidarbha Petroleum Dealers Association took up the issue with district administration after oil Companies turned a deaf ear to their complaints. City MP and union minister for road transport and highways Nitin Gadkari had announced many times about the Centre’s plan to take ethanol blending in petrol upto 22.5% soon. President of Vidarbha Petroleum Dealers Association Harvinder Singh Bhatia told TOI doing that will create havoc. “Already petroleum dealers and consumers are facing severe problems with ethanol getting converted into water in underground tanks at petrol pumps. Consumers are alleging that petroleum dealers were mixing water in petrol. Almost all dealers are receiving complaints. Centre should drop the plans of increasing ethanol blending in petrol,” he said. Bhatia added that oil companies should not permit ethanol blending with petrol in Vidarbha due to high humidity here. “Ethanol is hygroscopic (attracts moistureand converts into water. High humidity is common in city. Ethanol blending will cause problems not only during rainy season but throughout the year except one or two winter months,” he said. Bhatia also said the petroleum dealers from other parts of the nation too were facing same problems and complaining to the oil companies. One dealer Amit Gupta said oil companies should not sell ethanol blended with petrol unless infrastructure suitable for it was available in the region. “Infrastructure, right from depots, oil tankers, underground storage tanks at pumps to fuel tanks in vehicles, is totally different for ethanol blended fuel. We do not have it right now,” he said. Gupta claimed ethanol damaged existing vehicles running here. “It is highly corrosive and damaged silencer and rubber material used for joints in engines. Parts in existing vehicles cannot sustain blended petrol. We can see silencers in most vehicles getting corroded sooner these days, especially since blending was increased to 10%,” he said. RTI activist and executive member of Akhil Bhartiya Grahak Panchayat, local chapter TH Naidu said it was a serious issue and citizens needed to fight against the Centre’s move. “I will take up the issue with panchayat office bearers. District administration cannot run away from it. It is the responsibility of the district administration to safeguard consumers and prevent loss to them,” he said.
Higher oil prices key for state-run oil producers
Shares of state-run oil producers Oil and Natural Gas Corp. Ltd (ONGC) and Oil India Ltd (OIL) have risen about 5-6% year-to-date. That falls short of an about 10% increase seen in the benchmark Sensex. Lower crude oil and gas prices, along with unexciting production trends, have kept sentiments low for these stocks. According to some analysts, things may soon get better. Spark Capital Advisors (India) Pvt. Ltd pointed out in a report on ONGC recently that crude oil prices are likely to head towards $60 a barrel over the next 12-18 months, led by ongoing capex (capital expenditure) and production cuts across the E&P (exploration and production) industry, a potential supply freeze by members of the Organization of the Petroleum Exporting Countries over the next 12 months, likely narrowing of excess supplies and stabilization of prices from the latter half of the current fiscal year. Needless to say, higher oil prices are key for investor sentiment to revive in these stocks. The recently announced June quarter results of these companies reflect the impact of lower crude oil prices. Net price realizations of both companies declined year-on-year. ONGC and OIL’s net realizations declined 22% and 25% to $46.1 a barrel and $43.09 a barrel, respectively. But that was on expected lines. The measure was higher sequentially, helped by a recovery in broader crude oil prices after touching lows earlier in 2016. As expected, the drop in realization led to a drop in profits. ONGC’s Ebitda (earnings before interest, tax, depreciation and amortization) declined 23% to Rs 93.90 billion. This excludes exploration costs that were written off. Again, ONGC’s Ebitda was above some analysts’ estimates owing to lower-than-expected other expenses. OIL’s Ebitda declined 29% to Rs 8.63 billion. On the flip side, production performance is far from encouraging. ONGC’s crude oil production declined 2% year-on-year and was flat compared to the March quarter. OIL’s crude oil production declined 4.6% over last year’s June quarter but was 2.8% higher than the March quarter. To be sure, ONGC subsidiary ONGC Videsh Ltd’s (OVL’s) production increased 12% year-on-year but that includes volumes from its stake purchase in Vankor (JSC Vankorneft), Russia. Of course, higher production from Vankor should help to some extent. For fiscal year 2016, OVL reported a net loss of Rs 20.94 billion against a net profit of Rs 19.04 billion in FY15, as low crude oil prices caused tremendous grief. ONGC and OIL both currently trade at about 12 times their estimated earnings for this fiscal year. Even as valuations appear undemanding, as mentioned earlier, higher oil prices are essential for improving sentiments for both stocks. Improving production will be a bonus. Dan Hampton Authentic Jersey
Land acquisition affecting IOC’s pipeline projects
Indian Oil Corp. Ltd’s (IOC) pipeline projects are facing problems due to issues related to land acquisition, according to Anish Aggarwal, director-pipelines at India’s largest refining company. This comes in the backdrop of the public sector unit constructing 20 pipelines at an investment of Rs.200 billion to be operational by 2022. “Land acquisition is causing a problem for our linear projects,” said Aggarwal. The issue assumes importance given the role envisaged for IOC’s pipeline network to improve the energy access for India’s citizens. IOC has a network of 11,746km at present which is expected to go up to around 17,000km, thereby increasing the throughput capacity from 85.5 million ton per annum (mtpa) to 102 mtpa. Of this, 4,867km transports crude oil, 6,739km is used for product transportation and 140km is meant for gas. Newswire agency Reuters reported on 14 September about IOC’s goal to generate 15% of revenue from its gas supply and distribution business by 2021 from the current level of 5%. IOC has a refining capacity of 80.7 mtpa through its 11 refineries and accounts for 35% share of India’s refining capacity. Pipelines will have to play an important role in helping India achieve the target of natural gas contributing 15% to India’s energy mix from the current level of 6.5%. According to petroleum planning and analysis cell, India currently has a gas pipeline network of 16,250km with a capacity of 386.53 million standard cu. metre and a pipeline grid of 12,687km. Experts believe that the land acquisition requires immediate attention. “Land acquisition has been a serious problem. A lot of projects are stalled because of this and these can only be resolved with government intervention,” said Raju Kumar, partner-oil and gas at consultancy firm EY. The National Democratic Alliance government also plans to set up a common hub for India’s gas pipelines for market price discovery of natural gas in the country. A gas hub is a physical point where several gas pipelines come together or intersect. It is a trading place for gas at market determined prices. However, it is an ambitious task given the falling domestic production. India’s domestic gas production fell by 4.7% to 31.14 billion cu. metres (bcm) in financial year 2015-16 from 32.69 bcm a year ago. According to a report by consultancy firm EY, India’s 39 cu. metres per capita of natural gas consumption lags far behind the world average of 469 cu. metres. The country’s share of natural gas in the primary energy mix is also far behind the global average especially due to a sharp drop in domestic production. Nevin Lawson Womens Jersey
IOC’s investment plans not to affect credit profile: Fitch
Indian Oil Corporation’s (IOC) Rs 1800 billion capital investment plan over the next six years will not affect the company’s credit profile, Fitch Ratings said. “The large investment plans announced by IOC are in line with the agency’s expectations that are incorporated in the assessment of its standalone credit profile of ‘BB+’. Fitch equalises IOC’s rating with that of its largest shareholder, the state of India, due to their strong operational and strategic linkages,” it said in a statement here. IOC, on September 15, had said its capex would be Rs 1700-1800 billion over the next six years, including around Rs 150 billion in the current fiscal and around Rs 250 billion each in 2017-18 and 2018-19. Fitch said it has already factored in most of the capex over the next three years and sees no significant change to its current expectations as a result of this announcement. “We continue to expect IOC’s free cash flow to remain negative over the medium term due to the high capex,” it said. “However, we still expect IOC’s financial profile to remain stable due to strong volume growth and relatively robust refining margins.” The rating agency said it expects IOC’s credit metrics to weaken marginally, but to remain within levels commensurate with its stand-alone profile over the medium term. Fitch said it has not factored in IOC’s investment in the proposed mega refinery project in coastal Maharashtra though. This project is planned along with the other state-owned oil-marketing companies -Bharat Petroleum Corporation Ltd and Hindustan Petroleum Corporation Ltd. “We anticipate no major investments associated with this project in the medium term, given the early stages of the proposed project. Fitch will take into account IOC’s investment share in the proposed project once there is more clarity and certainty on time and quantum of the investments,” the statement added. Sean Lee Womens Jersey
GAIL May Scrap Tender for Hiring LNG Vessels
State-run gas marketer GAIL India will likely scrap the tender for hiring liquefied natural gas (LNG) ships after failing to negotiate acceptable terms with bidders in what would hurt India’s ambition to build high-tech LNG carriers at home under the ‘Make in India’ programme. GAIL had issued a tender last September seeking to charter at least nine LNG vessels to bring home from the US up to 5.8 million tonne of gas annually from early 2018. Successful bidders were supposed to locally build a third of all ships they make under the Make in India plan. GAIL received bids from two Japanese consortiums after the deadlines for submissions were extended more than once. The bids, however, were not fully aligned with the tender and contained several conditions, which the GAIL executives hoped to resolve in negotiations that lasted more than five months with the bidders. GAIL and the Japanese consortiums have now ended their negotiations after failing to reach a common ground, sources with direct knowledge of the matter said. In the next few days, the board of GAIL will likely consider the proposal to scrap the current tender for LNG carriers and issue a new one to hire ships without any condition on building some ships locally, sources said. The bidders wanted the Indian government to share some of the risks they saw in investing billions of dollars in making LNG carriers. They sought some form of guarantee that would help compensate them if gas supply from America were to shrink during the contract period, sources said. Bidders were a little averse to sinking money in building ships at Indian shipyards as it would cost almost triple the amount at a Korean shipyard and therefore also demanded higher equity contribution from the Indian government for these ships, sources said. GAIL declined to comment for the story. GAIL is now running out of time to hire ships as the supplies of its contracted gas from the US will start flowing in a little more than a year. A GAIL executive said hiring LNG ships in time wouldn’t be difficult if we were to lift the Make in India condition. Early last year, GAIL had scrapped a previous tender seeking LNG carriers after receiving no response from foreign bidders reluctant to transfer technology and build ships in India. Indian shipyards don’t have LNG carrier building technology. A diplomatic push finally got some interest from the Korean shipbuilders, who agreed to tie-up with local shipyards to build LNG carriers in India. The bidders for GAIL ships had to tie-up with shipbuilders who would in turn partner local shipyards. Vessels from foreign shipyards had to be delivered between January and May 2019 and from Indian shipyards between July 2022 and June 2023. An LNG vessel on average costs about $200 million. The Japanese consortium of Mitsui OSK Lines Ltd, Nippon Yusen Kabushiki Kaisha Ltd and Mitsui & Co Ltd had bid to supply six vessels while the other group of Mitsubishi Corporation, Kawasaki Kisen Kaisha Ltd, GasLog Ltd and Foresight Oil Ltd had bid for four ships. Both consortiums had partnered with Cochin Shipyard to meet the local manufacturing condition. Two other Korean ship makers – Hyundai and Daewoo – too were earlier keen on participating in the process but dropped off after local partners L&T and Pipavav shipyards respectively pulled out. Ed Dickson Jersey
U.S. rig count drops amid concern global glut will persist
The number of rigs exploring for oil and natural gas in the U.S. decreased by two last week as a major forecast indicated the downturn that started two years ago could continue well into 2017. Across the U.S., 506 rigs were active for the week ending Friday, down 40 percent compared to the 842 operating a year ago, according to Houston-based oilfield-services company Baker Hughes Inc. Of last week’s total, 416 rigs sought oil, which was up by two from the week before. The number of oil rigs in operation has risen 11 of the past 12 weeks, the longest streak since early 2014. Rigs drilling for gas dropped by three to 89 last week. One rig was listed as miscellaneous. The U.S. rig count peaked at 4,530 in 1981 and hit its lowest level in May at 404. The Gulf of Mexico rig count, which has the greatest impact on Houma-Thibodaux’s oil-based economy, rose by two to 20 this week. It’s down by nine rigs, 31 percent, from a year ago, according to the Louisiana Department of Natural Resources. Louisiana’s rig count, on land and offshore, dropped by two to 41, down 41 percent from a year ago. Crude oil prices, meanwhile, dropped last week amid concern that the glut that has persisted for more than two years will continue. West Texas Intermediate crude, the U.S. benchmark, closed Friday at $43.03 a barrel, down 2 percent for the day and 6 percent for the week. Brent, the world benchmark, closed at $45.87, down 1.6 percent for the day and nearly 5 percent for the week. Prices are at less than half their levels from two years ago. Terrebonne and Lafourche residents have watched the numbers as a downturn in the oil and gas industry, the area’s main economic engine, continues to take a toll. In the past two-and-a-half years, Houma-Thibodaux’s unemployment rate has risen from the nation’s lowest, 2.8 percent, to its current 7.2 percent. The local jobless rate has fallen to 352nd among 387 nationwide, according to the U.S. Bureau of Labor Statistics. Including ties, only 31 metro areas have higher unemployment rates than Houma-Thibodaux, which has lost more than 7,000 jobs in two years. Oil and natural gas companies have cut more than 350,000 jobs since crude prices started to fall in 2014, reports show. A global supply glut, fueled in part by a U.S. shale boom, is expected to keep prices from rising significantly. Last week, the International Energy Agency downgraded its previous predictions and forecast the oil glut will continue well into 2017, citing increased production in the Middle East and lower demand from China, India and Europe. “When will the world oil market return to balance? That is the big question today,” the agency said in its monthly forecast. “With the price of oil at current levels, one would expect supply to contract and demand to grow strongly. However, the opposite now seems to be happening. Demand growth is slowing and supply is rising.” Mark Barron Womens Jersey