LNG price slump sends Indian Oil Corporation on buying binge
Indian Oil Corp., the nation’s biggest refiner that’s also boosting its liquefied natural gas business, is lifting purchases of the fuel to take advantage of a price plunge amid a glut. The state-run company plans to buy two LNG shipments per month in the spot market for six months from October, according to Debasis Sen, director of planning and business development. That compares with a total of nine spot cargoes for the previous year, when it started importing the commodity directly. India is among buyers seeking more cargoes of the cleaner fuel as spot prices have fallen about 60 per cent since October 2014 amid a supply glut. While demand growth prospects are limited in more mature markets like Japan and South Korea, consumption in India, China and emerging Asian nations will increase, the US Energy Information Administration forecasts. India’s consumption may rise 11 per cent a year over the next decade, BMI Research predicts. “Low prices have made LNG more affordable,” Sen said in a telephone interview on Aug. 25. “We are witnessing strong demand from customers such as fertilizer, power plants and glass industries.” Indian Oil sold 1.93 million metric tons of natural gas during the year through March 31, up 6.9 per cent from a year ago, according to a statement. The refiner holds rights to market 30 per cent of the fuel imported by Petronet LNG Ltd., the country’s top purchaser. While IOC gets supplies sourced from Petronet, it is seeking to increase direct procurement through spot deals. Cleaner Fuel Higher imports will help New Delhi-based Indian Oil diversify further into natural gas. Prime Minister Narendra Modi’s administration is seeking greater use of the cleaner fuel in the country’s energy mix to curtail carbon emissions by the world’s second-most populous nation. The nation has more than doubled its imports in the past seven years as domestic supplies dried up. Purchases rose 15 per cent from a year earlier to 16.08 million tons during financial year ended March 31, 2016, according to provisional data from the oil ministry’s Petroleum Planning & Analysis Cell. The country plans to increase its LNG import capacity to 55 million tons per year within five years, from about 21 million now, Oil Minister Dharmendra Pradhan said in New Delhi on Aug. 1. Petronet has expanded the capacity of the Dahej terminal in western India, the nation’s largest LNG import and re-gasification terminal, by 50 per cent to 15 million tons per year. Indian Oil, which owns 12.5 per cent of the importer, has booked a portion of the increased capacity to bring in more shipments directly. “We were facing capacity constraints at Dahej in importing LNG on our own and could purchase only one shipment so far since April,” Sen said. “But now with the expansion, we can accommodate two cargoes a month.” Mark Andrews Jersey
ONGC hires consultant to assess reserves in GSPC KG gas block
State-owned ONGC has hired US-based consultant Ryder Scott to assess natural gas reserves in Gujarat State Petroleum Corp’s (GSPC) Deendayal block before deciding to buy a stake in it. Since the BJP-led government came to power at the Centre, the Gujarat government firm GSPC has been seeking to sell a majority stake in its KG-OSN-2001/3 (Deendayal) block in Bay of Bengal to ONGC to avoid defaulting on loans. ONGC initially was not keen to buy stake in the block as it felt the block had reserves far less than what GSPC was claiming and the asking price for the stake was not commensurate with the returns. “There is tremendous amount of pressure on ONGC to buy stake in GSPC block,” a source with direct knowledge of the matter said. “Being a commercial organisation, it cannot throw away money so it has now decided to get the reserves in the GSPC block validated.” Ryder Scott Petroleum Consultants has been asked to evaluate gas properties in the GSPC block and independently certify the reserves quantities, the source said. “The consultant will submit its report by November,” he said. GSPC was to begin gas production from the block in 2013 but after sinking in USD 3.6 billion it was found that gas reserves are one-tenth of 20 trillion cubic feet claimed in 2005 and that too is technically difficult to produce. In the process it has amassed Rs 19,576 crore of debt, on which interest cost was Rs 1,804.06 crore in 2014-15, according to the CAG. And against this its revenue was Rs 152.51 crore in 2014-15. Sources said GSPC has been doing trial production of a very small volume of gas from August 4, 2014 and has not yet reached commercial production and in absence of revenue commensurate with the debt servicing obligations it risks becoming a defaulter. To bail out of the situation, it offered to sell 50 per cent stake to ONGC, they said. Money from ONGC can repay a part of the debt and the remaining would become a joint liability of the two firms. M.J. Stewart Jersey
Iran-Pakistan gas pipeline must be top priority
Economist and former finance minister Dr Hafiz Pasha believes that Iran-Pakistan (IP) gas pipeline project is the most viable and feasible energy project for Pakistan and needs to be completed at the earliest. In an Interview with IRNA, Dr Pasha said that the gas pipeline project should be the top priority in Iran-Pakistan relations. “This project has to be revived at the earliest, because it is most viable and feasible project for Pakistan,” he noted. Pasha said that as compared to other energy projects including Turk¬menistan-Afghanistan-Pakistan-India (TAPI), CASA-1000 and Qatar LNG, the IP gas pipeline is the most suitable project. “Price of the IP is very attractive and it should be the first priority for Pakistan,” he stressed. Expressing his views Pasha said that Pakistan should also try to sign bilateral trade agreement with Iran with special focus on the exports of rice and textile products from Iran and import of oil products and other things from Iran. “So far we don’t have any such agreement with Iran,” he noted. “We should take immediate steps to enhance our trade with Iran after removal of sanctions from the Islamic Republic,” he said, adding after the lifting sanctions, new opportunities are emerging in Iran and being first neighbour of Iran, Pakistan should take advantage of this situation. The economist added that strong economic and trade ties are in the interest of both Iran and Pakistan. He said that the current volume of trade between Iran and Pakistan is less than its potential and capacity of the neighbouring countries. “But I again insist that the IP gas pipeline should be the top priority in Iran-Pak ties, we are importing LNG from Qatar which is quite far away and expensive,” he said. The former minister went on to say that IP is more important for Pakistan because of its proximity and the price is very reasonable. Iran-Pakistan (IP) gas pipeline project, once known as the ‘Peace Pipeline’, is about 1,900-kilometre long pipeline which will transfer natural gas from Iran to Pakistan when completed. Tre Madden Authentic Jersey
Oil showing positive bias, but attempt to freeze output may hit Iran, Iraq roadblock
WTI and Brent crude traded with a positive bias in the past fortnight, rising around 7.5 and 6.5 per cent, while MCX oil prices gained around 8 per cent in the same time frame. Comments from the Saudi Energy Minister about possible action to stabilise prices triggered a round of buying and the International Energy Agency forecast crude markets to tighten in the second half of 2016. Saudi Energy Minister Khalid al-Falihsaid Opec members and non-members would discuss the market situation, including any action that may be required to stabilise prices, during an informal meeting on September 26-28 in Algeria. Oil rallied with few stops over the past two weeks, going from a bear to bull market, as it reversed a loss of more than 20 per cent in early August on speculation that Saudi Arabia and the rest of the Opec nations will agree to a production freeze with Russia and other non-Opec members. However, Iran, the third-largest producer in the Opec, had earlier this year refused to join such an attempt by the group and non-Opec members led by Russia to stabilise production. Tehran has been boosting oil output since the lifting of the western sanctions in January. News of its potential support for a production freeze helped halt an abrupt slump in crude prices. Iraq’s Prime Minister said the country had not yet reached its full oil market share, suggesting his government would not restrain crude output as part of any possible Opec agreement to lift prices. Despite rebounding this year, oil still trades at less than half of mid-2014 levels, with the market still worried about a glut that spurred the biggest price rout in a generation. The selloff has battered the economies of Venezuela, Iraq and Nigeria, which are more anxious to boost crude prices than major Opec producers. On the other side of the globe, China’s July diesel and gasoline exports soared 181.8 per cent and 145.2 per cent, respectively, from the levels reported for the same month last year, putting pressure on refined product margins. Iraq planned to increase exports of Kirkuk crude by 150,000 bpd from its northern fields while Nigerian rebels who regularly attacked oil facilities in the country earlier this year said they were ready for a ceasefire. US drillers added 10 oil rigs in the week to August 19, the eighth straight week of rig additions, as crude rebounded toward the $50 a barrel mark that makes drilling viable. Johnny Oduya Authentic Jersey
RIL focuses on domestic market for refined products
Mukesh Ambani-led Reliance Industries (RIL) is looking to increase focus on the domestic market for its refined products, a company official said on Friday. “We will focus more on India, where we see scope for growth. We will also focus on the East for exports,” said an RIL official, who did not wish to be named. On July 15, in its results press statement, RIL said its exports of refined products from India were at Rs 286.10 billion during the April-June 2016 quarter, compared to Rs 323.52 billion in the same period a year ago. In terms of volume, exports of refined products were at 9.8 million metric tons (MMT) during the April-June 2016 quarter, compared to 8.5 MMT in the corresponding period a year ago. RIL expects growth in India’s diesel and gasoline consumption for the next 10-15 years, as the country’s economy and disposable income increase. For the financial year 2015-2016, India’s industry sales for petrol rose 15 per cent, to 21.84 million tons (MT), and sales for diesel rose eight per cent to 74.63 MT, according to data available with the Petroleum Planning and Analysis Cell. Ratings agency India Ratings & Research (Ind-Ra), in its outlook for FY17, said, “Growth was driven by strong pick-up in automobile sales, particularly passenger vehicles. Ind-Ra expects petrol consumption to further increase by eight to 10 per cent in FY17, driven by strong passenger vehicle sales.” Diesel consumption, the rating agency said, is likely to grow by five to six per cent on improved sales of commercial vehicles, however, offset to some extent by lower consumption of diesel in power backup. RIL is also in the process of reopening its 1,400 retail outlets, which were earlier mothballed. So far, the company has restarted operations at more than 1,000 such outlets. The company official added the expected growth will help support the company’s gross refining margins (GRMs). In the April-June 2016 quarter, RIL reported GRMs of $11.5 per barrel, higher than the $10.4 per barrel seen in the same period a year ago. For its liquefied petroleum gas (LPG) business, the official said, “We are looking at all options in India, including LPG. Our market is small, as our customers do not get subsidised. We reach areas where the public sector companies do not reach, and with subsidy coming down, our products will become more economical.” FUEL PROSPECTS • In 2015-16, India’s industry sales for petrol rose 15 per cent to 21.84 MT, and sales for diesel rose eight per cent to 74.63 MT • Ratings agency Ind-Ra expects petrol consumption to increase by eight-10 per cent in FY17 • Diesel consumption set to grow five-six per cent, says Ind-Ra Joshua Garnett Authentic Jersey
CBM pricing tweak
The government plans to come out with a new pricing formula for coal bed methane as part of the Hydrocarbon Exploration Licensing Policy (HELP). “A new pricing and marketing policy for the CBM would soon be made to make it attractive for investors,” a senior oil ministry official said. In 2014, the new domestic natural gas pricing guidelines also covered CBM blocks. This resulted in CBM gas beyond this date to be priced at natural gas rates, which is now about $3.06 per mBtu on gross calorific value (GCV) basis. According to latest estimates by the ministry the gas price could drop to a low of about $2.25 or $2.50 per mmBtu from October 1. CBM is natural gas trapped within coal formations and commercially unviable for mining. It is extracted by drilling holes into the seams. Officials said the ministry plans to hold consultations with stakeholder on pricing and marketing of CBM before coming out with a specific policy as part of HELP. The government is still in the process of working out the nuances of HELP contracts, and a fresh round of hydrocarbons auctions will be conducted under this regime. The sector also has differential pricing, which would be addressed, officials said. The existing pricing regime has created a divide in the industry with two firms – Essar Oil and GEECL – being able to sell CBM gas at pre-approved (high) prices of $6 and $15/mBtu, respectively. However, RIL and ONGC, which are gearing up to start production, would have to follow the natural gas pricing formula. Phillip Danault Authentic Jersey
Government may advance Parliament session to get GST laws approved
Eager to meet the April 1 target to roll out the landmark Goods and Services Tax (GST), the government may advance Winter Session of Parliament by a fortnight to get supporting legislations passed, leaving sufficient time for implementation of the new indirect tax regime. Winter Session of Parliament is normally convened in the third or fourth week of November but this year the government is looking at starting the month-long session immediately after the end of festive season. An early Winter Session would help get the Central GST (CGST) and Integrated GST(IGST) legislations, that will pave way for the Goods and Services Tax (GST), to be approved within November or latest by early December, government officials said. The two are supporting legislations to the Constitutional Amendment Bill approved in the Monsoon Session of Parliament. Requiring ratification by half of the 31 states for it to become a law, the Constitution Amendment Bill has already been ratified by 8 state assemblies including Assam, Bihar, Chhattisgarh, Jharkhand, Himachal Pradesh, Gujarat, Delhi and Madhya Pradesh. Maharashtra and Haryana are likely to follow suit soon and the requisite numbers may be in place by September, an official said. “With required number of states ratifying the Bill, there is a thinking that the Winter Session should be advanced to around November 9 or 10, after the festivities, including Chhath Puja,” he said. “In doing that, a consensus with all the political parties will be needed.” The government is of the view that once half of the state legislatures approve the new national sales tax regime, the GST Council – comprising Union finance minister and state finance ministers, can be nudged to quickly approve the tax rate, slabs and exemptions for it to be incorporated in the supporting legislations. Parliament nod to the legislations in the Winter Session would give enough time to prepare for the rollout of GST from April 1, 2017. The new regime will subsume excise, service tax and other local levies including VAT, octroi. Government is of the view that an early Winter Session will also be beneficial as the Budget Session is planned to be convened in the last week of January. “Presentation of Budget around end-January is under consideration and hence an early Winter Session also paves way for an early Budget Session,” the official said. Ed Dickson Jersey
Demand for diesel is bound to grow in India: P Raghavendran, President – Refinery, RIL
In this interview with ET Now, P Raghavendran, President-Refinery of RIL talks about the demand for petroluem products and growth. Edited excerpts: What is your outlook on demand for petroleum products in India? We are very bullish on demand in India. We believe that India growth story is yet to play itself out in terms of demand for petroleum products. So demand for diesel driven by transportation for agriculture and industrial transportation of goods is bound to grow. Similarly, as disposable income rises, especially in rural areas, there is a growth in gasoline demand. The high demand growth rates we have seen in gasoline – close to 10 per cent – is expected to continue for some more time. How are you looking at things from export perspective? Is the demand in the same range as it was, say six months ago or are you seeing global demand also increasing? The demand is growing only in some parts of the world, especially in the developing part of the world. China growth is still continuing at a lower level, India is growing. Africa and many parts of the developing world are continuing to grow and they provide the growth impulses for the sector. As far as we are concerned, we look at all the markets, whether India or outside India, whichever gives us best margins. With the kind of growth outlook that you are looking, are you confident of maintaining the same level of GRMs that you have in last three to four quarters? We are trying to optimise GRM to the extent that we can. Demand and supply is a very significant component of it. We will try to optimise our margins within the play that is available. How are your retail outlets panning out, how would it go to the optimal level in FY17? Right now we are focussed on commissioning all our outlets and we are nearing the end of that. Most of our outlets have been commissioned and our next phase is to try to build volumes and build new outlets so that our network is complete. DJ Moore Authentic Jersey
New power project based on old map zoning worries Yelahanka residents
Karnataka Power Corporation Limited’s gas-based thermal power plant is set to come up on a plot in Yelahanka – historically classified as an industrial zone – in North Bengaluru. However, land use patterns have changed over the years. According to the 2015 master plan, more land in this parcel is set aside for residential purposes than for industrial. But KPCL has obtained environmental clearance for the project without taking present-day demographics and public health concerns into account. This has vexed residents in the vicinity. Today, residential units are located just 300 metres from the proposed plant site. Also in proximity are the eco-sensitive Puttenahalli and Yelahanka lakes, where new species of animals have been found over the years. But KPCL hasn’t considered alternative sites for the Rs 1,571-crore plant because the proposed site is duly classified as an ‘industrial’ zone. The 370 MW plant coming up on the plot where a defunct diesel power plant – forced to shut down in 2013 due to environmental reasons – stands at present is meant to address the power woes of Bengaluru. The Gas Authority of India (GAIL) will supply natural gas to the plant from its terminal point near Kuvempu Circle on Outer Ring Road. Power generation is expected to start in two years. KPCL has got approval from the State-Level Environment Impact Assessment Authority, constituted by the environment ministry, but it hasn’t allegedly mentioned the residential and environmentally sensitive areas in the vicinity in its plan. The power major has not even conducted any public hearings on the project because the site legitimately sits on an industrial parcel. However, the BBMP map shows the proximity of these site to residential clusters. “We don’t know how KPCL secured the nod for the project despite residential blocks being located a few hundred metres away. Danger lurks when projects come up very close to residential areas,” said Balasundaram Athreya, a resident of the area. The environment ministry says project-implementing agencies must provide details of the site, nature of land, waterbodies within 2-3km, population within 10km, forests, eco-sensitive zones and accessibility. The guidelines exempt agencies from giving these details if the proposed site is in an industrial estate – the very reason KPCL hasn’t held any public sittings. Residents have also expressed concerns over the use of natural gas, which will arrive in liquid form and then get converted to gas. KPCL chairman G Kumar Naik said: “The old diesel plant was closed because of pollution. The gas-based plant is many times better and safer, and it won’t pollute.” Siddharth Padi, another resident, argued against a big project coming up in the midst of residential zones and lake-conservation areas. “A buffer zone is absent here. We are not against a power plant but we value our safety more,” he added. Naik dismissed all fears, saying: “We’ll safely implement the project. We have the know how for it.” Kent Tekulve Womens Jersey
Iran wants pre-sanctions oil market share: minister
Iran wants its pre-sanctions share of the crude market, Oil Minister Bijan Zanganeh said on Friday, dampening the prospects of agreement on an output freeze at an OPEC meeting next month. “Iran had no role in disrupting the stability of the oil market and after the (lifting of) sanctions we seek to revive our share in the global crude market,” he said, quoted by the ministry’s SHANA news service. Zanganeh had given a brief boost to world prices on Thursday after announcing he would attend the informal OPEC meeting in Algiers on a possible output freeze with non-cartel producer Russia in late September. But on Friday he insisted there could be no talk of Iran abandoning its ambitions to restore its market share after last year’s nuclear agreement with world powers led to the lifting of sanctions on its oil exports. “Iran will cooperate with OPEC on improving prices and the state of the crude market, but we expect our right to restore our lost market share in the market to be considered,” Zanganeh said. “Iran has made its sacrifices for the market and it’s no longer the time for Iran,” another Iranian website, Mizan Online, quoted him as saying. Tehran says it has doubled its exports of oil and gas to 2.7 million barrels per day (bpd) since signing the nuclear deal in July last year. Its total output has risen from 2.7 million bpd to 3.85 million bpd, close to the level before international sanctions were imposed in 2012. “When the instability occurred in the market, … Iran’s oil exports were less than one million bpd,” Zanganeh said. “We expect those who disrupted the market’s stability to take the highest responsibility in restoring stability.” Prices had already dipped in Asian trade earlier on Friday after Saudi Energy Minister Khalid Al-Falih played down the prospects of any major move on output. “I don’t believe that an intervention of significance is required. I certainly don’t advocate a cut,” he told Bloomberg News. A previous OPEC attempt to freeze output collapsed in April largely because of Iran’s refusal to join talks. Alexei Kovalev Womens Jersey