Government set to start talks on merging 13 state oil companies to create behemoth
The government is set to start consultations for an ambitious plan to merge 13 state oil firms to create a giant corporation whose revenue dwarfs global energy major Chevron which competes with US conglomerate General Electric in the Fortune-500 ranking. The Cabinet Secretariat has referred the idea of the integrated giant, which would also absorb various institutions related to safety, development and analysis, to the oil ministry, sources familiar with the development told ET. Following this, the oil ministry has begun the process of evaluating the prospects of creating the conglomerate, which will have a bigger market value than Russian state oil giant Rosneft and India’s Reliance Industries Ltd, sources said. It plans to consult all stakeholders including the state firms that may be combined to create the mega corporation that will be the country’s No. 1 in turnover, net profit, capital expenditure and market capitalisation, they said. The oil ministry declined comment for the story. A similar proposal was considered more than a decade ago. But the government in July 2005 said that the official committee that studied the matter felt that a merger or formation of the holding company “may not be advisable for the present”. Oil and Natural Gas Corporation (ONGC), the top oil producer and one of the largest companies in the country, leads the pack of 13 state oil companies that are being considered for the merger. Other companies include Indian Oil Corporation, the nation’s largest refiner and fuel retailer, Bharat Petroleum CorporationBSE 2.19 %, Hindustan Petroleum, GAIL, Mangalore Refinery and Petrochemicals (MRPL), Chennai Petroleum, Numaligarh Refinery and Oil India. A consolidated entity could rival the likes of Russia’s Rosneft ($55 billion in market cap) and UK’s BP Plc ($112 billion) in market value and financial power. The top six listed Indian state oil firms have a market value of $77 billion. In 2015-16, all state oil firms together reported a profit of Rs 45,500 crore on a revenue of Rs 9,32,000 crore. In the current fiscal year, they have planned a capital expenditure of Rs 87,600 crore. The government is also evaluating if the consolidated entity can include all non-corporate government bodies in the oil sector such as Oil Industry Development Board (OIDB), Petroleum Planning and Analysis Cell (PPAC) and Petroleum Conservation Research Association. A powerful integrated company would have the muscle to consider proposals like a significant stake in Rosneft. Oil minister Dharmendra Pradhan recently said Indian state firms were considering a stake in the company that pumps more oil than Exxon. The NDA government under AB Vajpayee and the UPA government in its first term had seriously explored the possibility of merging state oil companies or reorganising them in fewer units to give them heft and efficiency that would help them compete globally. In 2005, the government had also appointed a panel led by V Krishnamurthy, which advised against merging the state oil firms, arguing the dominance of a mega entity may not be good for competition in an energy-starved economy and that there were several examples of smaller specialist firms doing better. It also argued that globally, less than a third mergers succeeded in enhancing shareholder value mainly due to their inability to manage employees. The option of cutting jobs to slash costs mostly undertaken by private players after mergers is not easily available to state firms where lay offs have big political fallouts. And it requires greater political will and smart manoeuvring to offset that. Moreover, the competing interests and ambitions of top leaders and diverse cultures at companies also obstruct a smooth merger. In the last decade since the merger talks were buried, state oil firms have also changed in character, growing in size and pushing for vertical integration. Refiners like Indian Oil, HPCL and BPCL have acquired several exploration and production assets in India and overseas while ONGC has enhanced presence in refinery and petrochemicals. Kyle Wilber Womens Jersey
NTPC plant’s prospects hinge on LNG pricing
The survival of National Thermal Power Corporation (NTPC) Ltd’s thermal power plant at Kayamkulam is linked to the pricing mechanism of natural gas, that is, the plant can solve the energy crisis of Kerala if the global pricing system takes a new turn. Alternatively, the Union government will have to take measures to end the disparity in the prices of domestic and imported gas. Global prices are set according to an international system. There are a few popular formulae to calculate the prices. Two of the most widely accepted pricing systems are Japan Crude Cocktail (JCC) and Henry Hub pricing. Both are linked to international crude prices, according to experts in the industry. Natural gas is supplied mostly on long-term contracts. The gas can be brought through spot markets as well. With increased availability of natural gas, spot prices have become more attractive. In the event of natural gas-based power production at the NTPC unit, gas could be sourced from the Petronet LNG terminal where gas is supplied on a long-term international contract. The price of imported gas reaching Kayamkulam could be a matter of concern to Kerala State Electricity Board, which is the sole purchaser of power from the plant. Unless the prices are low, the cost of production will go up, resulting in higher price for electricity generated at the plant. The NTPC has been providing electricity under its naphtha-based fuelling system at about Rs.7 a unit, whereas the KSEB has been getting power at cheaper rates from other sources. If LNG is made available at lower prices, the plant could function at its installed capacity of 350 MW. The plant has a plan to increase the capacity to 1,050 MW. Again, the expansion plan is hinged on the profitability of operation. At present, the prices of imported LNG offered to entities in Kerala are above $12 per million Btu (British thermal units), while the gas available from domestic sources are provided at less than half that price. Kerala being not connected to the national gas grid, it has to depend on imported gas. Rob Havenstein Womens Jersey
Cairn India, Vedanta merger sealed with revised terms
For each equity share a minority investor holds in Cairn India, he’ll get one equity share and four redeemable pref shares in Vedanta. The Boards of Vedanta Limited and Cairn India announced approval of the revised and final terms for the merger. “The Boards of Vedanta Limited and Cairn India have approved revised and final terms for the Transaction, taking into account prevailing market conditions and having regard to underlying commercial factors,” a company release stated. Pursuant to the revised and final terms, each Cairn India minority shareholder will receive for each equity share held, one equity share in Vedanta and four redeemable preference shares with a face value of Rs. 10 in Vedanta. This translates to implied premium of 20 percent to one month volume-weighted average price (VWAP) of Cairn India share price. The merger plans were stalled after the income-tax department froze Cairn Energy’s 9.5 percent stake in Cairn India. In 2011, Cairn Energy sold 58.5 percent of Cairn India to Vedanta, for USD 8.67 billion. However, Vedanta holds 59.88 percent in Cairn India and LIC owns 9.06 percent in Cairn India with 3.9 percent stake in Vedanta. Wade Baldwin Authentic Jersey
RIL, BP spend Rs 45 billion to maintain gas output at KG-D6
Reliance Industries and its partner BP of UK have invested over Rs 45 billion in the flagging eastern offshore KG-D6 block to maintain gas output at current level despite the steep natural decline that has set in the seven-year old fields. RIL-BP are currently producing from Dhirubhai-1 and 3 gas field and MA oil and gas field, three of the over one-and-half dozen discoveries made in the Bay of Bengal Block KG-DWN-98/3 or KG-D6. The fields, which began gas production in April 2009, hit a peak output of 69.43 million standard cubic meters per day in March 2010 before water and sand ingress shut down well after well. The fields are on steep natural decline and RIL-BP have spent over Rs 45 billion arrest the decline and continue to increase the ultimate recovery of gas, sources said. The block is currently producing 8.7 mmscmd. Currently, RIL-BP are in the process of sidetracking (drilling) two of their existing wells and drilling away from the water to increase recovery of gas. Side-track campaign has also been initiated in MA field. Sources said the existing and enhanced production from these fields only get the price as per the formula that was approved in November 2014. Price according to this formula currently is $3.06 per million British thermal unit and is expected to be revised lower in October 2016. At these prices, leave alone new investment, even the base business will struggle to yield any profits, they said. Sources said RIL-BP have started working developing R- Series and satellite discoveries. A field development plan (FDP) approved in 2013 envisages $3.18 billion investment in R-Series or D-34 gas field to produce 13-15 mmscmd of gas for 13 years. RIL-BP recently submitted FDP for two other discoveries D-29 and 30, which formed part of R-Culster. Besides, another FDP of $1.529 billion for four satellite gas discoveries – D-2, 6, 19 and 22, was approved in 2012. The four fields can produce 10.36 mmscmd. The two partners are also working on a FDP of MJ find. Sources said it will take 36-42 months to build and install new facilities on these fields and to drill new wells and hook them up. Mike Palmateer Jersey
Centre sticks to GAIL pipeline plan
Dashing the hopes of some 2,430 farmers in the western belt of Tamil Nadu, the Union government has categorically ruled out an alternative route for the proposed Kuttanad-Kochi-Mangalore GAIL gas pipeline project. After the Supreme Court ordered in April that the pipeline be laid along its original route cutting across agricultural fields, the only ray of hope for the farmers was the possibility of a rethink on the part of the Union government and GAIL on the alignment. But a week ago, Union minister of state for petroleum and natural gas Dharmendra Pradhan told Parliament that the Centre examined the issue with GAIL and that the company’s response was that it was not feasible to lay high pressure cross-country gas pipelines along the highways as suggested by the affected farmers and the Tamil Nadu government. “Reputed consultants in the field of oil and gas pipelines have also expressed their opinion regarding technical non-feasibility of laying of high pressure cross-country gas pipelines for long distances along national highways,” Pradhan said. The state’s apprehension is that the alignment would cause irrecoverable damage to the agricultural property of several thousand farmers in the districts of Coimbatore, Tirupur, Salem, Erode, Namakkal, Dharmapuri and Krishnagiri. The pipeline will cover a distance of 310 km and farmers will have to give up land for a width of 20 metres along that stretch. It is estimated that over 1,20,000 fruit bearing trees will have to be uprooted to lay the giant pipes. Pradhan cited GAIL’s contention that there was non-availability of adequate space on national highways for movement of heavy duty crawler mounted equipment used for laying of pipeline, non-availability of land for installation of sectionalizing valve stations intermediate pigging stations required to be installed at regular intervals along the pipeline, safety and security concerns, and disruption of highways. But the state hopes to arrive at a solution fast. “The state government has recently received a letter from GAIL to join its 13-member expert committee, which includes Anna University professors, to resolve alignment issues, following CM’s request to PM Modi,” said a senior TN government official. Ricardo Allen Authentic Jersey
Centre will not force Tamil Nadu to implement CBM project: Dharmendra Pradhan
The Centre would not force Tamil Nadu to implement coal-bed methane project, Union Minister of State for Petroleum and Natural Gas Dharmendra Pradhan said. “Government of India is not going to force or apply force. After consulting and take local community and the state government into confidence then only we can proceed (on the project),” he said. He was talking to reporters on the sidelines of the Golden Jubilee Celebrations of Chennai Petroleum Corporation a subsidiary of Indian Oil Corporation, at Manali near here. Pradhan’s comments have comes in the backdrop of Tamil Nadu government halting the project in 2013, by Great Eastern Energy Corporation Ltd in delta districts following the apprehensions of farmers who feared that the project would affect agricultural operations. “On the better interest of youth of Tamil Nadu, for their employment, for the industry and for the business, we must monetize the gas”, he said. Earlier at the Golden Jubilee celebrations, he sought the support of Chief Minister J Jayalalithaa for development of the gas pipeline network and for the coal-bed methane production in Tamil Nadu. “Our Government under the leadership of Prime Minister Narendra Modi is committed towards ‘Energy Justice’ & CPCL has a large role to play in it”. After formally the commissioning of Mounded Bullets at the CPCL refinery, he said the Mounded Bullets facility would enhance the safety and storage capacity of LPG at the refinery. He said CPCL was meeting the energy demands of Tamil Nadu and nearby states with “great reliability”. Commemorating the Golden Jubilee celebrations, he unveiled a memorabilia, symbolising the 50 years of CPCL refinery on the occasion. Pradhan along with Minister of State for Road Transport, Highways and Shipping, Pon Radhakrishnan reviewed the performance of CPCL. Austin Carr Womens Jersey
IOC in talks to buy GSPC’s stake in Mundra LNG terminal
Indian Oil Corporation (IOC) is in talks to buy debt-laden Gujarat State Petroleum Corp’s (GPSC) stake in the under-construction Rs 45 billion Mundra LNG import terminal in Gujarat. GSPC is looking to exit the 5 million tonnes a year LNG import terminal project, which is likely to be completed by mid-2017. It has offered its 50 per cent stake in the terminal to IOC, sources privy to the development said. With a view to expand its gas business, IOC is keen to buy a stake in Mundra terminal but does not want GSPC to exit the project completely. IOC, the country’s largest oil company, wants the state government entity to remain as a part of the project for smooth operations, sources said. The terminal is not connected with any pipeline for shipping gas to consumers. To lay a pipeline to the nearest grid, it would require state government support and with GSPC on board, it could be done easily, according to IOC. Sources also said IOC is keen to take half of GSPC stake and wants the Gujarat government entity to keep the remaining 25 per cent. GSPC LNG, a unit of GSPC holds 50 per cent interest in the project. Adani Group holds 25 per cent while the remaining 25 per cent is to be bid to a strategic partner, the shortlist of which also included IOC. It will be selling 5 million tonnes a year LNG terminal together with storage and re-gasification facilities over an area of 28 hectares on the coast. India Gas Solutions Pvt Ltd, the equal joint venture between the Mukesh Ambani-led Reliance Industries and Europe’s second largest oil firm BP and state-owned Oil and Natural Gas Corp (ONGC) are the other two firms shortlisted to pick up 25 per cent stake earmarked for the strategic partner in the project. Initially, eight firms including state gas utility GAIL India had expressed interest to buy the stake but only three were finalised. Essentially, GSPC was looking at a partner which can bring in LNG or can consume the imported liquid gas, sources said. While BP is a producer and trader of LNG, RIL’s twin refineries at Jamnagar in Gujarat as well as its large petrochemical plants are huge consumers of gas. ONGC also is a big consumer of the fuel. IOC too has large requirement of gas at its oil refineries. The company also markets gas to users. Besides the three, other firms which had expressed interest included Petronet LNG, Torrent Energy, Japan’s Mitsui & Co and Toyota Tsusho, sources said. Mundra terminal, which is to be financed in a debt to equity ratio of 70:30, is expandable up to 10 million tonnes per annum in near future. Teemu Pulkkinen Jersey
OVL raises $1 billion through dollar bonds for Vankor stake buy
ONGC Videsh Ltd has raised $1 billion through a US dollar bonds issue to finance its acquisition of 15 per cent stake in Russia’s second biggest oil field Vankor. OVL, the overseas arm of state-owned Oil and Natural Gas Corp (ONGC), raised $600 million through a 10-year bond at a coupon rate of 3.75 per cent and another $400 million through a 5.5-year maturity bond at an interest rate of 2.875 per cent, company’s Director (Finance) S P Gargsaid. The proceeds of the issue would go to refinance a $1.2 billion bridge loan the company had taken from a group of foreign banks to make payments for the $1.268 billion acquisition. “We will draw down the bonds sometime next week,” he said. The bridge loan was taken in May this year at a highly competitive rate of about 1.3 per cent. The interest rate is lower than 4.625 per cent OVL had paid on a $2.23 billion 10-year bond issue in July 2014 to finance its Mozambique gas field acquisition. OVL had in September last year struck a deal to buy 15 per cent in the Russia’s second biggest oil field of Vankor from Rosneft for $1.268 billion. OVL had signed the agreement to buy 15 per cent stake in Vankorneft, the developer of the Vankor oil and gas condensate field in Turukhansky district of Krasnoyak Territory in Russia. In March this year, it signed an initial agreement to buy an additional 11 per cent. That deal is yet to close, he said. Vankor, the largest field to have been discovered and brought into production in Russia in the last 25 years, is located in the northern part of Eastern Siberia. As of January 1, 2015, the initial recoverable reserves in the Vankor field are estimated at 476 million tons of oil and condensate, and 173 billion cubic meters of gas. The area of the Vankor field is 447 square kilometers. Oil and gas condensate production in 2015 was 22 million tons. The 15 per cent stake will give OVL 3.3 million tons per annum of oil production. Prior to the deal, Rosneft, Russia’s national oil company, held 100 per cent stake in Vankorneft. This is the fourth biggest acquisition by OVL. It had in 2013 paid $4.125 billion for a 16 per cent stake in Mozambique’s offshore Rovuma Area 1, which holds as much as 75 trillion cubic feet of gas reserves. In 2009, it had bought Russia-focused Imperial Energy for $2.1 billion. Prior to that in 2001, it had paid $1.7 billion for a 20 per cent interest in the Sakhalin-1 oil and gas field off Russia’s far eastern coast. With daily output of 442,000 barrels per day, Vankor accounts for 4 per cent of Russian production. Nomar Mazara Jersey
L&T Hydrocarbon led consortium bags $1.6 billion order from Aramco
Engineering major Larsen & Toubro (L&T) on Thursday said L&T Hydrocarbon-led consortium has bagged order worth $1.6 billion (Rs 107.572 billion) from oil major Saudi Aramco. “L&T Hydrocarbon Engineering (LTHE), a fully-owned subsidiary of Larsen & Toubro, in consortium with EMAS CHIYODHA Subsea (ECS), a 50:50 joint venture company owned by Ezra Holdings Ltd and Chiyoda Corporation has announced the conclusion of a large EPCI contract from Saudi Arabian oil giant Saudi Aramco,” L&T said in a BSE filing. It further said: “The contract valued at over $1.6 billion is for development of second phase of Hasbah Offshore Gas Field situated off the coast of Saudi Arabia. LTHE’s share in the contract is 60 per cent.” Dalton Prout Authentic Jersey
Promoting Biofuels as Substitute to Mineral Fuel
Petroleum Minister, Dharmendra Pradhan informed the Rajya Sabha in a written reply today that the Government is promoting biofuels, such as ethanol and bio-diesel, as substitutes of mineral fuels. The Government, through Oil Marketing Companies (OMCs), is implementing Ethanol Blended Petrol (EBP) Programme under which, OMCs sell ethanol blended petrol with percentage of ethanol upto 10%, depending upon availability of ethanol. Besides, the Government has opened second generation ethanol route (cellulosic and lignocellulosic route) for production of ethanol. Also, Ministry of Petroleum and Natural Gas had announced a Bio-diesel Purchase Policy in October 2005, which became effective from 1st January, 2006. On 10th August, 2015, the Government has allowed the sale of Bio-diesel (B100) by private manufacturers to bulk consumers like Railways, State Transport Corporations and other bulk consumers. Also, retailing of bio-diesel blended diesel by Oil Marketing Companies has started on World Biofuel Day, i.e., 10th August, 2015. In its endeavour to take forward the biofuel programme, the Government is striving for achieving higher blend percentages. Steps initiated are: (i) In September, 2015, Ministry of Petroleum and Natural Gas has asked OMCs to target ten per cent blending of ethanol in petrol in as many States as possible. (ii) A Steering Committee has been constituted in Ministry of Petroleum and Natural Gas for regular consultations and monitoring. (iii) Ministry of Petroleum and Natural Gas has been regularly taking up the matter with State Governments to address State specific issues relating to taxation, excise permits, import/export permits, storage license, etc. (iv) A 2G ethanol demonstration plant of 10 Tons Per Day (TPD) capacity has been operationalised at Kashipur, Uttarakhand on 22nd April, 2016. Alex Redmond Womens Jersey