ONGC Q4 profit jumps 12%
Oil and Natural Gas Corporation’s fourth quarter profit jumped 12% mainly on reversal of impairment loss as well as lower provisioning for dry wells. The state-run oil and gas producer’s profit rose to Rs 44.16 billion in three months to March despite a 24% contraction in revenue that slid to Rs 164.24 billion due to a sharp fall in oil prices. The company realized a net crude oil price of Rs 2354 ($34.88) per barrel in the quarter compared with Rs 3,463 ($55.63) a year ago. The fourth quarter profit was primarily driven by write backs of some impairment losses taken last quarter, lower provisioning for dry wells and the government taking over the burden of oil price discounts ONGC had provided to fuel retailers in the first half of 2015-16, A K Srinivasan, director (finance) said. ONGC wrote back about Rs 8.50 billion of impairment losses it took in the previous quarter as oil prices rebounded, boosting the value of the company’s assets. The company has used a crude oil price range of $40-54/barrel for valuing its assets for the purpose of impairment. The provision for dry wells was lower by Rs 6 billion while the government decision to take over most of ONGC’s oil subsidy burden for 2015-16 boosted quarterly profit by Rs 3.50 billion. An impairment of Rs 30 billion also swung ONGC’s overseas arm, ONGC Videsh, to a loss of Rs 20.94 billion for 2015-16, chairman Dinesh Sarraf said. This was probably the first loss for ONGC Videsh in a decade, Sarraf said. Sarraf declined comment on whether ONGC was in talks to acquire Gujarat State Petroleum Corporation (GSPC) or its key project in the KG basin off the eastern coast. ONGC currently has a cash reserve of Rs 140 billion. Sarraf said the company would evaluate marginal fields’ data and bid in the auction that was launched on Thursday. Most of 67 marginal fields were discovered by ONGC but not developed for years, prompting the government to take over these fields and put up for auction. Glen Rice Authentic Jersey
LNG Deals: India, Qatar Made For Each Other
Liquefied Natural Gas (LNG) is slated to become a commodity in the coming ten years with multiple sources and FOB prices converging. India needs LNG in large quantities to fuel its economy and its success depends on how it negotiates the deals. India has botched up negotiations on long-term supply contracts for LNG with such alarming regularity that it raises serious questions about its negotiators ability to read and anticipate trends in the volatile world of oil and gas. Is it just a case of bad luck, or are there integrity issues involved as well, given the consistency with which the Indians have ended up on the wrong side of a long-term LNG contract every single time? One reason is certainly because the country’s so-called “energy experts” who negotiated the deals were mostly bureaucrats who had no knowledge of the LNG business. The business executives who were associated with the negotiations were equally unfamiliar with the intricacies of the relatively new LNG trade. Moreover, Indians have never been known to be a tough or shrewd negotiators. Naturally, India bungled in LNG deals at regular intervals. India’s tryst with LNG began in the late 1990s with the creation of Petronet LNG Ltd (PLL). The only company that had any knowledge about the LNG business was the state-owned GAIL, whose management was upset that a business that should have legitimately belonged to it had been forcibly taken away. To rub salt into its wounds, it became one of the four state-owned promoters of PLL. Even though it did not receive primacy among the PLL promoters on the strength of its knowledge base, it did not sulk and sincerely prepared the tender specifications for supply of LNG at the proposed terminal at Dahej in the state of Gujarat. The specifications were so framed that the two offers it got for the tender turned out to be quite attractive. The bidders were Petronas of Malaysia and RasGas of Qatar. PLL accepted the offer of RasGas which offered LNG at a price of $ 4/mmbtu with negligible escalation. However, RasGas soon came up with a crude- linked pricing formula that was deceptively attractive but decidedly risky. In the initial years of the contract, it offered a price that was lower than $ 4 per mmBtu but in later years would be linked to the price of crude. Before accepting the crude-linked formula, the energy experts in the Ministry of Petroleum and Natural Gas (MoPNG ) decided to seek expert opinion on the likely price of crude in 2015. Through the international trade division of Indian Oil Corporation (IOC), the petroleum ministry obtained expert opinion from a London-based petroleum consultant which certified that the crude price in 2015 would be $ 20 a barrel. The deal was signed and included the crude-linked price proviso without setting a floor or a ceiling. The result: the price of RasGas’ LNG last year soared to $ 13-14/mmBtu even as the spot market price crashed to $ 7/mmBtu. In 2009, an official team hurriedly negotiated a deal with Gorgon Project of Australia for the supply of 1.4 million tons per annum of LNG to PLL’s Kochi terminal which turned out to be among the costliest in the world. Four years ago, the then petroleum secretary went on record saying that the delivered cost of Gorgon LNG to Indian consumer would work out to $ 20/mmBtu at the then prevailing crude price. That deal has not yet been renegotiated. P. DasguptaThe third long-term contract was signed by GAIL for a total quantity of 5.8 million tons per annum with two US companies. That deal is also in trouble as it is indexed to the Henry Hub price. According to International Energy Association (IEA), the Henry Hub price, which is around $ 2.5/mmbtu now, is expected to rise go to $ 3.50 in 2017. This will effectively push up the cost of GAIL’s US LNG to $ 9.5/mmbtu. The 25-year contract with RasGas for 7.5 million tons per annum of LNG was on the verge of collapse. GAIL, which marketed 60 per cent of the imported LNG, refused to lift the promised quantity. RasGas had no option but to renegotiate. True to form, India once again botched up the renegotiation. The LNG price now stands lowered because the crude price is low. If the crude price rises to the previous level, the price of LNG from RasGas will go up accordingly. The renegotiated deal has saved the contract from collapse. Both sides heaved a sigh of relief but this can only be temporary situation. International energy experts acknowledge that the chapter can be reopened if India plays its cards well. There is still time to do it. Qatar is the largest LNG producer in the world with an annual production capacity of 77 million tons. It had ramped up capacity to cater to the US market. But it has now run into trouble as the US itself has emerged as a significant LNG exporter amid a boom in shale gas production. Europe prefers to depend on the piped Russian gas. Demand in China has slowed down sharply and Japan threatens to go back to coal. India is the only economy which is growing which will need more and more LNG to fuel its growth. Qatar needs India desperately to sell its LNG. Equally, India will benefit from sourcing gas from Qatar because of its proximity which reduces transportation costs significantly. Experts say it will be a mutually beneficial arrangement if India can negotiate a comprehensive deal to source LNG from Qatar. This can cover the existing contract as well. A contract that is linked to the price of crude need not be dangerous if the proviso provides for a floor and ceiling price for the linkage mechanism. This will give both the buyer and the seller some comfort in terms of a more or less stable price regime for LNG. This is always done when an LNG contract is negotiated. But
Centre to distribute 5 crore LPG connections in country: Narendra Singh Tomar
The Centre will distribute five crore LPG connections nationwide with a view to conserve the environment and protect women from pollution, Union Minister Narendra Singh Tomar said today. “To conserve the environment and to protect women from pollution (caused by traditional cooking stoves and open hearths), the Modi government will distribute five crore LPG connections across the country. It will be given in the name of the women members of the family,” the Union Minister of Steel and Mines said. Under the ‘Pradhan Mantri Ujjwala Yojana’, the Centre has recently launched an ambitious Rs 8,000 crore scheme for providing five crore free LPG connections to BPL families using the money saved from 1.13 crore cooking gas users voluntarily giving up their subsidies. He was addressing a rally at Seevanpat village in Ghodadongri Assembly constituency, where a bypoll is scheduled to be held on May 30. The by-election was necessitated due to the death of BJP MLA Sajjan Singh Uikey. BJP has fielded Mangal Singh Dhurve in the tribal dominated Ghodadongri (ST) constituency, while Congress has given ticket to former minister Pratap Singh Uikey. Derek Rivers Womens Jersey
GAIL reconfigures Rs 120 billion Jagdishpur-Haldia gas pipeline
Country’s biggest natural gas transporter GAIL India Ltd has reconfigured the Rs 120 billion Jagdishpur-Haldia pipeline, which will connect Prime Minister Narendra Modi’s political constituency Varanasi to the gas grid, to link the Dhamra terminal. The over 2,500-kilometer line will be constructed in three phases and will also now connect Adani Group’s Dhamra LNG import terminal in Odisha, GAIL Chairman and Managing Director B C Tripathi said here. In the first phase, a trunk pipeline from Phulpur (Allahabad) will be laid to Dobhi (Gaya) in Bihar with spur lines to Barauni and Patna. “The 755-km Phase-1 project will cost Rs 32 billion and will be completed by December 2018,” he said. This section will take natural gas to Varanasi for not just feeding local industries but also for retailing CNG to automobiles and piped cooking gas for households. GAIL already as a line up to Phulpur. It is raising capacity of this pipeline by laying a 672-km parallel line from Vijaipur in Madhya Pradesh to Phulpur via Auriaya in Uttar Pradesh at the cost of Rs 43 billion. In the Phase-II, a 1200-km line would be laid from Dobhi to Bokaro/Ranchi in Jharkhand and Angul and Dharma in Odisha at the cost of Rs 55.65 billion, he said, adding that Phase-III will involve laying 583-km line to Haldia at the cost of Rs 34.25 billion. “While we can confirm that Phase-1 will be completed by December 2018, Phase-II and III completion will depend on the fertiliser plants coming up in the region as well as the timing of the Dharma LNG terminal,” he said. The phase-1 project will supply gas to major industries such as the Barauni Refinery and the Barauni fertilizer plant, which is being revived, besides power and steel plants. It will also help in setting up of City Gas Networks in major cities enroute. Previously, Jagdishpur-Haldia pipeline was to span over 2,050-km but the length has now been increased with addition of Dharma port connectivity. GAIL originally proposed to lay the pipeline from Jagdishpur in Uttar Pradesh to Haldia in West Bengal nearly a decade back. But the project was put on the back burner due to non availability of gas and customers. The project was revived after BJP government came to power in May 2014 and it was felt that Modi’s constituency, Varanasi should be connected to the gas grid at the earliest. Also, the pipeline was needed for revival the fertiliser units in Barauni in Bihar and Gorakhpur in Uttar Pradesh. Tripathi said GAIL is also investing Rs 20 billion in replacing old pipelines in Cauvery and Krishna Godavari area of Andhra Pradesh and Tamil Nadu as well as in Gujarat. “We are laying 700-km of new pipeline to replaced 35-40 years old pipelines,” he said Ondrej Pavelec Authentic Jersey
Dharmendra Pradhan unveiled new refining technology at Honeywell India Technology Center in Gurgaon
Indian Minister of Petroleum and Natural Gas Dharmendra Pradhan unveiled a new refining technology at Honeywell’s India Technology Center, which is dedicated to helping Indian refiners get more clean transportation fuels from every barrel of oil. The technology is one of several being developed at the center by Honeywell UOP, a world leader in developing and licensing process technologies used in oil refining and the production of petrochemicals and renewable fuels in India and globally. The company has invested about $40M at the facility, which is one of the main technology development hubs for Honeywell UOP outside the U.S. It also develops technologies for other Honeywell businesses in the region. “The Indian government is committed to innovation and being an early adopter of technologies to drive growth for the country. I am pleased to launch this new Honeywell technology today, dedicated to making Indian refiners more competitive and efficient,” Shri Pradhan said. The technology inaugurated at the event is a pilot plant specifically designed to develop advanced hydrocracking catalysts that can more efficiently produce higher yields of clean-burning diesel fuel from crude oil. The technology can allow Indian refiners to get more from each barrel of oil, helping reduce imports of crude oil while producing environmentally preferable diesel fuels. “The Hon’ble Prime Minister’s visionary call to realize a 10 percent reduction in the country’s crude imports by 2022 has already set a challenge before the Indian hydrocarbon sector, making this advanced hydrocracking technology the solution of choice to help meet this goal and meet the growing demand for energy in India,” said Steven C. Gimre, Managing Director, UOP India Private Limited. In the past, Honeywell UOP has helped India meet its goal for production of petrol and diesel in the 1980s and to implement Euro III and Euro IV fuel specifications in the 1990s. Today, Honeywell UOP’s technologies are deployed in every refinery in India. More than half the country’s oil and more than 70 percent of the country’s gasoline are made with Honeywell UOP processes, and more than 85 percent of the nation’s biodegradable detergents are produced using Honeywell UOP technologies. More recently, Honeywell UOP entered into a collaboration agreement with Indian Oil Corporations Limited (IOCL) to develop a range of biofuels technologies. “Honeywell India employs close to 15,000 people to deliver innovative technologies that help customers improve energy efficiency, safety, security, and productivity – all of which are key imperatives for India. Honeywell and its employees are creating solutions and technologies in India, for India, and for the rest of the world,” said Anant Maheshwari, President of Honeywell India. Honeywell is aligned with and has a significant Make in India footprint with seven manufacturing facilities in Chennai, Dehradun, Gurgaon, Pune and Vadodara, and five technology and engineering centers in Bangalore, Gurgaon, Hyderabad and Madurai. Artie Burns Authentic Jersey
India’s LNG imports rise 45% in April
Imports of LNG have steadily risen over the years, albeit at varying rates of growth from about 7 bcm in FY06 to about 21 bcm now. With liquified natural gas (LNG) prices hovering around a benign $5/mBtu for several months coupled with drop in domestic production of natural gas, India’s gas imports have risen a steep 45.4% annually in April. The LNG imports for the month of April stood at 2,142 million metric standard cubic metres (mmscm) compared with 1,473 mmscm in the corresponding month last year, according to petroleum ministry data. On the other hand, the gross gas production from domestic fields dropped 6.9% to 2,488 mmscm in April 2016 against the same month last year. In the full year of 2015-16, the LNG imports witnessed a surge of 14.96% at 21,309.28 mmscm against 18,535.73 mmscm in FY15. The domestic natural gas output fell 5.5% in FY16 at 25,306.73 mmscm. “Industrial and commercial segments are the largest consumers. With the expected pick-up of power generation and industrial manufacturing, imports are likely to grow further in FY17. Some new urea plants under implementation as well as some on the drawing board are likely to be drivers of incremental demand. Over the next five years, demand from city gas is also likely to grow faster than that of industrial segment and thus, its share in overall demand is expected to increase to double-digit figures,” said Kalpana Jain, senior director at Deloitte in India. Imports of LNG have steadily risen over the years, albeit at varying rates of growth from about 7 bcm in FY06 to about 21 bcm now. Overall gas consumption, has increased, especially FY14 onwards, to compensate for the decline in domestic production. In March, gas volumes to the tune of 7.62 mmscmd have been auctioned to different stranded power stations to run operations. “India’s total domestic production has been a sort of bell curve over the last 10 years,” explained Jain. The production was 32 billion cubic metres (bcm) in FY06, which increased to a high of 52 bcm in FY11 and thereafter reduced to about 32 bcm in FY16. While the overall production dropped, production of PSU explorers ONGC and OIL has largely remained flat in the range of 25-26 bcm. Production from private players, particularly RIL, ramped up from FY08 to FY11 and then declined substantially from FY12 onwards. The flat production by PSUs is primarily because of two key factors—most of their producing fields are old and have crossed peak production stage and second, new discoveries are either yet to commence production or have not reached their full potential. “New fields being brought on production are not large enough to significantly offset the decline in production from older fields. Besides, some fields which are likely to be large reserves, such as ultra-deep water blocks in eastern coast, are in difficult to produce areas which probably require higher gas price to justify investment,” added Jain. Indian domestic fields do not operate in a pattern where output could be ramped up immediately. Such production increase is possible on a short notice where output is varied based on global price and economics of fields as those in West Asia or Russia. Given that India is an import-dependent country, all developed and producing fields are in any case operated at optimal levels as regulated by the directorate general of hydrocarbons (DGH). The government’s efforts to spur investments in exploration and production is recent and given the long gestation of oil and gas investments, it could take time to bear fruit.
Slump in LNG prices delays production at Mozambique gas field
Production at the Mozambiquegas field, in which Indian state firms have 30% interest, will get delayed by about three years with the first output likely only in 2021, as plunging gas prices cast a shadow on investment decisions and make buyers scarce. “It’s aclassic chicken and egg situation,” said a source with direct knowledge of the matter. “Gas purchase agreements can’t be finalised quickly as the final investment decision (FID) hasn’t been made, and an FID can’t be made because there is no visibility on who will buy the gas.” At the heart of this complex situation is the massive three-fourths drop in liquefied natural gas (LNG) prices in two years. A supply glut has brought down spot LNG prices to about $4.25 per unit, upending the market rules and leaving buyers and sellers with little pricing certainty with which to strike long-term deals. Many of those caught in long-term expensive deals prefer spot cargoes these days. The Mozambique project, however, is not unique in this as many other projects globally face the same stress brought on by the price crash. To be sure, the Mozambique project has entered into preliminary agreements with several buyers for its natural gas. But those agreements haven’t entered the final, binding stage since, according to a source, buyers first want to see investment commitment from the promoters of the Mozambique field. Another source said the investors in the project are hesitant in committing to long-term deals at current prices and are therefore delaying the project. The FID for the project is now expected only by the end of 2016, according to the source. The output would start only in 2021, he said. The first LNG from the project was expected by 2018, Oil and Natural Gas Corporation (ONGC) had said while announcing its first stake buy in the project in June 2013. ONGC and Oil India had jointly agreed to purchase 10% participating interest from Videocon Mauritius Energy Ltd for $2,475 million in Rovuma Area-1block in Mozambique with an estimated recoverable reserves of 35 to 65 trillion cubic feet. Just two months later, ONGC agreed to buy additional 10% stake from Anadarko for $2,640 million. Bharat Petroleum Corporation had entered the project in 2008 with a 10% stake. Anadarko Petroleum Corporation, with its 26.5% interest, is the operator of the block. According to the source quoted above, $5-6 billion has already been invested in the Mozambique project and another $25 billion is further needed. Michael Grabner Womens Jersey
RIL, BP on way to end dispute with government
Reliance Industries (RIL) and joint venture partner BP Plc are moving towards ending their dispute with the government on gas pricing, but are yet to officially approve the proposal for it, industry sources said. RIL and BP declined to comment on the matter. RIL, BP and their partner Canada’s Niko Resources are contemplating pulling out of the arbitration against the government as the government’s policy changes announced in March requires them to drop the case if they want to accept the higher gas prices being offered. On April 13, EThad reported that RIL, BP and Niko have formally started the process of developing their deep sea fields, which industry executives say signals their intention to withdraw arbitration against the government a necessary condition if they want to charge market price for natural gas. At that time, BP had said: “The recent reforms announced by the Government of India will provide the much needed impetus to the Indian oil and gas industry. Together with our partners, we are working with the Government to progress activities in our blocks.” In March, the government announced a new policy that links the pricing of gas from undeveloped difficult fields such as deep sea and high-pressure, high-temperature areas to alternative fuels, effectively doubling the prices. While the maximum price available to domestic natural gas is $3.06 per unit, difficult fields can avail of $6.61per unit. But the policy states that any operator engaged in litigation against the government cannot avail of these prices. Top executives of Reliance and BP met government officials recently to discuss plans to develop discoveries affected by the new policy. In a report on Wednesday, Bloomberg said RIL and BP intend to complete the withdrawal from multiple arbitration proceedings, at least one dating back to 2011, before they finalise plans to restart developing discoveries in the KG-D6 block off the east coast of India, among other exploration areas they hold. Byron Buxton Authentic Jersey
First round of bidding for discovered small fields to begin from July 15
The first round of bidding for discovered small fields will start from July 15 with the last date of bid submission being kept on October 31. Dharmendra Pradhan, Minister of State (Independent Charge) for Petroleum and Natural Gas, said the Ministry will aim to complete the contract signing and award of the fields by maximum January 2017. On offer would be 67 fields clubbed into 46 contract areas. The fields have resources worth Rs. 70,000 crore locked and were previously owned by ONGC and Oil India, Pradhan said. The two companies could not develop the fields because of the small size and unattractive pricing. “Even if they were offered revenue sharing contract, marketing and pricing freedom, which is being offered to the bidders, ONGC and Oil India may not have been able to develop these fields,” Pradhan said after launching the first round of bidding for discovered small fields. Already 130 wells have been dug in these fields and they have 48 million tonnes of in-place oil reserves as well as 38 billion cubic meters of in-place gas reserves. Pradhan said that roadshows for the bidding round will begin in Mumbai on June 6. “To attract and encourage start-up companies in the hydrocarbon exploration and production business, we will also host a roadshow in Bengaluru and keeping in mind our focus on developing eastern India, we will have a roadshow in Guwahati,” the Minister said. Devin Funchess Jersey
Slump in LNG prices delays production at Mozambique gas field
Production at the Mozambique gas field, in which Indian state firms have 30% interest, will get delayed by about three years with the first output likely only in 2021, as plunging gas prices cast a shadow on investment decisions and make buyers scarce. “It’s aclassic chicken and egg situation,” said a source with direct knowledge of the matter. “Gas purchase agreements can’t be finalised quickly as the final investment decision (FID) hasn’t been made, and an FID can’t be made because there is no visibility on who will buy the gas.” At the heart of this complex situation is the massive three-fourths drop in liquefied natural gas (LNG) prices in two years. A supply glut has brought down spot LNG prices to about $4.25 per unit, upending the market rules and leaving buyers and sellers with little pricing certainty with which to strike long-term deals. Many of those caught in long-term expensive deals prefer spot cargoes these days. The Mozambique project, however, is not unique in this as many other projects globally face the same stress brought on by the price crash. To be sure, the Mozambique project has entered into preliminary agreements with several buyers for its natural gas. But those agreements haven’t entered the final, binding stage since, according to a source, buyers first want to see investment commitment from the promoters of the Mozambique field. Another source said the investors in the project are hesitant in committing to long-term deals at current prices and are therefore delaying the project. The FID for the project is now expected only by the end of 2016, according to the source. The output would start only in 2021, he said. The first LNG from the project was expected by 2018, Oil and Natural Gas Corporation ( ONGC) had said while announcing its first stake buy in the project in June 2013. ONGC and Oil IndiaBSE -0.31 % had jointly agreed to purchase 10% participating interest from VideoconBSE 0.63 % Mauritius Energy Ltd for $2,475 million in Rovuma Area-1block in Mozambique with an estimated recoverable reserves of 35 to 65 trillion cubic feet. Just two months later, ONGC agreed to buy additional 10% stake from Anadarko for $2,640 million. Bharat Petroleum CorporationBSE 0.85 % had entered the project in 2008 with a 10% stake. Anadarko Petroleum Corporation, with its 26.5% interest, is the operator of the block. According to the source quoted above, $5-6 billion has already been invested in the Mozambique project and another $25 billion is further needed. Marcus Gilbert Authentic Jersey