ONGC Videsh raises $1.2 billion foreign loans to buy 15 per cent stake in Russia’s Vankorneft
ONGC Videsh Ltd has taken a bridge loan of $1.2 billion from a group of foreign banks at a highly competitive rate of about 1.3 per cent to fund its acquisition of 15 per cent stake in Russia’s second biggest oil field of Vankor . Banks including Citi, DBS, Mizuho, Standard Chartered and Sumitomo Mitsui Banking Corp have given a nine-month loan to OVL (ONGC Videsh Ltd), the overseas arm of state-owned Oil and Natural Gas Corp (ONGC), at an interest rate of Libor plus 83 basis points, sources privy to the development said. At one-month average Libor rate, the interest rate comes to about 1.3 per cent, they said. 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. Sources said the loan is likely to be drawn by the month end. It will be during the course of nine months replaced by a long-term financing. OVL had in September last year signed an 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, OVL signed an initial agreement to raise its stake in Vankor to 26 per cent from 15 per cent, while three other state companies- Indian Oil Corp (IOC), Oil India Ltd (OIL) and Bharat Petroleum Corp Ltd ( BPLC), would together pick up 23.9 per cent. The agreement for additional stake has not yet finalised, they said. Vankor is OVL’s fourth biggest acquisition ever. Vankorneft, a subsidiary of Rosneft, was founded in 2004 to carry out the project of the Vankor field development, the largest field to have been discovered and brought into production in Russia in the last 25 years. It is located in the northern part of Eastern Siberia, in Turukhansky District of Krasnoyarsk Territory, 142 km from Igarka. As of January 1, 2015, the initial recoverable reserves in the Vankor field are estimated at 476 million tonnes 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 tonnes. The 15 per cent stake will give OVL 3.3 million tonnes per annum of oil production. Prior to the deal, Rosneft, Russia’s national oil company, held 100 per cent stake in Vankorneft. This will be 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, it had in 2001 paid $1.7 billion for a 20 per cent interest in the Sakhalin-1 oil and gas field off Russia’s far eastern coast. Vankor is Rosneft’s (and Russia’s) second largest field by production and accounts for 4 per cent of Russian production. The daily production from the field is around 442,000 barrels per day of crude oil on an average with OVL’s share of daily oil production at about 66,000. Upon completion of the deal, OVL will have two seats on the board of Vankorneft, Rosneft said. Indianapolis Colts Authentic Jersey
Mixed bag for India’s oil firms as explorers spend less, while refiners meet Capex targets
India’s oil firms had a mixed bag in capital expenditure in 2015-16, with exploration firms spending less, in line with the global trends in the bearish oil market, while refiners met or exceeded their targets. Higher profit, lower working capital requirement and reduction in borrowings due to lower oil prices encouraged refiners to fast-track execution of projects to cater to a rapidly rising demand for fuel in the country. But oil producers slashed capex plans in part due to lower oil prices and in part due to poor execution ability. State-run Oil and Natural Gas Corporation (ONGC) spent Rs 295.02 billion during the fiscal, nearly a fifth lower than originally planned, according to the oil ministry data. Its overseas arm ONGC Videsh invested just Rs 67.83 billion or 35% less than the targeted capex. Oil India Ltd spent nearly a tenth less. ONGC’s and Oil India’s cuts in capex were driven mainly by delays in the tendering process, company executives said. ONGC Videsh, which is mostly a junior partner in several overseas fields, cut its capex to align with partners responding to lower oil prices, they said. Cairn India, a private producer that controls about a quarter of the country’s oil production, reported a capex of just $248 million in 2015-16, much lower than the original plan of $1.2 billion. Cairn slashed its capex target several times during the year due to tumbling oil prices that resulted in its biggest quarterly loss of Rs 109.48 billion in January-March. GAIL, India’s largest natural gas pipeline operator, invested barely half of its target spending, primarily due to slower progress in some of its key pipeline projects stuck for years. With an investment of Rs 143.68 billion, Indian Oil Corporation, the nation’s largest refiner and fuel retailer, almost met its capex target while Hindustan Petroleum Corporation spent Rs 54.59 billion to marginally exceed its target. Bharat Petroleum Corporation spent Rs 109.26 billion, 12% more than its target. Mangalore Refinery and Petrochemicals Ltd, controlled by ONGC, missed its capex target by 10%. Overall, state-run oil companies missed their capex target by 13.5% during the fiscal. Lower oil prices and higher economic growth in the country pushed up fuel consumption 11% in 2015-16, encouraging refiners to fast expand capacity to capture the new demand. Refiners were also aided by the declining requirement of working capital and debt. At the end of March, the borrowings at Indian Oil Corporation had fallen to Rs 490 billion from Rs 862.63 billion two years ago. Similarly, the debt at BPCL and HPCL fell 18% and 38% respectively in two years. Hisashi Iwakuma Jersey
RIL to withdraw arbitration, begin KG drilling
RIL and its partner BP Plc are all set to begin their next phase of expansion at the Krishna-Godavari. In April, the Mukesh Ambani-led company invited tenders for drilling and recovering gas from three deep-sea clusters off the east coast of India including the R-series, Satellite-series and MJ-1 fields. But the most important aspect of any gas recovery by RIL and its partners is the pricing of gas. Sources in the government said that executives from both RIL and BP have met oil ministry officials to initiate talks of withdrawing the gas-pricing arbitration pending in Supreme Court. “These are deep-sea areas and RIL will get marketing and pricing freedom, that is, a higher price for gas from these areas, if they withdraw the litigation with the government,” said a source in the oil ministry without wanting to be named. He confirmed that the company has assured the government that it will initiate the process of withdrawing the litigation. Sources said that BP has been advising RIL to withdraw the litigation and the entire matter will be resolved by the end of the year. RIL did not respond to mails sent by HT. On March 11, the Union Cabinet had allowed free pricing of gas to developers drilling difficult terrains including deep-sea and high-pressure zones. During this decision it was also made clear that if the developer was engaged in a gas-pricing litigation with the government then this liberal pricing mechanism will not be applicable to them, unless the arbitration is dropped. According to the new pricing formula, from April a unit of gas produced from existing wells will fetch $3.15 per million British thermal unit (mmBtu), but gas from new deep sea wells will get $7 per unit. A presentation by the oil ministry said that the recent pricing freedom allowed by the Cabinet, will help monetise 6.5 tcf (trillion cubic feet) of gas valued at $28.35 billion, or Rs. 1.8 trillion. Of this, RIL has eight discoveries with 2.5 tcf of gas. BP is 30% partner in RIL’s 21 gas blocks, including the KG D6. Canada’s Niko Resources has 10% holding in KG D6. It was in 2014 that RIL proceeded with an arbitration demanding immediate implementation of the gas pricing formula as devised by the previous UPA regime Joe Kelly Authentic Jersey
Reliance Industries seeks pricing, marketing freedom for CBM output
Private explorer Reliance Industries (RIL), which is targeting to start production of coal bed methane (CBM) from its Sohagpur (West) block in Madhya Pradesh in FY17, has sought marketing and pricing freedom for the commodity. Private explorer Reliance Industries (RIL), which is targeting to start production of coal bed methane (CBM) from its Sohagpur (West) block in Madhya Pradesh in FY17, has sought marketing and pricing freedom for the commodity. On May 17, petroleum minister Dharmendra Pradhan reviewed the CBM output in the country that is still lagging way behind targets with the output being a meagre one million standard cubic metres per day (mmscmd). The Mukesh Ambani-promoted firm wants the government to roll out the marginal fields policy, which was put in place by the Narendra Modi government last year, for the CBM blocks. “The CBM exploration is tricky and much more difficult than the marginal fields. The explorers are of the view that the absence of gas infrastructure and gas markets make the CBM projects more challenging. The blocks are situated in West Bengal, Jharkhand and Madhya Pradesh,” said an official, who took part in the minister’s review meeting. Other than RIL, the companies taking part in the meeting include Essar Oil, ONGC and GEECL, among others. In September last year, the Modi government introduced the revenue-sharing and uniform licensing models for 69 marginal fields. Of these, 67 fields would be put under the hammer on May 25. The developers of these fields will benefit from ‘market-determined prices’ sans any government interference. Moreover, the bidders for marginal fields are given the right to sell gas to customers of their choice, unencumbered by the government’s allocation policy. Currently, GEECL’s Raniganj (South) and Raniganj (East) held by Essar Oil are the only two blocks under production. The firms have informed Pradhan that CBM blocks are planning to spend nearly Rs. 90 billion in FY17 and FY18. This would help to ramp up the output to about 2.4-2.6 mmscmd from 1 mmscmd now. Of this, RIL has given projections to invest to the tune of Rs. 30 billion in Madhya Pradesh. Public sector explorer ONGC proposes to invest about Rs. 16 billion towards drilling CBM from Bokaro and North Karanpura blocks. The field development plan (FDP) for Bokaro has been approved by ONGC Board, said another government official. The PSU plans to spend Rs. Rs. 8.67 billion in the Bokaro block and the peak output is expected at 0.7 mmscmd. The block is envisaged to commence production from FY18. The FDP for North Karanpura block is still in works, where ONGC plans to invest Rs. 6-7 billion and achieve a peak output of 0.36 mmscmd. Ruias-owned Essar Oil has committed to spend nearly Rs. 26 billion to pump out more gas from its CBM blocks in West Bengal. Prada said about Rs. 100 billion have been invested in CBM in India. “By 2017, it is likely to contribute 5% of national gas production,” the minister said after the meeting. India offered 33 CBM blocks. However, 17 of them, or 50% of the blocks, have been relinquished. Though two other firms producing CBM — Essar Oil and GEECL — have a pre-approved price for their gas, RIL and ONGC would have to follow the natural gas pricing formula put in place by the government in October 2014. This means RIL and ONGC would have to sell CBM at $3.06/but, compared with more than $5-6/mBtu enjoyed by Essar Oil and GEECL. Keyshawn Johnson Jersey
Indian Oil working out review of diesel procurement for railways
Indian Oil Corporation (Indian Oil), the nation’s largest fuel retailer is working with Indian Railways on a proposal to cut down the transporter’s mammoth fuel bill through a review of its diesel procurement practices. The proposal by the railways includes importing crude oil and procuring refining capacity from Oil Marketing Companies (OMCs) on lease and cutting down diesel inventories by a third to mere five days. “We want to cut down our total diesel bill from around Rs 180 billion last financial year to Rs 165 billion this year. With that objective in mind, we are trying to work out a few ideas – sourcing crude on the High Seas basis, seeking refinery capacity for our use, and even cutting down inventory costs at the Railway Consumer Depots (RCDs),” a senior rail ministry official said. Business Standard was the first to report on March 4 the railway plan to review diesel procurement processes over zonal units as part of a larger reform drive. Railways has also floated a tender for selection of a consultant to identify alternate procurement strategies enabling the transporter to procure diesel at market linked prices. “These may include but are not limited to High Seas procurement of either diesel or crude (feasibility, taxation, logistic and process aspects, optimum nature (such as blocking refining capacity) and period of contract for improving price discovery with the Oil Marketing Companies (OMCs),” Indian Railway Organization for Alternate Fuel (IROAF) said in its Expression of Interest. High Seas procurement refers to a mode of transaction where the buyer sells his consignment to a third party during transit. A senior IOC official confirmed the development and said discussions have been going on for quite some time – on railways proposal to pay tolling charges to IOC for the refining capacity to be booked — and are yet to be finalized. He said IOC has set up a Joint Working Group of officials along with railways which is looking at the proposal and working out the modalities “in right earnest”. Some of the issues that need to be sorted out include the offtake. “The Railways can give us guaranteed offtake of diesel for their requirement if refinery capacity is booked as per plan. But what about other petroleum products which will be produced apart from diesel?” Besides, the railways procure diesel from oil companies at multiple locations across states. “The changed scenario may require modifications in inter-state transport of the fuel which would give rise to taxation issues. We plan to talk to the state governments on this subject,” the IOC official said. Indian Railways consume around 2.8 billion litre diesel annually at a cost of RS 180 billion – around 18% of Net Ordinary Working Expenses. The procurement price is governed by a rate contract settled through an open tender by the railway board. Through the contract with the OMCs, which is valid for a year, zonal railways place diesel orders on OMCs for supply at RCDs. The RCDs are built by OMCs but railways provides commitment to buy diesel through them for a fixed number of years. The depots maintain at least 7 days of inventory on an average, the cost of which is borne by railways. Ryan Shazier Authentic Jersey
Shell says will expand investments in India
Royal Dutch Shell Plc. will be committing further investments in India after its February merger with BG Group Plc., a spokesperson for the oil and gas company said. Shell has so far invested around $1 billion in its India operations. A Shell India spokesperson said by email, “We have a long history in India and have consistently looked to expand our investments. I can assure that our overall approach towards investment in India remains positive.” Shell announced its merger plans with BG Group in April 2015 and completed the same in February 2016. On Monday, Shell India announced the appointment of Nitin Prasad as its new chairman after Yasmine Hilton retires in September. Shell is one of the few international oil companies in India present in the downstream and midstream segments. With BG Group’s assets in tow, Shell becomes an upstream player too through the Panna Mukta and Tapti (PMT) oil and gas fields where Shell now partners Oil and Natural Gas Corp. Ltd (ONGC) and Reliance Industries Ltd (RIL). Shell holds a 30% interest in the mid and south Tapti gas fields and the Panna/Mukta oil fields, while ONGC holds a 40% stake and RIL 30%. Production from the PMT fields has been falling and Shell and its partners may have to invest around $1 billion to arrest it. Added to this will be extension to the production sharing contract (PSC) that the consortium has been seeking for the past few years. The PSC expires in 2019 and for further investments to be viable and attractive it would have to be extended by at least five years, an ONGC official said. “No decisions will be taken about specific locations where BG had operations until we have a good understanding of their potential. We look forward to entering into a close dialogue with the government about the future of the operation, and any areas of uncertainty, as soon as we are in a position to speak with some authority,” Shell added in the emailed reply. Another asset added to Shell’s portfolio is the country’s second largest compressed natural gas (CNG) retailer Mahanagar Gas Ltd (MGL). MGL is in the process of launching its initial public offer (IPO) of around Rs. 12 billion shortly. Shell India and state-owned GAIL (India) Ltd, the promoters, will sell 12.5% each in the IPO. The promoters currently hold a 49.75% stake each in MGL, while the Maharashtra government holds a minor 0.49% stake. MGL sells CNG to automobiles and piped cooking gas to households in Mumbai and its adjoining suburbs. It has 128 CNG filling stations in Mumbai and greater Mumbai and 45 in Thane, Navi Mumbai and Panvel. Last month, Shell said it is nearly doubling its headcount to 1,000 at its Shell Technology Centre Bangalore, (STCB) to insource more work. The centre is one of its three global hubs for technology, after Houston and Amsterdam. STCB provides access to Indian talent and resources to Shell worldwide. The STCB currently employs around 900 engineers. Shell is also the only global oil company to have a fuel retail licence in the country. The company has a marketing licence from the centre to set up a network of up to 2,000 fuel retail stations in India. Currently, about 77 Shell fuel retail outlets are operational. Through its Rs. 30 billion Hazira Liquefied Natural Gas (LNG) storage and re-gasification terminal with a capacity of 5 million tons per annum (mpta), the company is a significant player in the downstream segment. The terminal is being expanded to 7.5 mtpa by March 2017 with the capacity to be further expanded to 10 mtpa. Royal Dutch Shell through its unit Shell Gas holds a 74% stake in Hazira LNG, while Total Gaz Electricite France, a unit of France’s Total, holds the remainder. Shell also has a 26% stake in building the Kakinada LNG terminal on the east coast. AP Gas Development Corp., a joint venture company between the Andhra Pradesh government and GAIL and GDF Suez hold 48% and 26% equity in the project, respectively. “It is a good time to be in India. It is the largest consumer market in all segments of energy and Shell is in a good position to gain significantly from the Indian market,” said an energy consultant at a large consulting firm on condition of anonymity, as he is not allowed to talk to the media. Brynden Trawick Jersey
Gujarat Gas FY16 net profit down 65% at Rs 1.53 billion
Piped gas distributor, Gujarat Gas Ltd, reported a standalone net profit of Rs 1.53 billion for the financial year ended March 31, 2016, against Rs 4.44 billion in the previous year, showing a decline of over 65 per cent on a year-on-year basis. The total standalone income from operations stood at Rs 61.06 billion for the year as against Rs 90.06 billion in the previous year. The board of directors recommended a dividend of Rs 2.5 per equity share of face value of Rs 10 per share for the year ended March 2016. For the fourth quarter, company posted standalone net profit of Rs 580 million as against Rs 200 million in the corresponding quarter a year ago, up 190 per cent. Income from operations for the quarter was lower at Rs 13.78 billion against Rs 14.85 billion in the same period last year. Tyler Bertuzzi Jersey
India eyes oil-for-drugs deal with Venezuela to recoup pharma cash
Indian officials say they have proposed an oil-for-drugs barter plan with cash-strapped Venezuela to recoup millions of dollars in payments owed to some of India’s largest pharmaceutical companies. Several of India’s generics producers, led by the country’s second-largest player Dr Reddy’s Laboratories Ltd , bet heavily on Venezuela as they sought emerging market alternatives to slower-growing economies such as the United States. But the unravelling of Venezuela’s socialist economy amid a fall in oil prices has triggered triple-digit inflation and a full-blown political and financial crisis. Unable to pay its bills, the country is facing severe shortages of even basic supplies such as food, water and medicines. Dr Reddy’s wrote off $65 million in the March quarter, which it said was almost all the money it was owed from Venezuela. Rival Glenmark Pharmaceuticals Inc, another major investor, says it is due $45 million. The situation in Venezuela is very precarious … the government knows it needs to do something about the medicine shortage, that’s why it is willing to discuss such a deal,” one Indian official told Reuters. “At this point, even if our companies get back 5 or 10 percent of the payment they are owed, they would be satisfied.” Venezuela’s Health Ministry did not immediately respond to a request for comment. Like pharmaceutical companies globally – which used to enjoy a preferential exchange rate in Venezuela – Indian producers have been left badly stung by the collapse of the bolivar currency. PAYMENT PLAN The Indian officials, who could not be named as they are not allowed to speak to the media, said the trade ministry had proposed a payment mechanism that would allow Venezuela to repay some of the amount owed with oil. The proposal, seen by Reuters, would use the State Bank of India to mediate the transfer. The plan is now awaiting approval on the Indian side from the finance ministry and the central bank, which regulates such payments. India, one of the world’s biggest oil importers along with the United States and China, had similarly elaborate barter deals with Iran , swapping rice and wheat for oil. The officials said Venezuela had been receptive to the plan “in principle”, but not made any concrete commitments yet. Indian officials said a “high level” meeting with Venezuela was due in the coming months to discuss the proposed deal. “The finance ministry has assured us that the government is fully committed to it, but it will take time,” said P.V. Appaji, Director General of the Pharmaceutical Export Promotion Council of India, a body under the country’s commerce ministry. India’s exports to Venezuela between April 2015 and February 2016 almost halved year-on-year to $125.5 million, compared with a year earlier. Most of that was pharmaceutical products. Tyler Ervin Womens Jersey
Sri Lanka to cancel Indian coal plant deal; proposes LNG instead
Sri Lanka will cancel plans for a 500 megawatt Indian-built coal-fired power plant at its strategic eastern port city of Trincomalee and will instead opt for a liquefied natural gas (LNG) power plant, a cabinet minister said. Chandima Weerakkody, Sri Lanka’s petroleum minister, said President Maithripala Sirisena told Indian Prime Minister Narendra Modi of the decision at a meeting on Saturday during Sirisena’s visit to the island nation’s larger neighbour. “We do not want to hurt India. So President Sirisena in his visit has offered an LNG plant instead of the coal plant,” Weerakkody told Reuters. “This has been discussed at the highest level and there is consensus.” Sri Lanka is trying to increase its power generation capacity after a recent blackout that was the worst in 20 years, government officials say. B.M.S. Batagoda, the energy ministry secretary said the switch to LNG was proposed after ten years of opposition to a coal-fired power plant by the residents of Sampur, a village near Trincomalee, where India has already proposed to build South Asia’s largest petroleum hub. Area residents and environmental groups have resisted the coal power plant ever since it was originally proposed in 2006 due to worries about land clearance and pollution. Plans for the $500 million coal power plant project were finalised in 2011, when state-run Ceylon Electricity Board (CEB) and India’s state-run National Thermal Power Corporation Ltd (NTPC) agreed to form a joint venture for its construction. It is not clear which Indian companies would be considered as partners on the proposal to build a gas-fired power plant. Natural gas is a cleaner burning fuel than coal, but there would be the added hurdle that Sri Lanka has no LNG import infrastructure. Sri Lanka’s only coal-fired power plant with 900 MW capacity was built with a $1.4 billion loan from China in two phases. However, the Chinese plant has faced frequent repairs. India and China have been increasingly loaning funds to Sri Lanka over the last few years, mainly for infrastructure projects. Since the island’s civil war ended in 2009, the two rivals have been competing for influence in Sri Lanka, which sits right off one of the world’s busiest shipping routes. Alex Pietrangelo Jersey
CBM to contribute 5% of India’s gas production by 2017: Pradhan
Natural gas from coal bed methane is likely to contribute to five per cent of national gas production by 2017, Minister of State for Petroleum and Natural Gas, Dharmendra Pradhan, said in a tweet late last night. He wrote this after a meeting with CBM producers in India who, he said, had invested Rs. 10,000 crore collectively in CBM blocks. Coal bed methane refers to a reserve of natural gas stored in coal seams. With India having the fourth largest proven reserves of coal globally, according to the Directorate General of Hydrocarbons, the country holds significant prospects for exploration and production of CBM, which is also seen as a clean energy source. Currently, Great Eastern Energy Corporation and Essar OIl are the only two CBM-gas producing blocks in the country, both from separate reserves in Raniganj, West Bengal. Reliance Industries has reportedly begun test production from its two blocks in Madhya Pradesh. However, pricing is crucial to encouraging more production, as the government has reduced the price for domestic gas from $4.24 per million British thermal unit (mmBtu) last year to $3.06 mmBtu this April, in line with falling gas prices globally. Rodney Gunter Womens Jersey