Iran cuts crude prices vs Saudis, Iraq in market share fight
Iran has set its June official selling prices (OSPs) for heavier crude grades it sells to Asia at the biggest discounts to Saudi and Iraqi oil since 2007-2008, raising the stakes in its fight to regain market share. This is third time Iran has changed price formulas since January, underscoring its need for competitive pricing to push more exports into Asia after international sanctions against it were lifted early in the year. In contrast, top OPEC producer Saudi Arabia raised its June OSPs for all grades to multi-month highs, outstripping forecasts. Saudi Aramco’s chief executive has said demand for the kingdom’s oil is increasing. Iran on Tuesday set the June OSP for Iranian Heavy crude at $1.60 a barrel below the Oman/Dubai average, up $1 from the previous month, an industry source with direct knowledge of the matter said. This still puts Iranian Heavy at 30 cents a barrel below Saudi’s Arab Medium grade, the biggest discount between the two crudes since 2007, trade data showed. Against Iraq’s flagship Basra Light, Iranian Heavy is 20 cents a barrel cheaper, the widest gap since 2012, the year that sanctions hit Iran’s oil exports. Tehran typically adjusts its crude price formulas to Asia at the beginning of each quarter following negotiations with its clients. However, this year it has changed at least some of its crude pricing formulas in March, April and June. The changes helped to boost its exports to Asia by 50 percent in March from a year ago even though lingering sanctions posed difficulties for buyers in paying for and shipping Iranian oil. The June OSP for Forozan Blend has also fallen to the largest discount against Arab Medium since the fourth quarter of 2008, data showed. Iranian Light remained at 25 cents a barrel above Arab Light in June, or $0.50 above the Oman/Dubai average. Joe Kocur Jersey
More than 31 lakh households connected with piped natural gas, says government
Besides the households, 29,993 industrial and commercial units are also currently given piped natural gas across the country. Over 3.1 million households are connected with piped natural gas across the country and efforts are on to expand the city gas distribution networks (CGD), Commerce Minister Nirmala Sitharaman said on Monday. “Government has prioritised domestic gas allocation for CGD entities and has issued guidelines wherein the entire requirement of CGD entities for PNG (domestic) segment is being met through domestic gas,” Sitharaman, replying on behalf of Petroleum Minister Dharmendra Pradhan, said in Lok Sabha during Question Hour. Ivan Provorov Authentic Jersey
Auction of 67 small oil and gas fields to kick off on May 25
India will kick off an auction of 67 small oil and gas fields on May 25 that will test the response of investors to recent policy measures such as the revenue-sharing model and gas pricing freedom. The Directorate General of Hydrocarbons (DGH), the technical arm of the oil ministry, has announced on its website that oil minister Dharmendra Pradhan will launch the discovered small fields bid round on May 25 in Delhi. “A total of 67 discovered small fields will be offered in 46 contract areas through the new revenue sharing model,” the DGH said in its notice inviting interested parties to register for the launch. Separately, the DGH has sought bids from consultants for promoting the auction at international roadshows meant to showcase fields to potential investors. It has also sought event managers for the roadshows. The auction, the first in about five years in the country, comes after months of delay due to low oil prices, which officials feared may curb interest among potential bidders. Oil prices have dropped about two-thirds in two years, forcing many oil companies to shelve projects and cut jobs. Crude oil prices have increased about 50 per cent in the past three months to trade at about $46 a barrel on May 9 afternoon. Last year, the government unveiled a new policy for 69 small fields that had remained undeveloped for years due to their limited reserves, high development cost and technological constraints. These fields were owned by Oil and Natural Gas Corporation and Oil India Ltd, before being taken away by the government for auction under the new policy. Two fields in the Northeast will not be part of the auction while the balance have been organised into 46 clusters to make them financially attractive as potential investors can build common infrastructure for these fields, keeping costs low. The auction will test some of the key policy changes introduced by the government in the exploration and development sector such as marketing freedom for gas and revenue-sharing, instead of profit sharing, between the operator and the government.
Government’s drive to widen LPG customer base faces twin hurdles
The government’s plan to offer cooking gas to 5 crore poor households and expand the overall consumer base by 60% over the next three years may run into twin hurdles: inadequate distribution capacity and low purchasing power. Hoping to drive out smoke-generating fuels from kitchens, mainly in rural areas, the government plans to add 10 crore cooking gas consumers, half of them from poor families – an ambitious target for a country that has 16.5 crore liquefied petroleum gas (LPG) consumers after decades of efforts at taking clean fuel to homes. In the first year, state-run Indian Oil, Hindustan Petroleum and Bharat Petroleum are expected to add 3 crore consumers. “It’s a very stiff target,” said a state oil company executive who didn’t want to be identified. “The biggest challenge will be the logistics needed to serve so many new consumers, especially in the remote areas. Oil companies just don’t have enough distributors for this,” said Deepak Mahurkar, Leader-Oil & Gas Industry, at PwC. State companies currently serve consumers through about 18,000 LPG distributors and plan to add 10,000. Executives at state oil companies say appointing so many distributors quickly wouldn’t be easy. “The hard part will begin now. It will be a challenge for our distributors to reach out to the deeper rural and tribal areas, where we don’t have much presence today and which is where most new consumers will come from,” another state oil company executive said. The purchasing power of potential new consumers could be another hurdle and many of the poor families likely to be provided subsidised gas connections may not necessarily use it much, said Satwant Singh, a former executive director (LPG) at Indian Oil, the country’s top distributor of cooking gas. “In our experience, lower-income rural consumers do not seek more than 4 refills a year, while the government provides for 12 subsidised refills. This means many of these cylinders meant for the poor will end up on the black market,” he said. A commercial LPG cylinder costs about a third more than a non-subsidised domestic cylinder in Delhi due to customs duty and sales tax. The taxes vary from state to state. This difference in prices can become an incentive for consumers and distributors to divert cylinders to the black market, Singh said. Some poor families might be encouraged to give away their existing regular connections to opt for fresh subsidised ones, while some others who have already benefitted in the past under another scheme might seek a fresh subscription as the new one is being issued in the name of women, Singh said. The executives said it would be a headache for oil companies to filter data of poor families eligible for Rs 1,600 subsidy on fresh connections and is putting in place an elaborate system for that. James Bradberry Jersey
ONGC crude oil output up in FY16
State-owned Oil and Natural Gas Corp’s (ONGC) crude oil production has risen for the second consecutive year in 2015-16 but natural gas output continues to decline. ONGC produced 22.37 million tonne of crude oil in the financial year ended March 31, 2016, a notch higher than 22.26 MT in the previous fiscal, a senior company official said. In 2014-15 it had reversed a 7-year declining trend in crude oil production as it brought small and marginal fields in western offshore to production. Output of 22.263 MT of crude oil from April 2014 to March 31, 2015 was higher than 22.247 MT in the previous fiscal. “Most of our major fields are three to four decade old where natural decline has set it. So the challenge before us is to arrest this by investing in enhanced and increased oil recovery schemes and bring newer deposits into production,” he said. ONGC used to produce more than three-fourth of country’s oil needs but that share has slipped down to 60 per cent now. It had produced 26.05 million tons of crude oil in 2006-07, which dipped to 25.94 MT in the following year. That year its share in nation’s oil production of 33.51 MT was 75.7 per cent. ONGC’s production fell to 25.37 MT in 2008-09; 24.67 MT in 2009-10; 24.42 MT in 2010-11; 23.71 MT in 2010-11; 22.56 MT in 2012-13 and to 22.25 MT in 2013-14. Its 22.37 MT of output in 2015-16 is 60.5 per cent of country’s 36.95 MT of production. The company has been under critical scrutiny ever since the BJP government took office in May 2014. Oil Ministry has been monitoring its performance on a monthly basis. The official said output has increased primarily due to about 1 MT of additional production from offshore fields. Natural gas production however continues decline, falling to 21.17 billion cubic meters (BCM) in 2015-16 from 22.02 bcm in the previous fiscal. ONGC, which produced 22.49 bcm of gas in 2008-09, saw output peak to 23.55 bcm in 2012-13 but has since then been falling. Its current output makes up for 65.6 per cent of the country’s production of 32.25 bcm. “We are in the process of developing a series of gas fields on both western and eastern offshore and production will start to look up from this fiscal,” the official said. Alex Mack Womens Jersey
ONGC may buy 50% in GSPC block amid Cong vs BJP storm over Rs 20,000 cr
The central government-owned ONGC and the Gujarat government-owned GSPC are in advanced talks to negotiate the price at which ONGC will take a 50%+ stake in the latter’s 1,850 square kilometer KG Basin block, KG-OSN-2001/3, which is set to commence commercial production as early as next month. GSPC is the operator for the block and has an 80% share in the consortium. Neither officials at ONGC nor the GSPC-consortium wished to comment on the contours of the likely sale. Nor did petroleum minister Dharmendra Pradhan. The deal is likely to be completed within the next few months and ONGC is likely to acquire a 50%+ stake in the deal for a price of anywhere between $2 and $2.5bn. Though ONGC and GSPC have been negotiating the deal since November last year, ONGC is reportedly more confident of the viability of the block after having run its own simulations based on the data provided by GSPC and ratified by reservoir-management firm Gaffney, Cline & Associates. GSPC’s external consultants have also designed a new well —global major BP has also been providing some assistance — likely to start producing by September, and officials are hopeful that the flow will be better than in the previous wells. If so, GSPC can legitimately claim to have cracked the extremely difficult extraction of ‘tight’ gas, made worse by the fact that it is also classified as high-pressure high-temperature. GSPC is in the middle of a political storm with the Congress party alleging that the Rs 20,000 crore spent by it so far has been a waste of resources since there is very little gas in the block. GSPC has, however, stuck to the gas-in-place estimate of 14.4 trillion cubic feet (tcf) of which 7.6 tcf is recoverable. Based on the information provided to it by GSPC on its exploration so far, the Directorate General of Hydrocarbons, India’s oil regulator, has okayed gas-in-place estimates of over 10 tcf and recoverable reserves of over 2 tcf — see graphic. While the GSPC-consortium has already spent close to Rs 20,000 crore on the project including borrowing costs of nearly Rs 6,000 crore, it does not have the funds needed to develop the block fully — estimates are it will need another $1.5bn to develop the Deen Dayal West (DDW) field, perhaps another $1bn for DDW Extension and anywhere between $4-6bn to develop other areas such as the Six Discoveries. Though GSPC has been talking about selling a stake to global exploration firms as well, officials are more confident about dealing with ONGC since a PSU-to-PSU deal is easier. Apart from the fact that ONGC may be willing to pay more, a stake sale deal of this type entails intense negotiations which could fall foul of the CAG/CVC. While ONGC has nearly Rs 11,500 crore of cash reserves, it is in the process of embarking on its own $5.1bn gas exploration programme in the KG-DWN-98/2 block which it bought from Cairn India — unlike ONGC Videsh which has spent billions to buy discovered blocks. In September last year, OVL sealed $1.25 billion deal to acquire 15% in East Siberian project Vankorneft from Rosneft. It also forked out about $4.125 billion in a back-to-back 16% acquisitions in Mozambique’s Rovuma Area 1. ONGC has so far not spent too much money on domestic merger and acquisitions. Since 98/2 is close to the GSPC facilities, ONGC could utilize some of the facilities already erected by GSPC. GSPC has already set up well-head platform, processing cum living quarter platform, sub-sea pipeline network and onshore terminal. These facilities have a capacity to process anything between 6 and 17 mmscmd of natural gas. Utilising the existing facilities could save ONGC over $1bn in its own project. GSPC started test production from wells DDW-1 and 2 in August 2014 and from DDW-3 from September 2014. These were conventional wells where initial results were positive but did not sustain for a longer period. Currently, only DDW-2 is under test and producing about 0.1 mmscmd of gas. Later, it drilled another well, DDW-4, where it utilised hydro-fracking technology. This well, the sources said, would be put on stream for commercial production this month. The output is expected to rise after a fifth well· DDW-5 would be completed later this year. At the same time, side-tracking model would be implemented to DDW-1, 2 and 3 to hydro-frack and improve gas production from these wells. Damien Wilson Jersey
Petrol prices slashed 32 times, hiked 21 times since 2013: Nirmala Sitharaman
Prices of petrol were reduced 32 times and increased 21 times while diesel prices were slashed 19 times and raised 28 times since 2013, Commerce Minister Nirmala Sitharaman said today. The prices of ATF, petrol and diesel have been made market determined by the government since April, 2001, June 26, 2010 and October 19, 2014 respectively, Sitharaman said, replying on behalf of Petroleum Minister Dharmendra Pradhan, in Lok Sabha. “Since then, the public sector oil marketing companies (OMCs) take appropriate decision on pricing of these products in line with their international and other market conditions,” she said during Question Hour. The Minister said since April 1, 2013, petrol prices were decreased 32 times and increased 21 times and diesel prices were decreased 19 times and increased 28 times. Sitharaman said retail selling price (RSP) of petrol and diesel in the country are linked to their respective international prices and OMCs are at present applying Trade Parity Pricing methodology to compute the RSP. “Other cost elements in the RSP of petrol and diesel viz. excise duty, BS-IV premium, marketing cost and margins etc. are specific costs which do not increase/decrease with the volatility in international prices of petrol and diesel. “The element of excise duty which is specific in nature has been increased since November 2014. Most of the state governments have also increased VAT on petrol and diesel. After taking into account these factors, OMCs have passed on major portion of decrease in price to consumers of petrol and diesel,” she said. The Minister said the effective prices of PDS kerosene and subsidised domestic LPG have not been increased since June 25, 2011. Sitharaman said price of crude oil in the international market fluctuate depending on various factors including demand and supply of crude oil. Similarly, the requirement of crude oil imports for consumption of petro-products and fulfilling the needs of oil refineries is an inter play of several factors like success in new production of crude oil, blending of bio fuels, success in conservation efforts etc. The public sector oil companies import crude oil on term and spot basis as per the prevalent crude import policy, she said. The Minister said the impression that PSU oil companies make profits when the international crude price falls was “really not right” as they could make just 1.34 per cent profit after tax in 2013-14 and 1.49 per cent in 2014-15. Sitharaman said the PSU oil companies together had suffered around Rs 29,200 cross loss on petrol in the first nine months of last fiscal due to inventory cost and Rs 11,400 on diesel. Ernie Stautner Authentic Jersey
Chinese team starts hydrocarbon exploration in Nepal’s western district
A team of Chinese experts on Sunday launched a study on prospects for minerals, gas and oil at Shreesthan in Dailekh, a western district of Nepal, which, officials claim, holds petroleum products in abundance. It is after a gap of two decades that the Nepal government has allowed Chinese geologists to begin hydrocarbon exploration in the western part of the country in a bid to become self-reliant. Six Chinese experts are involved in the exploration bid, according to a government statement issued here. The Chinese team will carry out the feasibility study on all 10 petroleum blocks in Nepal sprawled from east to west. The Chinese team will report its findings in about a month on the exploration prospects apart from the amount of petroleum products that could be harnessed in the district. The study comes in the wake of an agreement between Nepal and China during Prime Minister K.P. Sharma Oli’s visit to the communist country in March, said Minister for Industry Som Prasad Pandey, who kick-started the exploration venture. Under the agreement, China was also to help in the construction of at least three petroleum reservoirs in Nepal. China will also extend technical and financial help to Nepal in exploration. Nepal began exploring for hydrocarbons some three decade ago and awarded several contracts to international firms. But the attempts were not a success due to lack of political will and adequate budget. Rasheem Green Authentic Jersey
Refined petroleum imports more beneficial than crude
Bangladesh will benefit more if it imports refined petroleum products instead of bringing in crude oil and refining them at home, BMI Research said in a new report. The country imports crude oil from Saudi Arabia and the UAE, which is refined at Eastern Refinery Ltd (ERL), a wholly-owned subsidiary of state-owned Bangladesh Petroleum Corporation. Recently, ERL has contracted Engineers India Ltd as a consultant to expand the country’s lone Patenga refinery. The facility currently has a refining capacity of 1.5 million tons a year. The government is seeking developers to construct a second crude distillation unit at the refinery, which will increase the refining capacity by an additional three million tons a year by 2019, at an estimated cost of $1.7 billion. “Given the geographical proximity of the Middle East and the competitiveness of its refineries, it may be more economical for Bangladesh to import refined fuels from the Middle East in the short term,” said London-based BMI Research. At present, Bangladesh imports refined fuels from countries such as Malaysia, China, Vietnam, the Philippines, Indonesia and Brunei, Turkey, Kuwait, the UAE and Oman. “Additionally, we forecast Bangladesh will remain a net importer even if the refinery expansion project goes ahead, restricting the potential of international sales revenue that ERL and BPC could generate.” Owned by Fitch Group, BMI Research provides macroeconomic, industry and financial market insights. The analysis forecasts Bangladesh’s refined fuel consumption will grow at an average of 3 percent a year to 2025, led by an expanding manufacturing sector and strong economic growth. BMI Research cautioned that there are significant downside risks to the expansion project, such as a delay or project downsizing, given that the government has yet to secure financing. The government has teamed up with France-based Technip in order to treble the country’s capacity for refining crude oil, thus cutting the reliance on imports. Under the deal, Technip, which also established the existing sole unit of ERL in Chittagong 47 years ago, will set up the second unit. Once completed, the second unit will help the country save $220 million, said BPC Chairman AM Badrudduja earlier. Domestic refining can help save a country up to $5 a barrel, according to experts. At present, the country’s annual demand for crude and finished oil is 5.5 million tons. Of them, 64 percent is diesel, 17 percent furnace oil and 5 percent kerosene. The rest are octane, petrol and other products. Of the fuel imports, 46 percent is used in the transport sector, 26 percent in power sector and 17 percent in agriculture. Mohammad Tamim, a professor of petroleum and mineral resources engineering department at the Bangladesh University of Engineering and Technology, said the second unit should be designed in a way that it can process crudes to give out the maximum quantity of diesel. The current refinery can produce up to 30 percent diesel, while the available technology can produce up to 45 percent diesel from crude. ERL processes Arabian light crude and Murban crude, imported respectively from Saudi Arabia and the UAE, and produces 16 petroleum products. But the refinery cannot process Russian crude, for example. BPC has made a profit twice in the last 15 years, mainly because it subsidises fuels to end consumers. In fiscal 2014-15, BPC made a profit of $443.1 million. However, the profit will be short-lived, as the BMI Research analysis forecasts fuel prices to strengthen in the coming years, increasing the subsidy burden. Dale Hawerchuk Womens Jersey
Diesel vehicles ban worst advertisement of India: Toyota
With the Supreme Court set to take up the matter of ban on diesel cars and SUVs on Monday, the world’s largest automaker Toyota said continued restrictions on vehicles that comply with all regulations would be the “worst advertisement of India”. The ban has been imposed on diesel vehicles with an engine capacity of above 2,000 cc in Delhi and NCR. The company, which operates in India as a joint venture — Toyota Kirloskar Motor — with the Kirloskar group, is among the worst hit and has not been selling its popular vehicles Innova and SUV Fortuner in the Delhi-NCR region since the ban was imposed in December last year. “If we don’t get a breakthrough on Monday, our vehicles despite being compliant of all regulations in India would continue to be banned. That’s the worst advertisement of India,” Toyota Kirloskar Motor Vice-Chairman and Whole-time Director Shekar Viswanathan told PTI. Stating that the environment lobby is not adequately informed, he said, “Does the ban suggest to mean that other diesel, petrol and CNG driven vehicles don’t pollute? Why is the ban only on 2,000 cc and above diesel cars and SUVs?” On the company’s plans in case the ban stays, Viswanathan said, “Then, we will sit out of the market where the ban is imposed. We cannot change the engine specification as our customers may not desire it.” He also cautioned that there would be “losses, laying off of people and hardships for dealerships” in the auto industry if other cities were to seek a similar ban on such diesel vehicles as is being currently done in the capital and NCR. Questioning the rationale of the ban, he said, “While the latest BS-IV compliant cleaner vehicles are banned, old vehicles of pre-BS era, BS I, I and III continue to pollute.” Asked if Toyota is ready for an environment compensation cess on the lines of the Supreme Court asking the Delhi Police to pay 30 per cent of the real value of new vehicles as a pre-condition for their registration, Viswanathan said, “That would be too much of a burden for ordinary customers.” Besides Toyota, other manufacturers like Mercedes-Benz, Jaguar Land Rover and Mahindra & Mahindra are the major automobile firms hit by the ban. The automobile industry has been against the ban, saying such restrictions will not help achieve the desired objective of reducing pollution and will only vilify diesel technology. Maruti Suzuki India Chairman R C Bhargava had termed the ban as “totally arbitrary”. Derrick Thomas Womens Jersey