Oil glut set to ease this year: IEA
A global oil glut that hit energy companies hard but meant cheap prices for consumers is set to ease by the end of this year, the International Energy Agency (IEA) said on Thursday. However, the agency said any potential production freeze agreed by leading oil producers, who are due to meet in Qatar on Sunday, would only have a “limited” impact on supplies. Ahead of the highly anticipated Doha talks, the 29-nation IEA said the oil market, which for months has been depressed by a vast oversupply, is expected to practically balance out in the second half of the year. Prices shot to 2016 highs this week and are now well over US $40 a barrel after plummeting below US $30 early in the year. They are nevertheless far below the US $100-a-barrel mark of mid-2014. The IEA said in its monthly oil market report that it still anticipates “steady oil demand growth and falling non-OPEC supply”, referring to producers outside of the Organization of the Petroleum Exporting Countries (OPEC). Expectations that the Doha meeting will agree to freeze output have helped buoy prices recently after reports that state OPEC kingpin Saudi Arabia and non-OPEC producer Russia had reached a consensus on freezing output, boosted hopes of a wider deal. “We cannot know the outcome but if there is to be a production freeze, rather than a cut, the impact on physical oil supplies will be limited.”
Tankers: Indian term LPG importers taking total 14 vessels on time charters
Three Indian state-run oil companies are taking four VLGCs on term charters this year to take advantage of three-year low freight rates and to handle rising LPG import volumes from the Middle East, shipping sources said this week. With the latest, a total of 14 LPG vessels have, or will be, taken on time charter by Indian Oil Corp., Hindustan Petroleum Corp. Ltd. and Bharat Petroleum Corp. Ltd., sources said. These comprise nine VLGCs and five medium or large gas carriers. BPCL on Tuesday closed its bid for a VLGC time charter for a two-year period, with extensions for six-plus-six months, sources said. The laycan starts June 1-30. Among vessels said to be put on offer include Global United’s Benny Princess, as well as vessels from India’s Great Eastern Shipping, BW LPG, Phoenix, Dorian, South Korea’s KSS Line and the VLGC EverRich 10, shipping sources said. Most of the offers could be in the mid-to high-$20,000’s/day, though one of the vessels could have been offered at around $35,000/day, sources added. “It’s India business, terms are tough. It’s a full-time job running term charters for Indian companies,” said a shipping source, adding that it is difficult to determine the term charter amount. The three other new term charters are for one year, with a one-year extension, and for two years, sources said. “The reason is the market is low and in case it picks up, it hedges them from the risk,” another shipping source said, referring to the recent pick up in term charters. The newest VLGC charters were said to have been taken at around $37,000-$42,000/day. These were down from IOC’s charters of two BW LPG vessels in February at $50,000/day and BPCL’s charter of Great Eastern Shipping’s Jag Vishnu, in December 2015 at $55,834/day. However, a number of VLGCs were chartered in 2014/2015 at around $31,000-$46,200/day. Sources said some Indian importers had been grappling with high term charter rates concluded in the past two years. But spot rates on the major Persian Gulf-Japan route have plunged 81% since last year’s peak around mid-July to about $25.50/mt Wednesday, the lowest since February 2, 2013, Platts data shows. HIGHER INDIAN IMPORTS Indian term lifters have increased their term import volumes from Saudi Arabia to nine to 12 cargoes of varying sizes per month this year, up from about five to 10 shipments of varying sizes in 2015, market sources said. Some 10-12 vessels carrying cargoes ranging between 8,000 and 44,000 mt for a total of at least 226,000 mt were loaded in April, shipping sources said. Another trade source said even though the number of vessels that lifted Saudi cargoes in March were less than in April, overall volumes were higher as the VLGC Chaparral had lifted a large 48,000-mt cargo from Ras Tanura over March 20-22 and has arrived in Haldia on the Indian east coast last week. Shipping sources said Chaparral has been put on subjects by Naftomar to lift a cargo from the US Gulf Coast during May 25-26, possibly to move to North Asia. Indian shipping fixtures are also showing a pick-up in discharging activity in April. Around 16 vessels carrying cargoes ranging between 6,000 mt and 20,500 have arrived, or due to arrive so far this month on the west coast ports and 11 ships with 9,870-25,000 mt cargoes have, or are scheduled to, arrive on the east coast ports. India’s LPG imports are forecast to jump to 11.4 million-11.8 million mt in fiscal 2016-2017 (April-March), up by around 1 million mt from projections for fiscal 2015-2016, as a 7.6% year-on-year rise in demand to 19.36 million mt in fiscal 2015-2016 outstripped domestic output, industry sources have said. To help meet growing import demand, Great Eastern Shipping, India’s top private sector shipping firm, this week bought the 1996-built VLGC Gas Vision, due for delivery in the first-quarter of the current fiscal year. Shipping sources said the 76,931-cu m vessel was owned by South Korea’s KSS Line Ltd. and was sold at around $27 million.
Russia seeking strategic investor to buy Rosneft stake – Putin
President Vladimir Putin said on Thursday the Russian government was searching for a strategic investor to buy a 19 percent stake in global top oil producer Rosneft (ROSN.MM) as part of a privatisation plan. “We will be searching for a strategic partner who understands and knows that one should not be greedy while buying, let’s say, 19 percent of shares in Rosneft,” Putin told reporters after his annual televised phone-in. “That (partner) should not pay attention to the current share price but should look into the future,” he added. “If we find such a partner… then we will take this step.” State-controlled Rosneft, in which BP (BP.L) owns 19.75 percent, is on a Russian government list of companies slated for privatisation in 2016 in order to prevent the state budget deficit from ballooning. Russian Economy Minister Alexei Ulyukayev said on Wednesday legal advisers had been chosen for Rosneft’s privatisation.
Iran ends free oil shipping to India, insists on being paid in euros instead of rupee
Iran, no longer under sanctions, has ended free shipping of crude oil to India and has terminated a three-year old system of getting paid for half of the oil dues in rupees. The Persian Gulf nation is now insisting on being paid in Euros for the oil it sells to Indian refiners. It also wants refiners like Essar Oil and Mangalore Refinery and Petrochemicals Ltd (MPRL) to clear nearly USD 6.5 billion of past dues in Euros, officials said. Iran had in November 2013 offered free delivery of crude oil to Indian refiners as tough Western sanctions crippled its exports. With shipping lines refusing to transport Iranian crude for fear of being sanctioned, Iran used its shipping line for the delivery and did not charge for transportation. “National Iranian Oil Company (NIOC) has written to Indian firms saying it will no longer be shipping oil for free,” an official said. “It will continue to ship the oil in its tankers but will charge a discounted tariff,” he said. The transportation fee will for now be less than half it takes to ferry oil from Iran. “May be in future this 50 per cent discount too may go,” he added. Iran however has continued with its liberal fiscal terms of offering 90-day credit period – i.e payment becomes due only after three months of invoice being raised. With US lifting sanctions in January, Iran has told Indian authorities that the three-year old mechanism of paying 45 per cent of oil import bill in rupees and keeping the remaining 55 per cent pending for payment channels to clear, stands terminated. The pending payments now total to nearly USD 6.5 billion which Iran has agreed to receive in instalments over the next six months, officials said. “NIOC is raising invoice for oil it is now exporting to Indian refiners in Euros,” he said. Since February 2013, Indian refiners like Essar Oil and MRPL paid 45 per cent of their import bill in rupees to UCO Bank account of Iranian oil company. The remaining has been accumulating, pending finalisation of a payment mechanism. With the lifting of sanctions, the payment channels will reopen and Iran is seeking the pending USD 6.6 billion in Euros. The payments would be done in instalments to prevent a run on the rupee with MRPL likely to be asked to clear its outstanding dues of close to USD 3 billion first. Indian Oil Corp (IOC), which owes over USD 580 million to Iran, may be the second in the queue followed by smaller payments by HPCL-Mittal Energy Ltd (HMEL) and Hindustan Petroleum Corp. Essar Oil may be the last to clear its about USD 3 billion dues. Officials said Iran has not yet decided on utilisation of the USD 3 billion which has accumulated in the rupee account with UCO Bank. It could use the money to make payments for imports of steel and other commodities from India.
Gulf oil lines up Rs 150 crore to expand lubricant business
Gulf Oil Corp is expanding its lubricant business in India with an investment of Rs 150 crore in setting up a plant in Chennai, as the Hinduja Group company sees opportunity emerging for value-added products driven by the Indian government’s push to cutting down emissions. While it aggressively expands its fuel retail business globally, the company has not yet looked at entering the Indian market for fuel retail. “It is amazingly brave and wise of India to accelerate the pace of implementing emission norms. It gives us the possibility to work on products that are more focused on fuel economy,” Frank Rutten, VP -international at Gulf Oil International, told ET.”The moment the legislation creates the right play ing ground, the industry immediately plays into it by offering renewable, fuel efficient products.” India recently set a 2020 target to implement BS VI emission standards, advancing its previous plan. The company plans to introduce products that will have “measurable benefits”. “When we talk about the growth rate that Gulf Oil is enjoying in India, it t will be necessary to expand the t production capability as the product portfolio is likely to get more t complex.The investment in Chennai alt lows us to have production infrastructu re that would match the upcoming product portfolio for the next 10 years,” he said. Gulf Oil in 2011singed up Indian cricket team captain Mahendra Singh Dhoni as its brand ambassador, which helped it create awareness among cus tomers, especially in the commercial vehicle (CV) segment. The company said it has a 7% market share in the Indian automotive lube sector, and is growing at a speed faster than its customer or its own growth rate in other economies.It is now making an international foray into fuel retail business. It signed up with Manchester United to become the English football club’s global sponsor and official lubricant-cum-fuel retail partner. “We recently entered Russia, Canada, Mexico, and would be entering 1020 countries this year. So we would definitely be interested in the second-largest country (by population) in the world. At the moment, given the regulation, there is a barrier in entering the Indian fuel retail market but the moment the barrier is gone, we would look at it,”Rutten said. Indian regulations state that a company which wants to enter the fuel retail business must invest or show propose to invest . 2,000 crore in petroleum ` infrastructure, which acts as a barrier for new entrants.
Will not allow GAIL’s pipeline project in Tamil Nadu, says Jayalalithaa
Tamil Nadu Chief Minister J Jayalalithaa today said that she will not allow GAIL’s pipeline project to come in the state and will keep putting pressure on the Centre not to implement in the project in Tamil Nadu. During her campaign, for the upcoming Assembly Elections, at Dharmapuri today, Jayalalithaa said around 120,000 trees will be lost because of the project. Around 1.2 million trees need to be planted, which is not possible. “I will not allow the GAIL pipeline project and will keep putting pressure the Centre not to implement the project in the state,” said Jayalalithaa. Thousands of farmers in these seven districts are opposing the project stating that it will impact their livelihood, as it will be difficult to do agriculture in the land once the pipeline is laid. GAIL (India) Limited was instructed by the Government of Tamil Nadu in 2013, for laying pipeline alongside the National Highways without affecting the agricultural lands of the farmers of Tamil Nadu. GAIL had challenged the above order of Government of Tamil Nadu in the Madras High Court which quashed the state government’s order in November 2013. Government of Tamil Nadu challenged the Order in the Supreme Court and the same was dismissed two months back. The Supreme Court ordered the State Government of Tamil Nadu to fix market value of land as on January 1, 2016 for the Right of Use (RoU) compensation purpose. The ownership of the land remains with the land owner and RoU of land is acquired for laying of gas pipeline and after laying the pipeline, the land is restored back in original condition to the land owner. Compensation is paid to the land owner as per Petroleum & Minerals Pipelines Act and the Supreme Court have ordered that the RoU compensation against land will be 10 per cent of market value as on January 2016 plus 30 per cent Solatium. Farmers can continue agricultural activities after the restoration of land and only construction of permanent structure, plantation of deep rooted trees are not allowed in the acquired RoU and as such there will be no adverse effect to the interest of the farmers, said the Minister. However, farmers fear that any kind of digging of land above the pipeline could be considered by the company as an offense and even if the pipeline is damaged due to some other reason, the land owners has to face serious legal action. They are also alleging that if the pipeline cuts across a farmland splitting the land into two parts, the farmer cannot take water from one side to the other side by establishing a pipeline, as any possible damage to the gas pipeline would result in serious legal action. The 925 kms Kochi-Kottanad-Bangalore-Mangalore pipeline passes through Kerala (505 kms), Tamil Nadu (310 kms) and Karnataka (60 kms). The pipeline has already been laid for 200 kms at a cost of Rs 6.85 billion. The project was originally started in 2012, of the total project only 50 kms has been completed in Ernakulam (Kerala). Not only in Tamil Nadu, farmers have been protesting in Kerala fearing that they will loose their livelihood. They also want the Government to withdraw the Petroleum & Mineral Pipelines Act, 1962 (PMP Act). State Government also supports the farmers in this mater. Gail India Gets Two Bids to Ship U.S. Shale Gas; Shares Gain Gail India Ltd., the South Asian country’s biggest gas transporter, said it got bids from two groups to transport shale gas from the U.S. Shares jumped the most in more than a month. The state-run company’s spokeswoman Vandana Chanana declined to name the bidders, saying Gail India won’t elaborate on commercial matters that aren’t public yet. Gail had originally floated a tender two years ago, calling for nine LNG vessels to help ship the gas starting 2017-18. Gail shares advanced 4.1 percent to 366.35 rupees on Tuesday in Mumbai, the biggest gain since March 3. The shipping tender, which closed on March 31 after several extensions since last year, seeks tankers that can carry 150,000-180,000 cubic meters of LNG, three of which must be built locally to help advance Prime Minister Narendra Modi’s flagship ‘Make in India’ initiative aimed at creating jobs. The New Delhi-based firm bought one of the first shipments of LNG from Cheniere Energy Inc.’s Sabine Pass project in Louisiana on spot basis, making it the first Asian importer of U.S. shale gas. Gail will import about 6 million metric tons of gas from the U.S. beginning 2018, Oil Minister Dharmendra Pradhan said in an interview in New Delhi on March 28. It has agreed to buy 3.5 million metric tons of LNG a year for two decades from Sabine Pass, which is expected to start supplies in March 2018. It has also booked 2.3 million tons a year capacity at the Cove Point LNG liquefaction terminal in Maryland, which is set to commence deliveries in December 2017.
Reliance, BG to hand over some drilling assets to ONGC
A joint venture led by Reliance Industries and BG Group has agreed to hand drilling infrastructure from an abandoned gas field to ONGC, their junior partner, helping the state-run group develop a large gas reserve nearby, two company sources said. Executives from Reliance, BG and ONGC signed an agreement in New Delhi on Tuesday night — providing respite in a months-long battle between the partners over the cost of closing the Tapti field off India’s west coast. The sources, with direct knowledge of the matter, declined to be named as they are not authorised to talk to the press. ONGC plans to invest around 100 billion rupees ($1.50 billion) to develop its key Daman field, which is next to Tapti. This deal will help the group keep a lid on costs. Reliance, ONGC and BG, now owned by Royal Dutch Shell, could not immediately be reached for comment.
India’s Fuel Demand Rises to Record on Gasoline, Diesel Growth
India’s fuel demand grew 11 percent in the year ended March 31, the fastest pace in records going back to fiscal 2001. Fuel use rose to 183.5 million metric tons from 165.5 million tons in the previous period, according to preliminary data on the websiteof the Oil Ministry’s Petroleum Planning & Analysis Cell. Diesel consumption rose 7.5 percent to 74.6 million tons, while gasoline usage rose 14.5 percent to 21.8 million tons. “Gasoline growth has been unprecedented and has even surpassed our own expectations,” Arun Kumar Sharma, finance director at Indian Oil Corp., India’s biggest fuel retailer, said in New Delhi. “People are preferring gasoline more than diesel as the price difference between the two has narrowed.” Gasoline is taxed higher than diesel in India, resulting in the former costing more at retail pumps. The differential narrowed to about 25 percent in April from 34 percent in January. India is replacing China as the world’s oil-demand growth driver as its economy expands faster than any other major country and a growing middle class has more money to spend. The International Energy Agency estimates India to account for a quarter of global energy demand growth by 2040 as booming manufacturing and a bigger, richer and more-urbanized population will drive fuel growth. It expects the country’s oil demand to reach 10 million barrels a day in the next quarter of a century, marking the fastest growth in the world. “In addition to the boost from low oil prices, structural and policy-driven changes are underway that have resulted in India’s oil demand ‘taking off’ in a similar way to China’s during the late 1990s,” analysts including Amrita Sen at Energy Aspects Ltd. said in a note. “These changes include a rise in per capita oil consumption, a massive programme of road construction and a push towards increasing the share of manufacturing in GDP.” Indian Oil, which controls more than half of fuel sales in the country, expects gasoline sales this fiscal to climb 11 percent and diesel by about 3 percent, Sharma said.
Oil oversupply on the market will be overcome in 2 years — head of Rosneft
Oil oversupply on the market will be overcome in the course of 2 years, president of Russia’s state-owned oil company Rosneft Igor Sechin said at the 2016 Commodities Global Summit in Lausanne. “The decisive factor of a sharp fall in oil prices is a significant excess of supply over demand. Today it looks that the oversupply will be overcome in two years,” he said. According to the head of Rosneft, during this period the surplus of supply on the market will be offset due to global growth of economy and consumption, depletion of existing fields, temporary shutdown of complex and underperforming projects. “That means that it will take some time to achieve the market balance that we find inevitable. During this period the market will be characterized by a continuing volatility and making good decisions will require a proper analysis of short-term and fundamental factors,” Sechin said.
India state refiners import diesel as private processors cut discounts
Indian state refiners may continue importing higher volumes of diesel for the next few months instead of buying locally as private domestic oil processors like Reliance Industries and Essar Oil have withdrawn discounts on taxes and shipping. India’s diesel use is rising along with an economy that is estimated to have grown by 7.6 per cent in the financial year just ended. Between April and February India’s diesel demand surged 10.8 per cent. To meet this soaring demand, the state refiners – Indian Oil Corp, Hindustan Petroleum Corp and Bharat Petroleum Corp – last year bought some 12 million tons of diesel from the private oil processors. And through the fiscal year that ended on March 31, the private refiners encouraged these purchases by absorbing the central sales tax and coastal freight costs for interstate cargoes shipped from their plants in western Gujarat state. Now the private refiners have asked their state peers to pay the sales tax and coastal freight, potentially making buying from Reliance and Essar costlier than imports, trading sources with knowledge of the matter said. “Instead of getting diesel from their private peers the state refiners have had to go to the market and import,” one trader said. Refinery sources said talks were continuing with the private refiners to rework the diesel prices. in the absence of a deal, Indian Oil Corp and Hindustan Petroleum have together booked about 400,000 tonnes of imports of the fuel in April, compared with just 70,000 tons in March, and they plan to take similar volumes in the following months if the deadlock isn’t broken, sources at the two firms said. Further tightening India’s diesel market, according to another oil products trader, is that the “private refiners are maximizing jet-fuel and cutting back diesel production because of better prices.” India’s private refiners have also boosted their fuel exports. The private firms say the tax increases on diesel and gasoline that safeguard federal revenue instead of passing on the benefits of falling oil prices to customers have made the discounted sales to state-run refiners unattractive.