New Delhi: GAIL (India), under a petroleum ministry directive, has decided to buy a third of the LNG ships it plans to acquire to ferry the fuel from the US to India, from Indian shipbuilders. Considering that the PSU, whose massive LNG imports from the US would start in 2017, has lined up investments to the tune of $7.6 billion for hiring the required specialised vessels, the move would give a big boost to the Indian shipbuilding industry.
Domestic players such as L&T and Pipavav are among the obvious beneficiaries of the decision, which is in line with the Modi government’s thrust on the domestic manufacturing sector. Although some analysts are doubtful about the feasibility of Indian ship makers meeting such huge demand given their lack of experience in the areas — guarantee for performance of LNG ships for a 20-year period will be part of the contracts — the government, sources said, is of the view that the challenge would force Indian ship makers to shape up.
The ministry wrote to the GAIL (India) board which met here on July 7: “(The) Board (may) take cognizance of the provisions contained in the National Manufacturing Policy and in the 12th Plan document of the Planning Commission regarding promotion of indigenous manufacturing in India.” Petroleum minister Dharmendra Pradhan told FE, “someday (large and sophisticated) shipbuilding has to start in India.”
A senior GAIL official told FE that the company board has decided to go-ahead with ministry’s direction and would soon float the tenders accordingly. “The tender may specify the exact time lines for delivery of vessels, Indian shipyards need to be given more time, as they first need to upgrade the manufacturing facilities,” the official added.
GAIL (India), as reported by FE earlier, had drawn up plans to hire a fleet of sophisticated LNG ships to ferry gas from the US to India for 20 years from 2017. The firm had tied up 5.8 million tonnes per annum (mtpa) of LNG imports from the US starting 2017.
The PSU wants to charter ‘new build’ ships to transport gas from the US. Step-in right (to GAIL) in the ownership of LNG ships would only be possible for new build ships. Since fuel and other charges are to the charterer’s account, GAIL is looking at chartering fuel-efficient ships.
GAIL is considering taking up equity stakes of up to 10% in the ships with a seat at the owners’ table to facilitate the company to have an insight into on-board happenings.
Currently, about 379 LNG ships are operating globally and another 105 ships are being built/ordered. The specialised carriers are built mostly in South Korea and Japan by companies such
as Samsung Heavy Industries, Daewoo Shipbuilding and Marine Engineering, Hyundai Heavy Industries, Mitsubishi Heavy Industry, STX and Hanjin Shipyard. In recent years, China has also started making LNG ships.
GAIL appointed Lloyd’s Register to carry out assessments if Indian shipyards have the requisite capability of building LNG carrier. The consultant, however, said both L&T and Pipavav would need to create new infrastructure to build these vessels. These firms may require six to seven years to deliver the first LNG ship. Generally, it takes 30 months for Japanese and Korean companies to deliver an LNG ship.
Building an LNG ship in an Indian shipyard would involve technical risks in terms of design and integration of the ship system. Moreover, Indian-built ships may be rejected by US terminals, according to consulting firm Integration.
(Source: Financial Express July 28, 2014)
INDIA HOPES TO CLINCH DEAL WITH US ON LNG DURING MODI VISIT
New Delhi: Prime Minister Narendra Modi’s persuasive skills will be put to test, when he visits the US which is to emerge as a major LNG exporter.
India is hoping that the US will agree to sell LNG to the country by exempting it from the requirement of a compulsory Free Trade Agreement (FTA) when Prime Minister Narendra Modi visits Washington DC in September.
“The issue is very much on the Prime Minister’s agenda, and we have indications that the US is seriously considering the matter,” a Government official told Business Line .
At present, the US gas is available to only those countries with which it has a Free Trade Agreement (FTA) and India does not have an FTA with the US.
Though two projects in the US, where GAIL (India) has stake, have been given special permission for future sourcing, New Delhi would prefer complete waiver from the existing conditions. India’s confidence on getting the waiver emerges from a Bill recently introduced in the US Congress for speedy approval of export of natural gas to World Trade Organisation countries.
“The introduction of the Bill on export of natural gas early March was followed by the India-US Energy dialogue in New Delhi attended by US Energy Secretary Ernest Moniz where the matter was discussed at length,” the official said.
Since the US has a lot of natural gas to export and India would prove to be a big market, officials are hopeful that a deal could be on the anvil during Modi’s proposed visit.
The Indian-American business community in the US, which has sprung into action to make Modi’s visit to the country a success, believes that a deal on LNG is a low-hanging fruit.
“The two sides need to make a big announcement during Modi’s visit to lift the bilateral relationship that has gone a little downward (in the recent past). Since the Bill that could give India a waiver and allow US to sell it LNG is already there in the Congress, we are optimistic that something on this could be announced in September,” Sanjay Puri, Chairman, US India Political Action Committee, told Business Line during a recent visit to New Delhi.
LNG imports from the US are largely dependent on approvals from the Department of Energy, Federal Energy Regulation Commission and clearances from various departments of the US. Approval of Department of Energy is crucial as it pertains to export of LNG to countries which have a free trade agreement with the US and/or nations which have not signed FTA with the US but are not covered under any sanctions for trade relations.
GAIL was the first Asian company to have signed a long-term LNG sales and purchase agreement with Cheniere Energy Partners, LP (Cheniere) to procure 3.5 million tonne per annum of LNG from the latter’s Sabine Pass Terminal in Louisiana, US for a period of 20 years.
GAIL has also signed a Terminal Service Agreement with Dominion through GAIL Global (USA) LNG LLC for booking 2.3 million tonne annually liquefaction capacity in the Cove Point LNG liquefaction terminal project located at Lusby in Maryland.
As the agreements are on Freight on Board basis, GAIL is required to make its own arrangements for transportation of LNG from these terminals. The transportation of LNG is expected to begin from mid-2017.
(Source: Business Line July 28, 2014)
PETROL PRICES SET TO FALL FIRST TIME SINCE APRIL
NEW DELHI: Petrol prices are likely to fall at least by Rs 1 a litre, the first drop since April, if the current trend in international oil rates continues through this month.
Also, the revenue loss of state-run marketers on diesel is expectd to narrow to less than Rs 1.40, taking the fuel closer to deregulation.
“Petrol prices would be reduced by more than Rs 1 a litre if international gasoline rates continue to decline in remaining four days of this month. But, oil companies want to retain about 54 paise before price reduction this time because the government did not allow it to raise petrol prices on July 15,” a person with knowledge of the matter said.
“A final call will be taken after an informal discussion with the government.”
State-owned IOC, BPCL and HPCL are supposed to be free to fix prices of petrol since June 2010, but company executives say the oil ministry exercises informal control.
(Source: Economic Times July 28, 2014)
CAIRN INDIA SEEKS ONGC NOD TO EXTEND RAJASTHAN BLOCK PERMIT BEYOND 2020
NEW DELHI: Cairn India has sought partner Oil and Natural Gas Corporation’s (ONGC) nod for extension of the licence of their prolific Rajasthan oil block beyond the contractual deadline of 2020.
Cairn’s contractual term for exploring and producing oil and gas from the Rajasthan Block RJ-ON-90/2 expires in 2020 and the area is to return to the block licensee, ONGC.
The Anil Agarwal-group company, which wants the term of the block extended by a minimum 10 years, has formally written to ONGC on the issue, sources said.
ONGC, which currently holds 30 per cent stake in the block, has told the Oil Ministry that the Production Sharing Contract (PSC) can be extended beyond 2020 if all parties to the contract agree on mutually agreeable terms.
The state-owned firm will now decide on terms on which it can agree on allowing Cairn to continue to operate the fields.
Once ONGC agrees, a formal resolution will be passed by the block’s Operating Committee which has the two partners as members. After this, the proposal will go to the block oversight panel called the Management Committee headed by upstream regulator DGH and then to the government.
Sources said as a licensee, ONGC has concerns on royalty which it would be like to be addressed at the time of extension.
ONGC as a licensee of the block, which produces just over 181,000 barrels per day of oil, pays royalty to the government on not just its 30 per cent stake but also on Cairn’s 70 per cent interest. Though the royalty is later cost recovered, the company faces cash flow issues because of the payment.
For agreeing to Cairn’s proposal, ONGC may put a condition that royalty be shared by the partners in proportion to their shareholding. Also, it can seek a higher stake of 50 per cent.
The Rajasthan PSC provides for ONGC becoming the owner of all facilities once their cost is recovered from sale of crude oil.
The cost of Mangala, Bhagyam and Aishwariya oil field facilities in the block as well as the heated pipeline that carries the crude from the field to Gujarat refiners will be recovered much before the current term of PSC ends in 2020.
The Rajasthan Block RJ-ON-90/2 was awarded as an exploration acreage on terms different from 28 small and medium-sized fields like Panna/Mukta and Tapti and Ravva awarded alongside during 1991 and 1993.
The Oil Ministry in a draft policy has proposed extension of the PSC for these fields by 10 years or the balance economic life of the field, whichever is earlier. Cairn’s Rajasthan block is not included in this policy.
Sources said the Rajasthan PSC provides for extension of license for 5 years if there is a producing oil field and by 10 years if there is a gas prospect.
The official said ONGC, who is a party to the Rajasthan PSC as well as the licensee, will also need to agree to any extension provisions under the PSC.
(Source: The Economic Times, July 28, 2014)
ESSAR SEEN IN TALKS WITH GERMANY’S BASF FOR $ 2 BILLION PETROCHEMICAL JV
MUMBAI: Steel-to-BPO conglomerate Essar is in talks with Germany’s BASF, the largest chemicals player in the world, for a petrochemicals joint venture, according to people directly involved in the discussions. The move revives a diversification plan which had been put on hold for long, both because of the global factors and the company’s high debt burden.
Essar, led by billionaire brothers Shashi and Ravi Ruia, has long nurtured a desire to be an integrated oil and gas major and had conceptualized an integrated petrochemicals complex along with its refinery expansion in Vadinar, Gujarat. With Essar Oil, the country’s second largest private refiner, trudging back to profitability in FY’14, the plans are back on track.
Moreover, the petrochemicals industry, experts say, is poised for a strong rebound from fiscal 2016. Already key Indian players, notably Reliance, is working towards completing a mega $8 billion expansion to ramp up overall petrochemicals capacity by 66% and offer a much bigger product basket.
Essar seen in talks with Germany’s BASF for $ 2 billion petrochemical JVEssar’s refinery currently has a 20 million tonne per annum (MMTA) capacity and is capable of refining a diverse range of crude.
The total project cost is expected to be $2 billion, inclusive of debt and equity.
Interestingly, according to the people cited earlier, cash strapped Essar is not willing to pump in funds by way of equity upfront and wants BASF to bankroll the entire venture, at least for the initial years. However, it is keen to infuse its share of equity over a 3-5 year period.
“It is still not clear if it will be an equal 50:50 JV or BASF will retain a 70% share. They would want majority (stake) since they are likely to finance the project almost entirely to start with. These structuring and funding related discussions are still ongoing,” said one of the sources mentioned above. All the people contacted for this story spoke on condition of anonymity as the talks are still in the private domain.
Both sides however are still to sign a definitive agreement and a transaction may still be some time away, according to these people.
SBI Caps, the investment banking arm of the country’s largest lender, is working as an advisor and is currently preparing a detailed project appraisal and financial feasibility report.
Essar is one of the most indebted business groups in India Inc. with over $14 billion of net debt at the end of the last financial year as per a Credit Suisse report – a fallout of its rapid expansion in steel, power and oil refining in the past decade. In FY’14, the net debt of Essar Oil alone stood at Rs 17,410 crore with a very high net debt to equity ratio of 7.1. Essar also has a liability of Rs 6149 crore of sales tax on account of a Supreme Court ruling that it was not entitled to a tax holiday on its refinery. Consequently the company is not keen to commit to new capex just yet.
Spokespersons of both Essar Oil and BASF India told ET they do not comment on market speculations and rumours.
The plan, said sources, is to set up a fluidized catalytic cracker (FCC) plant and propylene plant with an initial annual capacity of 1 million tonne, adjoining the existing refinery. Out of that about half a million tonne will be used to make polymers like polypropylene while the residual half a million will be used for specialty chemicals, plasticizers and absorbents.
Polypropylene is part of the polymer group of petrochemicals, which is in high demand in developing economies and is widely used to manufacture diverse products like packaging materials, textiles, plastics, automobile parts, leather accessories and films. Reliance Industries is the dominant market leader in India with a 60% share. In FY2013-14, RIL produced 2.8 MMT of polypropylene, making it the 5th largest player in the world.
BASF – present in India since 1943 with a locally listed subsidiary – already manufactures a wide ranging portfolio of polymers, tanning agents, textile and agro-chemicals, specialty chemicals, performance plastics, automotive and coil coatings, construction chemicals, polystyrene and polyurethane systems across 9 production sites.
India is among the fastest growing polymer markets in the world with a 5 year CAGR (2008-13) of 10.7%. Last fiscal, polymer demand grew by 3% locally to 9.3 MMT, largely on the back of polypropylene. However, the overall slowdown in the economy has a taken a toll on the petrochem industry. Even polypropylene was also negatively impacted as cement packaging and auto industry saw a drop in demand.
“Going forward, the demand outlook is robust. Performance polymers like polypropylene will only grow further as newer applications of thermoplastics are coming into the market. With a new Budget offering some sops for petrochemicals, we expect demand cycle to go up soon,” feels Mahinder Singh, Secretary General, Chemicals and Petrochemicals Manufacturers’ Association, India (CPMAI).
As per industry experts, there are 18 new crackers coming up across the world using both gas and naphtha as feedstock. Each cracker of 1.5-2 MT takes at least 35-40 months to get installed. So Essar’s petchem plans are being tailor made to exploit the demand cycles which could peak in 2017-18.
RIL is already setting up huge facilities to cater to this growing demand. For global giants like BASF, a tie-up with Essar will also give a steady raw material supply, feel analysts. BASF has already invested Rs 1000 crore for an integrated manufacturing facility for production of polyurethanes, care chemicals and polymer dispersions in Dahej, Gujarat. This new unit is to start production this year. India is a strategic market for the company and currently contributes 2% of its annual 80 billion euro sales. Turnover from India has grown to Rs 7,900 crore in 2013 from Rs 4600 crore five years ago.
(Source: The Economic Times, July 28, 2014)
MORE DABHOL DEBT MAY BE CONVERTED INTO EQUITY
MUMBAI: With power generation at the Ratnagiri Gas and Power (RGPPL) grinding to a halt in the absence of natural gas, lenders to the project may consider a further conversion of debt into equity to help the company tide over the crisis, Arundhati Bhattacharya, chairperson of State Bank of India, told FE, adding that the portion of debt, that got converted into equity, would no longer be treated as “past due debt”.
Bhattacharya said the power ministry was soon going to convene a meeting of all stakeholders in RGPPL’s 1,967 MW power generation and natural gas regasification plant at Dabhol in Maharashtra to discuss the issue. “That (converting some of the debt to equity) is an option that we are looking at,” Bhattacharya, said. “It will help for a little while till we can work out a permanent solution.”
RGPPL’s outstanding debt is around R8,500 crore and the last month in which the company repaid the principal amount due on its loan was in March, when it paid around R151 crore to banks. Lenders have converted a portion of the debt that RGPPL owed to them into equity in the past and currently have a 17% shareholding in the company.
RGPPL, which has state-run undertakings Gail (India) and NTPC as major shareholders, hasn’t been generating power since December due to lack of gas supplies from Reliance Industries’s KG-D6 offshore gas field, which has been facing technical challenges.
The power plant in Dabhol, which initially used naphtha as fuel, was converted to a gas-based plant in 2007. Almost all the gas-based power RGPPL generates is allocated to the Maharashtra State Electricity Distribution (MSEDCL). The cost of power generated by RGPPL worked out to around R4.8 per unit. MSEDCL contended that this was higher than the prevailing market price of power and refused to purchase power from RGPPL.
This led to a cash flow crisis for RGPPL and impacted its debt servicing obligations.
“RGPPL’s asset is good, but it just doesn’t get the input needed,” Bhattacharya of SBI said. “Up to March 2011, they were making profits and repaid 2-3 instalments in advance. As long as they get gas, they can do very well.”
As per Indian banking regulations when repayments on loans are overdue for more than 90 days, they are classified as non-performing assets (NPAs). RGPPL has managed to avoid being classified as a defaulter by making two interest payments aggregating to Rs80 crore in April and May to lenders.
According to a senior RGPPL official, MSEDCL owes around R1,850 crore to the company.
Meanwhile, it is RGPPL’s LNG regasification terminal that is helping the company barely pull through. Cash flows generated in the form of processing charges received from Gail for re-gasifying the imported LNG is helping the firm pay employees’ salaries.
(Source: The Financial Express, July 28, 2014)
EXPLORING CONCERNS – RELATED-PARTY CONCERNS OVER CAIRN’S SESA STERLITE LOANS
The restructuring of the Vedanta Group’s business, announced in February 2012, was not only expected to result in a cleaner structure that eliminated cross-holdings, it was also intended to make the cash within the group more fungible. Indeed, it was inevitable, analysts had pointed out at the time, that money would move freely across entities given there were some like Cairn India that were spewing cash and others like the loss-making Vedanta Aluminium Ltd that were starved for it. While transfer of cash is usually frowned upon, the easier ‘horizontal’ movement of money without any dividend tax leaking, it was felt, was a more transparent way for the management to use the group’s resources. However, now that Cairn has loaned a large amount of $1.25 billion to a subsidiary of Sesa Sterlite—a related party transaction going by the Companies Act—at Libor plus 3%, the news has not gone down well; that a sum of $800 million has already been disbursed came as a shock to many. To be sure, no laws have been violated—the transaction has been cleared by the audit committee—but shareholders feel they could have been kept in the loop. Since the transaction needn’t be voted on by small shareholders, it can’t be undone, but if there’s a signal to the management, it is in the fact that the stock lost close to 11% in two sessions. The management’s contention that it will earn a better yield on the loan, backed by a corporate guarantee, than that from other investment avenues such as deposits—the loan is a two-year facility—has been treated with some degree of scepticism. Shareholders are concerned about the loan being given at time when Sesa Sterlite’s debt is a fairly large R80,400 crore. Some believe the management could have returned a part of the surplus cash to shareholders in the form of dividends but that has been ruled out since Cairn might need the funds a couple of years down the line for capital expenditure.
More than five years ago, after protests by a foreign fund, the Vedanta Group’s management had rolled back its restructuring plan; it had planned to demerge the energy and aluminium businesses from Sterlite and transfer Vedanta’s stake in Konkola Mines to Sterlite. The move would have left shareholders of Sterlite without a direct exposure to the energy and aluminium businesses. Interestingly, earlier this month, Sebi discussed the need for separate corporate governance standards for ‘big and complex business groups’ to ensure that the governance was focused. The regulator’s International Advisory Board felt there was a need to address the gap in what is reported by auditors and what investors, across jurisdictions, expect. The discussions couldn’t have been more timely.
(Source: The Financial Express, July 28, 2014)
RELIANCE INDUSTRIES: ON TRACK TO RECOVERY; RATING ‘OUTPERFORM’
* RIL reported a 6% year-on-year growth in standalone profit after tax to Rs 56.5 bn (estimate of R54.4 bn). Consolidated earnings (reported for the first time quarterly) were at R59.6 bn, growth of 14% y-o-y, led by US shale and retail turnaround.
* Refining margins at $8.7/bbl marginally beat est of $8.6/bbl, driving Ebit of R37.7 bn (+28% y-o-y, 3% above the rest) But petchem disappointed with Ebit of R18.9 bn (-10% quarter-on-quarter) well below estimates.
* Ebitda (earnings before interest, taxes, depreciation, and amortisation) at R75.3 bn, came in 11% below estimates. A sharp increase in other opex (operating expenses) due to a one-time increase in fuel and power expenses drove this miss. We believe opex would moderate to normative levels over the rest of FY15e.
* KG D6 volumes at 13 mmscmd (million metric standard cubic metre per day), -15% y-o-y. Improvement q-o-q in E&P (exploration and production) Ebit was led by a 16% y-o-y increase in PMT (Panna-Mukta & Tapti) oil volumes—uptick from infill wells on the block, expected to sustain at higher levels over next two years)
Refining –Middle distillates under pressure, Light distillates steady: Despite a slowdown in global supply additions and the recovery in the USA, refining margins remain subdued, with (i) rising exports from the USA, which has ramped up refining throughput in view of cheap feed stock (ii) muted demand growth in emerging economies as well as western Europe and (iii) gradual ramp up of additional refining capacity in the Middle East, which were commissioned in earlier years but are getting fully synchronised only now. This has led to a pressure on middle distillates, as diesel exports have ramped up from the US and Middle East into Europe, while a gradual reduction in subsidy in India and slower demand from China has depressed Diesel consumption in Asia.
Petchem–pace of capacity additions moderating but demand growth tepid: The petrochemical segment has seen divergent trends over the last few quarters, with steady polymer/ plastic spreads being offset by weakening spreads in the polyester segment. This quarter has been no different, with q-o-q increase in spreads for PE and PP (polyethylene and polypropylene), which were offset by very weak spreads across the polyester chain. Despite relatively better spreads, polymer demand domestically remains weak owing to weak demand in key consuming sectors of automobiles, construction, etc. We believe that margins from this segment will remain muted over the medium term.
Petchem spreads globally have been muted for much of the last three years, and we do not see that changing over FY15/16e. However, the estimates of capacity additions are seeing downgrades, with latest estimates of global capacity upgrades for CY13/14e seeing downgrades from earlier forecasts. We remain conservative on margins for the next two years.
A look at Ebit trends clearly reflects the predominance of the downstream business segment in the overall business of RIL. The rapid decline in E&P volumes over the last few quarters has meant that the relative importance of upstream in overall business.
E&P–gas price notification the key: There was momentum in RIL’s exploratory activity and upstream business over the past year, with success on the MJ1 exploratory well (two appraisal wells completed) and approvals for well work-over on the MA field. Also, news reports indicate the government might allow RIL to retain three discoveries (D29, 30,31) that have been held up for development due to DGH (upstream regulator) not allowing extension sought by RIL to conduct further drill stem tests. However, all these, along with the company’s plans to develop the R Series/Satellite fields, are contingent on a higher gas price for the fields, the level and modalities of which has become uncertain post the deferment of a decision by the oil ministry. We believe that RIL will not invest meaningfully in the newer assets before the actual gas price is intimated to it, so expect further momentum only post Q2FY15 on this segment.
Shale gas: gaining material scale: Volumes from the shale gas business (net to RIL) increased 27% y-o-y and 10% q-o-q, due to more aggressive fracking at Pioneer JV and higher volumes from the Chevron JV. Muted gas prices q-o-q, coupled with flat NGL (natural gas liquids)/condensate prices meant that revenue/Ebitda from this segment was flat on a q-o-q basis. We value the segment at R60/share or $2.9 bn.
Valuations & view: RIL remains on track to reverse the last three years track record of stagnant earnings and moderating return ratios over FY15-17e, via the $12 bn downstream expansion and improving regulatory environment. RIL now trades at attractive multiples of 12x EPS and 8.5x FY16e Ebitda. Reiterate Outperformer
(Source: The Financial Express, July 28, 2014)
KUWAIT EYES PIE IN IOC PARADIP REFINERY
New Delhi: Oil-rich Kuwait is in talks with Indian Oil Corporation (IOC) to invest in its Paradip refinery project.
Sources said the Gulf nation was also keen on picking up a stake in the proposed petrochemical project.
“We are discussing details of their (Kuwait Petroleum Corp) participation, whether they are interested in taking a stake in the refinery or in the petrochemical project or both is what we are discussing now,” a senior IOC official said.
However, Kuwait wants to sign an exclusive crude supply agreement with IOC for 10 years. Besides, the amount of stake to be picked up by Kuwait Petroleum Corp may prove to be a stumbling block.
“If the equity participation is subject to the refinery buying all or most of its crude oil requirement from Kuwait, that will be a big no-no from us as we don’t want to tie ourselves down to just one supplier,” the official added.
The official said the state-owned company did not want to part with more than a 26 per cent stake in the project, while the Gulf nation was eyeing a larger stake.
The 15-million-tonne (mt) refinery is expected to start commercial production by the end of this year.
The project cost has escalated to Rs 37,000 crore because of delays in implementation resulting from law and order problem, environment issues and the Phailin cyclone that struck Odisha in October last year.
The refinery will be able to process the toughest, heaviest and dirtiest crude such as Maya from Mexico, which is cheaper than the cleaner and more easily processed varieties available in West Asia.
IOC is also firming up plans for the second phase of the project involving an investment of Rs 7,650 crore. It is planning to set up a polypropylene unit with a capacity of 0.7mt per annum at a cost of around Rs 3,150 crore. The project is expected to be complete by 2017-18.
The PSU also plans to set up an ethylene derivatives complex at an investment of Rs 4,500 crore and is conducting a feasibility study. The project is expected to come up by 2019-20. The refining capacity of state-owned companies will increase 37 per cent to 185.3mt by 2016-17, following the expansion of units and the commissioning of the Paradip refinery.
At present, PSU refiners own 19 refineries with a total capacity of 135mt. IOC is the market leader, with seven refineries and a capacity of 54.2mt.
The International Energy Agency has projected a widening gap between India’s oil demand and supply. It said the demand reached nearly 3.7 million barrels per day (bpd) in 2013 compared with less than 1 million bpd of total production.
“India’s demand will more than double to 8.2 million bpd by 2040, while domestic production will remain relatively flat at around 1 million bpd,” it said.
(Source: Telegraph July 28, 2014)
NEW DELHI OWES TEHRAN $4.6 BILLION FOR OIL IMPORTS
NEW DELHI: India paid a third and final instalment of $550 million to Iran on Thursday, three industry sources said, part of the frozen funds released to Tehran in the interim deal with world powers. Under a pact reached in November, Iran won access to $4.2 billion in oil revenues held by its buyers, to be paid out in eight money transfers through July. The payments were linked to Iran carrying continuous reduction in its nuclear activities. Iran and six world powers have now agreed to extend the November deal another four months, after failing to reach a final agreement before a July 20 deadline. The extension allows Tehran access to another $2.8 billion in frozen oil monies.
Five Indian refiners — Mangalore Refinery and Petrochemicals Ltd, Essar Oil, Indian Oil Corp, Hindustan Petroleum Corp and HPCL-Mittal Energy Ltd (HMEL) — have partly paid money owed for crude imports in the previous two instalments. Of the total of about $4.6 billion the refiners owe Iran as of May 31, they have paid $1.65 billion by taking the last three of the eight payment slots scheduled in the November deal. In the latest round of payments, HMEL, part owned by steel tycoon L. N. Mittal, did not make its payment due to exchange rate fluctuations, the sources said. That lead to a higher payout by the other four. “HMEL shall not be participating in this payment process whereby exchange losses are being imposed upon HMEL contrary to commercial understanding,” the company said to the oil ministry earlier this month in a letter seen by Reuters.
HMEL as a policy does not comment on its crude sourcing or matters associated with it, a spokeswoman for the company said, replying to an email seeking comments. Essar Oil cleared dues of $240 million, followed by $236 million by MRPL, $67 million by IOC and $7 million by HPCL, which also has a stake in HMEL, the sources said. HMEL was due to pay money owed for 4 million barrels of oil imported from Iran in 2012. Since then, however, the Indian rupee has weakened, and the fluctuation would increase its cost by about 10 percent, the company said in the letter. India, which imports a total of 4 million barrels per day of oil, has been steadily reducing its dependence on Iran. Over the last five years to the fiscal year ended this past March 31, Iran’s share of India’s crude imports has fallen by two-thirds to 5.8 percent.
However, in the January-June period for this year its crude imports from Iran rose by a third compared to a year ago, data from trade sources showed. China and India both started raising their oil imports from Iran after the interim deal was reach in November.
(Source: Arab Times, July 28, 2014)
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