Mumbai: State-run Hindustan Petroleum Corporation Limited may go solo on its plans to build its second underground liquefied petroleum gas (LPG) storage facility in Mangalore.
The company which was planning to rope in Total SA of France, to build the cavern jointly, said Total is not interested at present and may join the company at a later stage.
“We see merit in the project and have decided to go ahead. We will commission the detailed feasibility report shortly and then call for tenders in the next four-six months,” said a senior HPCL official.
The cavern, will cost HPCL Rs 700 crore and will store 60,000 tonnes of LPG. HPCL and Total, through their equal joint venture, South Asia LPG (SALPG), already have a 60,000-tonne capacity LPG underground storage facility in Visakhapatnam, Andhra Pradesh. The facility was commenced in 2007 at an investment of Rs 333 crore.
HPCL on its website says its cavern at Visakhapatnam has been dug in rock to store LPG. The storage facility is made up of two caverns of 19 metres height, 20 metres base width and 160 metres in length with interconnections. The cavern is designed on “water containment principle” and is jacketed with water curtain. Besides being safe from natural calamities and hazards like sabotage, and aerial bombings, the caverns are leak and fireproof.
The HPCL official said that looking at the growing demand for LPG in the country, a new cavern made commercial sense. The facility would be exclusively used by HPCL.
HPCL plans to complete the project in the next four years. “We plan to begin construction by next year as it will take three years to construct the facility. We have kept the option open for Total if it wishes to join us later in the process,” the official added.
According to HPCL, given the demand for LPG, importing in large quantity would make more sense than importing in smaller capacity. Of the three oil marketing companies, Indian Oil Corp Ltd holds 48% of LPG market share. Bharat Petroleum Corp Ltd and HPCL’s market share stands at 26% each.
According to data from the petroleum planning and analysis cell, India consumed 16.3 million tonnes of LPG in 2013-14 against 15.6 million tonnes, an increase of 4.7%.
(Source: Business Standard July 30, 2014)
OIL MINISTRY SETS RIDER TO EXTEND CAIRN CONTRACT
NEW DELHI: Anil Agarwal’s Vedanta Group is heading for a fresh showdown with the government as the oil ministry says the state’s share of oil from the Rajasthan block should rise if Cairn India wants to extend its contract for the block for 10 years.
State-run behemoth ONGC, which prevailed over Cairn India in a dispute over royalty payments, is also demanding its pound of flesh and said its 30% stake in the block should increase significantly — up to 50%. ONGC holds the exploration and production licence for the block, and will be able to seize control of the entire block if Cairn’s contract is not extended.
The 25-year contract of Cairn’s Rajasthan block lapses in 2020, but the issue is vital for the entire exploration sector as the government’s decision will set the precedence for how other companies would be treated after their contracts expire. Exploration firms say oil and gas fields need thousands of crores of investment, which cannot be planned without clarity on this matter.
One official said the company has written to the oil ministry and argued that its production sharing contract (PSC) allows “unconditional” extension for five years in case of an oilfield and 10 years if the block produces gas in commercial quantities. ACairn India spokesman said the company has sought an extension and is pursuing the matter actively with the relevant authorities.
“Our Rajasthan Production Sharing Contract clearly allows for an extension for a period of 10 years, if we have a commercial gas production. We are currently selling gas from the block and the discovered resources itself will allow gas sales to continue right up to 2030 and then beyond that. The Rajasthan block has a significant natural gas potential and Cairn India is actively pursuing the natural gas development project in Rajasthan. In light of our growing confidence in our gas resource base we are positive of a decision in the interest of national energy security,” he said in an emailed response to ET’s query.
Oil ministry officials said “in-principle” they do not have any problem in granting a five-year extension to Cairn for the Rajasthan oilfield, which is as per the PSC, but beyond that the company would have to renegotiate the profit petroleum. “PSC says that extension is subject to mutually agreed terms, which allows parties to renegotiate.
The private sector has a different perspective. “The period of extension should be the period of the economic life of the field. Contractor should be allowed to determine the economic life of the field. In case of any disagreement, the economic life of the field should be as determined by an independent expert,” an executive in a private exploration firm said.
(Source: The Economic Times, July 30, 2014)
AP GOVT GIVES NOD TO LNG TERMINAL AT GANGAVARAM PORT
HYDERABAD: The Andhra Pradesh government has given its nod for setting up the LNG Terminal by Petronet LNG Ltd at Gangavaram Port on the East Coast near Visakhapatnam.
However, it has refused Gangavaram Port’s proposal to collect the water front charges at the rate of Rs 103.68 per metric tonne of LNG cargo handled from Petronet.
Petronet is a Joint Venture set up by GAIL (India) Ltd ONGC, Indian Oil Corporation Ltd and Bharat Petroleum Corporation Ltd to import LNG and set up LNG terminals in the country with an authorised capital is Rs 1,200 crore (USD 240 million).
Gangavaram Port Ltd along with PLL has proposed to construct and operate a 5 MMTPA LNG Terminal with a provision to expand further to 10 MMTPA.
The JV company will have equity contributions from PLL (76 per cent) Gangavaram Port Ltd (8 per cent) and other parties such as prospective LNG suppliers/buyers or any strategic investor.
PLL will be the majority share holder and will have complete management control over the JV Company.
According to a government order issued yesterday, the Gangavaram Port Ltd will submit to the government the Detailed Project Report that was submitted to the lenders for achieving Financial Closure and ensure financial sustainability of the project.
“Government after detailed examination of the proposal in consultation with Law and Finance Departments and keeping in view the recommendations of the Empowered Group of Ministers, hereby accord approval to M/s Gangavaram Port Limited, Visakhapatnam District for establishing LNG Terminal at Gangavaram Port,” the order said.
(Source: The Economic Times, July 30, 2014)
COMMITTEE OF SECRETARIES APPROVES GAS POLICY REJIG; CITY GAS FIRMS LIKE INDRAPRASTHA GAS TO GET PRIORITY
NEW DELHI: A Committee of Secretaries has approved a rejig of natural gas allocation policy, giving city gas distribution firms like Indraprastha Gas Ltd top priority for allocation of domestically produced fuel.
The CoS approved a proposal of Oil Ministry for changes in priority ranking for gas allocation, official sources said. The issue will now go to the Cabinet Committee on Economic Affairs ( CCEA) for final approval.
At present, urea-manufacturing fertiliser plants have the first right over the domestically produced gas, followed by liquefied petroleum gas (LPG) plants and power stations. City gas distribution (CGD) projects are ranked fourth in the priority list.
The CoS agreed to change this priority listing to give CGD firms like IGL, which sells CNG to automobiles and piped gas to households in the national capital, top priority, they said.
CGD firms like IGL currently get 8.32 million standard cubic meters per day of gas out of total domestic supplies of about 77 mmscmd.
As city gas projects get rolled out in new cities, the requirement of the sector will grow and so the government is now giving it top priority.
Sources said compressed natural gas (CNG) and piped natural gas (PNG) are clean fuels and will help replace subsidised diesel in automobiles and LPG in households respectively.
According to the new allocation policy, additional requirement for CGD will be first met by imposing proportionate cuts in the domestic gas presently being supplied to sectors other than priority sectors as decided by the Oil Ministry.
Plants providing inputs to strategic sectors of atomic energy and space research will get the second priority, followed by plants that can extract higher fractions from natural gas.
Gas-based urea plants will rank fourth in the priority list and power stations fifth.
Since domestic gas production is now stagnant, it is being proposed to freeze allocation to all sectors expect CGD and LPG sector, at supply levels of 2013-14.
In 2013-14, fertiliser plants received 29.79 mmscmd of gas. Power plants got 25.59 mmscmd while LPG extraction plants received 1.83 mmscmd. Petrochemical plants received 3.32 mmscmd while refineries got 1.89 mmscmd and steel plants 1.32 mmscmd.
Sources said incremental production from NELP blocks like KG-D6 and Gujarat State Petroleum Corp’s (GSPC) Deendayal gas will be allocated as per the decision taken in the meeting of an Empowered Group of Ministers (EGoM) on August 23, 2013.
The EGoM had decided that incremental gas would go to power plants.
The requirement of CGD project is quite small compared to power and fertiliser sectors and can be met through proportionate cuts, they said.
(Source: The Economic Times, July 29, 2014)
CENTRE CALLS MEETING WITH STATES ON DIESEL PRICE
NEW DELHI: With state specific levies adding up to Rs 7 a litre in price of diesel, the Centre has called a meeting with 12 states with the highest incidence of taxes like octroi and entry tax, to impress upon them to cut these duties and bring down prices.
A litre of diesel in Delhi costs Rs 57.84 while in Mumbai it costs Rs 66.01 and in rest of Maharashtra Rs 65.99. This difference is primarily because of higher local sales tax or VAT and levy of state specific taxes like octroi and entry tax on the fuel.
Carrying Prime Minister Narendra Modi’s governance model of federal cooperativism where states are equal partners with the Centre, the Petroleum Ministry on instructions from Oil Minister Dharmendra Pradhan, has initiated the consultation process with the states, a top official said.
The ministry on July 9 wrote to the state governments on the issue and has now called a meeting with the states to impress upon them on the need for a uniform taxation policy and doing away with state specific multiple levies, he said.
A meeting has been called with concerned officials from six states of Assam, Bihar, Haryana, Karnataka, Uttarakhand and Kerala on July 30/31. A similar meeting with officials from Maharashtra, Madhya Pradesh, Rajasthan, Tamil Nadu, West Bengal and Uttar Pradesh has been scheduled for August 5-6. “State specific levies add up in the price of petrol and diesel and this is borne by the consumers. For example, in some cities of Maharashtra, state specific multiple levies add between Rs 4 and 7 in the price of diesel,” he said.
Diesel in West Bengal costs Rs 62.64 while the same is priced at Rs 61.70 in Tamil Nadu. In Madhya Pradesh it costs Rs 63.94, Rs 62.21 in Uttarakhand, Rs 63.25 in Uttar Pradesh, Rs 62.85 in Karnataka and Rs 63.04 in Andhra Pradesh.
Similarly, petrol in Delhi costs Rs 73.54 while in Mumbai it costs Rs 81.68 and the rest of Maharashtra Rs 82.16.
“Our experience has showed that states with these levies have seen sales volumes shift to neighbouring state with no or lower rate of taxes,” the official said.
If states do away with these levies, price of petrol and diesel in those places will fall, benefiting local population.
“The new government is of the belief that consumer interest is supreme and policies should be woven around them. States often see levy of taxes on petroleum products as a short-cut to filling revenue gap but if the volumes shift to neighbouring states, then they are the ultimate loser,” he said.
(Source: The Economic Times, July 29, 2014)
LPG CONNECTIONS: OIL MINISTRY, NSSO ESTIMATES DIFFER BY 7 CRORE
New Delhi: The oil ministry’s claim that there are about 16 crore live LPG connections in the country is far higher than the picture that comes from another government agency.
Numbers estimated from the National Sample Survey Organisation under the ministry of statistics shows the actual number of LPG connections in India are possibly much less at just above 9 crore.
The ministry numbers have been worked out by adding the records available with the public sector oil companies. These in turn are provided by the oil dealers spread across the country from their registers. But the NSSO data from the latest 68th round of national sample survey is far more conservative.
It shows that of the total urban households in India, 71 per cent own an LPG connection. Similarly the same data shows “21 per cent in rural areas reported consumption of LPG for household use during the last 30 days”. Since the number of households in urban India again as per NSSO data, is 78.87 million and that for rural areas is 167.83 million, this puts the number of LPG owning families at 90.6 million or 9 crore. The data is for the period 2011-12, but even assuming for a growth rate since then, the chasm between 9 and 16 crore seems too far to bridge.
The data provides an enormous opportunity for the government to cut down on its annual subsidy bill and one that does not require raising the prices of subsidised cylinders. The requirement of each of these 9 crore families is for 12 cylinders annually as various government estimates have shown. At the current price of Rs 414 per subsidised cylinder the annual cost will work out to Rs 44,712 crore while the government is paying over Rs 79,488 crore for the ghost bill. The difference can provide a saving of Rs 34,776 crore to finance minister Arun Jaitley in fiscal 2014-15 itself.
According to Pronab Sen, former chief statistician of India, the numbers show there is enormous scope for savings within the government allocation. “To me this indicates there is a problem in the oil ministry numbers of over allocation but not necessarily an institutional fraud”.
Sen said there is obviously a good percentage of the connections that does not require 12 cylinders, even more than what the government estimates. These are the ones where there could be leakage through collusion between the suppliers and those who have the connections. This means the political cost could become even easier for the government to handle since it would not mean having to cut down real connections. According to estimates of the oil ministry released in May, the subsidy on account of LPG was Rs 46,458 crore in FY14 which is about 32 per cent of the annual subsidy bill.
(Source: Indian Express July 30, 2014)
CENTRE CALLS MEETING WITH STATES ON DIESEL PRICE
New Delhi: With State specific levies adding up to Rs 7 a litre in price of diesel, the Centre has called a meeting with 12 States with the highest incidence of taxes like octroi and entry tax, to impress upon them to cut these duties and bring down prices.
A litre of diesel in Delhi costs Rs 57.84 while in Mumbai it costs Rs 66.01 and in rest of Maharashtra Rs 65.99. This difference is primarily because of higher local sales tax or VAT and levy of State specific taxes like octroi and entry tax on the fuel.
Carrying Prime Minister Narendra Modi’s governance model of federal cooperativism where states are equal partners with the Centre, the Petroleum Ministry on instructions from Oil Minister Dharmendra Pradhan, has initiated the consultation process with the states, a top official said.
The ministry on July 9 wrote to the State Governments on the issue and has now called a meeting with the states to impress upon them on the need for a uniform taxation policy and doing away with state specific multiple levies, he said.
(Source: Pioneer July 30, 2014)
COMPANIES APPROVES REJIG OF GAS POLICY, CITY GAS TO GET TOP PRIORITY
New Delhi: A Committee of Secretaries has approved a rejig of natural gas allocation policy, giving city gas distribution firms like Indraprastha Gas Ltd top priority for allocation of domestically produced fuel.
The CoS approved a proposal of Oil Ministry for changes in priority ranking for gas allocation, official sources said. The issue will now go to the Cabinet Committee on Economic Affairs (CCEA) for final approval.
At present, urea-manufacturing fertiliser plants have the first right over the domestically produced gas, followed by liquefied petroleum gas (LPG) plants and power stations. City gas distribution (CGD) projects are ranked fourth in the priority list.
The CoS agreed to change this priority listing to give CGD firms like IGL, which sells CNG to automobiles and piped gas to households in the national capital, top priority, they said.
CGD firms like IGL currently get 8.32 million standard cubic meters per day of gas out of total domestic supplies of about 77 mmscmd. As city gas projects get rolled out in new cities, the requirement of the sector will grow and so the government is now giving it top priority.
Sources said compressed natural gas (CNG) and piped natural gas (PNG) are clean fuels and will help replace subsidised diesel in automobiles and LPG in households respectively.
According to the new allocation policy, additional requirement for CGD will be first met by imposing proportionate cuts in the domestic gas presently being supplied to sectors other than priority sectors as decided by the Oil Ministry.Plants providing inputs to strategic sectors of atomic energy and space research will get the second priority, followed by plants that can extract higher fractions from natural gas.
(Source: Pioneer July 30, 2014)
RS 4,500-CRORE PETRONET LNG TERMINAL AT GANGAVARAM PORT GETS AP GOVT NoD
HYDERABAD: However, it has refused Gangavaram Port’s proposal to collect the water front charges at the rate of Rs 103.68 per metric tonne of LNG cargo handled from Petronet.
Petronet is a Joint Venture set up by GAIL (India) Ltd ONGC, Indian Oil Corporation Ltd and Bharat Petroleum Corporation Ltd to import LNG and set up LNG terminals in the country with an authorised capital is Rs 1,200 crore ($240 million). Gangavaram Port Ltd along with PLL has proposed to construct and operate a 5 MMTPA LNG Terminal with a provision to expand further to 10 MMTPA.
The JV company will have equity contributions from PLL (76 per cent) Gangavaram Port Ltd (8 per cent) and other parties such as prospective LNG suppliers/buyers or any strategic investor. PLL will be the majority share holder and will have complete management control over the JV Company.
According to a government order issued on Monday, the Gangavaram Port Ltd will submit to the government the Detailed Project Report that was submitted to the lenders for achieving Financial Closure and ensure financial sustainability of the project.
‘Government after detailed examination of the proposal in consultation with Law and Finance Departments and keeping in view the recommendations of the Empowered Group of Ministers, hereby accord approval to M/s Gangavaram Port Limited, Visakhapatnam District for establishing LNG Terminal at Gangavaram Port,’ the order said.
However, the order clarified: ‘The Gangavaram Port Ltd shall not collect water front charges as proposed by them in the Term Sheet Agreement. The Gangavaram Port Ltd may collect Port Service Charges as provided in the Concession Agreement.’
As per the agreement between PLL and Gangavaram Port, the LNG Terminal is likely to be operational by the end of 2016.
The LNG Terminal is expected to contribute immensely to the economic development of the region by providing additional and lower cost alternate fuel to various sectors such as refinery, power, fertiliser and transport which in-turn would result in the substantial downstream investments in these sectors.
The terminal will be set up at the cost of Rs 4,500 crore with an initial capacity of 5 million tonne per annum, which will be later increased to 10 million tonne.
(Source: Millennium Post July 30, 2014)
RAJASTHAN HIRES CONSULTANCY FIRM TO REVIEW OIL REFINERY STAKE
Jaipur: To review Rajasthan’s share of equity with the HPCL in Rs 37,230 crore oil refinery, the ruling BJP government today told the house that a “consultancy firm” has been hired to review the financial aspects of the oil refinery and petrochemical plant.
The plant’s foundation stone was laid by the former UPA chairperson Sonia Gandhi at Pachpadra in Barmer district in September last year.
Replying on the demands of grants on mining and industry after five hours of debate, minister-incharge R S Rathore said after giving free land, interest less loan of Rs 56,000 crore for fifteen years to HPCL to build the oil refinery-cum-petrochemical project of Rs 37,230 crore, it would give just 26 per cent of equity to the state.
Thus, the state government hired the consultancy firm to review and propose new financial aspect of the oil refinery, Rathore, who is also Parliamentary Minister, said.
Interrupting him, an Independent MLA M C Surana informed the house that there were reports that HPCL was ready to pay 50 per cent share in the business, on which Rathore said, “Wait, more will come out”.
Quoting recent figures of Cairn oil exploring targets, Rathore claimed that Rajasthan had got plenty of not only crude oil reserves but also gas reserves as Barmer-Jaisalmer basin would touch the production of 7.0 billion barrels from 4.6 billion barrels.
Based on geological formations, Cairn also spotted new crude oil reserves in Fatehgarh, Dharvi-Dungar, and Barmer Hill (names coined in geological survey), the minister-incharge said, adding Cairn also found gas reserves of one trillion cubic feet.
(Source: Business Standard July 30, 2014)
GAIL TIES UP WITH JAPANESE COMPANY
NEW DELHI: Public sector gas major GAIL ( India) Limited has roped in Sumitomo Corporation of Japan to help expand its global footprint.
B. C. Tripathi, Chairman and Managing Director of GAIL ( India) Limited, said the company has signed an MoU with Sumitomo to pursue business opportunities in natural gas and LNG value chain business globally which will cover cooperation in petrochemicals, natural gas procurement, pipelines and LNG. Tripathi said, “ We are happy to enter into this strategic relationship with Sumitomo with whom we are long- term partners in Cove Point project. There are significant opportunities in the North American gas markets and we are pleased to be partnering with Sumitomo in jointly developing this business.” spanning E& P, LNG, pipelines, LPG, petrochemicals, city gas distribution, among others.
In the US, GAIL has a wholly- owned subsidiary, GAIL Global ( USA) Inc, which has acquired stake in Eagle Ford shale acreage. GAIL also has long- term LNG contracts with Sabine Pass and Cove Point terminal for import of 5.8 MMTPA of LNG . GAIL and Sumitomo hold half of the capacity in the Cove Point LNG Sumitomo is one of the world’s leading fully- integrated trading and investing enterprises headquartered in Tokyo, Japan.
Apart from its role as an international trader, Sumitomo is an active investor in a diverse range of businesses such as metal, mineral resources, energy, chemical, among others. Sumitomo’s subsidiary, Pacific Summit Energy LLC, is a significant player in natural gas trading and marketing ( physical and financial) in the US. Sumitomo has also invested in shale gas/ tight oil assets in that country.
The United States, followed by Canada, leads the world in producing natural gas from shale formations.
Shale gas, which has emerged as game changer in the world energy market, accounts for as much as 40 per cent of the total output of natural gas in the US.
(Source: Mail Today, July 30, 2014)
GAIL ANNOUNCES ADDITIONAL RS 5 LAKH FOR NAGARAM BLAST INJURED
RAJAHMUNDRY: A month after the gas pipeline explosion in the Nagaram village that claimed 21 lives, GAIL has announced to give an additional compensation of Rs 5 lakh to the injured.
In a meeting held yesterday at the office of East Godavari district collector Neetu Prasad, GAIL Executive Director (Human Resources) Amit Kumar Ray and Executive Director (Operation and Management) E S Ranganathan accepted the victims demand to pay an additional of Rs 5 lakh compensation to the injured, according to an official release issued by the district collector’s office today.
The state-owned gas utility had disbursed amount of Rs 25 lakh to the family of the deceased and Rs 5 lakh to injured, as announced by the Andhra Pradesh government, soon after the incident which took place on June 27.
The officials, also accepted the proposal to pay Rs 5 lakh each for 16 houses that were completely destroyed in the blast, for re-construction.
The authorities said they would also conduct a survey of the affected homes with help of experts of JNU, New Delhi.
Regarding compensation of the damaged coconut fields and crop, an additional of Rs 2,000 would be given to farmers for the damage for cultivation of new crop. Farmers, were earlier given a compensation of Rs 6,000 each for the damage.
A survey would also be undertaken by the Horticulture department.
A compensation of Rs 15,000 per acre for a year, where coconut plant cultivation was completely damaged with no scope of further cultivation, would be given to the affected families. A sum of Rs 1.20 lakh would also be paid to them for next eight years for the severe damage caused.
The GAIL authorities also said after the through enquiry of Horticultural Department, compensation would be paid to mango and paddy cultivating families, release said.
Employment would be provided to the family members of the deceased and vocational training be given to members of the injured.
Following the meeting, members of the affected families have declared to call off their agitation from today, it said.
(Source: The Economic Times, July 30, 2014)
INDIAN OIL OFFERS DAHEJ CARGO AFTER LONG ABSENCE
SINGAPORE: Indian Oil Corp (IOC) offered 35,000 to 40,000 tonnes of naphtha for Aug. 14-16 loading from Dahej, traders said on Tuesday, making this its first offer since it sold a cargo for January loading from the same port, Reuters data showed.
IOC used to regularly export naphtha from ports including Dahej, Kandla, Chennai, but the exports became irregular as the refiner had maintenance lined up this year at several plants including Koyali, Manali and Panipat, which may have affected its output.
Between January and June 2013, IOC sold a monthly average of 107,000 tonnes, lifting from various ports, versus 40,000 tonnes during the same period this year.
It is currently looking to sell the Dahej cargo through a tender which will close on Aug. 31.
India’s overall naphtha exports have been low since the start of this year, falling mostly below 600,000 tonnes, with the exception of July where levels hit about 700,000 tonnes.
This added to the recent naphtha supply woes as strong gasoline demand soaked up a lot of the light fuel. Naphtha can be reformed into gasoline or used as a blend stock for motor fuel, apart from being used in the petrochemical sector.
But traders expect the tight naphtha supply situation to ease as the peak demand season for gasoline has tailed off with the Muslim fasting month having come to an end.
(Source: The Economic Times, July 30, 2014)
GAIL TENDERS FOR UP TO 8 LNG CARGOES IN 2015
MILAN: Gail has launched a tender to buy up to eight liquefied natural gas (LNG) cargoes from Jan-Dec 2015, mainly unloading at its western Dabhol terminal, the tender document seen by Reuters showed. Gail is seeking the cargoes on a delivered-ex-ship basis, the document said, meaning they would be delivered to the buyer.
During the monsoon months of May-September, cargoes will be unloaded at the Dahej or Hazira import terminals in Gujarat state, the document said. The deadline for offers is Aug. 14, it said.
(Source: The Economic Times, July 29, 2014)
BPCL OFFERS Q4 CARGOES FROM MUMBAI
SINGAPORE: Bharat Petroleum Corp Ltd (BPCL) has offered a total of 105,000 tonnes of naphtha for fourth-quarter lifting from Mumbai, about 8 percent lower in volumes compared to what it had sold for the third quarter, traders said on Tuesday.
BPCL is offering a 35,000-tonne cargo from Mumbai every month from October to December through a tender closing on Aug. 5, but this comes at a time when tight naphtha supplies are expected to ease as peak gasoline demand comes to an end with the Muslim fasting month having ended.
Naphtha can be reformed into gasoline or be used as a blend stock for motor fuel, apart from being cracked into petrochemical products.
The state-owned refiner currently has an existing term for July to September cargoes lifting from Mumbai with Idemitsu. It also has a contract with Unipec for cargoes lifting July to October, but from Kochi.
BPCL used to export spot naphtha regularly from Kochi and Mumbai but is now mostly tying up cargoes from the two ports through quarterly tenders.
(Source: The Economic Times, July 29, 2014)
VEDANTA RESOURCES SAYS $1.25 BILLION LOAN FROM CAIRN INDIA WIN-WIN FOR BOTH
NEW DELHI: Vedanta Resources today attempted to play down the Cairn India $ 1.25 billion loan issue, saying the move is a win-win for both the firms and was done following existing rules and regulations.
Creating concern among investors, Cairn India loaned out $ 1.25 billion to parent Vedanta Resources and has already disbursed $ 800 million at an interest rate of three per cent above LIBOR for a period of two years.
“This was a very cordial transaction consistent with all of the rules and regulations including effectively giving the Cairn shareholders the higher returns for their investment and it was done in a way which was in compliance with all forms of governance and ethics,” Vedanta Resources CEO Tom Albanese told PTI.
Vedanta Group holds 59.90 per cent stake in Cairn India. He said Cairn India’s recent success in exploration, particularly with gas, and the amount of cash required for its future operations were well serviced by its existing balance sheet.
“So, there will be a component to its balance sheet, which basically was not getting good returns on its investments,” he said, adding that Cairn India would not have got better returns anywhere else on similar terms with the funds.
Likewise for Sesa Sterlite, it was a good deal since it would not get an “equivalent” amount of debt at “such a competitive rate” externally, he added.
In its earnings statement, Sesa Sterlite today said its wholly owned subsidiary, which got $ 800 million loan disbursement till June 30, has repaid all of the accrued interest and a part of the principal of the inter-company debt extended from Vedanta Resources to Sesa Sterlite.
Shares of Cairn India on July 24 dropped the most in nearly five years after the transaction came to light. Cairn made the loan disclosure after analysts raised doubts on utilisation of cash reserves.
Analysts were of the view that the if Cairn did not have a better usage of its cash, it should have rewarded its shareholders buy way of bonus etc.
“While management justified it as just a treasury operation given a relatively higher yield (LIBOR + 300bps), we believe returning surplus cash to investors through a dividend payout or buy-back would have been a better utilisation,” foreign brokerage Jefferies said in a note.
Proxy advisory firm InGovern Research Services said not making proper disclosures about such related party transaction shows “disregard for fair disclosures” and suggested that the capital market watchdog Sebi should look into the matter.
Under the new Companies Act which came into effect from April 1, companies need to take shareholder nod for related party transactions.
Cairn India, however, had earlier said that this being a related party transaction, prior approval of Audit Committee was taken and the transaction has been effected on arm’s length principal.
(Source: The Economic Times, July 30, 2014)
BP POSTS JUMP IN PROFIT BUT WARNS OF SANCTIONS IMPACT
LONDON: Oil and gas producer BP reported a sharp rise in second quarter profits on Tuesday but warned that further Western sanctions on Russia could harm its business there and its relationship with Russian state oil company Rosneft.
BP said that to date, the sanctions had not had a significant effect on its business in Russia, where it makes about a third of its crude oil output, but that could change. “If further international sanctions are imposed on Rosneft or new sanctions are imposed on Russia or other Russian individuals or entities, this could have a material adverse impact on our relationship with and investment in Rosneft, our business and strategic objectives in Russia and our financial position and results of operations,” it said.
BP, by far the largest foreign investor in Russia through its 19.75% stake in Rosneft, has repeatedly said it will stand by its investments in Russia since Moscow’s intervention in Ukraine, where pro-Russian rebels are fighting government forces in the east of the country.
BP is not the first to make such a warning. Last week French oil services firm Technip cut margin targets for its onshore/offshore unit for this year and next.
For the second quarter, BP said underlying replacement cost profit rose to $3.6 billion, up 36% from a year earlier.
Its share of profits from Rosneft topped $1 billion in the quarter, nearly five times higher than a year earlier as a result of “favourable foreign exchange effects” with the Russian rouble. It also received an annual dividend of $690 million from Rosneft in the last two weeks.
Pfizer, which in May officially abandoned its bid to buy British rival AstraZeneca, reported higher-than-expected second-quarter revenue, helped by growing demand for its cancer medicines. The largest US drugmaker on Tuesday said it had earned $2.91 billion, or 45 cents per share. That compared with $14.1 billion, or $1.98 per share, a year earlier, when Pfizer received more than $10 billion in proceeds from the spinoff of its animal health business into a new publicly traded company, Zoetis. Excluding special items, Pfizer earned 58 cents per share. Sales fell 2% to $12.77 billion, hurt by declines for generic medicines that Pfizer calls established products, but they exceeded Wall Street expectations of $12.46 billion. Pfizer stuck to its prior earnings forecast of $2.20 to $2.30 per share for the full year.
(Source: The Financial Express, July 30, 2014)
ESSAR REVAMPS FOREIGN BIZ
Mumbai: The Essar group is putting more money into its two struggling units in North America, cutting costs in its Stanlow refinery and has sold a part of its outsourcing business for $610 million.
On July 16, the Essar group announced it would add $300 million more into new equity of its US-based steel company, Algoma, including $100 million before financial restructuring is approved by a bankruptcy court. The infusion comes within months of the group investing $150 million in Trinity Coal, which helped the company emerge from bankruptcy.
“The fund infusion by the promoters will help these companies to continue operations,” said a Mumbai-based banker who did not wish to be named.
Algoma blamed the US economic downturn, severe weather disruptions, raw material prices and a rise in pension costs while filing for bankruptcy protection. The company listed liabilities of more than $1 billion, according to Bloomberg.
The Algoma restructuring comes within four months of Trinity Coal, with mines in Kentucky and West Virginia, announcing it had resolved $325 million of claims. After putting in $150 million, Essar reorganised the company’s equity, helping it to emerge from bankruptcy protection sought last February. Essar had bought Trinity Coal from Denham Capital in 2010 for $600 million.
“There is no impact on any employee, pension or trade obligation of Algoma beyond the senior unsecured note-holders. This agreement provides for a comprehensive capital infusion, a substantial deleveraging of our balance sheet and the refinancing of all of Algoma’s senior secured debt,” an Algoma spokesperson said.
The spokesperson said Algoma had not commenced insolvency proceedings in Canada or the US. Because Algoma’s debt was issued under US laws, the company had been granted protection from creditors in the US under Chapter 15 of the US bankruptcy code, the spokesperson added.
The purpose of the Chapter 15 proceedings was to recognise and give effect under US laws to consensual restructuring of Algoma’s debt in Canada, the spokesperson said.
Essar also announced on July 22 it would shed a third of its capacity at its UK oil refinery to 195,000 barrels a day by October. International media reports said the group would cut 1,000 jobs at Stanlow, but Essar executives who did not wish to be named said the cuts would not be more than 100. The executives said the Stanlow refinery was not for sale after Reuters reported on June 11 the company would be sold off for $500-600 million. Essar had bought the refinery from Shell for $350 million in 2011. By mothballing the unit, the company will be able to reduce overcapacity that has reduced profit margins in Europe.
(Source: Business Standard July 30, 2014)
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