BPCL PLANS OVER RS 16K-CRORE ASSAM REFINERY EXPANSION

NEW DELHI: State-run oil refiner-marketer Bharat Petroleum Corporation Ltd has drawn up plans to ramp up the capacity of its refinery at Numaligarh in Assam’s Golaghat district from three million tonnes per annum to nine million tonnes at an investment of Rs 16,600 crore.

The project includes laying a 1,350-km pipeline to bring in crude from a port on the east coast. While the refinery expansion would cost about Rs 8,800 crore, the remaining investment is expected to go into laying the pipeline and other assorted facilities.

Company sources said the project would mark the single-largest investment in Assam and boost economic activities in the north-east as well as unlock potential for exporting fuels to India’s eastern neighbourhood. Government consultancy firm Engineers India Ltd is preparing the feasibility report for the project and the pipeline. The BPCL board has discussed the plan but a final call would be taken after the project report and other paperworks are completed.

But, Bharat Petroleum wants 53% of capital subsidy on the Rs 8,800 crore to be spent on the refinery expansion and extension of excise duty concession on the expanded capacity as a cushion against geographical, infrastructure and political difficulties in execution of the project.

The company has approached the oil ministry for the relief measures. It has cited the example of Brahmaputra Cracker and Polymer Ltd, a joint venture with gas utility GAIL, which has been granted similar subsidy. The polymer project was drawn up as part of UPA government’s initiative for the north-east.

It has further argued that all refineries built during the last decade were granted financial relief by the Centre and the respective state governments. Besides, the construction and operation of the expanded capacity and the pipeline would create infrastructure and sources of livelihood for local population.

The present capacity of three million tonnes per annum of the Numaligarh refinery is considered too small to ensure efficient operations. Though the refinery is capable of running at 3.3 million tonnes per annum, it operates at only 2.5 million tonnes due to short supply of crude from Oil India Ltd.

A capacity of nine million tonnes would ensure inclusion of facilities, with latest technology, to produce more products and better quality of fuels required for meeting more stringent vehicle emission norms.

(Source: The Economic Times, August 9, 2014)

EXPECT NEW POLICY FOR PETROLEUM & NATURAL GAS SECTOR: RAM NAIK

JAIPUR: The Centre is likely to draft a new policy for the petroleum and natural gas sector, former petroleum minister and now governor of Uttar Pradesh and Rajasthan, Ram Naik, has said.

“I have spoken with the petroleum minister and both he and Prime Minister Narendra Modi realise that increasing (domestic) production (of crude oil) is very important, so the central government is likely to come up with a new policy,” Naik told the media on Friday after he was sworn in as the governor.

The reference to India’s petroleum sector came up when Naik mentioned his ‘initiatives’ regarding oil and gas exploration in the early 2000s when he served as the union minister.

Citing data, the former BJP MP said he had inaugurated the oil fields in Barmer at a time when the country’s oil demand was much less. “Of the total crude oil requirement, India needed to import 70 per cent 10 years ago and today we need to import 80 per cent. This is because domestic production has not kept pace with increased consumption,” said Naik.

It was to address this situation that the country needed a “stable” petroleum policy, Naik emphasised. He also assured that he would play the role of a “bridge” between the Centre and state and resolve pending problems like the MoU with HPCL for starting a refinery in Barmer.

(Source: The Economic Times, August 9, 2014)

INDIA BUYS 46% MORE IRAN OIL IN JAN-JULY

NEW DELHI: India took about 46% more oil from Iran in January-July compared with a year ago as its refiners continued to lift higher volumes while world powers and Tehran work to resolve a dispute over the OPEC nation’s nuclear programme.

Six major powers and Iran failed to meet a July 20 deadline to negotiate a final deal under which Iran would curb its nuclear activities in exchange for an end to economic sanctions.

An interim deal that eases some sanctions while talks continue has been extended by four months.

India and China both boosted imports from Iran after the initial interim deal was agreed in November. Iran’s two other main clients, Japan and South Korea, have continued to reduce volumes overall.

India, top Tehran client after China, received about 210,300 barrels per day of Iranian oil last month, nearly six times the volume as in July a year ago, data on tanker arrivals from trade sources shows. State-run Mangalore Refinery and Petrochemical was the big-gest buyer of Iranian oil in July followed by Essar Oil, the data showed.

(Source: The Financial Express, August 9, 2014)

SUBSIDING OIL SUBSIDIES

If the global crude prices and rupee remain at the current level, the government will be able to wipe out diesel subsidies within 3 months.

After deregulating petrol prices, the biggest task for the government has been to reduce diesel under-recoveries. The good news is that the 50 paise per litre increase in diesel price since January 2013 has led to daily under-recoveries on diesel dropping to R1.33 a litre as on August 1 from R9.03 in January 2013. Since January 2013, diesel prices have risen by R11.25 per litre in Delhi. So, if the global crude prices and the rupee remain at the current level, the government will be able to wipe out diesel subsidies from its books within three months.

Now, the next big step that the government has to take is to reduce subsidies on domestic LPG and kerosene. Daily under-recovery on LPG has not budged much as oil companies are losing R448 per cylinder as of August 1 and R32.98 on kerosene. In FY14, the total under-recovery in LPG was R46,458 crore and is expected to increase to R47,000 crore in the current financial year. In contrast, total oil under-recovery in FY15 is expected to decrease to R1.1 lakh crore from close to R1.4 lakh crore in FY14 and R1.6 lakh crore in FY13. The government’s appeal to those who can afford to give up LPG subsidy can help, but to a limited extent only. A better idea would be to restart LPG direct benefit transfer (DBT), which had been abruptly put on hold by the UPA government in February this year. The advantage of Aadhaar-based DBT is that it can curb leakages in LPG and kerosene to a large extent by restricting disbursal of subsidies to the targeted segment only. In fact, finance ministry data show that out of the 4 crore LPG consumers in the country who were linked to Aadhaar for LPG DBT, 6.18 lakh duplicate connections had been identified. This led to savings of R251 crore in subsidy outgo.

(Source: The Financial Express, August 9, 2014)

GUJARAT CM MEETS DHARMENDRA PRADHAN

The Gujarat Chief Minister Anandiben Patel met the Minister of state (Independent charge) for Petroleum and Natural Gas Dharmendra Pradhan here, and discussed the issues between the state and the Centre regarding oil and gas. Pradhan appreciated that Gujarat has a model gas economy, and it has adopted certain best practices in gas distribution. Both the leaders emphasized on increasing cooperation and coordination between the State PSU- GSPC and Central PSUs – GAIL and ONGC, in sharing of data, infrastructure and knowledge, and redressal of grievances in land acquisition for oil and gas activities. The issue of expediting the survey activities in Kutch and Saurashtra regions, and Gulf of Khambat, came up for discussion, so as to explore gas and oil in the area. The issue of expanding the city gas distribution network was also discussed. Streamlining the procedure for grant of permission of City Gas Distribution network too came up for discussion.

(Source: Indian Oil & Gas August 9, 2014)

IOC’S CAPEX INVESTMENT TO SEE A 28% DROP THIS YEAR

State-run Indian Oil Corporation (IOC) will invest Rs 120 billion in capex for FY15, a drop of 28 per cent compared with FY14, when the company had a planned capital investment of Rs 167 billion. “Despite the severe financial crunch in the past few years, the Corporation continued with its investments in value-addition projects that would contribute to future growth and expansion of business in the coming years,” said Ashok Balasubramanian, chairman of IndianOil Corporation, in the company’s annual report.

“For Indian Oil, 2013-14 was a year of subdued optimism as the turnover touched a new high of Rs 4575.53 billion, a jump of 10.3 per cent over the previous year, and net profit surged to Rs 70.19 billion, a leap of 40.2 per cent compared to 2012-13,” he added. Indian Oil, which has been maintaining its leadership in the downstream petroleum sector for the past many years and currently holds a market share of 47.1 per cent, has an expenditure target of Rs 562 billion for various projects in the 12th Plan period, which is substantially higher than the Rs 486.55 billion spent in the 11th Plan period.

The pipelines division of IndianOil is currently implementing 13 projects at a cost of Rs 68 billion to expand its network of crude oil and product pipelines during the 12th Plan period. “This would result in an additional throughput capacity of 15.5 million tonnes per annum and a pipeline length of 3,200 km. Several LPG (liquefied petroleum gas) pipeline projects are also being planned to leverage the multiple advantages of pipeline transport,” the report noted.

However, the prevailing dual-pricing policy in diesel has resulted in a sharp decline of bulk sales for the company. Even though Indian Oil maintained its position as the market leader with product sales of 75.53 million tonnes (including petroleum products, gas, petrochemicals and exports) for FY14, the overall volumes in domestic sale of petroleum products registered a drop of 1.5 million tonnes, compared to the previous year.

“Even though dual-pricing threatened to erode the Corporation’s market share as well as profits in diesel, we could still maintain our coveted status as the lead supplier to the railways, defence services and several major consumers,” the report noted. The other factors that contributed to the dip in diesel consumption include a decline in sale of commercial and passenger vehicles, improved power situation in the country, and shift of industrial users to alternative fuels.

During the year, IndianOil expanded its overseas portfolio with the acquisition of 10 per cent interest in new integrated upstream and liquefied natural gas (LNG) project Pacific Northwest LNG – based on unconventional gas – in British Columbia (Canada).

This interest was acquired through a wholly-owned subsidiary of the company incorporated in the Netherlands, which in turn incorporated a wholly-owned subsidiary in Canada. “This is a producing asset with total gross 2P (proven and probable) reserves of 8.35 tcfe (trillion cubic feet of gas equivalent) and has generated a gross revenue of CAD 1.56 million during the year. The Corporation will have access to assured LNG supply of 1.2 million tonnes per annum from this project for a minimum period of 20 years,” said IndianOil.

(Source: Business Standard August 9, 2014)

S MAHAPATRA JOINS OIL AS DIRECTOR (E&D)

New Delhi: Sudhakar Mahapatra has taken over as Director (Exploration & Development) of Oil India Ltd (OIL), succeeding B N Talukdar who left OIL to join as DGH Director General. Mahapatra brings with him 33 years’ experience in various facets of the petroleum industry.

Prior to joining OIL, he served as Group GM and Head of E&D for the global exploration portfolio of ONGC Videsh Ltd at its corporate office in Delhi.

He holds an MSc in Geology from Utkal University, Bhubaneswar, and an International Diploma in Petroleum Exploration & Reservoir Evaluation from NTH, Trondheim, Norway.

(Source: Millennium Post August 9, 2014)

KERALA GAS LEAK MAY BE RESULT OF PRIVATE BUSINESS CONSPIRACY

Kollam: Collector was set up on Friday to inquire into the incident even as doubts about possible conspiracy by private business interests surfaced.

A panel headed by the District Collector, which include on it medical personnel and experts from pollution control board, has been set up to inquire into the incident. This was in addition to the experts’ inquiry ordered by the state government on Thursday, KMML Managing Director Michael Vetha Siramani said.

While plant workers and political parties harped on the possibility of some kind of conspiracy by private business interests eyeing to tap rare earth and minerals available in the area by ending virtual monopoly of the PSU over them, ADGP (Intelligence) A Hemachandran, probing the ‘sabotage’ angle, said he proposed to conduct ‘a thorough inquiry, looking at all possibilities.’

The company management stuck to its stand that no major gas leak had occurred from the plant though there was a ‘minor leak of burning gas on Wednesday, which was sealed immediately.’

Some of the workers at the plant said it was ‘mysterious’ that only children of nearby schools had showed ill effects of the alleged gas leak while no worker or adult people in the area close to the plant had complained of uneasiness.

They said there had been reports that private business interests, known in local parlance as ‘blacksand lobby’ had been eyeing to get hold of the raw material available in the area used by KMML, which mostly produce rutile grade titanium dioxide, a material required in a range of industries.

Siromani in a statement denied that there was any leak of gas, but admitted there was a ‘minor leak of burning gas on Wednesday, which was immediately sealed and the plant shut down.’

(Source: Millennium Post August 9, 2014)

RIL FINED RS 13 CR FOR NOT DISCLOSING EARNINGS RATIO

In one of its biggest penalties for non-disclosure of a key earnings ratio, the Securities Exchange Board of India (Sebi) on Friday imposed a R13-crore penalty on Reliance Industries (RIL) for violation of the Listing Agreement.

The order follows a probe by the capital markets regulator in an over seven-year-old case involving alleged irregularities in issuance of 12 crore warrants by Mukesh Ambani-led RIL to its promoters, entitling its holders to subscribe to sequivalent number of equity shares of RIL.

It was alleged that this issuance in April 2007 had resulted in diluting the pre-issue paid-up equity share capital of RIL, but the company repeatedly failed to disclose a key earnings ratio for as many as six quarters.

Later, Sebi began adjudication proceedings to probe the alleged violation of relevant clauses of the Listing Agreement and the Securities Contracts (Regulation) Act (SCRA) for not disclosing to stock exchanges the diluted earnings per share (DEPS) as prescribed for the quarterly and annual disclosures, the regulator said in its 15-page order.

A show-cause notice was served on RIL in February 2013, listing out allegations levelled against the company.

After looking into the company’s reply and investigating the matter, Sebi said that “EPS (basic or diluted) is a vital factor or one of the fundamental tools for the investors while arriving at decision to continue or invest in the shares of a particular company”.

The regulator said that RIL was “under an obligation to disclose separately the DEPS for the quarters ended June 2007, September 2007, December 2007, March 2008, June 2008 and September 2008, which the noticee had failed to do so”.

“In view of the aforesaid observations, facts and records of the case”, Sebi said, the company was in violation of the Listing Agreement and the SCRA and therefore it was liable to a penalty. Noting that a specific quantum of any direct or indirect unfair gain made by RIL and the loss caused to the investors were not available on records, Sebi said “the fact cannot be ignored that millions of shareholders/investors were deprived of correct disclosures about DEPS”.

Of the R13 crore, R1-crore penalty has been levied for violation of Listing Agreement, and of R12 crore for violating the SCRA. RIL has been given 45 days to pauy the penalty through a demand draft in favour of ‘SEBI – Penalties Remittable to Government of India’. Sebi said, “EPS is considered as the single most important vehicle in determining a share’s price.” The regulator said that RIL’s annual report for 2008-09 contained a disclosure regarding issue of 12 crores warrants on preferential basis on April 12, 2007, to entities in the promoter group, entitling them to acquire equivalent number of fully paid-up equity shares.

RIL had also disclosed that the warrant holders had applied for and were allotted 12 crores shares during 2008-09.

(Source: The Financial Express, August 9, 2014)

RATNAGIRI GAS REJECTS LENDERS’ PLAN TO SPLIT POWER AND LNG BUSINESS

MUMBAI: Ratnagiri Gas and Power (RGPPL) has rejected a proposal by lenders to hive off its electricity generation and LNG businesses into separate entities and dilute equity holding to pare its debt of Rs 8,200 crore.

NTPC, which is a co-owner of the firm that took over the assets after the collapse of Enron Corp, said the lenders had been asked to convert some of the debt into equity. The proposal to hive off the assets was put forth by IDBI, State Bank of India, ICICI Bank, Canara Bank, IFCL and PFC.

“We are not on board with this plan as we don’t see it as viable because one lucrative business (LNG) cannot be made to pay for the problems that another business (power) is facing. As of now, the lenders have been asked to convert a portion of the debt into equity as there is no other option,” NTPC chairman Arup Roy Choudhury told ET.

Sources said the finance ministry had backed the proposal, but the government said no decision had been taken. “As the issue is under consideration and a decision is yet to be taken, no specific response is possible at this stage,” Sharmila Chavaly, joint secretary for infrastructure at the finance ministry, said. GAIL India, which also holds equity in the firm, and the lenders did not respond to ET’s queries.

The gas-based power plant stopped producing power in July 2013 after supplies from the Krishna-Godavari basin stopped. The plant had an allocation of 7.6 mmscmd from KG-D6 and 0.9 mmscmd from ONGC’s C-series fields. Senior RGPPL executives also told ET that the company is left with Rs 60 crore in its coffers which is only enough to survive till September 2014.

“The lenders had proposed this survival plan of hiving off the power and LNG businesses as a short-term fix as they wanted to stop it from becoming an NPA,” said a senior RGPPL executive.

“They were keen to sell off a productive part of the business, but senior company executives disagreed as long-term questions remained regarding the supply of domestic gas from KGD6 for the power business and the kind of valuations that the LNG business will garner, given the overall debt on the company’s books and the appetite that power and fertiliser sectors have for imported gas,” he added.

Industry sources also told ET that GAIL was also against this proposal as it has signed re-gassification agreement with RGPPL for the LNG that it was sourcing from the US. GAIL has also entered into a 25-year concession agreement with RGPPL for the commercial operation of the entire 5-MT capacity by operating the terminal on a tolling basis. The terminal has a current capacity of 3 MTPA which can be raised to 5 MTPA once the terminal’s break-water facility is constructed.

Sources added that the finance ministry was batting for the lenders’ proposal and tried to convince GAIL by saying that an outright third-party sale of both the businesses is not the only option. And both GAIL and NTPC can exercise their ‘right of first refusal’ over the LNG and power businesses. Of the Rs 10,000-crore debt, IDBI and SBI have the maximum exposure followed by IFCL, Canara Bank and PFC.

(Source: The Economic Times, August 9, 2014)

CUT IN DIESEL LOSSES DRIVES PRIVATE RETAILERS ESSAR OIL, RELIANCE INDUSTRIES

NEW DELHI: With the retail price of diesel approaching the market rate, private companies, whose retail forays were frustrated by the price controls on petroleum products, are about to take the plunge again. Essar Oil, controlled by billionaire brothers Shashi and Ravi Ruia, is gearing up for a massive expansion of its retail business.

The plan is to increase the number of outlets from some 1,400 now to 3,000 in three to four years, with the focus on cities rather than rural areas, sources from the company said.

Reliance Industries (RIL), the other major private firm that has always had an eye on going big on the retail business and has been awaiting price deregulation, has similar plans, sources said. However, RIL won’t reveal its strategy at this juncture.

Thanks to the gradual increase in the price of diesel since January 2013, the under-recovery of public sector oil marketing companies on this fuel has narrowed to Rs 1.33 per litre now, from Rs 10-11 per litre that prevailed when the process began.

Market pricing of diesel is vital for the viability of the retail business because the fuel accounts for 44% of the total consumption of petroleum products in the country (from 36.64 million tonnes in 2002-03, diesel sales have risen to 69.16 million tonnes in 2012-13). Roughly 80-90% of the sales at fuel pumps along the highways are that of diesel and, on average, the sale of this transportation fuel accounts for nearly half of the sales at the country’s fuel stations.

Sushil Maroo, chief executive at Essar Energy, the parent company of Essar Oil, told FE that once diesel is completely deregulated, the firm would be aggressive in its retail expansion.

“Currently, wherever (pump) owners are losing, we are compensating them,” the top executive said.

Another official in the group said on condition of anonymity, “Our retail sales have been almost entirely petrol-dominated. Upon diesel deregulation, we would begin selling diesel also.”

Petrol prices were deregulated in June 2010 and currently PSU oil marketers don’t incur any losses on it.

With another three scheduled hikes of 50 paise a month, the auto fuel would be at market rates from October unless the price of crude oil rises significantly during the period and/or the rupee plunges against the dollar.

“We are now looking at various other formats for expansion like COCO (company-owned and company-operated) and CODO (company owned, dealer operated), in additional to DODO (dealer owned, dealer operated) which is our current format,” the officer said.

(Source: The Financial Express, August 9, 2014)

SIEMENS BAGS RS 228 CRORE ORDERS FROM RELIANCE INDUSTRIES

NEW DELHI: Siemens Ltd has bagged orders worth Rs 228 crore from Reliance Industries for supplying steam turbine generation units to its Jamnagar refinery in Gujarat. The orders are for supply of four steam turbine generation units.

“Reliance Industries is in the process of expansion of its J3 petrochemical complex at Jamnagar, Gujarat,” Siemens Ltd, a diversified entity, said in a regulatory filing today.

The scope of work includes design, manufacture, supply and commissioning of steam turbine generation units, which would be manufactured at Siemen’s Vadodara factory. Shares of Siemens fell nearly three per cent to close at Rs 855.70 on the BSE.

(Source: The Economic Times, August 9, 2014)

SPICE JET SHELVES FUEL IMPORT PLAN

Mumbai: Budget carrier SpiceJet has shelved its plan to directly import Aviation Turbine Fuel (ATF) citing operational challenges.

“We did a proof of concept last year and then decided to put the idea on hold. Theoretically, importing ATF is a great opportunity to reduce fuel costs but we do not think that we are still ready for it yet,” a SpiceJet spokesperson told Business Line .

SpiceJet, which is promoted by billionaire Kalanithi Maran, had become the first Indian carrier to receive approval from the Director General of Foreign Trade (DGFT) to import ATF in 2012.

The intent then was to eventually import 15 per cent of the fuel requirement. Importing ATF would also help the airline save sales tax on jet fuel, which accounts for almost half of a carrier’s operating costs.

However, importing is logistically challenging because the carrier has to assume full responsibility of importing and storing ATF in India, according to the spokesperson. Given that SpiceJet has a fleet of over 50 aircraft, its fuel requirements would call for fresh investments in infrastructure, analysts said. Currently, carriers procure fuel from state oil marketing companies who import crude, process it locally and distribute it to airlines across the country. This requires infrastructure such as storage tanks and pipelines, as well as trucks and tankers.

“We may revisit the idea of importing ATF at a later stage,” he added.

It may be recalled that SpiceJet had reported a loss of over Rs. 1,000 crore last fiscal which is five times higher than its 2013 loss.

The management has been in discussions with various parties for infusion of funds. The company is silent on when the carrier would return to operational profits as the company is in a silent period ahead of its quarterly results announcement later this month.

However, he denied recent news reports that draw a parallel between SpiceJet and Kingfisher Airlines. The latter was grounded in 2012 under the weight of heavy debt and accumulated losses.

“We have been paying salaries on time and our fleet is being optimally utilised. We are definitely not another ‘Kingfisher’ in the making,” he said.

(Source: Business Line August 9, 2014)

HPCL ED H KUMAR APPOINTED AS MD OF MRPL

MANGALORE: Kuthethur-based Mangalore Refinery and Petrochemicals Ltd (MRPL), a subsidiary of ONGC has a new managing director in H Kumar. Government headhunters — the Public Enterprises Selection Board (PESB) had recommended the name of Kumar for the post of managing director of Karnataka’s only oil refinery. Kumar was i ssued his appointment order to take over as MD on August 7. PESB made its recommendations on January 22, 2014.

Kumar will take charge from Vishnu Agrawal, director (finance) of MRPL who on August 1 was given additional charge as managing director on the superannuation of P P Upadhya from the post on July 31. Incidentally, H Kumar is the executive director, Hindustan Petroleum Corporation Ltd (HPCL). MRPL has a design capacity to process 15 million metric tons per annum and have two hydrocrackers producing premium diesel (High Cetane).

(Source: Times of India August 9, 2014)

GLOBAL CRUDE OIL PRICE OF INDIAN BASKET INCREASED MARGINALLY TO US$ 103.35 PER BBL ON 7TH AUGUST, 2014

The international crude oil price of Indian Basket as computed/published today by Petroleum Planning and Analysis Cell (PPAC) under the Ministry of Petroleum and Natural Gas went up to US$ 103.35 per barrel (bbl) on 7th August, 2014. This was higher than the price of US$ 103.27 per bbl on previous publishing day of 6th August, 2014. In rupee terms, the price of Indian Basket increased to Rs 6346.72 per bbl on 7th August, 2014 as compared to Rs 6334.58 per bbl on 6th August, 2014. Rupee closed weaker at Rs 60.41 per US$ 7th August, 2014 as against Rs 61.34 per US$ on 6th August, 2014.

(Source: Indian Oil & Gas August 9, 2014)

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