When the Supreme Court decided to cancel 204 coal blocks, allocated since 1993, the underlying judgment was that in the absence of a competitive bidding mechanism for allocation of natural resources, the decisions to allocate coal blocks to private sector by the successive government were arbitrary. It, however, appears that the latest round of auctions were not so different after all. There is a fresh controversy surrounding the recent cancellation of four coal blocks, won by Jindal Steel and Power (JSPL) and Balco in the auctions held in February, on similar grounds.
Read More
Indian oil and gas major Reliance Industries said it had signed an agreement with Myanmar for a production sharing contract for two offshore blocks. Reliance Industries Limited (RIL) will be the operator of the blocks with a 96 per cent participating interest while United National Resources Development Services Co. Ltd, a Myanmar company, will hold the remaining stake. Reliance said in a statement its participation was in line with its strategy to expand its international asset base by investing in attractive oil and gas destinations. Both the blocks are located offshore in the Tanintharyi basin of Myanmar in water depths up to 3,000 feet and together encompass total area of 27,600 square kilometers. "RIL's participation is in line with its strategy to expand its international asset base by investing in internationally attractive oil and gas destinations. The company in this way will leverage its organizational capabilities and expertise to create value for the E&P segment," the Mukesh Ambani-run firm said. Myanmar is the latest country where the oil-to-telecom conglomerate is seeking to expand its upstream business after testing waters in nations such as Venezuela and Iraq. RIL had bid for three blocks in the Myanmar Offshore Block Bidding Round in 2013 and won two. While Myanmar, like India, offers a similar production sharing contract regime that allows recovery of all costs before sharing spoils, its contractual regime is much more attractive. Unlike Indian production sharing contracts where the work on an area begins with an exploration phase, Myanmar offers six months of preparation period, followed by up to 12 months of study period after which companies have an option to exit the block. This way they avoid incurring unfruitful expenditure and liquidated damages for not fulfilling work programme. The exploration phases begin after this study period. While Indian PSC provides for a two-year time from approval of development plan to tie up markets for natural gas and development to commence within 10 years of first discovery well, Myanmar allows an operator to retain a discovery for 7 years even after if it is not considered economical. Also, multiple extensions of one year are available. Oil produced in India can be sold at arms length price but gas can only be sold at a prior approved formula. In Myanmar, oil can be sold at arms length while natural gas can be sold at any price that can be realised from the market. (Agencies)
Read More
India halted oil imports from Iran for the first time in at least a decade in March as New Delhi responded to US pressure to keep its shipments from Tehran within sanction limits during the last month of negotiations on a preliminary nuclear deal. India is Iran's second-biggest buyer on an annual basis after China, yet it did not take any crude from Tehran in March, according to tanker arrival data from trade sources and ship tracking services on the Thomson Reuters terminal. Refinery sources said this was the first time in at least a decade that no imports were made over the space of a month - indicating how Washington is trying to maximise economic pressure on Tehran amid the talks aimed at stopping Iran from gaining the capacity to develop a nuclear bomb. "There is pressure from the US on all Asian buyers to stick to the sanctions regime," said Johannes Benigni, chairman of JBC Energy GmbH in Vienna. Nuclear TalksIran and six world powers missed a Tuesday deadline to reach an outline accord on Tehran's nuclear program, extending talks into an extra day. The negotiators ended talks in the Swiss city of Lausanne in the early hours of Wednesday and said they would reconvene later in the day. Iran and Russia expressed optimism that an initial agreement was within reach. Iran will not be able to reap the benefits of any nuclear deal with world powers without the cooperation of its Gulf neighbours, Saudi Arabia's Foreign Minister Saud Al Faisal said. "If the P5+1 wanted to give Iran a role in the region they should have first looked to favour an entente between Iran and the Arab states," Saud told the Shura Council, an appointed consultative body. The halt in March comes after February imports hit a 1-1/2-year low for monthly imports, which together brought India's annual crude and condensate purchases from Iran in the year to March 31 to an average 220,000 barrels per day (bpd) or 11 million tonnes, slightly below shipments in the previous year. Days ahead of a visit by US President Barack Obama to India in January, the oil ministry had told Essar Oil, Mangalore Refinery and Petrochemicals Ltd and Indian Oil Corp - the Indian refiners that buy from Iran - to cut their imports over February and March to keep the fiscal-year figure in line with sanctions limits. Refiners in India had raised imports during the April-December period by more than 40 percent, leading US authorities to raise the alarm with India's Ministry of External Affairs ahead of Obama's visit. The sanctions currently restrict Iran's overall exports to 1 million-1.1 million bpd, with Asian buyers required to keep their purchases near end-2013 levels. In February, imports by Iran's four biggest buyers - China, India, Japan and South Korea - though down on-year, bounced back to average 1.02 million bpd, a two-month high, government and tanker-tracking data showed. April Imports Expected To RiseDespite India's import halt in March, shipments are expected to resume next month, with at least MRPL and Essar loading Iranian oil, trade sources said. India's oil imports from Iran could sharply rise if sanctions are lifted and the Islamic nation continues to give oil on current terms, company officials said. National Iranian Oil Co (NIOC) officials told Indian refiners it would continue to offer crude on 90-day credit terms and at a discount to the official selling price if sanctions were lifted, two sources said, although NIOC executives indicated Iran may stop offering free shipping. "I will definitely consider Iranian oil based on economics. If current terms and conditions are retained, then we may buy," said B.K. Namdeo, head of refining at Hindustan Petroleum Corp Ltd. HPCL has not received any Iranian crude since May 2013, after first halting its purchases from Iran in 2012 because insurance companies under pressure from Western sanctions had stopped covering installations processing Iranian oil. MRPL, which has continued to buy Iranian crude, said it would import more oil from Tehran if sanctions are lifted. "Subject to approval by the oil ministry ... we will increase the supply," said Vijay Joshi, head of refinery operations at MRPL. (Agencies)
Read More
India has bought the first oil for its strategic petroleum reserve (SPR), trade sources said on Monday, marking the start of a round of purchases by the world's fourth-biggest oil consumer to build up emergency stockpiles. Oil prices have almost halved in the past year due to excess global production, leaving traders looking for any signs of new demand to help absorb the surplus. The sources said state-refiner Indian Oil Corp bought a 2 million barrel cargo of Iraqi crude from Chinese trader Unipec, which will load in May for shipping to the first stage of India's SPR on the country's east coast. In addition, state-refiners IOC and Hindustan Petroleum Corp Ltd will buy another three Very Large Crude Carriers between them for the Vizag SPR storage site in Andhra Pradesh. While the first 8 million barrels for Vizag are relatively small compared with the global market, totaling less than 10 percent of daily demand, India's purchases could ramp up later this year as the country completes construction of the next phase. Two SPR sites, at Padur and Mangalore on India's west coast, will have a capacity of 29.3 million barrels and are expected to be ready by October. India is heavily reliant on fuel imports, producing less than a third of the nearly 3.7 million barrels per day it consumed in 2013, data from the U.S. Energy Information Administration shows. Its fast-growing economy has become the world's fourth-largest oil consumer after the United States, China and Japan. China's own SPR purchases, which have helped support oil prices during the global supply glut, are expected to slow this year with commercial and strategic storage space almost full. China's strategic stocks were estimated in January at more than 30 days' worth of crude imports. It plans to eventually build reserves of around 600 million barrels, or about 90 days of import cover. India's SPR should cover approximately 13 days of imports when it is completed by the end of this year. The east coast Vizag facility has two compartments of 7.55 million barrels and 2.20 million barrels, with the smaller to be used by HPCL for its 166,000 bpd refinery at the site. The VLCC cargo Basrah IOC bought from Unipec, the trading arm of China's state-backed oil producer Sinopec, was purchased at a premium of 50-60 cents to the official selling price of the Iraqi grade, the sources said. Separate from the SPR purchases, IOC has re-floated a tender seeking a million barrels of heavy grades for April first half loading, traders said. This tender will close on Tuesday with bids remaining valid till Wednesday. Brent crude oil prices were down by around $1 a barrel on Monday near $55 a barrel, having fallen from above $110 a barrel in June. (Reuters)
Read More
In the first ever reduction in domestic natural gas prices, the rates will be slashed by 9 per cent to $4.56 per unit from April 1 to reflect the softening in international prices, benefiting users in the power and fertiliser sectors. The government had in October last year fixed natural gas price at USD 5.05 per million British thermal unit based on weighted average of international hub rates. This was on gross clarofic value (GCV) basis. "The price of gas on GCV basis from April 1 will be $4.56 per mmBtu," a top source said. On net clarofic value (NCV) basis, the price would come to $5.01 per mmBtu as compared to $5.61 per mmBtu rate prevalent currently. "The government does not fix or notify a rate. A formula was notified last year, based on which the price applicable from April 1 would be $4.56 per mmBtu on GCV basis," said the source. This will be the first reduction in price of natural gas ever in India. While it will impact the revenue producers like Oil and Natural Gas Corp and Reliance Industries, it will be a bonanza for users in the power and fertilizer sector. As per mechanism approved in October 2014, price of domestically produced natural gas were to be revised every six month using weighted average price at Henry Hub of US, National Balancing Point of UK, rates in Alberta (Canada) and Russia with a lag of one quarter. So, rate for April 1 to September 30 would be based on average price at the international hubs during January to December 2014. The Oil Ministry is likely to announce the price for next six months "within next couple of day", said the source. When contacted, Oil Minister Dharmendra Pradhan refused to indicate the likely price but said, "if we are getting a cheaper price, its good for the economy".(Agencies)
Read More
Infrastructure Leasing & Financial Services Ltd (IL&FS) plans to more than triple its power generation capacity in five years, betting on demand for renewable energy sources such as wind and solar in Asia's third-largest economy. India has made renewable energy a priority as it looks to address its chronic power shortages and fulfil an election promise of round-the-clock power to all Indians by 2022. IL&FS, whose generation capacity is about 1,500 megawatts (MW), including about 900 MW of renewable energy, will take the total to about 5,000 MW in the next five years, Managing Director Hari Sankaran said on Wednesday. Half of that would be from coal and gas and half will come from renewable energy. "It is potentially possible for solar to become a really meaningful player in the mix, in the energy mix of the country as a whole. Because the price points have become more reasonable now. And India is really a big market," he said. The company has a small solar power generation capacity, but will add 1,000 MW. Wind power generation capacity is set to more than double to 1,500 MW from 700 MW now, Sankaran said. Japan's Orix Corp and sovereign wealth fund Abu Dhabi Investment Authority (ADIA) own more than a third of IL&FS, whose biggest shareholder is Indian state-run insurer Life Insurance Corp of India. IL&FS expects capital expenditure of about 40 billion rupees ($641.5 million) on its energy businesses in the next three years, he said, adding they were looking for funding options. The company is open to listing its energy assets as a business trust in Singapore as well as through an initial public offering in India. Selling a stake to private equity is also an option, he said. "Business trust for stable cash flows appears interesting. So we looked at it, we are looking at it. The capital markets in India are attractive from some points of view for energy," he said, declining to give a time frame for a possible listing.
Read More
Brent crude oil shot up nearly 6 percent on Thursday after Saudi Arabia and its Gulf Arab allies began a military operation in Yemen, although importers saw little immediate threat to supplies. The strike against Houthi rebels, who have driven the president from Yemen's capital Sanaa, could stoke concerns about the security of Middle East oil shipments. Oil prices jumped as traders and importers said they were worried the Saudi attack was a sign that fighting in the oil-rich Middle East was out of control and spreading. Brent futures had risen more than $3 a barrel to as high as $59.78 a barrel just before 0800 GMT, up almost 6 percent since their last settlement. U.S. crude was also up more than $3 at $52.35 a barrel. The risk from the attack in Yemen was heightened because the Houthis have received some support from Iran, Saudi Arabia's long-time rival for dominance in the Middle East. China's foreign ministry said on Thursday it was deeply concerned about the worsening situation in Yemen. Ministry spokeswoman Hua Chunying told a news conference that China urged all parties to act in accordance with United Nations Security Council resolutions on Yemen, and to resolve the dispute through dialogue. "The Saudis have taken military action because they have said the Houthis are getting support from the Iranians," said Li Guofu, director of the Centre for Middle East Studies at the China Institute of International Studies. "This is an indication that the war may gradually spread into a regional conflict. This is something the Chinese government is very much concerned about." ChokepointBeyond oil, the Middle East is also the world's biggest exporter of liquefied natural gas (LNG), from Qatar and also Yemen, but importers said they were not immediately worried. "Gas supply from Yemen has no disruption so far. We are not concerned given the supply surplus and weak demand currently," said Lee Sang-wook at Korea Gas Corp. Like oil, LNG prices have fallen by more than half in the last 10 months as surging output has been met with slowing economic growth, especially in Asia. With the global crude glut built up from U.S. shale oil and strong output from producers such as Russia, there is little immediate worry about any shortages developing. "Just because Saudi and others conducted air strikes doesn't mean the oil market becomes suddenly tight," said Masaki Suematsu, manager of the energy team at brokerage Newedge Japan in Tokyo, although he cautioned that the conflict could spiral further beyond the airstrikes. Some analysts said the strikes could lead to more stability in the region, if it resolved the conflict in Yemen. "If this is a prelude to a bigger operation in the Middle East, that may lead to some stability in the region," said Mari Iwashita, chief market economist at Tokyo's SMBC Friend Securities. Asian officials also said the fighting occurred near the Red Sea, waters that Arab Gulf supplies do not pass on their way to Asia. European importers may be more concerned as Arab producers have to ship oil past Yemen's coastlines via the Gulf of Aden to get to the Suez Canal. The waters between Yemen and Djibouti, at less than 40 km (25 miles) wide, are considered a "chokepoint" to global oil supplies by the U.S. Energy Information Administration and the region is heavily militarized by western navies. The United States and France both operate large military bases in Djibouti, and China also plans to open a base in the strategically well placed but small country in East Africa. NATO's anti-piracy fleet also operates from the Gulf of Aden. (Reuters)
Read More
Oil prices could hit $100 a barrel by the end of next year, U.S. oil magnate T. Boone Pickens said on Tuesday, revising his previous forecast which said they would reach that level as early as this year. "I think you could very well be at $100 a barrel by the end of 2016," the 86-year-old billionaire and chair of BP Capital told an audience of about 100 at the Commonwealth Club of California in San Francisco. Oil prices have fallen sharply amid weaker Asian and European demand and a boom in North American production. U.S. crude futures have dropped more than 60 percent since highs last summer and were at around $47.40 a barrel on Tuesday. Pickens said the idea of "peak oil" – the point in time at which oil production will go into an irreversible decline – shouldn't be dismissed on account of the increase in U.S. production. Other regions are seeing their output decline, he said. A lifelong Republican, Pickens said he would support Jeb Bush if he decided to pursue the party's nomination in 2016, as is widely expected. "The Republicans will win in 2016," said Pickens, who has donated heavily to Republican presidential candidates in the past, including Jeb's brother, former President George W. Bush. Saudi ViewMohammed Al Madi, Saudi Arabia’s OPEC governor, said on Sunday that oil is unlikely to rebound to $100 any time soon because higher prices would spur more output and prolong a glut. Crude prices at that level will let the high-cost producers come back again, Madi said at a conference in Riyadh. Saudi Arabia is pumping at a near-record level of about 10 million barrels a day, Oil Minister Ali Al Naimi said. Crude futures dipped on Wednesday as ballooning US storage volumes pressured prices, a trend some analysts said they expected to continue for another two months. Brent oil futures were trading at $55.06 a barrel at 0508 GMT, down five cents, while US WTI crude was at $47.36 a barrel, down 15 cents. For Brent, strengthening European manufacturing data lent contracts some support, preventing steeper price falls. The bigger fall in US prices came as American crude stocks appeared to extend their long streak of weekly builds. "US crude stocks will build through May ... (which) should support bearish sentiment for now," Morgan Stanley said in a note on Wednesday, adding that there was still plenty of storage capacity left for inventory gains. A poll of eight analysts - taken ahead of weekly reports from industry group the American Petroleum Institute (API) and the US Energy Information Administration (EIA) - forecast a crude stock build of 5.1 million barrels on average last week. The API report on Tuesday showed a slightly smaller build in US crude stocks at 4.8 million barrels for last week. Any build from the more closely watched EIA figures due out later on Wednesday would confirm US crude stockpiles have hit a record for an eleventh straight week. In Japan, commercial weekly crude stocks were down 2.8 per cent to 82.87 million barrels. The year-on-year change was a drop of nearly 8 per cent. (Agencies)
Read More
