India's plans to attract badly needed foreign investment and technology to its coal sector are getting a cool response from some miners and trading houses, even though the country is one of the few bright spots for global coal demand. Seeking to curb a growing reliance on imports, Prime Minister Narendra Modi passed an order in December to allow private firms to mine and sell coal for the first time in more than 42 years. But even with India on track to overtake the United States as the second-largest coal consumer after China this decade, executives at Japanese trading houses and some of the biggest global miners said they were currently not looking to invest. Red tape, problems with land and environmental approvals, and the quality of its coal have been cited as issues deterring investment, while on top of this Asian coal prices are languishing near six-year lows. Despite huge coal reserves, India's failure to modernise mining means it has become the world's third-biggest importer, shipping in coal from countries such as Australia and Indonesia. Asked about progress attracting investors for auctions that may start later this year, Coal Secretary Anil Swarup told Reuters talks were going on with several global firms on upgrading mining technology, although nothing had been finalised. "It is not just about mining on their own but also to provide technology to Coal India and Indian companies," he said. Up to now only state firms have been allowed to mine coal, but the sector is being opened up to help meet surging demand for coal for power. Indian conglomerates such as the Adani Group and GVK are expected to bid for coal blocks, but foreign firms will be harder to attract after previously facing obstacles to investing. For example, global miner Rio Tinto has had to wait more than a decade to secure approvals to start mining iron ore in India. Japanese trading firms have recently been increasing investments in coal, but executives at two firms said they did not intend to invest in India. "We have no plan to consider joining coal mine projects in India even (as) it opens up, as there are other countries which we are focusing on and where it is easier to manage projects," said an official at a trading firm, declining to be identified. Another senior executive at a rival firm said the quality of coal in India was not very high and the firm preferred to sell coal to the country rather than join in projects. Among global miners, a spokesman for BHP Billiton, the world's biggest coking coal producer, declined to comment on India specifically but pointed to recent management statements that the miner planned no new coal investments. Anglo American was also unlikely to be interested since it is focusing on divesting South African coal assets, said a source familiar with the miner's plans. Rio Tinto Chief Executive Sam Walsh said the firm had not looked at Indian coal investments yet but was open to opportunities, while Peabody Energy said it would "evaluate investments to serve India's rising coal needs as appropriate". India wants to more than double coal output to 1.5 billion tonnes by 2020, but its mining is deeply inefficient. Coal India, the world's largest coal miner, produces 1,100 tonnes of coal per employee a year, compared with 36,700 tonnes for Peabody Energy and 12,700 tonnes for China's Shenhua Energy. Despite the lack of foreign interest in mining coal, both local and overseas investors flocked to a 10 percent stake sale of state-run Coal India that raised about $3.6 billion. However, this interest may also indicate how government firms will continue to have an edge in navigating India's maze of clearances. (Reuters)
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The new Saudi king's decision to keep Ali al-Naimi in his job as oil minister signalled to energy markets that the world's top crude exporter would not flinch from its policy of refusing to cut output as it fiercely guards market share.Naimi convinced fellow OPEC members to pursue such a strategy, regardless of how far oil prices might fall. He was determined not to cede ground to producers outside the group such as Russia and U.S. shale drillers.When reshuffling his cabinet on Thursday, King Salman - just days into his role as ruler - would have found it difficult to find more experienced hands to guide the kingdom's oil sector through these turbulent times.After all, 79-year-old Naimi has seen at least three price crashes during his two decades as oil minister."You can't beat experience, and Ali al-Naimi has loads of it. He earned his wings in the 70s and 80s at Aramco and has now gone through three iterations of a crude price cycle: early 1980s, late 1990s, and the current one," said Yasser Elguindi from economic consultants Medley Global Advisors.That experience - and the respect it commands internationally - could be crucial to convince those OPEC states without pockets and reserves as deep as Saudi Arabia to hold the line in the current crisis."Is it reasonable for a highly efficient producer to reduce output, while the producer of poor efficiency continues to produce? That is crooked logic," Naimi told the Middle East Economic Survey in December."If I reduce, what will happen to my market share? The price will go up and the Russians, the Brazilians, U.S. shale oil producers will take my share."But since November's OPEC decision not to reduce output, some members have privately questioned whether this was the right approach.Oil prices - down by more than half since June - have collapsed more than $20 a barrel since November's meeting to depths unexpected even by core Gulf OPEC producers who had led the decision despite a call for a cut by others.Outside OPEC, the oil minister of Oman, a Gulf Arab crude exporter, said the decision was creating volatility in the market without benefiting oil producers.Survivor Of Many CrashesEnergy investors have been closely watching for signs of continuity - or otherwise - of oil policy in Saudi Arabia, which has reacted in different ways to price collapses in the past.The kingdom slashed its own output from over 10 million barrels per day (bpd) in 1980 to less than 2.5 million bpd in 1985, in a failed attempt to arrest a price slide which eventually removed Oil Minister Ahmed Zaki Yamani from office.Naimi has already survived more than one price crash by acting decisively.In the late 1990s OPEC, under his de facto leadership, agreed to a supply increase as Asia went into economic collapse. He is then credited with orchestrating a rescue from the subsequent price crash by also bringing non-OPEC producers to the table for production cuts and then for recruiting their support again in late 2001.In 2008, when oil prices crashed to the low $30s, Naimi led the way as OPEC implemented its biggest-ever supply cut.Faced with the latest crisis, while the tactics are different, few analysts expect Naimi to deviate from the policy he and his country have committed to.The main tenets of Saudi oil policy, including maintaining the ability to stabilise markets via an expensive spare capacity cushion and a reluctance to interfere in the market for political reasons, are set by the top members of the ruling Al Saud family.But Naimi has been granted wide scope to interpret and implement policy in the way he thinks best.Having joined state oil firm Saudi Aramco at the age of 12 as an office boy, he eventually became CEO. He was named oil minister in 1995 and is now one of the country's highest ranking non-royals, a technocrat who commands respect for his market knowledge and for avoiding politics, driving OPEC policy along business lines.Some people familiar with Naimi have said that he has considered retiring for years.But that is unlikely to happen until there are at least some signs of market recovery, said Olivier Jakob from Petromatrix consultancy. "If Naimi goes I would think that he prefers to go after there is some order put back into OPEC."(Reuters)
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Jet fuel (ATF) price was today cut by a steep 11.3 per cent and now costs less than diesel.Last month, its rate had fallen below the price at which petrol is sold.While petrol and diesel prices have so far not been changed as per the fortnightly revision, non-subsidised domestic cooking gas (LPG) was cut by Rs 103.5 per cylinder to Rs 605 a cylinder after international oil prices slumped to near six-year lows.The price of aviation turbine fuel (ATF), or jet fuel, in Delhi was cut by Rs 5,909.9 per kilolitre, or 11.27 per cent, to Rs 46,513.02 per kl, oil companies announced today.The reduction, which followed possibly the steepest ever cut of Rs 7,520.52 per kl or 12.5 per cent effected from January 1, has led to ATF becoming cheaper than even diesel.Last month's reduction saw the ATF price slip to Rs 52.42 a litre, below Rs 58.91 a litre cost of petrol in Delhi. And after today's cut it costs Rs 46.51 per litre and is cheaper than diesel that sells at Rs 51.52 per litre.ATF has a higher octane than petrol and diesel is a heavier fraction in the distillation process. Traditionally, auto fuels being of lesser quality than ATF, would cost less.But four consecutive excise duty hikes since November -- totaling Rs 7.75 a litre on petrol and Rs 7.50 on diesel, have reversed this.But for these, the cumulative reduction of Rs 14.69 per litre in petrol price in nine cuts since August and Rs 10.71 a litre on diesel since its deregulation in October, would have been higher.ATF attracts an excise duty of 8 per cent.The cut, effective today, is the seventh reduction in jet fuel rates since August. Jet fuel constitutes over 40 per cent of an airline's operating costs and the price cut will ease the financial burden of cash-strapped carriers.No immediate comment was available from airlines on the impact of the price cut on passenger fares. Following the global trend, the price of 14.2-kg non- subsidised LPG cylinder has been cut to Rs 605 from Rs 708.50 previously in Delhi.This is the seventh straight reduction in rates of non-subsidised or market-priced LPG, which the customers buy after exhausting their quota of 12 cylinders at subsidised rates, since August.A subsidised LPG refill currently costs Rs 417 in Delhi.Price of non-subsidised LPG were last cut on January 1 by Rs 43.50.In seven monthly reductions, non-domestic LPG rates have been slashed by Rs 317.50 per cylinder, bringing the price to a three-year low.State-owned fuel retailers, Indian Oil Corp (IOC), Bharat Petroleum Corp (BPCL) and Hindustan Petroleum Corp (HPCL) revise jet fuel and non-subsidised LPG prices on 1st of every month based on average imported cost and rupee-USD exchange rate.(Agencies)
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The new Saudi king's decision to keep Ali al-Naimi in his job as oil minister signalled to energy markets that the world's top crude exporter would not flinch from its policy of refusing to cut output as it fiercely guards market share. Naimi convinced fellow OPEC members to pursue such a strategy, regardless of how far oil prices might fall. He was determined not to cede ground to producers outside the group such as Russia and U.S. shale drillers. When reshuffling his cabinet on Thursday, King Salman - just days into his role as ruler - would have found it difficult to find more experienced hands to guide the kingdom's oil sector through these turbulent times. After all, 79-year-old Naimi has seen at least three price crashes during his two decades as oil minister. "You can't beat experience, and Ali al-Naimi has loads of it. He earned his wings in the 70s and 80s at Aramco and has now gone through three iterations of a crude price cycle: early 1980s, late 1990s, and the current one," said Yasser Elguindi from economic consultants Medley Global Advisors. That experience - and the respect it commands internationally - could be crucial to convince those OPEC states without pockets and reserves as deep as Saudi Arabia to hold the line in the current crisis. "Is it reasonable for a highly efficient producer to reduce output, while the producer of poor efficiency continues to produce? That is crooked logic," Naimi told the Middle East Economic Survey in December. "If I reduce, what will happen to my market share? The price will go up and the Russians, the Brazilians, U.S. shale oil producers will take my share." But since November's OPEC decision not to reduce output, some members have privately questioned whether this was the right approach. Oil prices - down by more than half since June - have collapsed more than $20 a barrel since November's meeting to depths unexpected even by core Gulf OPEC producers who had led the decision despite a call for a cut by others. Outside OPEC, the oil minister of Oman, a Gulf Arab crude exporter, said the decision was creating volatility in the market without benefiting oil producers. Watching For Signs Of ContinuityEnergy investors have been closely watching for signs of continuity - or otherwise - of oil policy in Saudi Arabia, which has reacted in different ways to price collapses in the past. The kingdom slashed its own output from over 10 million barrels per day (bpd) in 1980 to less than 2.5 million bpd in 1985, in a failed attempt to arrest a price slide which eventually removed Oil Minister Ahmed Zaki Yamani from office. Naimi has already survived more than one price crash by acting decisively. In the late 1990s OPEC, under his de facto leadership, agreed to a supply increase as Asia went into economic collapse. He is then credited with orchestrating a rescue from the subsequent price crash by also bringing non-OPEC producers to the table for production cuts and then for recruiting their support again in late 2001. In 2008, when oil prices crashed to the low $30s, Naimi led the way as OPEC implemented its biggest-ever supply cut. Faced with the latest crisis, while the tactics are different, few analysts expect Naimi to deviate from the policy he and his country have committed to. The main tenets of Saudi oil policy, including maintaining the ability to stabilise markets via an expensive spare capacity cushion and a reluctance to interfere in the market for political reasons, are set by the top members of the ruling Al Saud family. But Naimi has been granted wide scope to interpret and implement policy in the way he thinks best. Having joined state oil firm Saudi Aramco at the age of 12 as an office boy, he eventually became CEO. He was named oil minister in 1995 and is now one of the country's highest ranking non-royals, a technocrat who commands respect for his market knowledge and for avoiding politics, driving OPEC policy along business lines. Some people familiar with Naimi have said that he has considered retiring for years. But that is unlikely to happen until there are at least some signs of market recovery, said Olivier Jakob from Petromatrix consultancy. "If Naimi goes I would think that he prefers to go after there is some order put back into OPEC." (Reuters)
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In the biggest ever disinvestment exercise, the government's 10 per cent stake sale in Coal India got over-subscribed by 1.05 times on Friday (30 January) and fetched about Rs 22,600 crore although retail investors did not bid so aggressively.Stocks of Coal India ended nearly 4 per cent lower in the wake of the floor, or the minimum offer, price for the company's share sale being set at a discount. CIL's scrip lost 4 per cent to Rs 360.10 in intra-day trade at the BSE and finally ended at Rs 360.85, down 3.81 per cent from its previous close. On the NSE, it fell by 3.68 per cent to settle at Rs 361.15.This was the biggest ever share sale by any private or public sector company in India and exceeds the previous record of over Rs 15,000 crore made by CIL itself in 2010. However, the retail demand seemed lacklustre as 12.63 crore shares reserved for these investors could get bids for less than half the size (5.37 crore).General category investors, which include FIIs, mutual funds, banks and insurance companies, bid for 1.2 times the shares reserved for them. Of the 50.53 crore shares on block for non-retail segment, bids for 60.83 crore shares came in.The average bid price was however higher at Rs 360.11 for the retail category as against floor price of Rs 358. Retail investors would get a price discount of five per cent.The total issue of 63.16 crore shares got bids for 66.20 crore shares, generating demand worth nearly Rs 24,000 crore on offer, as per stock exchanges data. The issue got over-subscribed before the close of market hours.The government had offered to sell 31.58 crore shares, or five per cent stake, in CIL through a public offer, with an option to sell another 5 per cent.At the floor price of Rs 358 apiece the public offering is estimated to fetch Rs 22,600 crore to the exchequer. This will make up for more than half of the budgeted disinvestment target.Coal India was the second PSU to hit the market under the government's disinvestment programme in the current fiscal, the first being SAIL in which shares worth about Rs 1,700 crore were sold.This was the first disinvestment in which the shares reserved for retail investors were doubled to 20 per cent. A minimum of 25 per cent of the issue size were reserved for mutual funds and insurance companies.Shares of Coal India closed at Rs 360.85, down 3.81 per cent over previous close on the BSE.Divestment Programme In Full SwingCoal India issue is part of the government's divestment agenda, and a strong investor response will bolster New Delhi's plans to offload shares in other state firms including Oil and Natural Gas Corp and Power Finance Corp Ltd.Prime Minister Narendra Modi is racing to meet a commitment to narrow the budget deficit to a seven-year low of 4.1 percent in the year ending in March. The deficit promise relies heavily on the asset sale programme.The government has budgeted it will raise $10 billion by selling small stakes in state-run firms in this fiscal year. So far it has managed to raise a little more than $300 million.India is the world's third-largest coal importer even though it sits on the fifth-largest reserves. Coal India produces more than 80 percent of India's total but often fails to meet output targets.Coal India, the largest coal producer in the world, largely feeds India's growing demand for energy. It is expected to benefit from the Modi government's drive to increase India's energy and industrial production. (Agencies)
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As the US prepares to export its natural gas to India, an American lawmaker is pushing for a Congressional legislation to export the gas in US-made ship and tankers. "By requiring that the ships be American-built, we will be able to employ several hundred thousand new men and women in our shipyards," Congressman John Garamendi said on the floor of House of Representatives on Wednesday as he moved a legislative amendment that would require export of American gas in US-made ships. "As of now there are 117 shipyards in the United States that build ships. None of them yet build these tankers. They could if we pass this amendment," Garamendi said. "Let's build it in America. Let's make it in America," he said. Garamendi wrote a letter to US President Barack Obama before his India travel in this regard. The California Congressman said this strategy is employed by India, which has a tender out to buy gas from the US. "That tender requires that three of the ships used to transport that be built in India," he said. In his letter Garamendi said American LNG is a strategic national asset, and it must be used to bolster another strategic national asset - the domestic shipbuilding industry. "They want American natural gas; build the ships in America. We know that this is a big industry," the Congressman said. He said Cheniere Energy needs 100 ships when they begin to ship natural gas from the company's new terminal in Texas. "Are those American ships? No, not without this amendment. Those ships will be Chinese ships in Chinese shipyards built by Chinese," he said as he moved the amendment to the LNG Permitting Certainty and Transparency Act. Garamendi's amendment would require that American LNG be exported on United States-flagged vessels until 2020 and on United States-built and flagged LNG vessels thereafter. (PTI)
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Foreign players would not be allowed to bid for NTPC's three new solar power projects of total 750 MW capacity as the state-run utility has restricted the bidding to domestic companies. This comes at a time when the government is making a strong pitch for its Make in India programme among overseas investors, including for the renewable energy. According to company sources, domestic entities will be permitted to bid for solar power projects having a combined capacity of 750 MW. "These three projects of 250 MW capacity each are for domestic manufacturers," the source said. Refusing to divulge reasons for not permitting foreign companies to bid, sources said the Indian arms of foreign manufacturers would be free to participate in the company's future solar projects. NTPC had recently invited separate online bids for the three projects - one each in Madhya Pradesh, Rajasthan and Telangana. Currently NTPC's 110 MW solar capacity is in operation and its eight projects are in Andhra Pradesh, Odisha and other states. NTPC aims to set up 3,000 MW of solar power projects over the next three years. US President Barack Obama had recently announced $4 billion investment in India, including $2 billion in renewable energy projects. NTPC, which produces a quarter of the country's electricity, largely through thermal plants, plans to commission more than 11,500 MW of renewable energy by 2032. The company is executing thermal power projects worth 22,000 MW and another 8,000-10,000 MW capacity is in the pipeline. Prime Minister Narendra Modi's wants foreign companies to lead $100 billion of fresh investment to raise India's solar energy capacity 33 times to 100,000 MW by 2022, providing big opportunities for US companies like First Solar and SunEdison. However, the US and India are embroiled in a battle at the World Trade Organisation over state support for solar power. The US said last year that domestic content requirements (DCR) in India's national solar programme were in breach of WTO rules. Jasmeet Khurana at consultancy Bridge To India played down NTPC's decision, arguing that the DCR were restricted to a small portion of the government's solar target. He expects a majority of the planned expansion will be open to overseas firms.
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Oil remained weak in Asia on Thursday (29 January) after data showing record US stockpiles sent prices tumbling to the lowest level in nearly six years in the previous session and analysts said a global glut would continue to keep the market under pressure. The US Energy Information Administration (EIA) said domestic crude oil stocks rose by almost 9 million barrels last week to reach nearly 407 million, the highest level since the government began keeping records in 1982. "The market expects stockpiles to keep rising, pushing front-month prices further down as refineries enter maintenance season and are likely run at lower utilisation rates," ANZ said in a note. Prices on Thursday stuck close to the previous settlement levels. Brent was trading at $48.50 a barrel at 0741 GMT, virtually flat with its last settlement, while US crude was at $44.41, versus the low of $44.08 hit on Wednesday (28 January), the weakest since April 2009. Analysts said the outlook remained weak, especially with demand slowing in China. "The Chinese government is moving away from the post-2008 investment binge and gradually moving towards a more moderate but sustainable consumption-led economic growth," Wood Mackenzie said on Thursday. "2014 was the fourth straight year of a decoupling relationship between China's GDP and oil demand growth as the effects of the 2009 stimulus began to fade," it said, adding that it "expects industrial recovery and related investment will remain subdued in 2015-2016". Swiss bank UBS said cheap oil would not provide a big boost to Asian economic growth. "Big, big drops in oil; small effects on economies ... Cheap oil should give a small boost to Asian GDP, but not really enough to warrant major changes in growth forecasts," it said. Researchers at Energy Aspects said in a note that "a new normal is in the making for China — slower and less oil-intensive growth". They added that "oil consumption in China will become more efficient, leading to slower demand growth of around 0.2-0.3 million barrels per day compared to expectations of above 0.5 million". Price swings in Brent contracts have been falling since the beginning of the year and there seems to be some support around current levels, but not enough conviction to move prices towards or back above $50 per barrel. The Volatility Index from front-month Brent crude contracts has fallen from around 65 points at the beginning of the year to just over 53 points currently, its lowest since 2009. (Reuters)
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