Oil remained weak in Asia on Thursday after data showing record U.S. 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 U.S. 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 $48.65 a barrel at 0255 GMT while U.S. crude was at $44.54, versus the low of $44.08 hit on Wednesday, 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". (Reuters)
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The government will sell a stake of up to 10 per cent in state-run Coal India Ltd through an auction on the stock exchanges on Friday (30 January), the government said as it seeks to reignite an asset sale programme critical to the pledge to hit fiscal deficit targets by the end of March. The Coal India stake, worth about $3.9 billion at current market prices, will be sold through an auction on stock exchanges, the government said in a statement on Wednesday. It currently owns close to 90 percent of the mining company.With barely two months until the end of the financial year India has managed to raise a little more than $300 million from assets sales, against an ambitious target of $10 billion to keep the fiscal deficit at 4.1 percent of gross domestic product.The Coal India disposal, if successful, will cover more than a third of the total asset sales target.The government is also banking on the sale of a 5 percent stake in energy explorer Oil and Natural Gas Corp, worth $2.5 billion. The sale is scheduled for before the end of the financial year, the oil minister said on Wednesday.Friday's sale will include at least 315.8 million shares in Coal India, with an option to sell 315.8 million more, the statement said. A floor price for the auction will be set on Thursday.Last week the government invited bids from merchant bankers to sell a 10 percent stake in miner NMDC. Among others, the government is also planning to sell 5 percent each in Power Finance Corporation (PFC), Dredging Corporation of and Bharat Heavy Electricals.
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Jaiprakash Power Ventures Ltd said it was likely to default on payments for convertible bonds worth $200 million due on Feb. 13, because it could not generate enough revenue from its operations. Jaiprakash, which has been weighed down by debts and a sharp downturn in the performance of the Indian power sector, said in a statement on Wednesday the company was confident of its ability to pay its dues under the bonds by March 31, 2016. The default, if it happens, will be the first major convertible bonds default by an Indian company since wind turbine maker Suzlon Energy Ltd failed to meet its repayment obligations in 2012. Many Indian companies have struggled to meet convertible bonds payment obligations in the last couple of years due to a sharp plunge in their share prices, feeble earnings growth and a weaker rupee. Jaiprakash Power raised $200 million through convertible bonds in 2010. The conversion price of the paper, due next month, was fixed at 85.81 rupees a share, according to Thomson Reuters data. Shares in Jaiprakash were trading at 11.90 rupees on Wednesday, making conversion impossible for the bondholders and leaving the company needing to raise fresh funds to repay the investors. Jaiprakash, which has been selling hydroelectric plants to raise cash, said its power business had been "severely impacted" by various reasons beyond its control, including a court decision in September to cancel coal blocks that had been allocated to the company. Its difficulties highlight the wider problems facing India's infrastructure sector, where companies say they are too indebted to kick-start a new cycle of capital expenditure on roads, power plants and airports that the government has deemed vital to an economic recovery. Jaiprakash said in the statement on Wednesday it had called a meeting with the convertible bondholders to discuss a repayment schedule. The firm has total outstanding debts of $2.7 billion, according to Thomson Reuters data. "The company is of the view that while the conditions surrounding the recovery of Indian infrastructure and power sector have improved, recovery still remains a work-in-progress," it said. (Reuters)
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Oil prices at current levels may have reached a floor and could move higher very soon, OPEC's secretary-general said on Monday, his first public comment that oil's second-biggest decline on record may have run its course. Abdulla al-Badri also warned of a risk of a future price spike to $200 a barrel if investment in new supply capacity is too low. "Now the prices are around $45-$50 and I think maybe they reached the bottom and will see some rebound very soon," Badri told Reuters on the sidelines of a conference at Chatham House. The 12-member Organization of the Petroleum Exporting Countries pumps about a third of the world's oil and until last year had a policy of adjusting its supply to support prices. Oil prices have fallen almost 60 percent since June to below $49 a barrel on global oversupply. Prices kept falling after OPEC's surprise refusal in November to cut its output to retain market share against rival suppliers. Defending OPEC's decision, Badri warned that any oil supply cut would lead to spare production capacity, a lack of investment and an eventual shortage and price spike that could exceed that of 2008, when oil hit its record high above $147 a barrel. "Suppose we cut production, and then we'll have spare capacity," he said. "Producers, when they have excess capacity, they will not invest. "If they do not invest there will be no more supply, if there is no more supply there will be a shortage in the market after three-four years and the price will go up and we'll see a repetition of 2008." "Maybe we will go to $200 if there is a real shortage of supply because of the lack of investment," Badri said. Oil's decline in 2014 was its second-biggest ever, after the collapse in 2008 which followed the record high. Non-Opec Members Some OPEC members, including Venezuela, have continued to call for output cuts. Its President Nicolas Maduro earlier this month visited several OPEC countries, and non-member Russia. While praising Maduro's efforts, Badri said there was no imminent prospect of OPEC and non-OPEC producers sitting down to discuss cutbacks. "It will take some time," he said. "It will take another four-five months and we will not see some concrete efforts before the end of the first half of the year due to the reason that we will see how the market behaves at the end of the first half of 2015." Badri further defended OPEC's decision in November to leave its output target unchanged. "It was a collective decision," he said. "Everybody participated in the decision, there are some remarks and some reservations but at the end of the day all the ministers agreed to this." Asked about the prospect of a change in oil policy in top OPEC producer Saudi Arabia under its new king, Badri said: "Saudi Arabia is a stable country, is a stable government, and I think things will be normal." (Reuters)
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A civil nuclear pact struck at summit talks between Indian Prime Minister Narendra Modi and U.S. President Barack Obama could help clear a logjam of stalled projects, the head of U.S. nuclear power plant maker Westinghouse told Reuters on Monday. Daniel Roderick, president and CEO of Toshiba-backed Westinghouse Electric Co, said a commitment by India to "channel" immediate costs arising from any nuclear accident to the plant operator marked an important step forward. But he said he was looking for more detail on a nuclear liability insurance pool that India has proposed that would involve a state insurer and be backed by the government. "The term breakthrough is appropriate," Roderick said in an interview in New Delhi. "We have been in such a logjam for such a long time that making forward progress with a large stride instead of not even a baby step is pretty significant for us." At their first summit in September in Washington, Obama and Modi set up a contact group to address ambiguities in a 2010 liability law passed by India that put ultimate responsibility for any accident on nuclear equipment suppliers, and not on plant operators. The law sought to prevent a repeat of the battles for compensation over the Bhopal gas disaster three decades ago, but had the effect of stalling billions of dollars in projects under a U.S.-India nuclear alliance struck in 2006. The Indian side said it was not able to change the law, but still made a convincing case that costs - such as rehousing people away from a nuclear accident site - should be borne by a plant operator and not its suppliers, said Roderick. "Legal experts have looked at it and said, OK, yeah that makes sense," he said. "They believe they have that issue solved." On the nuclear liability insurance workaround, Roderick said he looked forward to hearing more details but welcomed the commitment from the Indian side to finalise the proposal in the coming weeks. Under the plan, the state-run insurance company GIC Re and four other Indian state companies would contribute 7.5 billion rupees ($122 million) to the pool and the government would contribute an equal sum. "I am very optimistic if we can get past that hurdle, and if the insurance does what has been discussed ... then maybe we can move forward," Roderick said. Westinghouse is keen to launch its AP1000 reactor in India, where it has partnered with Larsen & Toubro , but has not progressed beyond a $10 million feasibility study and the award of a site in Modi's home state of Gujarat. It is already building eight AP1000 reactors in China and four in the United States. The first of the 1,100-megawatt reactors should enter service in China in early 2016. The AP1000 uses a 'passive' technology in which water cools the reactor core under the force of gravity. That means, said Roderick, that it can remain safe in the event of an accident similar to the 2011 Fukushima disaster in Japan without external power or human intervention. (Reuters)
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Indian conglomerate Mahindra Group plans to expand its renewable energy business and invest Rs 4500 crore ($732.5 million) over the next three to four years, its chairman said, amid a government-led push to increase the use of clean energy.The investment will mainly be financed by taking on Rs 3300 crore in debt, with the rest funded through cash, Chairman and Managing Director Anand Mahindra told Reuters.The group also plans to commission 500 megawatts (MW) of solar power projects by the end of March 2016 from 180 MW it expects to complete by end-March this year, he added."The (renewable energy) business is going to boom this year. It is a very attractive investment right now," Mahindra said on Sunday.The renewable energy unit, which builds solar power projects and offers off-grid power solutions, was formed in 2011 and is currently one of the smaller businesses of the $17 billion autos-to-technology conglomerate.Prime Minister Narendra Modi has ramped up his target for solar energy by 33 times to 100,000 megawatts (MW) by 2022 as he bets on renewables to help meet rising power demand and overcome the frequent outages that plague Asia's third largest economy.Modi says India needs $200 billion - half of it from foreign companies - to meet its target and US President Barack Obama pledged on Sunday during a visit to India to support this ambitious goal through additional funding.Companies such as US-based First Solar and SunEdison Inc already have sizeable businesses in India, while Canadian Solar, China's JA solar and JinkoSolar Holdings plan to invest in the country.First Solar's biggest projects in India include a plant with local firm Kiran Energy Solar Power and the Mahindra Solar One plant.(Reuters)
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U.S. President Barack Obama on Sunday offered to help finance India's ambitious solar energy target and sought Prime Minister Narendra Modi's support at global climate talks in Paris later this year. India is the world's third-largest greenhouse gas emitter and often acts as the voice of the world's developing countries in United Nations talks on everything from climate change to economic cooperation. It is reluctant to commit to emission targets on the ground that this could hinder economic growth, which is vital to lifting millions of Indians out of poverty. Instead, Modi has made it a priority to expand India's renewable energy capacity and lessen the need for polluting fossil fuels. "We very much support India’s ambitious goal for solar energy, and stand ready to speed this expansion with additional financing," Obama said in a joint press conference with Modi on the first day of his three-day visit to New Delhi. India is seeking investments of $100 billion over seven years to boost the country's solar energy capacity by 33 times to 100,000 megawatts. The United Nations asked governments on Thursday to submit plans to cut greenhouse gas emissions as the building blocks of a deal due in Paris in December to limit global warming, after scientists said 2014 was the hottest year on record. "The prime minister and I made a personal commitment to work together to pursue a strong global climate agreement in Paris," Obama said. "As I indicated to him, I think India's voice is very important on this issue." Modi said a deal between Washington and China committing to a peak year for emissions did not put pressure to do the same on India, where industrialisation is far behind its larger neighbour and where hundreds of millions have no electricity. The U.S. Export-Import Bank is exploring projects for a $1 billion clean energy financing for companies willing to ship equipment from the United States to India. First Solar and SunEdison Inc are two U.S. solar companies that already have sizeable businesses in India, and together with local firms, are expected to invest $6 billion in India in the fiscal year to March 31 and $14 billion in the next fiscal year. To further mobilize private capital for the clean energy sector, the U.S. Agency for International Development will install a field investment officer in India this summer, the White House Press Office said in a statement after the summit. (Reuters)
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India expects to hold auctions for private firms to mine and sell coal in the near future, the country's coal and power minister Piyush Goyal said but first wants to deal with mines that are directly linked to plants that use the fuel. To boost output and cut imports, Prime Minister Narendra Modi passed an executive decree in December to open up India's nationalised coal industry. Bids have been invited from firms that use coal for their own power, steel or cement plants. "Once my actual user requirements are broadly met, I'm hoping to start opening up to private miners," Goyal told Reuters on the sidelines of the World Economic Forum in Davos. "I've not applied my mind entirely to it, but I don’t know whether the entire process for all the actual users could be done within this year. But somewhere in the near future I do see that happening." Indian conglomerates such as the Adani Group, controlled by billionaire Gautam Adani, and GVK are likely to bid for commercial coal blocks to cash in on fast-rising demand from the power industry. Goyal also said the decks were clear for a 10 per cent sale of the government's stake in Coal India Ltd, which could help raise about $4 billion towards meeting the asset sale target of $10 billion for the fiscal year to March-end. "If the timing is right and it is in the interests of the government and the people of India that it should be this year, we'll do it," Goyal said at the "Make in India" lounge set up to attract investment to Asia's third largest economy. "But I'm not privy to timing exactly as we speak." In a major victory for Modi, Coal India workers unions earlier this month called off a five-day strike on its second day. The five powerful unions of the world's largest coal company opposed Modi's move to sell a stake and open up the industry, but cancelled the strike after Goyal assured them a committee would be formed to address their concerns. The government on Friday came out with terms and conditions for operation of the mines which include features like safety and welfare of workers and anti-corruption provisions. The government will put on offer 46 coal blocks during the auction to begin next month. "The Coal Mine Development and Production Agreement (CMPDA) specifies the terms and conditions of operation of the mines by the successful bidder in the auction," Coal Joint Secretary and the Nominated Authority for the coal auctions Vivek Bharadwaj said. (Agencies)
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