Warning that an Air India-like situation is being replicated at SCI, the Shipping Ministry has raised red flag over the state-run company's plans to acquire fresh vessels, stating the firm stands to lose around $200 million from the proposed purchases.According to an internal document of the Shipping Ministry, Shipping Corporation of India (SCI) "is on the brink of financial collapse" and its plans to acquire 33 vessels would lead into a "debt-trap, almost on the lines of Air India"."SCI, which has had a profitable run for the last 19 years, is on the brink of a financial collapse...the company will be in the red from this year onwards. The large and high cost orders are leading to a debt-trap almost on the lines of Air India," the document said.According to the document, the is a significant gap emerging between the cost per vessel as per contract and market value of the vessel at present."The overall loss to the company on account of such acquisitions, where there are gaps between the contract price and the present market value, is in excess of $200 million," the document said.As on date, SCI has 33 vessels on order, of which 21 are ordered on Chinese shipyards. The company has been able to tie up the financing in respect to only 10 of these vessels."It was in this context that the broad of directors of SCI in its last meeting has desired a complete ban on all fresh acquisitions," it stated.When contacted, SCI Chairman S Hajara declined to comment on the observations made by the Shipping Ministry.SCI, which accounts for about one third of the total Indian shipping fleet of 9.61 million gross tonnage, planned to acquire 62 vessels during the 11th Five Year Plan (2007-12) but could acquire only 25 vessels.(PTI)
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Jindal Steel & Power is examining about two dozen proposals to buy power projects that have acquired land and government licences to accelerate expansion, a senior executive said.Jindal Power, a unit of Jindal Steel, whose 72-billion-rupee IPO plans have been delayed due to rocky market conditions, recently placed newspaper advertisements seeking to buy projects of above 1,000 mw."Today if you want to set up a project from absolute planning stage, it takes hell lot of time to acquire land and acquire permissions," Sushil Maroo, chief financial officer at Jindal Steel and Power, told Reuters in an interview.The talks with project owners are in the initial stages and some decision on purchase will be taken within 6 months, Maroo said, without specifying how many deals Jindal Power was eyeing.(Reuters)
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Pipavav Defence and Offshore Engineering Ltd has formed an equal joint venture with state-run Mazagon Dock to build submarines and warships, the shipbuilder's Chairman Nikhil Gandhi said on Monday.The company has invested over $1 billion to build warships, he added.The firm, earlier known as Pipavav Shipyard, had last week announced an agreement to raise about 1.6 billion rupees by issuing convertible warrants to a clutch of investors, including billionaire investor Rakesh Jhunjhunwala.In April this year, Pipavav got the go-ahead from the Foreign Investment Promotion Board to build warships, thus making it eligible to bid for multi-billion dollar defence contracts along with foreign partners.The company had also signed a protocol with a company controlled by the Russian ministry of defence for a potential contract of about $2 billion.(Reuters)
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BP expects output from Reliance Industries' gas blocks off India's east coast to rise from 2014, and is working for approvals from the government to develop satellite fields, the British group's chief executive said on Wednesday.Reliance, controlled by India's richest man Mukesh Ambani, has been under fire in recent months from the regulator, investors and analysts over slowing gas output from the Krishna Godavari (KG) D6 block.BP acquired a 30 per cent stake in 23 oil and gas blocks from Reliance earlier this year, in a deal worth $7.2 billion, and the collaboration is expected to boost gas output in the energy-hungry nation, given BP's expertise in deep water exploration."We are hopeful to get these approvals this year so we can begin engineering and by 2014 get gas production rising again," BP CEO Bob Dudley told reporters after meeting government officials. He is on a two-day visit to India.Earlier this month, India's upstream regulator said Reliance was currently producing 44 mscmd (million standard cubic metres a day) of gas from the D6 block, down from 60 mscmd a year earlier and far off the planned peak capacity of 80 mscmd.The CAG has also criticised Reliance and the government over development of the KG blocks and called for revamping profit sharing arrangements from oil and gas blocks."We already have joint teams in place looking at options to increase production from the D6 block. I am confident that we will be able to increase activitiy and output from these efforts sooner rather than later," Dudley said.The two firms are also evaluating the potential to add production from other blocks such as NEC 25, situated north of the KG basin, and part of the Reliance-BP deal, he said.BP, Europe's second-largest oil company by market value, has been pushing into emerging markets such as India, since a major spill last year from its deepwater Macondo well in the Gulf of Mexico forced the United States to ban drilling in the area for part of the year.Reliance Chairman Mukesh Ambani, who accompanied Dudley, said the partnership with BP would not be limited to India, but was initially focusing only on opportunities in the country.The two companies plan to set up a gas marketing joint venture in the next couple of months.At 1:23 p.m. (0753 GMT), shares in Reliance, India's largest listed firm valued by the market at $52.8 billion), were trading 0.5 per cent higher in a weak Mumbai bourse. The stock has lost a quarter of its value so far this year, largely due to drop in gas output.BP shares were up 0.2 per cent in London.(Reuters)
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The board of Oil and Natural Gas Corp has decided to issue a no-objection certificate for London-based miner Vedanta Resources' deal to buy a majority stake in oil and gas explorer Cairn India, ONGC said in a statement on Tuesday.The approval from state-run ONGC, which has a 30-percent holding in the Cairn-operated oil and gas fields in western India, comes after India granted conditional approval to the $6 billion deal in June, after a delay of more than 10 months.The transaction had been held up mainly over the disagreement on royalty payments between the two partners, and had undermined investor sentiment in Asia's third-largest economy.(Reuters)
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GMR Infrastructure said on Monday it agreed to sell a 30 per cent stake in its unit GMR Energy (Singapore) Pte Ltd to Petronas International Corp, a unit of Malaysian state-run oil firm Petronas.It did not provide financial details of the deal.GMR Energy is developing an 800 megawatt, gas-based power project on Jurong Island, Singapore, which will be set up by a consortium consisting of Siemens and Samsung, it said in a statement.(Reuters)
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Indian Oil Corp has barred Swiss-based Vitol, the world's largest oil trading firm, from participating in its tenders and other state-run refiners may follow suit, three sources with direct knowledge of the matter said.IOC, the country's biggest refiner, has put the Vitol Group companies, Vitol S.A. Geneva and Vitol Asia Pte. Ltd Singapore, on a holiday list from September 3 as the trader withdrew and modified a binding offer made in a crude import tender, they said.Officials at Indian Oil declined to comment. Vitol, responding to an email seeking comment, said it never comments on commercial relationships.IOC has informed other state-run refiners about the move and has asked them to explore the possibility of initiating similar action. Indian Oil was at one point the country's sole crude importer and used to buy oil on behalf of other companies. State-run firms still work closely on matters such as international trade and retail fuel prices.Other state-refiners would consult the oil ministry on suspending Vitol from participating in their tenders, the same sources said.Earlier, India's second-biggest state-run refiner Bharat Petroleum Corp had barred Glencore from participating in its tender but later lift the ban as the trader agreed to pay half the damages to the Indian firm.Vitol's competitors Glencore and Trafigura, which have significant Indian operations and have invested heavily to build their businesses there, are likely to be watching the developments closely.India is the world's fourth-largest oil importer and state refiners together currently control nearly two-thirds of the country's 4.17 million bpd refining capacity, which includes Reliance Industries' export-focused 580,000 bpd plant.IOC directly owns 1.08 million bpd of crude processing capacity through its eight refineries, while subsidiary Chennai Petroleum Corp owns 230,000 bpd of capacity. Indian Oil floats tenders almost every week seeking sweet barrels.(Reuters)
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National auditor CAG (Comptroller and Auditor General of India) on Thursday castigated the Oil Ministry for allowing Reliance Industries to retain its entire eastern offshore KG-D6 block in contravention of the Production Sharing Contract, but did not comment on more than tripling of the field development cost.CAG said the oil ministry should review determination of contracted areas to exploration companies in the Krishna Godavari basin, off the Andhra Pradesh coast.The CAG report questioned the "reasonableness of costs incurred" in the 2007-08 procurement activity in the area and said there was enough ground to revisit the profit sharing mechanism.The oil ministry said in June it was examining the draft report, and would prepare a reply to the audit observations after obtaining details from relevant agencies.The CAG, in its much-awaited report tabled in Parliament on Thursday, did not say if the capital expenditure for KG-D6 being raised from $2.4 billion proposed in 2004 to $8.8 billion in 2006 was unjustified or inflated.The CAG report said Reliance was allowed to enter the second and third exploration phases of the blocks without giving up 25 per cent of the contract area in each, by treating the entire area as a discovery area.It faulted the Oil Ministry and its technical arm, the Directorate General of Hydrocarbons (DGH), for allowing Reliance to retain the entire 7,645 sq km KG-DWN-98/3 (KG-D6) block in the Bay of Bengal after the giant Dhirubhai-1 and 3 gas finds were made in 2001.As per the PSC, Reliance should have relinquished 25 per cent of the total area outside the discoveries in June, 2004, and 2005, but the entire block was declared as a discovery area and the company was allowed to retain it."We recommend that the Ministry of Petroleum and Natural Gas should review the determination of the entire contract area as 'discovery area' strictly in terms of the PSC provisions," the CAG said, asking for delineation of the discovery area and relinquishment of the rest.The CAG was critical of government oversight, particularly on high value procurement decisions, and sought an "in-depth review" of 10 contracts, including eight awarded to Aker Group by Reliance on a single-bid basis.Giving Reliance a breather on charges of 'gold-plating' its KG-D6 expenses, the CAG said "approval of estimates (first $2.4 billion and then $8.8 billion in 2006) does not constitute acceptance of the cost projects", which can be done only through an audit of the actual cost incurred. While expenditure incurred in 2006-07 and 2007-08 was audited by CAG, remaining expenditure incurred from 2008-09 onwards would be covered in the future audit.CAG faulted Reliance for awarding a USD 1.1 billion contract to put up a production facility at MA oilfield in the same KG-D6 block to Aker on a single bid basis."During our scrutiny of the operator's records, we have come across instances, where multiple vendors were pre- qualified. However, when technical bids were received, all vendors (except one) were rejected, and the contract ws finally awarded on a single financial bid," it said.CAG said such disqualification of vendors on technical grounds, after a pre-qualification process and bidders' meeting for technical clarifications, limits the competitiveness which was not in accordance to the PSC.Seeking in-depth review in the award of 10 contracts (of which 8 were awarded to Aker Group companies), it said, "We are not even remotely suggesting that the operator should follow government procurement procedures, yet any commercially prudent private acquisition would also attempt to generate competition and thereby obtain the most competitive price."It sought review of the PSC signed under New Exploration Licensing Policy (NELP), evolved by the BJP-led NDA government in 1999, saying the regime provides inadequate incentive to contractors like Reliance to reduce capital expenditure.On the contrary, it provides "substantial incentive to increase capital expenditure or 'front-end' capital expenditure" so that government take from the blocks is lower."Given the similar conclusions that two independent agencies have reached as regards the adverse impact of the profit sharing mechanism in protecting Government of India's share designed in the late 1990s, there does seem to be enough ground to revisit the formula," it said.For future PSCs, CAG recommended that the Investment- Multiple linkage with the profit sharing formula be removed."Instead, the biddable profit-sharing percentage should be a single percentage. This will reduce the incentive for skewed volume and timing of capital expenditure resulting in very low Government of India share of profit petroleum."Further, in order to ensure a modicum of control, very high value procurement decisions above a specified limit should be subject to approval by the Management Committee, more specifically the approval of the Government of India representatives," it said.(Agencies)
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