India's top state-run refiner, Indian Oil Corp, wants the government to free up diesel prices ahead of a $2-billion-plus share sale, so as to raise the maximum funds from the offer, the firm's chief said on Monday.The sale of a 10 per cent stake by the government, along with the firm's plan to sell an additional 10 percent of fresh shares, should come in January or February, B.M. Bansal told Reuters. The government now holds 78.92 per cent in IOC, which is India's biggest fuel retailer, with a market value of $22.5 billion.In June, India gave autonomy to oil firms to set petrol prices and raised prices of diesel, kerosene and cooking gas. It also decided to free up diesel prices, but gave no time frame to implement the decision."We hope the government will deregulate diesel prices before the FPO (follow-on public offer)," Bansal told Reuters. "It will help a better valuation."India's oil ministry has approved the sale of a 5 per cent stake in Oil and Natural Gas Co. (ONGC) and 10 per cent in IOC. It has also allowed IOC to raise funds through sale of an additional 10 per cent of the expanded share capital.(Reuters)
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Brent crude fell below $115 a barrel on Monday, weighed down by expectations that OPEC's oil output in May would come in higher than April, while investors also kept an eye on demand from top consumer the United States as the summer driving season begins.More oil from top exporter Saudi Arabia and fellow OPEC members Nigeria and Iraq should push the group's total output higher and more than compensate for a further fall in Libyan supply in May, according to a Reuters survey.Brent fell 35 cents to $114.68 a barrel and US crude dropped 52 cents to $100.07 at 0804 GMT.7Reuters data showed that early morning trades were about one-quarter of the average trades done in the last two weeks due to public holidays in the United States and the UK. The US driving season traditionally kicks off on the weekend of Memorial Day, a public holiday taking place on Monday."The holidays have sidelined trades, as there are no aggressive buyers seen so far, but a weaker economy also seemed to have affected sentiment slightly," said Ken Hasegawa, a commodity derivatives manager at Newedge Brokerage in Tokyo.A plunge in US home sales reported last week could have stoked investor concerns. Industry data showed pending sales of existing US homes fell more than expected in April to hit a seven-month low, dashing hopes for a recovery in the vital housing market.However, eyes remained peeled on gasoline demand as there are uncertainties over the strength of the recovery in the world's largest economy."There are expectations of prices picking up purely because of the drive time in the US," said Jonathan Barratt of Commodity Broking Services managing director in Sydney. "We feel that might actually support crude prices."Still, government data ahead of the driving season last week showed gasoline demand over the previous four weeks down 2 percent on the year.High energy costs have sparked global concern as they are a drag on economic growth. A slowdown in economic expansion would in turn slow the growth in demand for fuel.In France, the Group of Eight world leaders agreed that the global economic recovery was becoming more "self-sustained", although they said higher commodity prices were hampering further growth.Middle EastFighting in Libya has almost shut down output in what used to be Africa's third-largest producer, but supply from all 12 members of OPEC is expected to average 28.90 million barrels per day (bpd) this month to help cover the gap.This is up from a revised 28.79 million bpd in April, the Reuters survey of oil companies, OPEC officials and analysts found. In small, independent oil producer Yemen, forces loyal to President Ali Abdullah Saleh opened fire on protesters in the southern city of Taiz on Sunday, killing at least six people and wounding 120, hospital sources said.In the capital Sanaa, seven explosions were heard on Sunday night in the district of Hasaba, the scene of a week-long fighting between Saleh's forces and a rival tribe in which 115 people were killed, residents said.Global powers are worried the country, already on the verge of financial collapse and home to al-Qaeda militants, could turn into a failed state that threatens the oil-rich region and its neighbour Saudi Arabia.(Reuters)
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Reliance Industries has said its eastern offshore KG-D6 gas field development cost is much less than what Gujarat government company GSPC and state-owned ONGC are spending on projects in the vicinity of its KG basin find.Reliance had in 2004 proposed a $2.4 billion investment for producing 40 million cubic metres per day of gas from 5.32 trillion cubic feet of reserves in the D1/D3 fields of the KG-D6 block. Later, in 2006, it revised the capital expenditure requirement to $5.2 billion in Phase-I for producing a higher 80 mmscmd of gas from 11.3 tcf of reserves.Replying to a draft audit report of the CAG, which said that the increase in field cost would mean a lower profit take for the government, Reliance said, "It has set a benchmark for the lowest project costs across the world."Its cost estimates for producing gas from the deepsea KG-D6 block are the lowest even in comparison to shallow water projects."Oil and Natural Gas Corp's block KG-D5 in vicinity, with a discovery made in 2001, has 1.9 tcf of gas reserves with an estimated development cost of $7.7 billion, for which a development plan is under preparation."Gujarat State Petroleum Corp's (GSPC) shallow water block in the same basin, which had a discovery in 2003, is estimated to cost $2 billion to develop 1.4 tcf," it said.ONGC's KG-D5 block sits next to Reliance's KG-D6 area, where the first discovery was made in 2002. While Reliance took six years to bring KG-D6 gas on to production, even after 10 years of the first discovery, ONGC has not yet been able to put together a development plan.Reliance said the allegations that government revenue interests have been affected by the 'gold-plating' are completely false. The New Exploration Licencing Policy, under which Reliance had won the KG-D6 block in 2000, brought an end to the 'cost plus regime', where firms got a fixed return on all the capital they invested.Under NELP, a contractor like Reliance "never benefits by an increase in costs," it said, adding it was imperative to view the revenue interest of the government from the point of view of the contribution of the project to the nation."Needless to say, inspite of all the noise, the draft CAG report has found nothing to suggest that Reliance indulged in 'gold-plating' viz that Reliance placed orders on its own affiliates at inflated costs or that payments made to vendors came back to Reliance," the voluminous 250-page response said.After an extensive and detailed audit process, in which eight CAG officials spent six months on Reliance premises, "CAG does not state that any evidence exists to support any case that the contract cost has been dishonestly inflated.""Using the benefit of hindsight, the CAG cannot question the technical and operational judgements of the operator that were in effect the best possible judgements at the time, based on the best information available," it added. (PTI)
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Private real estate developers whose projects at Greater Noida have been thrown into limbo by the Supreme Court's decision to quash the acquisition of land from farmers assured investors today that their money would be returned with interest if they want.At a media conference organised under the banner of the Confederation of Real Estate Developers Association of India (CREDAI), six builders -- Supertech, Amrapali, Mahagun, Panchsheel, Gulshan Homes and SPJ (Shree) -- said they expected to incur a collective loss of Rs 600 crore in lieu of funds already invested on construction and other activities at the project sites.Supertech Managing Director R K Arora said, "We are collectively talking to the authority about our loss incurred due to Supreme Court ruling quashing the land acquisition.Where authority will allot alternate site and how our loss could be recovered is being discussed with officials.""A total 6,000 apartments are affected under the Shahberi project. It include 700 apartments of Supertech, 150 of Panchsheel and 300 of Gulshan," said Arora.Amrapali Managing Director and CREDAI (Western UP) Vice Chairman Anil Sharma said, "Association has formed cell to monitor the ongoing projects too, to see where problem was expected and how to overcome it before hand so that investors are not affected."With regard to land acquisition, the developers said this needs to be looked after by the authorities. They indicated that the present act governing land acquisition needs amendment, but clarified that builders have no role in this.(PTI)
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State-owned oil companies have threatened to stop jet fuel supplies to Air India after the cash-strapped national carrier repeatedly defaulted on payment of fuel bills.Air India was put on cash-and-carry from December, but the airline has not been able to pay for even its daily fuel purchases.Oil companies last week sent a notice for stopping aviation turbine fuel (ATF) supplies to Air India at some airports like Calicut and Jaipur, officials said here.Air India owes Indian Oil Corp (IOC) about Rs. 1,900 crore. IOC meets 63% of Air India's jet fuel needs. The national carrier has run up an outstanding bill of over Rs 300 crore with Bharat Petroleum Corp Ltd (BPCL), while its dues to Hindustan Petroleum Corp Ltd (HPCL) are relatively small.Officials said Air India buys jet fuel worth Rs 18.5 crore per day from the three state oil firms, but it pays only Rs 13.5 crore.This led the oil firms to threaten to stop supplies of ATF beyond what Air India pays for."Oil companies already incur huge losses on selling diesel, domestic LPG and kerosene way below their production cost and to expect them to sell ATF at subsidised rates is not acceptable," an official said.At a meeting called by cabinet secretary K M Chandrasekhar in March to resolve the payment impasse, Air India sought discounts similar to the ones given to private airlines.Oil companies give a Rs. 1,600-1,800 per kilolitre discount to private airlines on promise of assured payment. After adding finance charges for a 90-day credit period, the discount comes to Rs. 3,600 per kl."Even if this discount is stretched to Rs. 5,000 per kl, the Rs. 18.5 crore per day fuel bill will not become Rs. 13.5 crore. After including some more concessions, the fuel bill at best will come down to Rs. 17 crore a day, a far cry from the Rs. 13.5 crore paying capacity of Air India," he said.Officials said Air India was discussing only the payments for future ATF purchases and there was no word on how the state carrier will clear the past outstanding."Air India talks of getting the same discounts as private airlines, but does it know that ATF purchases by airlines such as Jet Airways and Kingfisher Airlines are covered by a bank guarantee in case of default?", an official asked.Both Jet Airways and Kingfisher have brought down their outstanding to manageable levels and have provided bank guarantees to cover against any default.(PTI)
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Environmentalists criticised the United Nations on Tuesday after it ruled that a large Indian coal-fired power project is eligible to earn carbon credits worth $165 million at current prices.Several green organisations said the UN rules, or methodology, applied to the 4,000 MW supercritical plant owned by Reliance Power were flawed and that the project was viable without the sweeteners of tradeable carbon credits called certified emissions reductions (CERs).The power station, Andhra Pradesh's Krishnapatnam, is the second Reliance Power project to be formally registered by the United Nations under its Clean Development Mechanism.In total, five high-efficiency coal power plants have been registered under the CDM -- four in India and one in China -- meaning they are all eligible to earn CERs that they can sell.The CDM is meant to reward developers of clean-energy projects in poorer nations by giving them CERs as a way to make the projects viable."To say that this project required CDM revenues to go forward is patently absurd," said Anja Kollmuss of CDM Watch, a green group that monitors the CDM market."Not only is the project required by the Indian government to use supercritical technology, but they already secured all the necessary financing, bought the land, began construction, and ordered all of the critical components before they knew if they could receive CDM funds," she said in a Washington-datelined statement.The executive panel that governs the CDM has been under pressure to suspend the methodology under which firms can apply for U.N. offsets on the basis of cutting greenhouse gas emissions through more efficient power generation technology.Under PressureSupercritical and ultra-supercritical power plants use more efficient boilers that cut coal consumption per megawatt/hour. The Indian government has rolled out a programme that supports the building of 4,000 MW supercritical plants to try to meet booming power demand. Reliance, Tata Power and NTPC are investors.Last week, the methodology panel, which advises the CDM executive board, seemed to back the concerns by stating that the methodology, ACM0013, "may lead to significant overestimation of emission reductions," Point Carbon News, a Thomson Reuters subsidiary, reported on Monday.The panel said the methodology should be put on hold with immediate effect."This project never should have been registered. It is plainly not additional," said Steven Herz, senior attorney with the Sierra Club's International Climate Program, said in the joint statement with CDM Watch.He was referring to a central CDM rule that developers must prove that a project or technology type would not be viable without CER revenue.Reliance Power declined to comment. But a person familiar with the matter said that "the entire process as laid down by the U.N. was followed."The United Nations secretariat that oversees the CDM dismissed the concerns."The project was registered and there is no story there. The project would have gone through the regular vetting process," David Abbass, public information officer for the CDM office told Reuters.The five registered power projects involve two from Reliance Power totalling 8,000 MW, two projects totalling 2,640 MW from Adani Power and a 2,000 MW ultra-supercritical plant by Shenergy in China.According to U.N. data, the five projects are eligible to receive a total of 68.2 million CERs over a 10-year crediting period. That is worth 661 million euros ($919 million) based on current prices of CERs traded on the European Climate Exchange of 9.70 euros.Reliance's Krishnapatnam plant will receive 12.3 million CERs and the firm's other 4,000 MW plant, Sasan Power in Madhya Pradesh, will receive 22.5 million.Total carbon dioxide emissions from the five projects, based on data from project design documents, over the 10-year crediting period is 673 million tonnes. That compares with the total annual greenhouse gas emissions of Australia at less than 600 million tonnes.The European Union's emissions trading scheme is the main buyer of CERs and the EU has already banned the use of CERs in its scheme from some types of projects from 2013."As of now no other credits are banned, however, there is a risk that EU may ban the use of other kinds of credits on sustainability aspects," said Ashutosh Pandey, CEO, carbon advisory business, for project developer Emergent Ventures India.(Reuters)
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As China tries to cope with what may be its worst power shortage in years, coal demand from the world's biggest consumer is likely to take centre stage at one of Asia's largest coal industry gatherings in Indonesia next week.China will face stiff competition for coal shipped by Indonesia, the world's biggest exporter of thermal coal, from India where demand for electricity is rising in an economy seen growing around 8.5 per cent."With domestic prices rising so strongly - they are basically on par with import prices now - the likelihood of China being strong importers of thermal coal over the summer is extremely high," said Daniel Hynes, director of commodity research at Citigroup in Sydney.Chinese domestic coal prices rose to the highest level in more than two years last week as utilities stocked up ahead of the summer months, making imports more attractive.Chinese buyers have already been on the hunt for Indonesian cargoes as well as some Australian coal over the last few weeks to fill requirements.If Beijing lifts restrictions on how much coal-fired power plants are permitted to charge more for electricity, as it has already done in some provinces, import demand could grow even higher as utilities burn more coal.Indian demand for Indonesian coal is also on the rise, and India's short-term and long-term demand is likely to be a focus."Over the last couple of months, you're actually seeing the share of India coal imports from Indonesia, increasing... India has made a lot of progress with imports, with year-on-year growth. People will want to see where they are at the moment," said one Indonesia-based analyst who asked not to be named.Growing demand for Indonesian coal by India, to fill the widening gap between domestic coal output and demand, is likely to continue, the analyst added, resulting in intense competition between India and China for tonnage.Indian and Chinese companies are also seeking to acquire stakes in Indonesian coal mines to secure their supply, with Coal India, the world's largest coal miner, in advanced talks to buy up to 40 per cent of Indonesian low-grade coal producer Golden Energy Mines for up to $1 billion, three sources with direct knowledge of the deal said.Although India is home to 10 per cent of global coal reserves, it is plagued by a shortfall in local supplies as demand has grown rapidly with the increase in coal-fired power plants.India's coal demand is forecast to grow 11 per cent a year, reaching 135 million tonnes in 2011/12 with imports set to make up about 20 per cent of its total consumption.Anticipation Of RecoveryThe industry will also be closely watching Japanese demand for coal, which withered after the March tsunami took some coal-fired plants offline and forced some utilities to declare force majeure on coal shipments. Some Japan-bound cargoes have been diverted to destinations such as China.Japanese buyers, particularly industrial buyers, have been indicating a return to the market for coal, market sources said."Japanese buyers are starting to think that they might have a slight increase in coal burn," one Australia-based market source said.But industry watchers said demand so far has been tepid and utilities are still recovering from the tsunami aftermath ."They are certainly starting to dip their toes back in the water... (but) it's going to be July before the utilities in particular are back on their feet and a bit more comfortable with making some more longer term purchases," Citigroup's Hynes said, adding that a full-blown recovery may not materialise until the late third quarter or even fourth quarter of the year.Indonesia Mining RegulationWith demand for Indonesian coal ramping up, in particular from China and India, Indonesian coal production capacity and regulations will also be in the spotlight.Indonesia's coal, generally lower-quality than the coal its neighbour Australia produces, is attractive to Asian buyers seeking bargains, and cheaper freight from Indonesia offers an advantage.But the lack of infrastructure and some government regulations have depressed production."The overall consensus is that production is still under pressure," Singapore-based UBS analyst Andreas Bokkenheuser said.Indonesia also struggles to deal with a raft of problems including illegal mining and overlapping mining concessions.In its latest move to clean up the industry, Indonesia's government will audit some 8,000 new mining permits to make sure they are in line with mining and environmental laws."For the fifth or sixth year in a row, it's going to be about production, infrastructure and regulations," Bokkenheuser said."There will be talk about new land reform, increasing the investment environment in Indonesia - that will be the primary focus."(Reuters)
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A fragile global economy is likely to suppress oil demand growth to 1.3 million barrels per day (bpd) in 2012, lower than this year, the Organization of the Petroleum Exporting Countries said in its first forecast for next year.Oil prices could draw some support from a lingering supply shortfall of more than a million bpd between the anticipated need for OPEC crude and the amount pumped by the 12-member group, although increased output from top producer Saudi Arabia has narrowed the gap.In its monthly report on Tuesday, OPEC predicted world oil consumption would rise by 1.36 million bpd this year, slightly lower than the 1.38 million bpd expected in last month's report.It said the demand outlook was subject to much uncertainty and would depend on factors such as the speed of Japan's recovery from this year's nuclear disaster and tsunami, as well as on the impact of oil prices on developed economies."Should higher international oil prices persist, or should further setbacks in the OECD economies occur, then it might impose a stronger reverse elasticity on oil demand, putting more weight on the downside risk," OPEC said."This risk might be translated into a reduction of current growth by 200,000 bpd."The demand for OPEC's crude was estimated to rise to 30.3 million bpd next year, from 30 million bpd in 2011.At a meeting in June, OPEC failed to reach agreement on a Saudi-led proposal to increase output even though the group's own economists forecast a supply gap in the second half of the year. Tuesday's report implied a shortfall of 1.25 mln bpd.Saudi Arabia has since unilaterally added some 461,000 bpd to its production in June, compared with May, taking its output to 9.42 million bpd, according to secondary sources cited by the report.OPEC output as a whole rose by 520,000 bpd in June compared with May to 29.60 million bpd, the secondary sources found.In response to the failed OPEC meeting, the International Energy Agency, led by top oil consumer the United States, announced the release of 60 million bpd from emergency stockpiles late last month.Some OPEC officials, notably from Iran, condemned the intervention and OPEC's monthly report also implied criticism."Speculative activity has continued to push prices beyond levels justified by fundamentals", the report said."The market reaction to the recent decision to release Strategic Petroleum Reserves provides a good example," it continued, noting prices had initially fallen sharply, but then recovered.Brent crude futures were trading above $115 a barrel on Tuesday, higher than before the announcement of the IEA's emergency reserves release.(Reuters)
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