India will make a $700 million oil payment to Iran on Wednesday, sources said, the first release of such funds after the July deal that sets the roadmap for the lifting of sanctions aimed at Tehran's nuclear activities. Partial payments of some of Iran's oil dues have been allowed since early 2014 on the basis of a temporary deal that was a prelude to the July agreement, which will eventually end economic sanctions imposed on the country in exchange for curbs to its disputed nuclear programme. Toughened sanctions put in place in early 2012 had halved Iran's oil exports and strangled its oil revenue, crippling its economy and finally bringing it to the negotiating table. The sanctions are widely expected to be terminated in 2016 if Iran complies with terms of deal agreed on July 14. Refiners will be making payment in rupees equivalent to $700 million to the state-run UCO Bank on Wednesday this week, said three sources with direct knowledge of the matter. They said UCO Bank has already bought dollars in the forward markets for payments into the Central Bank of Iran's account with Oman's Bank Muscat. The sources said U.S. Treasury's Office of Foreign Assets Control (OFAC) has already approved the banking mechanism and payment of $1.4 billion by Indian refiners in two equal instalments to Tehran. Timing for the second installment is not yet known, the sources said. A U.S. Treasury spokeswoman declined comment. Indian refiners have been depositing 45 percent of their oil payments to Iran in rupees with UCO Bank since 2012. Tehran uses the funds, currently more than Rs 17,000 crore ($2.57 billion), for importing non-sanctioned goods from New Delhi. Refiners have been holding the remainder after a route to pay for oil through Turkey's Halkbank was stopped in 2013 under pressure from sanctions, although payment of some of those funds was allowed after the initial temporary deal. Indian refiners owed about $6.6 billion to Iran as of the end of August. Essar Oil owes about $3.1 billion, Mangalore Refinery and Petrochemicals Ltd $2.8 billion, followed by Indian Oil Corp, which owes $581 million. HPCL-Mittal Energy Ltd (HMEL) owes $97 million and Hindustan Petroleum Corp has to pay $29 million. Sources said HMEL, which last made purchases from Iran in 2013, has not been participating in the payment mechanism because of a sharp decline in the rupee since then. The remaining four companies will pay Iran amounts in proportion to what they owe, the sources said. HMEL Chief Executive Prabh Das declined to comment. India is Iran's biggest oil client after China, although New Delhi has reduced purchases under pressure from the sanctions. Tehran is now its seventh-biggest supplier, down from the No. 2 spot in the pre-sanctions era.
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BW|Businessworld’s Simar Singh caught up with Shell Lubricants India’s Managing Director Nitin Prasad, to talk about the challenges and future of the company and how Shell is investing a couple of millions in Bangalore R&D facility Excerpts from the interview What has been the focus of Shell Lubricants in India?In India, in terms of the domestic market, what we have been focusing on is how can we bring energy efficiency for our customers, how can we bring fuel efficiency solutions that are not available in India today and focusing on total costs of ownership so that we can help our customers in India become much more competitive. It's all about what value you bring to the country and how you orient yourself. In your experience, what are the challenges that you have faced at Shell Lubricants from the Indian policy environment?On the domestic side, when it comes to the movement of goods within the country the GST that has been drafted is a problem for us, it magnifies the costs by two to three times. In terms of having the right infrastructure to be able to service the entire company, the overheads are very high. That makes us less competitive. What it also does to the industry is that it breaks the benefits that come from consolidation and scale. Most industries like to have one big manufacturing facility and one big warehouse and be able to supply everywhere because thats how we get the maximum efficiency in our production levels. However, because of the way the economy works and not having a GST we actually have to break apart your business and operate in many small different locations as that works out to be more efficient. We ourselves have one manufacturing facility and 17 odd warehouses, and at different locations we import products all across the entire country. We have also had multiple manufacturing facilities, third-party facilities in Chennai and elsewhere. Another challenge is that the mindset so far has been to make the cheapest thing you can and everyone wants to try and save one rupee here and there. As a culture, we talk about value for money but I believe that we often mistake that for the cheapest possible thing. There are plenty of examples in the industry where people have made extremely cheap products, but consumers have come in and said that these don't meet their basic requirements or basic standards of quality. I see that, as a society, we are demanding more now in terms of quality and capability. Of course, we still want it to be competitive but we want quality now. On the export side, there are a lot of infrastructural challenges and we need a proper policy framework. On our side, we have invested quite heavily in both the labour and technology side. So we are exporting and we are comfortable exporting. But it doesn't take much for us to rank ourselves with other plants in countries across the world and I will say that we are not that competitive. Being a multinational, we at Shell have 35-40 odd plants across the world, so we really have the luxury of choosing where we want to manufacture our product. We have to compete with all those other 40 plants to get our business. Where would you rank your Indian operations amongst all the different plants that are there?The honest answer is that that we are better that more than half of them and we are worse than the other half. Somewhere in the middle, but getting better. We have been increasing our exports over the years and are drifting towards being the top 25 per cent. In a few years time we hope to be a top quartile manufacturing location and we feel like we can get there on our own steam. The real challenge is going from top quartile to top 10%, for that we would need a lot more support from the environment. Is Shell looking at expansion?We always have plans to expand capacity and have been expanding over the years. If you take a look at the Shell Group as a whole, we are by far, one of the most diversified oil and gas companies. We have been investing over a billion dollars in the marketplace and are continuing to invest. In India, we are expanding our R&D facility in Bangalore, we've put in a couple hundred million dollars to get the latest and greatest R&D technology. We already had about a 1,000 people there and are now growing that number to 1,500. We are expanding our finance outsourcing arms and are looking at expansion of our downstream businesses. We are looking at everything and are very bullish on India. We believe that it is economy that is coming into its own. We think its going to take time but it is a top priority market for us and we are going to continue investing in it.
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Oil prices dropped on Monday despite a fall in US drilling activity for the fourth straight week, with analysts pointing to a poor economic growth outlook as the main reason for low crude prices.China's August industrial profits dropped 8.8 per cent from the same month last year, and January to August industry profits were down 1.9 per cent."The growth problem endures. Asia isn't about to bounce," said Frederic Neumann, co-head of Asia Economics Research at HSBC in Hong Kong on Monday in a note to clients.The International Monetary Fund (IMF) is likely to revise downwards its global economic growth outlook due to weakness in emerging markets.Brent crude futures were at $48.13 per barrel at 0633 GMT, down 47 cents. US crude was 44 cents lower at $45.26 a barrel. Crude futures are now down more than 10 percent since the end of August.Monday's price falls came despite an ongoing reduction in US drilling, which has been on the decline for four straight weeks, a sign continued weak prices were causing oil and gas producers to reduce drilling plans.Yet analysts said US oil output was holding up despite the lower drilling."A rapid draw-down of the observed backlog of uncompleted wells could lead to higher production later this year and in 2016," Goldman Sachs said.Analysts said US output data would likely be the main driver this week for oil prices, especially as Chinese trading slows ahead of its seven-day National Day holiday that starts on October 1.The US Energy Information Administration is due to release its monthly petroleum supply report on Wednesday. [EIA/S]"We expect there to be laser-focus on US production figures ... Signs that US production rolled (fell) could provide a boost to both WTI and Brent flat prices," Morgan Stanley said.Jefferies bank said that oversupply in oil markets had halved since the second quarter to around 1 million barrels per day, and that the falling prices since June 2014 were impacting production."The price signal is working. US production is past its inflection and declines are accelerating ... (and) non-OPEC supply outside the U.S. is also beginning to show the effects of lower investment that arises from lower oil prices," Jefferies said.On the demand side, Barclays said that India "remains one of the bright spots" with oil demand up 7 percent between January and August this year compared to the same period in 2014.(Reuters)
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Oil prices pared losses on bargain hunting on Thursday after sharp falls overnight on an unexpectedly large buildup in US gasoline stocks and seasonally tepid demand.The global benchmark November Brent contract climbed 22 cents to $47.97 a barrel by 0517 GMT, after ending the previous session down $1.33 at $47.75 a barrel.US crude rose 31 cents to $44.79 a barrel, having slumped $1.88 on Wednesday to settle at $44.48."A combination of a slightly better supply-side scenario in terms of prices and a bit of an improvement in industrial sentiment globally has brought in some support," said Michael McCarthy, chief market strategist at CMC Markets in Australia.Data from the Energy Information Administration on Wednesday also showed that U.S. crude oil stocks fell 1.9 million barrels in the week to Sept. 18, the second straight weekly drawdown. Analysts had expected a draw of 533,000 barrels.Still, gasoline stocks rose 1.4 million barrels, compared with analyst expectations in a Reuters poll for an 819,000-barrel gain.The build in motor fuel in the world's largest oil consumer after the end of its summer driving season raised new concerns about high product stocks during autumn months.And longer-term, many analysts still see a continuing supply surplus weighing on the market."Despite early signs of a cutback in US shale production, the underlying supply and demand fundamentals remain weak for both Brent and WTI. This, alongside uncertainties surrounding China and the broader health of the global economy, is capping any recovery in prices," said BMI Research, part of the Fitch ratings agency.BMI added that it was holding to below-consensus forecasts for both key crude benchmarks for the next two years."Major supply additions in West Africa, North America, the North Sea and the Middle East will continue to outpace the growth in demand, contributing to a rising overhang of crude in the market," BMI said.A planned shutdown of Britain's North Sea Buzzard oilfield, has been reset to November from October, its operator Nexen said, contributing to a more immediate outlook for ample supplies. The field is the biggest contributor to the Forties oil stream, which has the largest volume of the four North Sea crudes used in the Brent benchmark.Asian shares were subdued on Thursday after more dour economic news in China and the United States prompted a bruising selloff the previous day. In the currency market, the euro was helped by comments from European Central Bank President Mario Draghi that the bank needed more time to decide on whether further stimulus is required.(Reuters)
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Iran has offered to supply natural gas at $2.95 for a urea plant that India will set up at Chabahar port on the Persian Gulf, but New Delhi wants rates to be lowered. With the US and other western powers easing sanctions against Iran, India has been in talks with Tehran to set up a gas-based urea manufacturing plant at the Chabahar port, besides developing a gas discovery ONGC had made. The total investment in the projects will be around Rs 1,00,000 crore, Road Transport, Highways and Shipping Minister Nitin Gadkari said today. Asked about the development of the port, he said: "Various ministries will give their report by September 28, based on which a final decision will be taken. India is ready to invest more than Rs 1 lakh crore, but that depends on negotiations with Iran." On talks on supply of natural gas, Gadkari further said: "Iran is offering gas to India at $2.95 per million British thermal unit to set up urea plant at the Chabahar port in Iran. India is negotiating the gas price and has demanded it at $1.5 per mmBtu rate." The rate offered by Iran is less than half the rate at which India currently imports natural gas from the spot or current market. Long-term supplies from Qatar cost four-times the Iranian price. India, which imports around 8-9 million tonnes of the nitrogenous fertiliser, is negotiating for a price of $1.5 per mmBtu with the Persian Gulf nation in a move which if successful will see a significant decline in the country's Rs 80,000 crore subsidy for the soil nutrient. India has already pledged to invest about $85 million in developing the strategic port off Iran's south eastern coast, which would provide India a sea-land access route to Afghanistan bypassing Pakistan. "India is ready to make huge investments in Iran. If urea plant is set up, it will result in slashing of urea prices in India by 50 per cent and cut on huge subsidy on urea, which is Rs 80,000 crore," he added. Earlier this month, Gadkari said: "I had been to Iran and we are trying to procure gas at a very economical rate. In 2013, they had offered it at the rate of 82 cents, less than a dollar. We make urea from naphtha. We are trying to set up a urea plant in Iran." Ministries of Chemical & Fertiliser and Petroleum are working on the proposed 1.3 million tonnes per annum plant, which once successful will led to urea prices coming down by 50 per cent, he had said then. The Minister had visited Tehran in May, and both the nations had inked a pact to develop the Chabahar port. Iran's Foreign Minister Mohammad Javad Zarif had also called on Gadkari last month. In August, Gadkari said Iran has given "very good offers" to India to develop the integrated Chabahar port, which has a special economic zone (SEZ). (PTI)
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Oil prices edged up in early trading in Asia on Monday (21 September) as US drilling slowed and analysts estimated that $1.5 trillion worth of planned American production investment was uneconomical at prices of $50 per barrel or lower.Crude oil prices have plunged almost 60 percent since June 2014, when soaring global production started to clash with slowing demand. This includes losses of more than a quarter since June this year as a sharp slowdown in China has sparked concerns over the health of the world economy.Analysts said the low prices were beginning to impact production as drillers slow down new projects, especially in cost-sensitive North America where drillers react fast to changing prices.US energy firms cut oil rigs for a third week in a row last week, a sign that the latest crude market weakness was causing drillers to put on hold production plans, triggering an increase in prices on Monday.US West Texas Intermediate (WTI) crude futures were trading at $45.04 per barrel at 0421 GMT, up 36 cents from their last settlement. Globally traded Brent futures were at $47.84 per barrel, up 37 cents."The current rig count is pointing to US production declining sequentially between 2Q15 and 4Q15 by 255,000 barrels per day at the observed path of the US horizontal and vertical rig count across the Permian, Eagle Ford, Bakken and Niobrara shale plays," Goldman Sachs said."The implied year-on-year growth by 4Q15 of 120,000 barrels per day is lower than the prior week's estimate of 125,000 barrels per day," it said.Analysts said low prices would have a bigger impact in the longer term as producers struggle to cut enough costs."While operators are seeking an average cost reduction of 20-30 percent on projects, supply chain savings through squeezing the service sector will only achieve around 10-15 percent on average," energy consultancyWood Mackenzie said."$1.5 trillion of uncommitted spend on new conventional projects and North American unconventional oil is uneconomic at $50 a barrel," Woodmac added.(Reuters)
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Oil prices fell on Monday (14 September) in Asian trading as weakening demand weighed on markets, although U.S. futures received some support from reduced American drilling.Front-month Brent crude futures were down around 40 cents from their last settlement at $47.73 per barrel at 0402 GMT. US crude futures dipped 16 cents to $44.46.The US oil rig count fell by 10 to 652 last week, the second straight monthly drop, and the International Energy Agency said on Friday that ongoing production cuts would lead to a rebalancing of the market by next year.Yet several banks said the immediate outlook remained weak."Both the supply and demand pictures look less favourable over the coming months ... Outside the US, oil fundamentals appear to be slipping seasonally," Morgan Stanley said on Monday, adding that there was potential for floating storage within the second half of 2015.Macquarie noted that falling global auto sales in August were dragging on demand."Sales were 1.0 per cent lower YoY (year-on-year), slightly more than the 0.8 per cent fall seen in July 2015," the bank said, although it added that sales could pick up towards the end of the year.ANZ bank said high production in the Middle East remained a concern on the supply side. OPEC's monthly market report will be published later on Monday.In part due to oversupply and to defend market share, Kuwait set its October Official Selling Price for crude to Asia60 cents lower than September, at a discount of $1.95 per barrel versus Oman/Dubai levels.Cheap oil undermines the health of energy firms, which have already seen steep share devaluations since prices started falling in 2014."The trajectory of the (oil price) recovery keeps getting shallower as our expectations for OPEC output shifts up ... The financial condition of the sector deteriorates further through 2017," Jefferies bank said."We are lowering our Brent oil price forecast by 9 percent to $54 per barrel (bbl) in 2015, 10 percent to $61/bbl in 2016 and 6 percent to $73/bbl in 2017," Jefferies said.Traders will this week eye U.S. monetary policy as the Fed will kick off a two-day policy meeting on Wednesday.Should interest rates be raised for the first time in years, analysts expect oil to fall as demand is hit due to higher import prices for countries not using the dollar.(Reuters)
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Chinese state-owned energy giant Sinopec Group will sell off most of its hotels by the end of 2017 and get rid of more than 4,000 company cars as part of efforts to root out corruption and waste, it said on Monday. Since President Xi Jinping's appointment in 2013, the government has cracked down on official corruption and extravagance in China, where the flaunting of personal and often illicit wealth and wasteful public spending have led to widespread criticism of the party. The big state-owned conglomerates have been a particular focus, and several high-ranking executives or former executives at Sinopec have been investigated or jailed. Sinopec Group is the parent of Sinopec Corp, Asia's largest oil refiner. In a statement released by the Communist Party's graft-busting Central Commission for Discipline Inspection, Sinopec said that the latest inspection by anti-corruption teams had been very effective at rooting out problems. "It has hit the nail on the head, grasping the essence and crux (of the issue), helping us to find the root of the disease," it said. As part of company efforts to rein in spending, all the hotels it runs will be sold off by late 2017, apart from a "small number" that are competitive or are in exploration areas with no other hotels, it said. State-owned firms in China tend to be very diversified and often own assets that have nothing to do with their core business. The number of cars the company operates will also be slashed by 4,300, it added, a move in line with other government-run organisations and departments. The probe found a series of other problems of waste, including a holiday two executives took to Taiwan in 2013 on the company dime, and four people who did not return to China immediately after a board meeting in gambling hub Macau. Sinopec is not the only state-owned energy company to have been probed by the graft watchdog. In a statement released late on Sunday, China National Offshore Oil Corp, better known as CNOOC, listed the steps it was taking to address the problems inspectors had found there, including promising not to use company money to buy high-end cigarettes and liquor. (Reuters)
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