Indian refiners have been told to prepare to deposit $700 million with United Commercial Bank in readiness for it to pass on the first instalment of oil payments owed to Iran, two sources with knowledge of the matter said, ahead of the expected lifting of sanctions against Tehran. After the landmark nuclear deal between Iran and six major world powers struck on July 14, sanctions could begin to be removed later this year if U.N. inspectors confirm Tehran is complying with its provisions. The refiners -- Essar Oil, Mangalore Refinery and Petrochemicals, Indian Oil Corp, Hindustan Petroleum Corp and HPCL Mittal Energy -- together owe a total of more than $6.6 billion. The $700 million part-payment will be split in line of the proportion owed by each. Last month Reuters reported that Indian refiners were asked to be prepared to pay $1.4 billion dollars to Iran in two equal installments. India is Iran's biggest oil client behind China, though New Delhi has reduced purchases under pressure from sanctions. Indian refiners together owe Iran more than half of the bill for crude bought since February 2013, when a route to pay for Iranian oil through Turkey's Halkbank was stopped. Under an interim nuclear deal in November 2013, some of Iran's blocked funds were released by Asian buyers, including India. Indian companies have deposited 45 percent of their oil payments in a rupee-denominated account at United Commercial Bank, which Iran is allowed to use to buy goods not covered by sanctions, such as food and medicine. (Reuters)
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The world's top oil exporter Saudi Aramco will open an office in India by the end of this year to help boost its crude sales in the world's fourth largest oil consuming nation, sources with knowledge of the matter said. India is one of the biggest markets for Saudi oil. In fact, Saudi Arabia has been the top supplier to the South Asian nation for the past 14 years starting April 2001, according to the government data. Saudi Arabia's share in India's crude intake has, however, dropped to about 18.5 percent in the year to March 2015 from about a quarter a decade ago, while India's refinery capacity has doubled to about 4.6 million barrels per day in the period. "With the new office, Aramco will integrate its existing operations in India run through Aramco Overseas with the crude sales business," said one of the sources, adding that India was a bright spot in an otherwise sluggish global oil sector as fuel demand in the country was rising contrary to other regions. Saudi Arabia opened Aramco Overseas in India in 2010 but its role has been limited to engineering, material requirement and inspection-related activity, according to the company website. "Aramco's office in New Delhi will be similar to the one in Tokyo and Seoul which also look into supply of oil to these countries," said a second source. The sources did not want to be named as they were not authorised to speak to media. India will be the fifth country in Asia where the state-owned oil company Aramco will set up offices after Korea, Japan, China and Singapore. It also has Aramco services company in the United States and Aramco Overseas company in Europe. Aramco's push into India comes at a time when fuel demand in the country is rising, driven by the government's focus on local manufacturing, infrastructure development and rising car sales. Below average monsoon rains are also pushing up demand for diesel used in gensets to pump water for irrigation. Kuwait Petroleum Corp also has an office in India that looks into crude sales to the country. (Reuters)
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Indonesia is reactivating its membership of the Organization of the Petroleum Exporting Countries in December, OPEC said on Tuesday, which would add almost 3 percent to the group's oil output already close to a record high. The southeast Asian country would be the fourth-smallest producer in the Organization of the Petroleum Exporting Countries ahead of Libya, Ecuador and Qatar, and bring the number of participants to 13 countries. Indonesia was the only Asian OPEC member for nearly 50 years before leaving the group at the start of 2009 as oil prices hit a record high, and rising domestic demand and falling production turned it into a net oil importer. In a statement, OPEC said Indonesia's request to reactivate its full membership was circulated to OPEC members and following their feedback, OPEC's next meeting on Dec. 4 will include the formalities of reactivating its membership. "Indonesia has contributed much to OPEC's history," the statement from the group's Vienna headquarters said. "We welcome its return to the Organization." Indonesia's Energy Minister, who OPEC said will be invited to December's meeting, told Reuters earlier on Tuesday the country would return as a full member. The development is no great surprise as in OPEC terms Indonesia never really left. OPEC termed its departure a "suspension." Ecuador, which rejoined in 2007, set a precedent for a return from suspension. OPEC sources made clear the door was always open. Indonesia's status as a net importer had raised the question of whether it would return as a full member given that OPEC's Statute says any country with a "substantial net export of crude petroleum" may become a full member. OPEC pumps more than a third of the world's oil and is engaged in a defense of market share, having dropped its long-standing policy of cutting output to support prices in November 2014. The addition of Indonesia's output will boost OPEC's production by about 2.6 percent based on July output figures towards 33 million barrels per day (bpd) - far in excess of OPEC's 30 million bpd official target. OPEC output has not been above 32 million bpd since 2008, before Indonesia's exit. Indonesia produced 840,000 bpd in July, according to the International Energy Agency, and OPEC pumped 31.88 million bpd in July according to a Reuters survey - the highest monthly rate on record from the current 12 members. (Reuters)
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The Union government's approval of the Marginal Fields Policy (MFP) for 69 oil and gas fields, proposing market linked prices and a revenue sharing mechanism, would shift the key risks to developers says India Ratings and Research (Ind-Ra). However, the policy is also likely to result in the simplification of the method to calculate the government's share. This presupposes prudence on the part of developers while bidding as the biddable parameter is likely to be the revenue share of the government. Developers will need to consider an overall exploration, development and production (EDP) cost along with volume and price estimates, as these would be the key variables for ensuring a reasonable internal rate of return on the projects. Ind-Ra expects the market linked prices for such gas to be closer to the lower of the spot or term liquefied natural gas landed prices, as these would be the alternatives available with key end-user industries. Thus, market-linked price from these marginal gas fields could be in the range of 1.5x-2.0x of the current domestic gas price of $4.66/mmbtu. Volume off-take at these prices should not pose a challenge and the gas is likely to see demand from consumers in the fertiliser, refinery and city gas sectors. In a significant move, the methodology for the calculation of the government's share from the hydrocarbons produced from these marginal fields has been shifted to the percentage share of gross revenue. This is in stark contrast to the earlier production sharing contracts (PSC) which comprised two main elements, cost recovery and sharing of profits based on pre-tax investment multiple. Thus, exploration and development (ED) costs (till the level bid for) were pass-through and first recoverable for developers. Furthermore, the investment multiple determined the government's share. Under PSC, the profit share of the government increased gradually till ED costs were recovered. Also, there were differences over gold plating of costs given that government's share of profit was calculated post the recovery of costs incurred by developers on ED. The prior methodology as outlined in PSC meant lower risks for developers as it allowed them to first recover the costs incurred followed by the sharing of profits with the government. However, profit maximisation strategies led to the allegations of gold plating of such costs. Additionally, this methodology led to disputes and delays in terms of costs acceptances due to the highly technical nature of cost details. The new methodology, though simplifies the basis of calculation of government's share, would place a greater risk on developers as they would need to estimate three key variables in advance before placing a bid a) EDP costs b) quantum of hydrocarbon extractable and c) market prices. Generally, revenue sharing contracts have been more amenable for businesses where upfront costs and output are fairly ascertainable. However, in case of hydrocarbon discovery both costs and output are not ascertainable completely and the success of the exploration activity itself is a low probability event. Thus, there might be situations where in developers could incur higher-than-expected EDP costs and thereafter the need to share a percent of the revenue with the government could lead to a longer payback or breakeven period, thus depressing project returns. Additionally, the nuances with respect to the percentage sharing methodology whether it would be a fixed percentage over the life of the block or would be a sliding scale dependent on gross revenue and cost incurred by the developer remain to be seen and would determine developers' interest in the same. In the PSC regime, the license to a particular developer was restricted to a single hydrocarbon, whether it be oil or gas and a separate license was required if any other hydrocarbon was discovered. However, the current policy would be applicable on all hydrocarbons discovered and exploited in the field which would ease the process for developers. MFP is applicable for the development of hydrocarbon discoveries made by national oil companies i.e. Oil & Natural Gas Corporation Limited and Oil India Limited. These discoveries could not be monetised earlier due to reasons such as isolated locations, small size of reserves, high development costs, technological constraints, fiscal regime among others. Under MFP, exploration companies would submit their bids for exploiting these oil fields under competitive bidding.
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Oil and Natural Gas Corp (ONGC) has paid just over $1.25 billion for a 15 per cent stake in Russian oil major Rosneft's Vankor oil field, a source with direct knowledge of the deal said on Friday. ONGC expects to get more than 3 million tonnes of oil a year (between 66,000 and 70,000 barrels per day) from its holding in the huge Siberian oil field, the source told Reuters on condition of anonymity. Rosneft earlier announced the deal to sell the interest in Vankor, a key source of supply to markets in the Asia-Pacific. Chief executive Igor Sechin said that talks with China's CNPC on a Vankor stake were continuing.
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India will auction 69 small and marginal oil and gas fields surrendered by state explorers, Oil Minister Dharmendra Pradhan said on Wednesday, expecting private companies to boost output from the areas that hold resources of more than $10 billion. India, the world's No.4 oil consumer, meets only a fraction of its demand through local sources and wants to boost private and foreign participation in its industry, dominated by state-run Oil and Natural Gas Corp and Oil India, and privately held Reliance Industries Ltd. Pradhan expects bidding to start in three months for the fields that were given up by ONGC and Oil India as they were uneconomical due to size, geography and state-set low sale prices. The fields have reserves of about 89 million tonnes worth 700 billion rupees ($10.57 billion), Pradhan said at a press conference.
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Oil prices fell nearly 3 per cent in Asian trade on Tuesday (1 September), with investors covering short positions and taking profits after Brent and US crude soared more than 8 percent in the previous session.Both Brent and US crude prices dropped nearly $2 a barrel shortly after trading in Brent started on Tuesday, before partly recovering later in the session."A lot of the fall was due to short-covering," said Ben Le Brun, market analyst at Sydney's OptionsXpress."There could be a bit of profit-taking for people who have gone long."U.S. crude, also known as West Texas Intermediate, had climbed 27.5 percent by the end of three days of gains in the previous session, the largest three-day increase in dollar terms since February 2011 and the biggest percentage increase over three days since August 1990.The surge was fuelled by an OPEC commentary saying the cartel was willing to talk to other producers to achieve reasonable oil prices, as well as by the downward revision of U.S. output data by the US Energy Information Administration (EIA)."(The OPEC comments) could be just a bit of politicking ... but it does suggest that many producers are likely to be hurting at these levels," ANZ said in a market report on Tuesday.OPEC's indications about possible cuts could be the cartel's way of dealing with increased Iranian crude exports once sanctions are lifted, Phillip Futures said in a note on Tuesday.Revised EIA data published on Monday showed US domestic oil production peaked at just above 9.6 million barrels per day (bpd) in April before falling by more than 300,000 bpd over the following two months.US commercial crude stocks fell by 1.5 million barrels to 449.3 million barrels last week, according to a Reuters poll of analysts on Monday taken ahead of US industry and government data.Despite the fall in US production the global oil market is still oversupplied with oil and a decline in US production is increasingly likely in 2016, Morgan Stanley said in a report on Tuesday.Brent crude for October delivery had dropped $1.47 to $52.68 a barrel, or 2.7 per cent, as of 0536 GMT after climbing $4.10, or 8.2 per cent, in the previous session. It dropped by $1.99 a barrel earlier in the session.US crude for October delivery dropped $1.43, or 2.9 per cent, to $47.77 a barrel, after it settled up $3.98, or 8.8 per cent in the previous session. It earlier dropped by $1.97 a barrel.Investors will be watching key US data, including oil stocks, manufacturing and vehicle sales figures, later on Tuesday to give further direction to prices.That comes after official data from China on Tuesday showed its manufacturing sector contracted at its fastest pace in three years in August, reinforcing concern over the health of the world's second-largest economy.(Reuters)
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Petrol price was on Monday (31 August) cut by Rs 2 per litre and diesel by Rs 0.50 a litre, the third reduction in rates this month on fall in global oil rates.The new rates will be effective midnight tonight, said Indian Oil Corp (IOC), the nation's largest fuel retailer.Price of petrol in Delhi has been cut by Rs 2 per litre, including local levies, and will cost Rs 61.20 per litre from tomorrow as against Rs 63.20 currently.A litre of diesel will cost Rs 44.45 as compared to Rs 44.95 currently.Oil firms had last cut petrol price by Rs 1.27 a litre and diesel by Rs 1.17 per litre with effect from 15 August.Prior to that, rates of petrol were cut on 1 August by Rs 2.43 a litre and that of diesel by Rs 3.60."Since last price change, there has been a decrease in international prices of both petrol and diesel. However, Rupee-Dollar exchange rate has depreciated during this period. The impact of both these factors warrants a downward revision in prices, the impact of which is being passed on to the consumers with this price decrease," IOC said in a statement.Last month, the price of petrol was cut on July 1 by 31 paise per litre and diesel by 71 paise a litre. This was followed by a Rs 2 per litre cut in rates of both petrol and diesel, excluding local sales tax, from July 16 but consumers in Delhi were deprived of the benefit as the Delhi government raised VAT.As a result, petrol price in Delhi went up by 28 paise a litre after hike in VAT or sales tax on the fuel from 20 to 25 per cent.Rates of diesel, on which VAT was raised from 12.5 per cent to 16.6 per cent, saw a smaller reduction of 50 paise per litre."The movement of prices in international oil market and INR-USD exchange rate shall continue to be monitored closely and developing trends of the market will be reflected in future price changes," IOC said.(PTI)
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