The Obama administration has opened a new front in the global battle for oil market share, effectively clearing the way for the shipment of as much as a million barrels per day of ultra-light U.S. crude to the rest of the world. The Department of Commerce on Tuesday ended a year-long silence on a contentious, four-decade ban on oil exports, saying it had begun approving a backlog of requests to sell processed light oil abroad. It also issued a long-awaited document outlining exactly what kinds of oil other would-be exporters can ship. The administration's first serious effort to clarify an issue that has caused confusion and consternation in energy markets for more than a year will likely please domestic oil drillers, foreign trade partners and some Republicans who have urged Obama to loosen the export ban, which they see as an outdated holdover from the 1970s Arab oil embargo. The latest measures were wrapped in regulatory jargon and couched by some as a basic clarification of existing rules, but analysts said the message was unambiguous: a green light for any company willing and able to process their light condensate crude through a distillation tower, a simple piece of oilfield kit. "In practice this long-awaited move can open up the floodgates to substantial increases in exports by end 2015," Ed Morse, global head of commodities research at Citigroup in New York said in a research note. The action comes at a critical juncture for the global oil market. World prices have halved to less than $60 a barrel since the summer as top exporter Saudi Arabia, once a staunch defender of $100 oil, refused to cut production in the face of surging U.S. shale output and tempered global demand. By opening the door to U.S. crude exports, the administration is offering a bit of relief to some domestic drillers that have said that they are forced to sell their shale oil at a discount of as much as $15 a barrel versus global markets as fast-rising domestic supplies overwhelm local demand. But the impending swell of U.S. petroleum into global markets may intensify what many analysts say is a pivotal oil market war, with Saudi Arabia and the Organization of the Petroleum Exporting Countries (OPEC) unwilling to yield ground. Now they will face even greater competition beyond U.S. shores. If they can boost selling prices by even a dollar or two, oil producers in places such as the Eagle Ford of Texas will be better able to withstand the slump in oil markets. Morse said U.S. condensate exports could rise from 200,000 bpd to as much as 1 million bpd by the end of next year. "This has an interesting impact on the current confrontation between Saudi Arabia and shale," he said. Among those most at risk from the U.S. shale exports is Nigeria, which pumps similarly light, sweet oil. The OPEC member has already lost the U.S. market to shale, with its exports falling from more than 1 million barrels per day to next to nothing; now it will face U.S. competition in Europe and Asia, too. Frequently Asked QuestionsThe Bureau of Industry and Security (BIS), which regulates U.S. export controls, has come under enormous scrutiny over the past year because of growing pressure to clarify confusing regulations on exporting crude. While untreated crude oil is generally banned from being exported, refined fuels such as gasoline and diesel can be freely sold abroad. The question that has bedeviled U.S. producers is how the rules apply to "processed condensate," ultra-light oil that has been heated through a very basic refining unit. On Tuesday, the BIS said it had given permission to "some" companies to ship treated light oil but did not give details about what it had approved. Two energy companies, driller Pioneer Natural Resources and mid-stream firm Enterprise Products Partners, have been regularly exporting processed condensate since the summer after receiving a private permit from the BIS. But several dozen other companies that also raced to file similar requests were left waiting, with no timeline for action. The agency also released its first ever written guidance on the rules themselves in the form of frequently asked questions (FAQs), clarifying a series of detailed questions that had clouded efforts to move forward with substantial exports. The document gives "considerable discretion" that could allow for rising export volumes in the future, measures that could narrow the price gap between U.S. benchmark WTI crude and global marker Brent, said Kevin Book, managing director at ClearView Energy Partners LLC. On Tuesday, the Brent/WTI spread narrowed by more than 50 cents to around $3.70 a barrel. In its guidelines, the BIS said that most goods can be shipped abroad "without a license" - a reminder that some analysts read as encouraging shippers to "self-classify" their condensate, as Reuters reported earlier. More QuestionsWith global oil markets in flux, it is far from clear how much U.S. condensate will find a market overseas. Drillers are already slashing billions of dollars off their 2015 budgets because of lower prices, actions likely to slow growth in output next year and push forward the point at which supply overtakes demand. One administration official said the question of exports would ultimately be left to the market, and that the agency was simply seeking to "make the boundary line clearer." Even so, with no changes to the core U.S. law that bans raw crude exports, even slower growth will eventually stretch refiners' limits, forcing tougher questions in years ahead. "Whether to allow crude oil exports directly because the production of light crude overwhelms the domestic refining system still remains a live issue that may need to be addressed in the future in response to changing market conditions," said Jason Bordoff, the founding director of Columbia University's Center on Global Energy Policy and a former energy adviser to the Obama White House. (Reuters)
Read More
Brent crude oil fell to a 5-1/2-year low below $57 a barrel on Tuesday (30 December) as a global supply glut outweighed concerns of lost supply from Libya where battling militias have closed ports. Brent fell $1.14 a barrel to a low of $56.74, its lowest since May 2009, before recovering slightly to trade around $56.95 by 0905 GMT. US crude fell 75 cents to $52.86 after hitting $52.70 - also its lowest since May 2009. It fell $1.12 on Monday (29 December). Supply disruptions in Libya mean the OPEC producer is exporting almost no crude. Still, oil markets have been oversupplied in recent months due to increasing output of high quality, light oil from US shale and lower-than-expected consumption as a result of faltering global economic growth and competition from alternative fuels. The Organization of the Petroleum Exporting Countries, which pumps a third of the world's oil, had been expected to trim output to stabilise prices, but it decided in November to keep production unchanged and let the market find its own level. "There's no sign of any reduction of output by OPEC," said Ken Hasegawa, commodity sales manager at Tokyo's Newedge Japan. He said Brent could drop to $55 a barrel and US crude to $50 a barrel early next year. Reuters technical analyst Wang Tao said Brent may fall to $54.98, as it has resumed its downtrend, while US oil is expected to drop to $52.10, as indicated by its wave pattern and a Fibonacci projection analysis. Traders are now eyeing weekly US inventory data. An industry group, the American Petroleum Institute, is scheduled to release its report on Tuesday, while the US Department of Energy's Energy Information Administration will release data on Wednesday (31 December). A Reuters poll forecast that US crude oil inventories will show a drop of 900,000 barrels last week. A draw would follow a rise to the highest recorded level for December in the week ended on December 19. "A potential surprise draw in US oil stocks would give a short-term fillip to the upside," said Michael McCarthy, chief market strategist at CMC Markets. (Reuters)
Read More
Fliers travelling with gold and precious jewellery may soon have some relief as Customs is mulling opening a counter at Delhi Airport for appraisal of such expensive items before embarking on a foreign travel so that they are not charged duty on their return. Giving away the earlier practice where a flier had to get their gold and jewellery evaluated at the Gems and Jewellery appraisal counter in Central Delhi, Customs has intensified its negotiations with the Delhi International Airport Limited, operator of Indira Gandhi International Airport here, official sources said. The Customs, which had been making attempts for having such counter for last one year, got into fast track after Delhi High Court recently directed it to take a reasoned decision within six months on shifting the existing appraisal counter to the airport or in the close vicinity. At present, an international flier has to travel about 30 kms from the airport to appraisals counters at Jhandewalan area in the national capital to declare gold and other expensive jewelleries and take an export certificate. The certificate can be shown to customs officials upon their return to avoid payment of duty on such items declared by them. There are already counters at the airport to declare personal items like watches, sun glasses and others being taken by fliers and airline crew. The High Court has asked Customs to have an additional counter inside or near the airport in case the appraisal counter cannot be shifted. A public interest litigation was filed in the court on the non-availability of appraisal counters inside the airport. "No appraisal counter which can give export certificate is available at IGI Airport and for getting the assessment; passengers are directed to Customs House at Jhandewalan, which is 30 kms distance -- the same causes inconvenience to the passengers," the petition said. Responding to the petition, Customs has contended that the process of issuing of export certificate for gold jewellery is time consuming, wherein the metal is tested for its purity rank and photographs are taken and the jewellery sealed. The department, opposing the PIL, contended that since export certificate can be issued only in advance, relocating such services to airport will require the passengers to make two trips to airport, furthering the problems faced by them. "Such trips with jewellery may also cause security hazards for the passengers," it said, adding that the IGI airport Customs is short of desirable space and infrastructure and trained jewellery appraisers to provide such facilities there. Rejecting the Customs counter-affidavit in this regard, the Court in its order given on Monday said if the appraisal counters are at the airport or in its close vicinity then "such persons can advance their departure from their homes by an hour or so, to in the same visit, obtain the export certificate as well as board the flight". "Internationalisation of the airports in the country has to be not only for looks but also in terms of convenience and amenities, facilities and following the practices in vogue at the airports of other countries," the court said, disposing off the petition. (PTI)
Read More
Paving way for additional foreign investment in insurance and to move ahead with the re-allocation of cancelled coal mines, President Pranab Mukherjee on Friday (26 December) signed the two ordinances in this regard. The government had decided to promulgate these ordinances to move ahead with reforms in the two sectors, as respective bills could not get through during the just-concluded Parliament Session that ended on Tuesday (23 December). The President has signed the two ordinances, Press Secretary Venu Rajamony said. The Cabinet had approved promulgation of the Ordinance on Insurance Bill and re-promulgation of the Coal Ordinance on Wednesday (24 December), a day after the conclusion of the Winter session of Parliament. Finance Minister Arun Jaitley had expressed the hope that hiking of the foreign investment cap in the insurance sector to 49 per cent, which has been pending since 2008, will result in capital inflow of USD 6-8 billion. Earlier, this foreign investment limit was capped at 26 per cent. "The Ordinance demonstrates the firm commitment and determination of this government to reforms. It also announces to the rest of the world including investors that this country can no longer wait even if one of the houses of Parliament waits indefinitely to take up its agenda," he had said. The Insurance Laws Amendment Bill, 2008 could not be taken up for discussion in Parliament despite being approved by the Select Committee of the Rajya Sabha because of the uproar over the conversion and other issues. The Coal Mines (Special Provisions) Bill, 2014 has already been approved by the Lok Sabha during the session but could make no progress in the upper House. The re-promulgation of ordinance on coal will facilitate e-auction of coal blocks for private companies for captive use and allot mines directly to state and central PSUs. (PTI)
Read More
Energy giant Reliance Industries Ltd (RIL) said on Thursday it has signed an agreement with Japan's Mitsui OSK Lines Ltd for shipping liquefied ethane from North America to India.RIL said it has signed shipping agreements with one of the world's largest and reputed shipping companies Mitsui."Mitsui will supervise the construction of six Very Large Ethane Carriers (VLECs), ordered by Reliance. Mitsui will also operate and manage the vessels after they are built and delivered," the company said in a statement.It however did not give out the investment or the cost involved in hiring of the vessels."Reliance, with this strategic tie-up with Mitsui, has achieved a key milestone for the successful implementation of Ethane import project to feed crackers in India," the statement said.The VLECs are being built by Samsung Heavy Industries Co Ltd and are expected to be delivered in the last quarter of 2016, MOL said.Reliance - controlled by Mukesh Ambani, India's richest man - operates the world's biggest refinery complex in a single location in western India.The refiner said in August that it planned to import 1.5 million tonnes a year of ethane from the United States as feedstock for its crackers.(Agencies)
Read More
Reliance Industries Ltd and its partners have relinquished an oil and gas block off India's east coast due to access restrictions and uncertainty over long-term natural gas pricing, one of the company's joint-venture partners Hardy Oil and Gas said on Wednesday (24 December).Hardy said the decision was taken after Reliance, the operator of the block, said land restrictions imposed by the Ministry of Defence ruled out further exploration in the area and inhibited further investment.Hardy also pointed to uncertainty over long-term natural gas pricing in India as one of the reasons for the decision as well as the government-imposed gas price being lower than expected.Reliance has a 60 per cent stake in the D-3 block in the Krishna Godavari basin off India's east coast. BP Plc has a 30 per cent stake. Hardy owns the remaining 10 per cent.Reliance and BP did not immediately respond to Reuters' requests for comment.Hardy said that the access restrictions imposed in 2012 covered more than a third of the block, affecting exploration, development and production.The partners won the exploration licence for the D-3 block in 2005 and have spent more than $220 million so far in the exploration phase, which has produced four gas discoveries, according to the statement.(Reuters)
Read More
In an urgent need for its image makeover, the scam-tainted coal sector will require mammoth efforts in 2015 from the government and the corporates, after a year full of adversities and stuck projects undermined investments totalling billions of dollars. The least glamorous among all raw materials, coal turned out to be a pricey affair in 2014, but a silver lining appears on the horizon with the courts and the government stepping in to overhaul the entire process of mine allocations. In a historic judgement, the Supreme Court this year cancelled 204 mines alloted since 1993, while terming those allocations as flawed. Those affected by the decision include biggies like Jindal Steel, Essar Power, GVK and JSW Steel. Among these, billionaire Naveen Jindal-led Jindal Steel and Power Ltd (JSPL) had to shelve a $10-billion coal-to-diesel project, while casualties continue to pile up from the controversy and the alleged scam in this sector, which has come to be known as 'Coalgate'. The companies that had got these mines claim to have invested close to Rs 300,000 crore in the coalblocks and further Rs 400,000 crore for their end-use plants. Making a hue and cry over the issue, the companies said such mass-cancellation of mines would hamper supply of this core fuel for the power sector in a country that is targeting to take electricity to every home in next few years, while adversely impacting the investment sentiments in a big way. The government watchdog CAG had earlier estimated a Rs 1.86 lakh crore presumptive loss to the exchequer on account of allotment of 57 coal blocks without competitive bidding. Soon after the court order, the government came out with an Ordinance to conduct fresh allocations of the affected coal blocks through a "transparent" e-auction, but the bill continues to hang in balance and a re-promulgation might be required soon as a permanent law remains elusive. The Left parties and several trade unions have opposed the e-auction of coal blocks and the enabling provision in the Ordinance that allows commercial mining by private firms and have sought its reversal, while warning of a nationwide strike if the Centre went ahead with the changes. Allaying concerns that the move would pave the way for de-nationalisation or privatisation of the coal sector, Coal Minister Piyush Goyal has said that the government was in fact strengthening the PSU major Coal India Limited. Beyond the coalblock controversy, the new government, headed by Prime Minister Narendra Modi, has announced an ambitious target of doubling the coal behemoth CIL's output to about one billion tonnes by 2019. Coal India, which accounts for over 80 per cent of the domestic coal production, has incidentally been headless for almost six months and has been facing production constraints and labour union related problems on a regular basis. The new government has also given charge of both coal and power ministries to Goyal, a move seen as being aimed at avoiding conflicts between these two ministries. Gearing up for a fresh allocation of the blocks cancelled by the Supreme Court, the government has meanwhile decided to auction 65 mines to private players while 36 other blocks will be directly allotted to state-owned companies. Of the 101 blocks to be alloted and auctioned in the first lot, 63 mines would be given to the power sector, while the rest would be for sectors like steel and cement. Out of these, government is targeting a revenue of Rs 1.47 lakh crore from the allotment and auction of 92 coal blocks. (PTI)
Read More
An affiliate of Singapore sovereign wealth fund GIC plans to take control of India's Nirlon Ltd in a deal estimated to be worth up to $197 million. Reco Berry Private Ltd has agreed to purchase up to 30.8 million shares, or a 34.2 per cent stake, from some shareholders of Nirlon at 222 rupees a share, according to a joint statement. Reco Berry will also make a tender offer for public shareholders of Nirlon, which owns an information technology office park in Mumbai, to buy a 28.4 per cent stake at the same price, the statement said. "This acquisition is consistent with our strategy in India to invest in assets that generate stable income streams over the long term," said Loh Wai Keong, managing director and co-head Asia of GIC Real Estate Pte Ltd. If the tender offer is fully subscribed, Reco Berry will hold 62.6 per cent of Nirlon after the offer, the statement said. Reco Berry said it had also signed definitive agreements with some other shareholders for a 5 per cent stake in Nirlon, subject to conditions. Separately, it is in talks with another group of shareholders of Nirlon to buy about 2 per cent more, Reco Berry said. Nirlon shares closed at 193 rupees in Mumbai trading on Tuesday, ahead of the announcement. Nirlon Limited owns Nirlon Knowledge Park, which is located along the Western Express highway in Goregaon and comprises seven blocks. Kunal Sagar, executive vice chairman of Nirlon Limited, said "We are delighted to have a global investor with the profile, record and stature of GIC as a long-term partner in Nirlon Limited. It is testimony to our commitment of developing a high quality, ecologically friendly commercial asset of lasting value in Mumbai".
Read More
