Oil prices hit the skids on 25 November after Iran and six world powers sealed a deal curbing its nuclear programme, a fillip for global economic growth that found expression in heartier share prices from Tokyo to Seoul.The agreement gives Iran some relief from crippling sanctions and is considered a big step toward a more lasting treaty. While Iran will not be allowed to increase its oil sales for six months, any easing of Middle East tensions tends to lead to lower crude prices.Brent crude oil shed $2.47 to $108.58 a barrel, its biggest daily drop in a month. US oil lost 88 cents to $93.96 a barrel.If sustained, the drop would be a net plus for spending power globally given high petrol prices essentially act like a tax on consumers."Positive growth signals continue to trickle out across the global economy and there is growth convergence between developed and developing economies," said Peter Dragicevich, a strategist at CBA."Our world GDP "nowcasting" estimate points to accelerating global economic growth in the final months of 2013. This is the general trend we expect to occur in early 2014."Attention in Asia was again on Japanese markets as a sliding yen promises to boost exports and profits. The Nikkei sped ahead by 1.3 per cent, having gained almost 11 per cent in little more than two weeks.On Wall Street, the Dow ended Friday with gains of 0.3 per cent, while the S&P 500 added 0.5 per cent for its first ever close above 1,800. Early Monday, S&P 500 futures had added another 0.3 per cent.But with money flooding into developed world assets, emerging markets are getting cold-shouldered. It was notable that MSCI's broadest index of Asia-Pacific shares outside Japan failed to make any headway at all last week, even as Wall Street made new peaks.So far on Monday, the index was up 0.4 per cent, as Seoul shares led the way with an increase of 0.7 percent.Yen Pain Is Euro's GainIn currency markets, the yen remained under pressure as investors use it for carry trades - borrowing the currency at super-low rates to invest in higher-yielding assets elsewhere.The dollar was up at 101.78 yen having cracked the old July top of 101.53. Much of the action was in the euro against the yen, which has had a barnstorming run to reach four-year highs above 137.80 yen.Euro-yen bulls now have their eyes set on a series of peaks from 2009 ranging from 137.43 all the way to 139.18, the top for that year. A break of the 139.18 level would take the euro to territory not visited since October 2008 -- very bullish from a technical point of view.Oddly, the gains have come even as the European Central Bank sounds ever-more dovish on policy.Earlier on Monday, ECB Executive Board member Benoit Coeure reiterated the central bank would take further action should inflation slow further. The single currency was been particularly strong against the Australian dollar, which has been undone by threats of intervention from the Reserve Bank of Australia.The euro leaped almost four full cents last week as the Australian currency crumpled to a three-month trough.Traders said the commodity currency could continue to struggle particularly if tensions between China and Japan grew.China at the weekend suddenly imposed new rules on airspace over islands at the heart of a territorial dispute with Tokyo, prompting Japan and ally the United States to warn of an escalation into the "unexpected".There is no major economic data due in Asia on Monday, while most of the U.S. economic releases will be front-loaded this week ahead of the Thanksgiving holiday on Thursday.The US diary includes figures on housing starts and prices, consumer confidence, durable goods orders and manufacturing in the Chicago area.(Reuters)
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Negotiations between the Department of Atomic Energy (DAE) and French company Areva over the Jaitapur Nuclear Power Plant (JNPP) in Maharashtra have hit a hurdle as DAE has questioned the capacity of reactors to generate electricity and its high cost.The bone of contention between the two is the generation of electricity by the EPR reactor, which Areva is planning to give to Nuclear Power Corporation of India Ltd (NPCIL).DAE sources pointed out that the department has raised objections because the "reference plant", which was agreed upon between DAE and Areva, was a plant that generated 1430 MW of electricity, but it says, Areva now wants a plant with enhanced power generation capacity.A reference plant is a nuclear power plant project that has already been tested, commissioned and which has commercially started generating power.According to a top DAE official, the reference plant for building reactors was one at Flamanville nuclear plant in France, which Areva mentioned with a capacity of 1430 MW. But it has now asked the DAE to enhance the power generation capacity to 1600-1700 MW. The DAE has raised an objection to this, the official said."The problem here is Areva is asking us to enhance the power generation capacity. The reference plant mentioned by Areva has not generated electricity between 1600 MW and 1700 MW with this technology. The EPR technology is first of its kind. More importantly, if the technology has been enhanced, even then the reference plant cannot be changed," the official said. The Atomic Energy Regulatory Board (AREB), whose nod at various stages of building a nuclear plant is mandatory, too has raised concerns about it."Areva has said that it will get an enhancement certificate for the plant from French Nuclear Regulatory Body, but we have doubts about this," he said.According to Areva's website, it is building EPR reactors for nuclear plants in Finland, United Kingdom, China and France.Of these, Olkiluoto 3 in Finland is a 1600 MW project, while two reactors for the Taishan plant in China are of 1660 MW each. The Hinckley Point plant project in United Kingdom has two EPR reactors of 1600 MW each and the Flamanville 3 nuclear plant is 1630 MW.A well placed source in Areva, who refused to be quoted, however, denied it."Flamanville 3 has been a reference plant for the Jaitapur project. From the very beginning of the discussions regarding Jaitapur, Areva proposed its EPR design, which is a 1600 MW plant," the source said.Another factor is the issue of the price per unit.Sources said that the price per unit for the JNPP comes to more than Rs 9 in 2021, which, according to the DAE is very high. The initial capital cost for the project per MW is between Rs 27-30 crore.The cost per unit for the Kudankulam Nuclear Power Plant Project (KKNPP) unit I and II is between Rs 3.50 and Rs 4. The cost for the KKNPP III and IV is also under negotiation."Even if we take inflation into account, this rate is too high. We have conveyed that the maximum cost can be Rs 6 per unit," the official said.He also pointed out that both the sides are negotiating hard, but India has made it very clear that it wont accept this high cost for producing energy."We have made it clear that unless the cost comes down, we would not be able to go ahead. Senior French government officials have assured us that they will look into the matter, so that the cost comes down," the official said.PTI made calls and also emailed a questionnaire to seek response from Areva, but did not receive any response.The JNPP project in five villages- Madban, Karel, Mithgawane, Varilwada and Neveli villages- in coastal district of Ratnagiri in Maharashtra, some 350 kms south of Mumbai, is to have six nuclear reactors with the capacity of 1650 MW each with French cooperation.On ground zero, despite the agreement of few groups to the project, the opposition still exists.According to Pravin Khade, the sub-divisional officer of Rajapur tehsil/ taluka (where the site falls), there are some 2336 Project Affected People (PAPs), of which 1311 PAPs have accepted compensation of Rs 11.20 crore and Rs 3.57 crore is yet to be accepted.As per the new compensation package announced by the Maharashtra government in February 2013, Rs 155.61 crore have been disbursed to 1240 people, while the remaining Rs 55.44 crore is yet to be accepted by people.After the plant is fully commissioned, Maharashtra will be the highest nuclear power producing state with it producing over 11,000 MW of electricity (if combined the JNPP and Tarapur Atomic Power Plant, north of Mumbai), the highest in the country.(PTI)
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Stocks in Cairn India surged as much as 5 per cent after the oil explorer said its board would meet on 19 November to consider a proposal to buy back shares.Shares also gained as Brent crude jumped $2 to end at its highest in more than a month on 21 November, fuelled by a sharp run-up in gasoline and gas oil prices on news of dwindling stocks and refinery glitches in the United States and Europe.Higher crude oil prices help increase realisations at oil exploration firms such as Cairn India, which sells crude in dollars. The rupee also weakened, heading for a third consecutive session of falls against the dollar. (Reuters)
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State oil group Petrovietnam and the overseas unit of state explorer Oil and Natural Gas Corp have signed a memorandum on joint exploration of crude oil, the Vietnam News Agency reported on Thursday.The exploration pact between Petrovietnam and ONGC Videsh Ltd would allow activities in Vietnam, India as well as in a third country.Vietnam's Industry and Trade Ministry also signed a memorandum with Tata Power Company Ltd on the construction of a $1.8 billion thermal power plant in Vietnam's southern province of Soc Trang, the agency said.The pacts were signed on 20 November during a visit to India by Vietnam's Communist Party General Secretary Nguyen Phu Trong, the report said.(Reuters)
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The government has slapped an additional penalty of $792 million on Reliance Industries for producing less than targeted natural gas from its eastern offshore KG-D6 block.A notice disallowing $792 million out of the cost already incurred on the Bay of Bengal fields was sent to RIL on November 14, an oil ministry official said here.With this, a total of $1.797 billion penalty in form of cost being disallowed, has been levied on RIL for producing less than targeted output during the past three years.The company has till date spent $10.76 billion on the block, which it can contractually recover from sale of oil and gas. It is obliged to share the profits with the government only after recouping those expenses.It may be remembered that on October 27, the Planning Commission had warned that imposing a second penalty on Reliance Industries for producing less-than-projected natural gas from its KG-D6 fields could impact investment climate in the same manner as retrospective tax amendments.Read Also: Reliance Refuses To Sign Oil Ministry ResolutionRead Also: Double Penalty On RIL To Hit Investment Climate: Plan PanelThe Planning Commission, in its comments on a draft Cabinet note floated by the Oil Ministry seeking to deny higher prices for the currently producing main fields in the KG-D6 block from April 2014, said the move "creates the possibility of potential arbitrariness.""It could impact adversely on the investment climate, in the same way as retrospective tax amendments did," it said.Meanwhile, on 20 November, the official said the cost has been disallowed as RIL and its partners BP plc of UK and Canada's Niko Resources did not drill the committed number of wells, which led to output dropping by over 80 per cent from the main Dhirubhai-1 and 3 (D1&D3) gas fields in the KG-D6 block.D1&D3 fields have in the first fours years of production (2009-10 to 2012-13) produced a total of 1.853 Trillion cubic feet of gas, 1.196 Tcf short of 3.049 Tcf that RIL had committed to produce in the 2006 development plan.But for the first year, the output has lagged the targets in all subsequent years, which has led to a huge chunk of facilities built lying unutilised, the official said.RIL had built facilities to handle 80 million standard cubic metres per day of gas from D1&D3 but the present output is just 8.78 mmscmd.As per the production sharing contract, RIL and its partners BP Plc and Niko Resources are allowed to deduct all of the capital and operating expenses from sale of gas before sharing profits with the government.Creation of excess or unutilised infrastructure impacts government's profit share and this is being sought to be corrected by disallowing part of the cost.According to the approved field development plan, the output should have reached 80 mmscmd last fiscal.The government had previously issued a notice to RIL disallowing$1.005 billion in cost for shortfall in production during 2010-11 and 2011-12. ($457 million for 2010-11 and the rest $548 million for 2011-12).The Mukesh Ambani-run company, which blamed unseen geological complexities for the fall in output, has initiated arbitration against the levy. The new levy would be opposed.The DGH blames RIL for not drilling its committed quota of wells for the fall in production that has resulted in a large chunk of production facilities lying unused or under-utilised.(Agencies)
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State-run Power Grid Corp of India's sale of shares, valued at about $1.2 billion, is likely to open on 3 December, three sources with direct knowledge of the matter said, as part of the government's drive to revive the divestment programme.The Power Grid offering, which was approved by the Indian cabinet earlier this month, includes fresh issue of company shares and the government's divestment of a 4 per cent stake.The government's planned sale of stakes in Power Grid and other state companies including miner Coal India is critical to relieving pressure on public finances that could put the country's investment-grade credit rating at risk.India has targeted raising $6.4 billion from selling stakes in state companies in the fiscal year ending March 2014, but has so far managed about $230 million, as ministries squabble over the timing of the issues and the rupee's fall against the dollar.The Power Grid issue is likely to remain open for investors to bid until 6 December, said the sources, who declined to be named as they were not authorised to speak to the media before a public announcement.A Power Grid official said the issue was likely to be launched in December but he was not aware of the launch date. Ravi Mathur, secretary at the Department of Disinvestment, was not immediately available to comment.Shares of Power Grid were trading down 1.3 per cent at Rs 95.10 on Tuesday (19 Nov) at 0924 GMT. At the current market price the sale of 787 million shares, of which 185 million will be sold by the government, will raise about $1.2 billion. Power Grid said on Monday (18 Nov) that it had filed for the follow-on offering with the market regulators.The divestment department, which oversees stake sale in state companies, is keen to push through the stake sales to take advantage of a share market rally that sent the Sensex to a record high this month.The government has also revived plans to sell stakes in two state companies, Indian Oil and Coal India, to raise about $2.3 billion by mid-December, sources with direct knowledge of the matter told Reuters last week.(Reuters)
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Oil and Natural Gas Corp on Wednesday, 13 November, reported modest profit growth in the second quarter, raising concerns about its ability to finance a major investment programme while shouldering the burden of hefty domestic subsidies.India's largest oil and gas exploration company, ONGC is raising debt for a spate of acquisitions over the past year that gave it interests in overseas oil and gas blocks. It is also looking to spend heavily to maintain output at ageing production fields in India and for exploration of newer blocks there."The realisations (earnings per barrel) are much less than what we need to maintain production," ONGC Chairman Sudhir Vasudeva told reporters in New Delhi, adding that if the current situation continues, the company may have to draw down reserves."It will not only affect us but also reflect on (overseas arm) ONGC Videsh because the cost of capital will increase."India imports nearly 80 per cent of its crude needs. Its state-run oil firms have been hit hard this year because the government, facing tough state and national elections, has not allowed significant increases in retail fuel prices to offset the impact of higher crude prices and a sharp fall in the rupee.Fuel subsidies for the fiscal year ending March 2014 are expected to be Rs 1.4 trillion, more than double the budgeted number. Explorers such as ONGC and Oil India are forced to share the burden by selling crude to state refiners at a fixed $56 per barrel discount to global prices.ONGC posted a net profit of Rs 6,064 crore for the quarter ended September 30, up 2.8 per cent from Rs 5,897 crore last year. Net sales rose 12.8 per cent to Rs 22,312 crore.Analysts, on average, had expected a net profit of Rs 5,900 crore, according to Thomson Reuters Starmine data."Their margins are under pressure. The subsidy burden is taking its toll, but its not something they have control over," said Jagannadham Thunuguntla, head of research at SMC Global Securities.These are the first results since ONGC entered into a $2.6 billion deal to acquire a 10 percent stake in Mozambique's offshore Rovuma gas basin. Last month, it also agreed to buy a 12 per cent of a Brazilian oil block in a $529 million deal.The flat profit may lower the comfort level for investors and lenders at a time when ONGC is raising funds in the debt markets to finance its growth plans.State-owned retailers Indian Oil Corp, Hindustan Petroleum Corp and Bharat Petroleum Corp reported steep profit declines for the quarter, hit by foreign exchange losses and lower subsidy compensation from the government.Analysts expect the finances of state fuel retailers to remain under pressure for the next few quarters, given their high level of borrowings and the expected delay of about six months in receiving compensation for the losses on fuel sales.ONGC said it gave discounts of 137.96 billion rupees to state refiners compared with 123.30 billion a year earlier. As a result, its net realisation fell to $44.8 per barrel from $46.8 a barrel a year ago. The company estimates it needs around $60 a barrel to keep operations viable.Shares of ONGC, India's fourth-biggest company by market value, closed 1.1 percent higher ahead of the results. The stock is nearly flat so far in 2013, compared to a 2 per cent fall in the sectoral index.(Reuters)
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The Supreme Court on Monday, 11 November, dismissed the plea of Essar Oil Ltd seeking extension of time for paying outstanding sales tax dues to Gujarat as the state government was not agreeable to the submission.A bench of justices A K Patnaik and J S Khehar said, "We could have done something but the state government is not agreeing."The bench also rejected the submission of senior advocate Mukul Rohatgi, appearing for Essar Oil Ltd, that the hearing be adjourned for four weeks.Rohatgi cited a newspaper report to drive home the point that the oil firm has not been given any concession or benefit as accorded to other companies by Rajasthan government."It would be a catastrophe. There are nearly 10,000 employees working in the refinery. This is the only refinery in the country which has not received any incentive or concession," Rohatgi said, adding that he was not seeking any rescheduling of repayment of outstanding sales tax dues.Senior advocate Parag Tripathi, appearing for Gujarat Government, said that he was not agreeable to any extension of time to the oil firm.Essar Oil Ltd had moved the Supreme Court on October 4 seeking more time for paying outstanding sales tax dues to Gujarat government on the ground that it was facing financial constraints due to economic slowdown and was not given tax benefits unlike other refineries. Essar Oil had said the state government may be asked not to take coercive steps, like locking down the Vadinar refinery, as nearly 10,000 people are employed there.It had also sought a direction to the state government to form a three-member committee to make recommendations for extending a viability support package to it for ensuring that it continues to carry on its business as a growing concern.In January 2012, Essar Oil had lost the case on rebate of Rs 6,165 crore sales tax dues.The company paid Rs 1,000 crore then and in September 2012 the apex court directed it to pay the remaining Rs 5,165 crore in eight quarterly instalments with an interest of 10 per cent applicable from January 2012 to Gujarat government.Essar Oil had said that it has paid Rs 2,941 crore of tax dues and Rs 756 crore of interest but is now unable to pay the fourth instalment.The apex court's order was passed after the company sought at least three years time to pay the dues. The Gujarat government had sought the payment of dues within six months.Essar Oil Ltd had approached the apex court against the order of the Gujarat High Court which had refused any relief to it for making the payment in instalments.Essar Oil had availed Gujarat government's 'Capital Investment Incentive to Premier/Prestigious Unit Scheme, 1995-2000' for its Rs 1900-crore Vadinar plant in Jamnagar district as a 100 per cent export-oriented unit for refining of petroleum products with a capacity of nine million tonnes per annum.(PTI)
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