Infrastructure and Energy Sector

[Indx TechStyle]

India's Rising Significance In Oil Markets
October 18

It is a quiet day in the oil market, with a wee bit of movement in the dollar offsetting the ongoing helium-like influence of OPEC. We get another set of weekly EIA inventory numbers tomorrow, but for now, hark: here are five things to consider in oil markets today.

1) Rosneft, with a group of investors, has struck a deal to buy Essar's Vadinar refinery - the second-largest in India. Rosneft, Russia's largest oil producer, is purchasing the 405,000 bpd refinery as it pursues a strategy attempted by other leading global producers: to set up roots in large, growing oil-consuming nations.

The port of Vadinar has five leading sources of waterborne deliveries; Iraq accounts for a quarter of volume this year, with Iran just behind at 23 percent. Venezuelan crude accounts for just under 20 percent, and with Nigerian and Kuwaiti volumes included, these five countries account for nearly 90 percent of flows into Vadinar this year.

2) As the graphic below illustrates (based on IEA data), India is projected to be the world's fastest-growing oil consuming nation through 2040. Granted, quite a bit can happen over the coming years to usurp this, but given India's population (hark, 1.3 billion people), its exceptionally low vehicle penetration rate (149 motor vehicles per 1000 people, compared to 781 in the U.S.), and its need to import the vast majority of the oil it consumes, it is set to remain an area for demand growth going forward.

3) Azerbaijan says it supports an OPEC / non-OPEC coordinated cut, and that it will not increase oil production. This is convenient, given that its September oil production is 10.2 percent lower than the prior month, and production of commercial oil was down 0.3 percent year-on-year.

4) While Iranian crude exports continue to remain strong to leading recipients China and India, our ClipperData below illustrate how exports into Europe continue to rise also. With crude discharged in 11 European destinations through September of this year, new countries are being added every month. In October, it is Ukraine's turn, with ~500,000 bbls heading to the port of Kerch.

5) Although oil and gas infrastructure was able to avoid the impact of Hurricane Matthew, power outages were widespread. At its peak, roughly 2.5 million residential, commercial, and industrial electricity customers were without power across five states.

Florida, who received the brunt of Matthew's force, saw the largest outages, with nearly one million customers (10 percent of all customers in the state) without service. As for South Carolina, its outages peaked at 800,000 customers, one third of the state’s total customers.

 

[Indx TechStyle]

Nigeria seals $15 billion oil, gas deal with India

Minister of State for Petroleum Resources, Dr. Emmanuel Ibe Kachikwu (right); receiving a souvenir from the Indian Minister of State in charge for Petroleum and Natural Gas, Shri Dharmendra Pradhan in India yesterday.

• To raise production to 2.2 mbp NIGERIA has sealed a $15 billion oil and gas investment deal with India.

The negotiated deal would require the Indian government to make an upfront payment for crude purchase to Nigeria, to be repaid on the basis of firm term crude contracts over some years.

In the deal too is consideration for Indian public sector companies collaborating in the refining sector as well as exploration and production activities on a government-to-government basis by Indian public sector companies. Other terms include long-term contracts for the supply of crude to Indian companies from Nigeria and also possibilities of executing infrastructural projects by Indian companies in Nigeria.

The Minister of State for Petroleum Resources, Ibe Kachikwu, who is currently on a three-day visit to India, concluded talks on the investments in a bilateral meeting with his Indian counterpart in charge of petroleum and natural gas, Shri Dharmendra Pradhan.

Both ministers noted the existing and significant engagement between the two countries in the hydrocarbon sector, while acknowledging that Nigeria was one of the largest trading partners of India in Africa, which is dominated by import of crude oil and gas from Nigeria.

In 2015-16, India imported nearly 23.7 MMT of crude (nearly 12% of India overall imports) and over 2 MMTPA of LNG from Nigeria. Following this negotiation, the two countries have agreed to work on a Memorandum of Understanding (MoU) to facilitate investments by India in the Nigerian oil and gas sector and specifically in areas such as term contract, participation of Indian companies in the refining sector, oil and gas marketing, upstream ventures, the development of gas infrastructure and in the training of oil and gas personnel in Nigeria.

Both ministers also agreed to strengthen the existing cooperation in oil and gas sector, and in particular to explore investment opportunities for Indian public and private sector companies in Nigeria.

On the sidelines of the official visit, the Minister of State had one-on-one meetings with top executives of Indian public sector oil and gas companies and also representatives of some Indian private sector oil and gas companies.

 

[OneGrimPilgrim]

great work @Indx TechStyle, compiling all updates pertaining to economy, tech, etc.! do you use RSS feeds to stay updated?

 

[Indx TechStyle]

great work @Indx TechStyle, compiling all updates pertaining to economy, tech, etc.! do you use RSS feeds to stay updated?

I'm in government service. Still I know a lot. I just wait and search for media articles to post them.

 

[OneGrimPilgrim]

I'm in government service. Still I know a lot. I just wait and search for media articles to post them.

'still'?! or, 'that's why'!
can you disclose which trade? ofc if there's no risk of you being tried under the Official Secrets Act!

 

[Indx TechStyle]

'still'?! or, 'that's why'!
can you disclose which trade? ofc if there's no risk of you being tried under the Official Secrets Act!

Engineer, now don't ask which.
One clue I'm not a hi fi aircraft engineer what @Navnit Kundu thought.

 

[charlie]

I'm in government service. Still I know a lot. I just wait and search for media articles to post them.

well seems like you have too much time in government service what can I say some people are lucky. I had a job like that for few months.

 

[Indx TechStyle]

well seems like you have too much time in government service what can I say some people are lucky. I had a job like that for few months.

I'm addicted to DFI and open it in every short interval I get. Otherwise, meri chhutti raat ko hogi.

 

[charlie]

I'm addicted to DFI and open it in every short interval I get. Otherwise, meri chhutti raat ko hogi.

well in government you either work hard or hardly work, I think government job all around the world is like that.

 

[Indx TechStyle]

well in government you either work hard or hardly work, I think government job all around the world is like that.

Hey hey, I used to work in a private firm in past. After every task, you get a break for 10-15 minutes enough to open DFI. Plus, I'm not a highly ranked person either.:biggrin2:

You have no idea about work, government ho ya private, pale ke rakhte hain subah se sham. Tankhwah fir bhi late.

 

[Indx TechStyle]

Strengthening India’s energy security
The Essar Oil-Rosneft deal shows how lucrative the Indian energy market is.

Illustration: Jayachandran/Mint

The sale of a 98% stake in Essar Oil to a consortium led by Russian state-owned oil giant Rosneft has, unsurprisingly, drawn significant attention. Rs72,800 crore is not chump change. Given India’s bad loans problem and the fact that Essar’s debt has been among the highest, the deal could be—as Chanda Kochhar, managing director of ICICI Bank, put it—“a significant step in the process of deleveraging the balance sheets of Indian corporates”. The other aspect of the sale is just as interesting—what it says about India’s place in the global energy market.

According to the International Energy Agency, India will cross Japan as the world’s third largest oil user this year, and is expected to have the highest rate of growth of crude demand globally through 2040. Asian Development Bank projections have India’s dependence on imports during the 2010-35 period growing from 76% to 92% for oil and 20% to 36% for gas. This is not an energy security scenario that encourages complacency.

But New Delhi currently enjoys an advantage. Unlike, say, China, whose energy binge a decade ago kicked off at a commodities peak, India is poised for take-off at a time of rock-bottom prices. How long this situation will last remains to be seen. But it is likely to be for a while yet. The Organization of the Petroleum Exporting Countries’ purported November production-cut deal faces two main obstacles.

Firstly, the quantum of the cut, less than one million barrels a day, is insufficient to deal with the existing supply overhang—a fact borne out by lukewarm market reaction to the news of the deal. Secondly, the political and strategic difficulties of allocating the burden of the cut.

The US shale industry is another factor. It has suffered during the oil plunge, with marginal producers squeezed out and drilling activity flatlining. But it has also proved resilient, with drilling activity starting to recover post-May. Any price rise will increase the shale industry’s skin in the game, maintaining a balance beneficial to consumers.

All of which shows—to circle back to the Rosneft deal—why the Indian market, with its expected demand surge, is currently such a lucrative prospect for oil suppliers. The leverage this gives New Delhi has allowed it to position itself better in negotiations with traditional suppliers—according to the Central Statistics Office’s Energy Statistics 2015 report, 59% of India’s crude imports were sourced from West Asia as of 2013-14—and bring about a certain amount of churn. India is increasing its focus on African suppliers such as Nigeria, while South American supplies are also rising. And in June, Iraq replaced Saudi Arabia as the top supplier.

And that has resulted in better deals and more inbound investment in the energy sector. Gulf countries have stopped levying the “Asian Premium” (a higher rate for crude sold to Asian countries); Riyadh has been negotiating shipping crude to India in its own tankers, saving Indian companies shipping costs; Abu Dhabi has entered an energy partnership with India that includes upstream and downstream investments. India’s new Hydrocarbon Exploration Licensing Policy, putting a new market-friendly regime in place for oil and gas exploration back in March, has helped as well.

This space that New Delhi now has to advance its energy security must be exploited fully. By some estimates, 60-70% of India’s own reserves remain unexplored. Given the interest in the Indian market, there is no need for the investment to rectify this to come from the government; indeed, that would be undesirable. Concurrently, this is also a good time for outbound investment flows. State firms like the Oil and Natural Gas Corp. Ltd are not bound to reduce capex unlike private oil companies. This means a relatively clear run for Indian investments in foreign energy assets at a time when global companies are leery of pouring in more money. The fourth quarter of 2015, for instance, saw Indian companies sign on to $3 billion of foreign asset purchases, while another $5 billion could go towards Siberian oil and gas fields that would give Indian companies an equity share equivalent to a third of total domestic output.

The commodities slump has already helped tame inflation in India. Now, if New Delhi plays its cards right, it could lock in energy arrangements that would go a long way towards enabling the Narendra Modi government’s stress on boosting manufacturing. It is rare indeed for global economic conditions to align so propitiously for domestic policies.

 

[Indx TechStyle]

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[Indx TechStyle]

Tata Power CEO says to buy stranded power assets in India

Tata in June bought 25 per cent of Singapore-based Resurgent Power Ventures Ptd Ltd which is tasked with seeking such assets in India, Anil Sardana

SINGAPORE: Tata Power Company Ltd plans to expand capacity by acquiring some of the country's numerous underutilised plants instead of investing in expensive new facilities, the utility's chief executive said.

Tata in June bought 25 per cent of Singapore-based Resurgent Power Ventures Ptd Ltd which is tasked with seeking such assets in India, Anil Sardana told Reuters.

"There's no plan right now ... on any greenfield projects," Sardana said. "We will look at acquiring stranded assets and turning them around because that's an expertise we have."

Power plant building picked up in India around 2007 with the country suffering a series of blackouts while demand for electrification increased among rural communities.

But electricity distributors were struggling to stay afloat and so were unable to sign power-purchase agreements, leaving several mainly coal-fired plants dormant or operating at very low capacity.

A government-led debt restructuring programme is helping revive distributors, but nothing substantial has changed for underutilised plants. It is these plants that Tata wants to buy.

Domestic acquisitions are part of Tata's plan to nearly double its global power capacity to 20,000 megawatts by 2025. Of that, 30 per cent to 40 per cent will come from unconventional sources including hydropower rather than coal, Sardana said.

But distributors are still a weak link in India's power sector as they struggle to profit, Sardana said. Their plight is exacerbated by the high price they pay for solar power - about 9 U.S. cents per kilowatt hour compared with 4 to 5 U.S. cents for conventional energy, he said.

"They are doing that on the assumption that over a period of time they'll be able to recover that from consumers," he said.

Tata has solar and wind power capacity of 1200MW each, he said.

Sardana also said Tata was studying the design ships, with a view to transporting compressed natural gas from the Middle East to India for power generation or to distribute directly to end users.

Elsewhere, Tata expects to complete the first phase of a $420 million 180MW hydropower joint-venture in Georgia in the first quarter of 2017, Sardana said. It plans another 115MW project downstream of the same river, he said.

 

[Indx TechStyle]

Reforms cut risk, drive up highway construction: CRISIL

Thanks to a healthy growth in traffic and reforms allowing developers to divest 100 per cent equity in projects two years after completion of construction, high-risk road projects in the sector came down by 13 per cent in FY16, compared to the previous year, an analysis showed.

According to the analysis -– done by CRISIL on 85 under-construction and 104 operational build-operate-transfer (BOT) and annuity projects awarded by the National Highways Authority of India (NHAI), spanning 16,600 km -– refinancing of debt by low-cost, longer-tenure loans played a big role in credit improvement of these projects.

The risks pertain to completion of under-construction projects and the debt-servicing ability of operational ones. The pace of construction also improved from an average 4.3 km a day in FY15 to six km in FY16.

Of the 104 operational projects, there was an 18 per cent reduction in both length (to 2,700 km) and outstanding debt (to Rs 19,650 crore) of high-risk operational BOT projects, compared with FY15. Consequently, 65 per cent of the operational portfolio had a debt service coverage ratio of 1x, compared with 55 per cent a year ago.

According to CRISIL, over the next two years, stronger developers will be able to raise funds for their under-construction portfolio through stake sales in their operational portfolio and from investment trusts. However, weaker developers still face a funding gap of Rs 6,300 crore, equivalent to three-fourth of funds required for their existing portfolio.

CRISIL Research Director Ajay Srinivasan said: “The material improvement in the pace of execution can be attributed to policy reforms by NHAI and facilitation by the government, which is also reducing delays. Given this, we expect the average construction per day for NHAI projects to nearly double to 11 km by FY18.”

The key policy reforms initiated include easing of the clearances process, ensuring 80 per cent land acquisition before the award of projects, premium rescheduling, allowing developers to fully exit operational road projects and introduction of the hybrid annuity model. Given that these reforms are largely aimed at reducing risk, private participation is set to pick up.

On reforms in land acquisition, CRISIL noted that of the 40 projects tendered by NHAI during 2015 and 2016 (calendar years), a large portion of the land was already in place at the time of tendering.

Within the 85 under-construction BOT projects, there has been a 10 per cent decline. As much as 4,600 km of projects are still in the high-risk category because delays in land acquisition and approvals have increased costs by 20 per cent or Rs 11,000 crore, and the financial health of sponsors remains weak. These stuck projects were largely awarded between FY09 and FY12 and the mitigation options for them include a one-time fund infusion through NHAI loans, and a change in sponsor.

CRISIL Ratings Director Sushmita Majumdar said: “Of the 4,600-km, high-risk, under-construction projects, 1,400 km have reached the provisional commercial operations date stage, but are still unviable due to cost overruns and weak sponsors. These projects need a whopping 60 per cent revenue growth to meet debt-servicing requirements. Refinancing, debt restructuring, premium deferment or acquisition by a stronger sponsor are the only solutions.”

The hybrid annuity model has a lot of potential since the developer is fully insulated from traffic risk and partly from inflation and interest rate risks. The award of projects through this mode would kick-start private-sector participation, as 60 per cent of the funding for these projects would need to be arranged by developers. However, bidding aggression on project cost and operations parameters, and funding mix for hybrid annuity projects need to be closely monitored. CRISIL indicates around one-quarter of the projects awarded so far could face challenge in debt-servicing.

 

[ezsasa]

@Indx TechStyle
on the topic of National Highway construction progress, The NHAI website progress report has not been updated since july 2016. If you come across any other website with updated data, let me know.

 

[Indx TechStyle]

NHAI awards Rs 1,274 crore contract to KMC Constructions
By: PTI | New Delhi | Published: October 26, 2016 7:10 PM

The development of the crucial 26-km long Nerchowk – Pandoh including Pandoh bypass section of the NH-21 will improve the connectivity for travellers from Chandigarh to the valleys of Kullu and Manali, it said. (NHAI photo)

National Highways Authority of India (NHAI) has awarded contract worth Rs 1,274 crore to KMC Constructions Ltd for development of National Highway section in Himachal Pradesh.

“NHAI has issued Letter of Award (LOA) for development of National Highway section in Himachal Pradesh under phase IV B of National Highways Development Projects (NHDP),” Ministry of Road Transport & Highways said in a statement.

The development of the crucial 26-km long Nerchowk – Pandoh including Pandoh bypass section of the NH-21 will improve the connectivity for travellers from Chandigarh to the valleys of Kullu and Manali, it said.

This will improve the transport of the horticulture produce like apples to the markets and also provide better connectivity to local commuters.

“The project will have two bypasses (about 8-km long Mandi Bypass and about 5-km long Pandoh Bypass), three twin tube 2-lane tunnels, six major bridges, 11 minor bridges and 3 vehicular underpasses,” it said.

The project would be executed on engineering, procurement and construction (EPC) mode and scheduled time of completion is 30 months from the date of commencement, it added.

 

[Indx TechStyle]

Road accidents would be halved in two years: Nitin Gadkari

 

[republic_roi97]

Road accidents would be halved in two years: Nitin Gadkari

Not much can be done on that by the government, just stricter laws and rules and some awareness programs, people have to realize it themselves.

 

[Indx TechStyle]

Not much can be done on that by the government, just stricter laws and rules and some awareness programs, people have to realize it themselves.

No, main reasons of accidents/casualties are:

• Lack of safety equipments.
• Corruption in Police (their salary is too low)
• The small amount of fine

By high fine, a well equipped and content law enforcement forces and safer vehicles.
The plan has been successful in other countries too, why not India? Americans have now our half accidents per capita.

 

[Indx TechStyle]

India's $20 billion refinery expansion to cut fuel oil output

An employee walks inside the premises of an oil refinery of Essar Oil, which runs India's second biggest private sector refinery, in Vadinar in the western state of Gujarat, India, October 4, 2016. Picture taken October 4, 2016.
REUTERS/AMIT DAVE

India may turn into a net importer of fuel oil as its state-owned refiners are making multi-billion dollar investments to upgrade their refineries and produce more profitable refined products such as gasoline or diesel.

India has traditionally been a net exporter of fuel oil, the residue oil left after initial crude refining that is typically used in shipping and power generation.

That is about to change. Three state-run energy firms -- Indian Oil Corp, Bharat Petroleum and Hindustan Petroleum -- plan to spend $20 billion on refinery expansions to add units by 2022 that would process fuel oil into gasoline and diesel, boosting their output to meet growing local demand for transport fuels.

"Our fuel oil production will be less because everywhere we are going for residue upgrades," said B. Ashok, Chairman of the country's biggest refiner Indian Oil Corp (IOC).

Private refiners Reliance Industries and Essar Oil have already invested heavily to build advanced refineries which produce gasoline at the expense of fuel oil.

With state refiners now doing the same, India will soon have to sharply raise imports of fuel oil, two traders that participate in the market said.

India's net fuel oil exports averaged 109,000 tonnes from April to September, according to the country's Petroleum Planning and Analysis Cell, and the traders estimate this could flip into a need to raise fuel oil imports as early as late 2017.

As a result, the price difference between diesel and fuel oil could narrow further from its current $17.61 a barrel, as Indian shipping fuel demand rises with the government's thrust on the coastal movement of cargoes, considered more cost efficient than road transport.

"Already, gasoil and fuel oil differentials have started shrinking from about $30 three years ago to $16-$18 now and it is likely to narrow further as refiners are destroying fuel oil to produce gasoil and gasoline," said S. Thangapandian, director at Gulf Petrochem.

Indian refiners' expansion plans almost coincide with changing shipping fuel norms from 2020 requiring the use of low-sulphur fuels.

IOC is the biggest expansion investor, planning to spend 500 billion rupees ($7.48 billion) by 2022 to raise its refining capacity by about 30 percent to 2.08 million barrels per day (bpd) including expanding its Panipat refinery in northern India to about 400,000 to 500,000 bpd.

HPCL and BPCL plan to spend $11.25 billion to expand refineries and install fuel oil upgrading units, halting fuel oil output in almost all plants.