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Nov 2015
Is it time now for ONGC to sell off MRPL or hand it over to the likes of HPCL?
8Clearly the ONGC brass has other important things in mind and it is not able to put in the kind of work that is meant to go into a company like MRPL, for the refiner works in an entirely different paradigm from how the E&P business operates.
8The oil and gas business is under severe pressure from all directions and it is no longer possible for a pure E&P company to salvage a non performing downstream enterprise.
8Going up the value chain was the slogan ten years ago, not now.
8In fact, with electric cars projected to become cost competitive to conventional cars, refineries will be under severe pressure going ahead.
8There is now the dire projection that retail outlets for dispensing MS and HSD will become defunct in 10 years when battery driven cars begin to proliferate.
8For MRPL, the road ahead is going to be even more difficult.
8It has just started selling petrochemicals from its new units in an environment in which companies like RIL are way ahead in the game.
8MRPL's retail entry is also fraught with uncertainties, again due to extreme competition.
8And with Saudi Arabia and other countries in the Gulf revving up their downstream capabilities, it will get increasingly difficult for MRPL to compete in the export market.
8The time has come for the ONGC brass to take a good and hard look at MRPL and decide which way the bread is now buttered.
Click on Reports for more Details
8Clearly the ONGC brass has other important things in mind and it is not able to put in the kind of work that is meant to go into a company like MRPL, for the refiner works in an entirely different paradigm from how the E&P business operates.
8The oil and gas business is under severe pressure from all directions and it is no longer possible for a pure E&P company to salvage a non performing downstream enterprise.
8Going up the value chain was the slogan ten years ago, not now.
8In fact, with electric cars projected to become cost competitive to conventional cars, refineries will be under severe pressure going ahead.
8There is now the dire projection that retail outlets for dispensing MS and HSD will become defunct in 10 years when battery driven cars begin to proliferate.
8For MRPL, the road ahead is going to be even more difficult.
8It has just started selling petrochemicals from its new units in an environment in which companies like RIL are way ahead in the game.
8MRPL's retail entry is also fraught with uncertainties, again due to extreme competition.
8And with Saudi Arabia and other countries in the Gulf revving up their downstream capabilities, it will get increasingly difficult for MRPL to compete in the export market.
8The time has come for the ONGC brass to take a good and hard look at MRPL and decide which way the bread is now buttered.
Click on Reports for more Details
Big companies make big looses too. And one example is Shell. The company has reported a third quarter loss of a massive $6.1 billion compared with a gain of $5.3 billion for the same quarter a year ago.
8Lower prices from its E&P business is mostly to blame.
8It has been a bad time for the multinational. Shell has poured $7 billion into a single 6,800-foot exploratory well in Alaska, making it possibly the most expensive hole yet drilled, only to admit that it had not found enough oil and gas to make further exploration worthwhile.
8Shell will now have to work very hard indeed to shore up its reserve base, at a time when oil and gas deposits are increasingly held either by national oil companies or by nimble American “frackers”.
8Last year Shell replaced only 26% of the 1.2 billion barrels of oil equivalent (boe) that it produced.
8It is not as if the multinational is in serious trouble. Its debt is just 12% of its networth and there is penty of ammunition left with it to stand up and fight another day.
8But the signals are increasingly clear to the big oil and gas companies who have made their money foraging for oil and gas over the last century.
8The times are changing and hard days are ahead for them.
Click on Details and also on our Reports section Details
8Lower prices from its E&P business is mostly to blame.
8It has been a bad time for the multinational. Shell has poured $7 billion into a single 6,800-foot exploratory well in Alaska, making it possibly the most expensive hole yet drilled, only to admit that it had not found enough oil and gas to make further exploration worthwhile.
8Shell will now have to work very hard indeed to shore up its reserve base, at a time when oil and gas deposits are increasingly held either by national oil companies or by nimble American “frackers”.
8Last year Shell replaced only 26% of the 1.2 billion barrels of oil equivalent (boe) that it produced.
8It is not as if the multinational is in serious trouble. Its debt is just 12% of its networth and there is penty of ammunition left with it to stand up and fight another day.
8But the signals are increasingly clear to the big oil and gas companies who have made their money foraging for oil and gas over the last century.
8The times are changing and hard days are ahead for them.
Click on Details and also on our Reports section Details
How liquid is the LNG trade?
8Hard numbers are still not available but by one estimate, around 70 million tonnes of LNG was sold in 2014 on contracts that run for four years or less. 40 million was traded on a one year or less basis and 10 million tonnes on spot basis.
8Long term contracts are being replaced with shorter duration contracts.
8Flexible volumes mean that they will respond to market signals. In other words, spare capacities will be the norm going ahead.
8The LNG market too has become much more diversified as both buyers and seller have grown in numbers. .
8The tyranny of distance has been broken with both the US and Canada aggressively breaking into the world market. The US and Europe gas hubs are being increasingly "tied in", thereby changing the game quite a bit.
8Since buyers have more choices, LNG will have to become more competitive and responsive in the years ahead.
Click on Reports for more Details
8Hard numbers are still not available but by one estimate, around 70 million tonnes of LNG was sold in 2014 on contracts that run for four years or less. 40 million was traded on a one year or less basis and 10 million tonnes on spot basis.
8Long term contracts are being replaced with shorter duration contracts.
8Flexible volumes mean that they will respond to market signals. In other words, spare capacities will be the norm going ahead.
8The LNG market too has become much more diversified as both buyers and seller have grown in numbers. .
8The tyranny of distance has been broken with both the US and Canada aggressively breaking into the world market. The US and Europe gas hubs are being increasingly "tied in", thereby changing the game quite a bit.
8Since buyers have more choices, LNG will have to become more competitive and responsive in the years ahead.
Click on Reports for more Details
Like everything else in the energy sector today, the LNG market is also evolving at a frightening rapid pace, leaving both buyers and sellers grasping for growth.
8Supplies have now become flexible. If all contracts that are to be renewed are taken as flexible because the buyer has the right to chose the contract he wants, as much as 25% of LNG to be traded in 2015 will have flexible parameters in terms of pricing, volumes and length of contract. This figure will go up to 42% in 2025, though some experts believe that this is a conservative figure.
Is LNG then likely to become a global commodity?
8The drivers are of course the increased liquidity in the market and the number of participants. There is a also a fragmentation of the market place that helps in the commoditization of LNG. Plans to set up LNG and gas hubs in Asia will also drive this trend.
8But on the other hand there are some inhibitors too. Existing long term contracts will take time playing through. Juxtaposed against this is the fact that LNG terminals can come up only if long term financing is secured and this has to work in tandem with long term supply contracts.
8Commoditization however is likely to get a boost as there is increasing demand uncertainty and buyers have competing fuel options.
8The tide however is turning but only time will tell how far it will turn.
Click on Reports for more Details
8Supplies have now become flexible. If all contracts that are to be renewed are taken as flexible because the buyer has the right to chose the contract he wants, as much as 25% of LNG to be traded in 2015 will have flexible parameters in terms of pricing, volumes and length of contract. This figure will go up to 42% in 2025, though some experts believe that this is a conservative figure.
Is LNG then likely to become a global commodity?
8The drivers are of course the increased liquidity in the market and the number of participants. There is a also a fragmentation of the market place that helps in the commoditization of LNG. Plans to set up LNG and gas hubs in Asia will also drive this trend.
8But on the other hand there are some inhibitors too. Existing long term contracts will take time playing through. Juxtaposed against this is the fact that LNG terminals can come up only if long term financing is secured and this has to work in tandem with long term supply contracts.
8Commoditization however is likely to get a boost as there is increasing demand uncertainty and buyers have competing fuel options.
8The tide however is turning but only time will tell how far it will turn.
Click on Reports for more Details
LNG freight rates are coming down rapidly due to weak demand from Asia driven by slowing growth in China.
8A supply of fresh vessels into the market has not helped either.
8Then again, the Europeans have stopped re-exporting LNG cargoes which were at one point at a premium to piped gas supplied into the continent. Asian LNG prices were at a premium compared to piped gas prices in Europe. European traders therefore preferred to re-export cargoes to more profitable Asian markets
8This re-export helped to create substantial shipping demand as vessels found employment on both legs of the trade, first in import and then in re-export.
8However, as Asian demand has weakened, the price differential between Asian LNG and European piped gas has eroded, which has hit re-exports from Europe.
8Spain, the biggest re-exporter from Europe, shipped 1.3 million tonnes of LNG during the first eight months of the current year, down 40% over the same period last year.
8The recent fall in oil prices has made LNG competitive compared with piped gas in Europe, and this has the potential to create more demand for LNG in European countries as they seek to diversify their supply base.
8However, a growing preference for renewable sources of energy and weakening domestic gas consumption will cap any major surge in LNG demand in Europe.
8Asia will continue to be the main hub for LNG demand and trade going ahead and this is not going happen just as yet.
8It is likely that LNG freight rates will continue to slide in the months ahead.
8In all likelihood, Indian LNG consumers will reap the benefits of lower rates.
Click on Reports Details
8A supply of fresh vessels into the market has not helped either.
8Then again, the Europeans have stopped re-exporting LNG cargoes which were at one point at a premium to piped gas supplied into the continent. Asian LNG prices were at a premium compared to piped gas prices in Europe. European traders therefore preferred to re-export cargoes to more profitable Asian markets
8This re-export helped to create substantial shipping demand as vessels found employment on both legs of the trade, first in import and then in re-export.
8However, as Asian demand has weakened, the price differential between Asian LNG and European piped gas has eroded, which has hit re-exports from Europe.
8Spain, the biggest re-exporter from Europe, shipped 1.3 million tonnes of LNG during the first eight months of the current year, down 40% over the same period last year.
8The recent fall in oil prices has made LNG competitive compared with piped gas in Europe, and this has the potential to create more demand for LNG in European countries as they seek to diversify their supply base.
8However, a growing preference for renewable sources of energy and weakening domestic gas consumption will cap any major surge in LNG demand in Europe.
8Asia will continue to be the main hub for LNG demand and trade going ahead and this is not going happen just as yet.
8It is likely that LNG freight rates will continue to slide in the months ahead.
8In all likelihood, Indian LNG consumers will reap the benefits of lower rates.
Click on Reports Details
GAIL has obtained permission to drill of eight wells in its Cambay Basin block CB-ONN-2010/11 spread over the districts of Ahmedabad and Anand.
8The block is jointly held by GAIL, Bharat Petro Resources, EIL, BF Infrastructure ltd and Monnet Ispat.
8The site is located next to the Sabarmati river and there is no forest area nearby.
8The drilling depth is between 2000 to 2500 metres.
8Environmental clearance has been obtained for the drilling programme.
8The total cost of drilling has been pegged at Rs 160 crore.
Click on Reports for more information. Details
8The block is jointly held by GAIL, Bharat Petro Resources, EIL, BF Infrastructure ltd and Monnet Ispat.
8The site is located next to the Sabarmati river and there is no forest area nearby.
8The drilling depth is between 2000 to 2500 metres.
8Environmental clearance has been obtained for the drilling programme.
8The total cost of drilling has been pegged at Rs 160 crore.
Click on Reports for more information. Details
ONGC plans to drill four exploratory wells in NELP-VIII Block VN-ONN-2009/3 in the frontier Son Valley in Madhya Pradesh.
8The total area of the block is 1250 sq km.
8The drilling will be carried out in the the Damoh district to begin with although the block is over two districts.
8The cost of the project is pegged at Rs 160 crore.
8The well depth will be around 2800 metres
8The environment clearance for the project has been received by ONGC.
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8The total area of the block is 1250 sq km.
8The drilling will be carried out in the the Damoh district to begin with although the block is over two districts.
8The cost of the project is pegged at Rs 160 crore.
8The well depth will be around 2800 metres
8The environment clearance for the project has been received by ONGC.
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L&T does not really see any significant pick up in business in the immediate future.
8The diversified giant operates in almost all major segments of the economy, from power and petroleum to heavy engineering, electrical and automation to IT and financial services.
8In Q-2, L&T claims that domestic macro-economic parameters showed some early indications of recovery along with pick up in industrial production indices, and softening inflation & interest rates.
8And while the government remained committed on the developmental agenda, through the reform process and public expenditure, the financial markets remained volatile and the overall investment climate stayed subdued during the quarter. Slowing global economies, depressed commodity prices, weakening currencies and capital outflows are constraining the growth prospects of emerging economies.
8Uncertainties in the financial markets and excess capacities across the world have also impacted the investment sentiment.
8The ground level inputs indicate that it may take further time for significant pick-up in business opportunities Details
8The diversified giant operates in almost all major segments of the economy, from power and petroleum to heavy engineering, electrical and automation to IT and financial services.
8In Q-2, L&T claims that domestic macro-economic parameters showed some early indications of recovery along with pick up in industrial production indices, and softening inflation & interest rates.
8And while the government remained committed on the developmental agenda, through the reform process and public expenditure, the financial markets remained volatile and the overall investment climate stayed subdued during the quarter. Slowing global economies, depressed commodity prices, weakening currencies and capital outflows are constraining the growth prospects of emerging economies.
8Uncertainties in the financial markets and excess capacities across the world have also impacted the investment sentiment.
8The ground level inputs indicate that it may take further time for significant pick-up in business opportunities Details
Larsen & Toubro recorded Consolidated Gross Revenue of Rs 23605 crore for the quarter ended September 30, 2015, registering a y-o-y growth of 11%.
8The International revenue during the quarter at Rs 7658 crore constituted 32% of the total revenue.
8For the half year April-September 2015 the Consolidated Gross Revenue at Rs 44065 crore recorded a y-o-y increase of 9%.The Company secured fresh orders worth Rs 28620 crore at the group level during the quarter ended September 30, 2015. The International order inflow during the quarter at Rs 10973 crore constituted 38% of the total order inflow.
8Major orders during the quarter were secured by the Infrastructure segment.On a cumulative basis, the order inflow for the half-year ended September 30, 2015 stood at Rs 54996 crore with the International order inflow accounting for 35%.Consolidated Order Book of the group stood at Rs 244097 crore as at September 30, 2015, higher by 14% on a y-o-y basis with International Order 8Book constituting 28% of the Order Book.
8Consolidated Profit after Tax (PAT) for the quarter July - September 2015 at Rs 996 crore recorded a y-o-y growth of 16%.
8For the half-year ended September 30, 2015 the PAT was Rs 1602 crore vis-à-vis Rs1829 crore recorded for the corresponding period of the previous year.
Click on Reports for more Details
8The International revenue during the quarter at Rs 7658 crore constituted 32% of the total revenue.
8For the half year April-September 2015 the Consolidated Gross Revenue at Rs 44065 crore recorded a y-o-y increase of 9%.The Company secured fresh orders worth Rs 28620 crore at the group level during the quarter ended September 30, 2015. The International order inflow during the quarter at Rs 10973 crore constituted 38% of the total order inflow.
8Major orders during the quarter were secured by the Infrastructure segment.On a cumulative basis, the order inflow for the half-year ended September 30, 2015 stood at Rs 54996 crore with the International order inflow accounting for 35%.Consolidated Order Book of the group stood at Rs 244097 crore as at September 30, 2015, higher by 14% on a y-o-y basis with International Order 8Book constituting 28% of the Order Book.
8Consolidated Profit after Tax (PAT) for the quarter July - September 2015 at Rs 996 crore recorded a y-o-y growth of 16%.
8For the half-year ended September 30, 2015 the PAT was Rs 1602 crore vis-à-vis Rs1829 crore recorded for the corresponding period of the previous year.
Click on Reports for more Details
Bongaigaon Refinery and Petrochemicals Ltd (BRPL), an IOC subsidiary, has announced plans to set up a Rs 3300 crore capacity expansion-cum-upgradation project to meet BS-IV specifications.
The details of the new projects are:
8Crude processing capacity enhancement from 2.35 to 2.7 MMTPA
8DHDT capacity enhancement from 1,200 TMTPA to 1,800 TMTPA to meet BS-V/VI HSD specification
8CRU-MSQ revamp to meet BS-V/VI MS specification
8Selective Desulphurisation (SDS) Unit
8An INDMAX project along with an Indmax Gasoline De-Sulphurisation Unit
8The capacity expansion is taking place because the capacity of the Haldia-Barauni pipeline that supplies low sulphur imported crude -- over and above sweet crude from the Assam fields -- is being expanded. The crude availability at the refinery now stands at 2.7 MMTPA.
8Bongaigoan has two CDUs and it is the capacity of the second CDU that is going to be raised from 1 to 1.35 MMTPA.
Click on our Reports section for more Details
The details of the new projects are:
8Crude processing capacity enhancement from 2.35 to 2.7 MMTPA
8DHDT capacity enhancement from 1,200 TMTPA to 1,800 TMTPA to meet BS-V/VI HSD specification
8CRU-MSQ revamp to meet BS-V/VI MS specification
8Selective Desulphurisation (SDS) Unit
8An INDMAX project along with an Indmax Gasoline De-Sulphurisation Unit
8The capacity expansion is taking place because the capacity of the Haldia-Barauni pipeline that supplies low sulphur imported crude -- over and above sweet crude from the Assam fields -- is being expanded. The crude availability at the refinery now stands at 2.7 MMTPA.
8Bongaigoan has two CDUs and it is the capacity of the second CDU that is going to be raised from 1 to 1.35 MMTPA.
Click on our Reports section for more Details
IOC is downplaying the fact that the INDMAX FCC unit is the pride of IOC's R&D division. The company is a joint licensor of the project with Lummus Technology Inc of the US.
8The unit will eliminate the production of demand limited black oils such as LDO, LVFO, LSHS as well as naphtha and instead will produce high value products such as LPG and MS conforming to BS-IV specifications.
8The ballpark cost estimate of the proposed Indmax project is Rs. 2,500 Crore.
IRR for the Indmax project at 90% capacity utilization based on feed availability is calculated at 11.2% post-tax considering debt-equity ratio of 1:1 with interest rate of 9.0% and a 15 year- operating life.
8The project is scheduled to be completed by April, 2019.
8The project is being set up at Bongaigoan on a nomination basis without going through a tendering process.
Comment: The website had commented that there could be a conflict of interest in licensor also being a captive buyer? In the attempt to promote its own R&D can it cause a loss to BRPL because a tender process will not be adopted to select the best technology for translating black oil into value added products? The post tax IRR of 11.2% is just about ok but is there any other licensor that can provide a better IRR? A company like IOC should never venture into becoming a process licensor because it does not pay to become one. No other refinery will want to buy the process on account of competitive principles. There are already licensors in the business who know how best to do these things. Eventually, it will up to the CAG to comment on whether it is fair on the part of IOC to place a Rs 2500 crore order on itself on a nomination basis. The other question is: Is IOC taking advantage of the excise duty relief to push through its INDMAX unit in Bongaigoan so that inefficiencies, if any in the new unit, can be cushioned with the relief?
Click on our Reports section for more Details
8The unit will eliminate the production of demand limited black oils such as LDO, LVFO, LSHS as well as naphtha and instead will produce high value products such as LPG and MS conforming to BS-IV specifications.
8The ballpark cost estimate of the proposed Indmax project is Rs. 2,500 Crore.
IRR for the Indmax project at 90% capacity utilization based on feed availability is calculated at 11.2% post-tax considering debt-equity ratio of 1:1 with interest rate of 9.0% and a 15 year- operating life.
8The project is scheduled to be completed by April, 2019.
8The project is being set up at Bongaigoan on a nomination basis without going through a tendering process.
Comment: The website had commented that there could be a conflict of interest in licensor also being a captive buyer? In the attempt to promote its own R&D can it cause a loss to BRPL because a tender process will not be adopted to select the best technology for translating black oil into value added products? The post tax IRR of 11.2% is just about ok but is there any other licensor that can provide a better IRR? A company like IOC should never venture into becoming a process licensor because it does not pay to become one. No other refinery will want to buy the process on account of competitive principles. There are already licensors in the business who know how best to do these things. Eventually, it will up to the CAG to comment on whether it is fair on the part of IOC to place a Rs 2500 crore order on itself on a nomination basis. The other question is: Is IOC taking advantage of the excise duty relief to push through its INDMAX unit in Bongaigoan so that inefficiencies, if any in the new unit, can be cushioned with the relief?
Click on our Reports section for more Details
IOC is in the process of hiring a Project Management Consultant (PMC) for installing an Indmax Process Unit along with associated facilities at its Bongaigoan refinery.
8The PMC will work on behalf of IOC and will be responsible of FEED, detailed engineering, contracting, installing and commissioning of the unit.
The unit will have two licensed units:
8A 0.740 MMTPA Indmax FCC unit that also includes an LPG treatment. The process licensor is Lummus Technology Inc
8Then there is the Indmax Gasoline De-sulphurization unit and a splitter with a capacity of 0.246 MMTPA and a HDS section with a volume of 0.155 MMTPA. Axens is the process licensor.
8These units are to be installed in the existing unit at Bongaigoan where site grading work is not going on.
8Low value components like Black Oils (LDO, LVFO) and Reduced Crude Oil (RCO) from the the Crude Distillation Bottoms will constitute the feed for the INDMAX FCC Unit so as to be able to generate higher value added products such as Indmax Gasoline and LPG.
8The Indmax Gasoline if blended in the Refinery MS Pool, the MS Pool would not meet Euro-III/IV specifications with respect to Sulphur so an Indmax Gasoline De-sulphurisation unit is added to remove Sulphur from Light and Heavy Indmax Gasoline so that when blended with the Refinery MS Pool, the Refinery MS Pool meets Euro-III/IV equivalent specifications.
For complete details of the work that is to be done to set up the units, please click on our Reports section. Details
8The PMC will work on behalf of IOC and will be responsible of FEED, detailed engineering, contracting, installing and commissioning of the unit.
The unit will have two licensed units:
8A 0.740 MMTPA Indmax FCC unit that also includes an LPG treatment. The process licensor is Lummus Technology Inc
8Then there is the Indmax Gasoline De-sulphurization unit and a splitter with a capacity of 0.246 MMTPA and a HDS section with a volume of 0.155 MMTPA. Axens is the process licensor.
8These units are to be installed in the existing unit at Bongaigoan where site grading work is not going on.
8Low value components like Black Oils (LDO, LVFO) and Reduced Crude Oil (RCO) from the the Crude Distillation Bottoms will constitute the feed for the INDMAX FCC Unit so as to be able to generate higher value added products such as Indmax Gasoline and LPG.
8The Indmax Gasoline if blended in the Refinery MS Pool, the MS Pool would not meet Euro-III/IV specifications with respect to Sulphur so an Indmax Gasoline De-sulphurisation unit is added to remove Sulphur from Light and Heavy Indmax Gasoline so that when blended with the Refinery MS Pool, the Refinery MS Pool meets Euro-III/IV equivalent specifications.
For complete details of the work that is to be done to set up the units, please click on our Reports section. Details
