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Cairn India signs agreement with PetroSA

PetroSA and Cairn India Group have signed a farm-in agreement for crude oil and natural gas exploration in the offshore Block 1 in the Orange Basin on the west coast of South Africa. The closure of the transaction is subject to South African regulatory approvals.

Block 1 covers a large area of 19,922km2 and is currently in the initial stages of exploration. It has an existing gas discovery and identified oil and gas leads and prospects. Located in the geologically-proven Orange Basin along the north-western maritime border of South Africa with Namibia, the block is on trend with the discovered Kudu and Ibhubesi gas fields. Cairn India will  hold a 60% interest in the block, through a wholly-owned South African subsidiary, and will be the Operator, with PetroSA holding the remaining interest.

PetroSA is well poised to grow into a leading integrated African energy company. The company seeks to nurture strategic alliances with experienced international companies across the oil and gas value chain. The partnership with Cairn India starts an exciting new chapter and represents another positive development in that direction.

This is a step forward in achieving Cairn India’s strategic goal of growing its resource base by acquiring exploration and appraisal assets outside the Indian sub-continent. The Orange Basin is an emerging hydrocarbon province with potential for material oil and gas discoveries. Block 1 will be an anchor exploration asset in South Africa and will augment Cairn India’s existing portfolio.

Everton September, PetroSA Vice President for New Ventures, said: “We are delighted to join hands with one of Asia’s most successful exploration companies. Cairn India brings with it extensive geo-technical and operating capabilities that will combine very well with our experience and understanding of the region. We have a shared mindset, and together are extremely well placed to realize the full potential of Block 1. “

P. Elango, Cairn India Director for Strategy said: “Cairn India is extremely pleased to partner with PetroSA, one of the largest oil and gas companies in South Africa. This is an important first step for the company’s growth beyond the Indian sub-continent. We see an attractive opportunity to leverage our capabilities in a rapidly-emerging area and aspire to build a wider business in the region.”

RIL is most influential stock in Sensex

Reliance Industries has become the most influential stock on the BSE benchmark index Sensex, while FMCG major ITC was to the second slot, according to reports.

Shares of ITC dropped after reports stated that Australia's tough new anti-tobacco marketing laws, which among others ban logos on cigarette packs, may see similar action in India as well.

RIL commands a market value of Rs. 2637.78bn, while ITC's worth is at Rs. 2022.10bn, says report.

Infocus News

IIFL recommends 'Add' on ONGC

IIFL Institutional Equities, a part of the IIFL Group, one of the leading players in the Indian financial services space, recommends “Add ” ONGC.

According to IIFL report, ONGC posted  PAT of Rs60.7bn, which was higher than estimated, owing to lower share of upstream subsidy burden (31.5%) and 35% QoQ decline in DD&A expenses. 

Subsidy burden for the quarter came in at Rs124bn, implying net realisation of US$47/bbl (US$55/bbl for FY12). Although upstream subsidy burden at 31.5% came in as a positive surprise, ONGC’s share in upstream subsidy at 82% was higher than expectation. 

Crude production was down marginally by 0.7% at 6.5mmt and gas production declined 2.2% QoQ to 6.4bcm. OVL production continued to slide, with 1Q production at 1.9mmtoe, a 9% decline QoQ, dragged by declines in Sakhalin,Columbia and Brazil, report stated.

ONGC announced discovery of higher oil reserves in the D-1 field in Bombay High, which will increase peak production by 25kbpd (~ 3.3% of consol FY15). Production is expected to commence by FY15 and will have a positive impact of 1.8% (Rs0.6 per share) on our FY15 consolidated EPS. Maintain ADD with target price of Rs290, brokerage added.

The report was published by IIFL’s Institutional Equities Research desk.

Result

ONGC Q1 net profit up 48%

Shares of ONGC advanced after the oil producer recorded 1Q net profit above expectations at Rs. 60.8bn, up 48% on year.

The company benefited from higher crude oil prices and the sharp depreciation in the rupee as it prices its locally produced gas in dollars.

ONGC Chairman Sudhir Vasudeva said that the company has made a fresh discovery at the D1 offshore field off India's western coast, which could boost in-place reserves at the field to an estimated 140 mn tonnes of oil-equivalent from 82 mn tonnes now.

Shares of ONGC closed at Rs. 280.80, up 0.5% over the previous close. It had touched a day’s high of Rs. 290.75 and a day’s low of Rs. 279.75. The total traded quantity of the shares stood at 4.01 lakh shares on the BSE. 

Domestic News

July inflation falls due to suppressed fuel prices: CRISIL Research

WPI-based inflation has declined sharply in July to 6.9%, compared to 7.3% in June. This is mainly due to non-revision of diesel, LPG and kerosene prices for a year rather than decline in prices within the fuel category.

The impact of last year’s revision in these prices on inflation – measured as a year-on-year change in prices - has dropped off this July. As and when administered fuel prices are revised upwards during this year, fuel inflation would once again pick-up. There remains significant suppressed inflation in the economy at present.

Our calculation suggests that if diesel, LPG and kerosene prices are fully aligned to the global prices in a single revision, WPI Inflation will shoot up by 3.4 percentage points over and above the current level.
In addition to suppressed fuel inflation, the upside risk to WPI-inflation arises from the adverse impact of deficient rainfall. As a result of higher-than-anticipated food inflation, CRISIL Research has revised the WPI-inflation forecast for 2012-13 up to 8% from 7% estimated earlier.

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GAIL seeks stake in Russia's LNG plant

ONGC plans to sign MOU with Japan's Mitsui: reports

ONGC to build urea manufacturing plant in Tripura

Relaxation of Norms for LNG Imports From US

International News

Iran's retreat from the International Energy Sector

Domestic demand for gasoline in Iran was driving growth in the energy sector for the year. OPEC, in its latest report, said retail gasoline consumption in Iran was up more than 20 percent for the first five months of the year, though overall oil demand was relatively flat.  Inflation, meanwhile, was up from stable levels reported last year.  Iran has struggled to find a reliable consumer base given international sanctions pressure and the recent levels suggest the Islamic republic is retreating somewhat from the international energy sector.
 
The Organization of Petroleum Economies, in its August report, said Iranian crude oil production in part led to a decline in overall output from the Vienna-based cartel. OPEC said crude oil production for its members, not including Iraq, was reported at 28.1 million barrels per day in July, a decline of 270,000 bpd compared with the previous month.  The decline in OPEC oil production in part was led by Iran, which saw its export options curtailed by sanctions imposed by the U.S. and European governments. Tehran announced it still had a viable consumer base in China, however, which received about 12 percent of its oil needs from Iran. The Indian government, meanwhile, said it would circumvent EU sanctions by extending government-backed insurance to tankers carrying Iranian crude because of the "definite need" for oil.
 
Sanctions, however, have hurt the Iranian economy and its overall crude oil levels. Italian energy company Eni reported that it's been unable to get oil out of Iran for the second straight month, however, because of insurance and banking problems. OPEC reported that the Iranian central bank posted an inflation rate of 22.9 percent this year after ending last year relatively flat. Domestically, oil demand reported a growth rate for May of 7.9 percent, or around 100,000 barrels per day. OPEC suggested any growth from Iran's oil demand was likely the result of gasoline consumption. The Iranian Oil Ministry, however, reported that domestic gasoline consumption was down 6.1 percent during the first two weeks of Ramadan, but has since recovered modestly by 1.8 percent. Gasoline consumption in Iran was up 22 percent during the first five months of the year compared with the same period last year, OPEC said.
 
Growth in Iranian gasoline demand could be a sign that the country's energy sector is retracting in response to sanctions pressure. Any external inhibitors fro Iran were in contrast to neighbouring Iraq, whose crude oil production is at least partially handicapped by domestic political disputes. On Monday, Iraqi officials said oil output reached 3.2 million bpd, taking the No. 2 spot from Iran among OPEC members.

Iranian threats to close the Strait of Hormuz in early 2012 caused an increase in oil prices. While recent spikes in crude were in response to Persian Gulf tensions, long-term trends were attributed mostly to economic stimulus initiatives in the United States and European Union.

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