Oil and Gas Newsletter – December 08 to 12, 2014

RIL’s existing textile business is the founding business of RIL and operates under the well-known brand ‘Vimal’. It has a prominent presence in the Indian textile market, especially in the worsted and synthetic suiting fabric segments.

Dec 12, 2014 12:12 IST India Infoline News Service

Top News
 
RIL enters into JV with Ruyi
Reliance Industries Limited India and Shandong Ruyi Science and Technology Group Co. Ltd, China (‘Ruyi’) (through its wholly owned subsidiary), have executed definitive agreements for a joint venture in textiles. As per the definitive agreements, RIL will transfer its existing textile business into a newly incorporated company (‘JV’), for which RIL will receive cash consideration. RIL will own a majority 51% in the proposed JV, with the balance 49% owned by Ruyi. The proposed transaction is subject to obtaining requisite approvals.
 
RIL’s existing textile business is the founding business of RIL and operates under the well-known brand ‘Vimal’. It has a prominent presence in the Indian textile market, especially in the worsted and synthetic suiting fabric segments.
 
Ruyi, a leading textile company in China with revenues in excess of USD 3 Billion, has a global presence including in America, Europe, Japan, Australia, New Zealand and China. Ruyi has a portfolio of world renowned brands such as ‘Taylor & Lodge’, ‘Harris Tweed’, ‘Royal Ruyi China’, ‘Nogara Italy’ and ‘Indios Italy’.  The RuYi group includes Renown Inc (founded in 1902 and listed on the Tokyo Stock Exchange) which owns or operates several leading global brands such as ‘Aquascutum’, ‘Simple Life’, ‘Ensuite’, ‘Mano’, ‘addenda’, ‘CHARGE’, ‘next eye’, ‘D’urban’ and ‘Intermezzo’.  Ruyi also operates in India under the ‘Georgia Gullini’ brand in the worsted suiting segment of the market. This business operation and activities would get realigned to strengthen the JV.
 
Rosneft and Essar agreed on key terms of Oil and Oil Products Supplies to Essar Refineries
Rosneft and  Essar signed key terms of oil and oil products supplies to Essar refineries in India. Supplies may begin in 2015. Consequently Rosneft expands its distribution area and builds up deliveries to the region, where the world’s economy growth zones are concentrated.
 
The document was signed on December 11 in New Delhi by the Head of Rosneft, Mr Igor Sechin and the Founder of Essar, Mr Shashi Ruia in the presence of the President of the Russian Federation Vladimir Putin and the Honorable Prime-Minister of India Mr Narendra Modi.
 
The reached agreement opens new horizons of cooperation between the two countries, thanks to the synergistic potential of the partnership in Upstream and Downstream areas of two leaders of the oil and gas industry of Russia and India. Thanks to this agreement Rosneft grants itself a secure market outlet of oil and oil products, while Essar gains a reliable and stable partner as a supplier of oil and oil products to its refining facilities.
 
Commenting on the signing Igor Sechin said: “The strategic potential of reached agreement between Rosneft – a global leader of hydrocarbon production – and Essar – a world’s leading player in the refining area – can hardly be overestimated. The performance of the terms of the agreement will have a substantial impact on the scale of economical cooperation between Russia and India – our Company estimates that the implementation of the contract will fuel significant growth in the goods turnover between two countries. For our Indian partners the signing of this agreement represents a vital element of basic supplies diversification which, at the same time, will ensure energy security for the country. The Russian counterpart, in turn, will get the possibility of production and supplies volume planning to a new region with considerable growth potential”.
 
RIL hits overseas debt market with US$1bn bond sale
Reliance Industries hit the international debt market to raise up to US$1 bn (about Rs 6,150 crore) by selling 10-year dollar-denominated bonds, says report. Report said that the company has raised US$ 3.3 bn in overseas debt this year so far. The company has hired as many as 11 i-bankers including HSBC, Bank of America Merrill Lynch and Standard Chartered. A perpetual bond is one which has no fixed maturity date.
 
News Infocus
 
Action Plan of 2014-15 on Disinvestment; Coal India, ONGC and NHPC approved for Disinvestment
Government has finalized plans to sell a part of its stake in Coal India, ONGC and NHPC under its disinvestment programme for 2014-15 targeted to mop up around Rs.58,425 crores. As per the Action Plan of 2014-15 on Disinvestment, Coal India, ONGC and NHPC have been approved for disinvestment.
 
As a general phenomenon, other things remaining the same, when the supply of any stock in the market increases, there is a run-down on the stock price. Disinvestment increases the quantity of CPSE stocks in the market. Therefore, the recent fall in share prices of Coal India, ONGC and NHPC is nothing unusual and does not show any diminished appetite for these stocks.
 
This information was given by the Union Minister of Finance, Shri Arun Jaitley in written reply to a question in Rajya Sabha today.
 
Domestic News
 
Regulate oil and gas price fall; create surplus for exploration: ASSOCHAM
Leading business chamber ASSOCHAM cautioned government over allowing oil prices to consumer fall further and suggested creation of a oil and gas price regulatory mechanism that will take into consideration the overall national interest in the petroleum price economy. The associated chamber of commerce and Industry of India (ASSOCHAM) also welcomed government raising excise duty on oil products to swab the surplus created by steep fall in international oil and gas prices.
 
In a detailed note to the Government, the chamber said that too low an oil price to the consumer will erode profit expectation from huge investments needed for our country to explore and exploit oil as well as gas reserves despite the beneficial effects of low oil and gas prices on several other sectors including in public and private transport costs.
 
The chamber recalled that India was importing almost 80 per cent of its oil and gas requirement and that total imports may rise further from 180 million tons to 300 million tons over the next ten years draining our hard earned export earnings further.  “For India, it is more important to gain access to new domestic sources of oil and gas rather than provide cheaper and cheaper oil and gas for transportation, power generation and industry” the chamber said in its note.
 
Mercator signs PSC with Myanma Oil & Gas Enterprise
Mercator Ltd has announced that this refers to our letter no. ML:DD:JL:909 dated 31st March 2014 informing that our subsidiary, Mercator Petroleum Ltd., in consortium with Oil India Ltd., and Others chosen as the selected candidate by the Ministry of Energy of the Republic of the Union of Myanmar, for two shallow water offshore oil blocks, in the Myanmar Offshore Block Bidding Round-2013.
 
Mercator Petroleum Limited in consortium with Oil India Limited, OilMax Energy Private Limited and Oil Star Management Service Co., Ltd has entered into the Production Sharing Contract (PSC) with Myanma Oil & Gas Enterprise (National Oil Company of Myanmar) for Block "M-4" (Moattama Offshore Area) and Block "YEB" (Tanintharyi Offshore Area) offshore Myanmar. Both the blocks are in shallow waters with a vast area wherein Block M-4 covers approx. 10380 KMs and Block YEB covers approx. 21297 Kms.
 
Oil India Limited (a Govt. of India undertaking) is the designated operator of both these blocks. Mercator Petroleum Limited has 25% participating interest in both the blocks.
 
CCEA approves closure of EIL's Malaysia subsidiary
According to the report, the CCEA approved a proposal to close down an EIL subsidiary in Malaysia. The closure will be as per Malaysian laws with regard to winding up, report said. As per the policy of the Malaysian government, any foreign entity that desires to render service in the Malaysian oil and gas sector should either be licensed or registered with PETRONAS, a state-owned company which control oil and gas activity in Malaysia.
 
UP Government agrees to constitute high power committee for GAIL’s Jagdishpur - Haldia pipeline
Giving a boost to the speedy implementation of GAIL (India) Limited’s Jagdishpur – Haldia natural gas pipeline project in Uttar Pradesh, the state Government has agreed to constitute a high power committee to provide Single Window Clearance for the pipeline construction activities.
 
During a presentation on the pipeline project, GAIL highlighted that the pipeline will bring growth in UP as the fertilizer plant of Fertilizer Corporation of India at Gorakhpur may be revived with Central Government support. Further, new City Gas Distribution networks are expected to come up in Varanasi, Allahabad, Azamgarh, Gorakhpur, Jaunpur, etc., depending on the potential of the city. This will contribute in generating additional revenue for the state Government.
 
The decision to set up the committee was taken at a meeting between senior state Government and GAIL officials held here which was presided over by Shri Alok Ranjan, IAS, Chief Secretary, Uttar Pradesh. Dr. Ashutosh Karnatak, Director (Projects), GAIL, who headed the GAIL team, apprised about existing as well as upcoming infrastructure of GAIL in UP.
 
ONGC plans to invest Rs 16,000 crore: reports
ONGC Ltd is planning to develop 45 drilling wells at a block in Krishna-Godavari basin at an estimated cost of Rs over Rs 16,000 crore, according to reports. Report stated that the company has approached the Ministry of Environment and Forests seeking clearance for preparing terms of References. ONGC will begin production in 2019, with a peak output of 4.5 million tonnes a year.
 
International News
 
BP expects $1 bn in Group-wide restructuring charges
BP will present to investors its strategy and plans to the end of the decade and beyond for its Upstream oil and gas business. The day-long presentation, led by BP’s Upstream chief executive Lamar McKay, will provide an in-depth and detailed account of how BP is managing its Upstream business and its distinctive strategy for the long term. The presentation will also review the macro-environment and the context of recent developments in oil prices. McKay and senior members of his upstream management team will share further insights into the depth and quality of the Group’s resource base and investment portfolio, which underpin BP’s long-term value proposition through the changes in the price environment.
 
“Although the current environment is challenging, BP is well-positioned to respond and manage our Upstream business for the long term,” said Lamar McKay. “We expect to see growth from our conventional and deepwater assets and an increasing contribution from gas. And we also have a quality pipeline of opportunities that we believe are capable of extending underlying growth well beyond 2020. Our focus throughout will remain firmly on safe operations, execution efficiency and greater plant reliability.”
 
OPEC cuts 2015 demand forecast
The Organization of the Petroleum Exporting Countries (OPEC) forecast demand for the group's oil will drop to 28.92 million barrels per day (bpd) in 2015, according to reports. The report follows OPEC's decision not to try and prop up prices by cutting output. OPEC's Nov. 27 decision to retain its output target of 30 million bpd sent prices slipped. The report cut its forecast for growth in global demand in 2015 due to a weaker outlook for Europe and Asia.

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