Royal Dutch Shell is in advanced talks to acquire BG Group for around £46bn ($68bn), in a deal that would expand the Anglo-Dutch group’s foothold in some of the world’s most exciting oil provinces and cement its dominance of the global trade in natural gas.
Since the price of crude began its rapid decline last June, expectations have been high that the oil sector could see a repetition of the mergers and acquisitions fever that reconfigured the industry in the late 1990s — another period of low oil prices.
That created the current crop of big oil companies such as BP, Chevron and ExxonMobil. Shell’s bid is worth about £46bn, according to people familiar with the matter, which represents a 50 per cent premium to BG’s market value. BG shares closed up 6.3 per cent at 910.4p on Tuesday, valuing the company at £30.7bn, before news of the talks broke.
Some significant deals have already materialised: Halliburton, the oil services group, recently bought rival Baker Hughes for $35bn and Repsol of Spain late last year acquired Talisman Energy of Canada for $8.3bn. Rex Tillerson, chief executive of ExxonMobil, said last month that the company could be open to a large deal. >> Read More
To salvage 14,305 MW of stranded gas-based power capacity, the government has decided to put in place a transient mechanism where the plants can run at 30% plant load factor with assured supply of gas, but subject to a tariff cap of Rs 5.50 per unit. The operators of gas-based power units will get monetary support from thegovernment for a period of one year so as to be able toservice their debt while forgoing their return on equity.
In a reverse bidding method, the plant willing to take the lowest amount of support from the government’s power system development fund (PSDF) to maintain tariff at R5.50 will be given imported gas. The move would benefit Lanco Infratech, Essar Power, Reliance Power, GVK Group and GMR Energy, among others.
Announcing the Cabinet Committee on Economic Affairs decision on Wednesday, power and coal minister Piyush Goyal said with this new arrangement, electricity generation in the country would be enhanced by 79 billion units worth R42,000 crore. >> Read More
The price of natural gas is likely to drop to around $5 per million British thermal unit (mBtu) from $5.61 per mBtu in the half-yearly revision to be announced by the government later this month.
“Steps are being taken to arrive at the gas price based on the approved formula. The final price will be announced in advance for the explorers and consumers to make the necessary changes in the contract,” a senior oil ministry official said.
Analysts expect the price to be lower than the one announced in October because of a fall in global crude and LNG prices at the international hubs, which are taken into account while calculating the domestic price.
“Domestic gas prices would decline to around $5 per mBtu because of subdued global demand and crude prices,” rating agency Crisil said in a research report. >> Read More
07 December 2014 - 17:57 pm
Russia’s President Vladimir Putin heads to New Delhi next weekend and will sign a deal with India on energy supply, marking the latest step in a remarkable set of developments that will reshape the international energy business and particularly the natural gas market for years to come.
The deal between India and Russia will centre on the long-term supply of gas and oil. The deal is likely to account for a substantial proportion of India’s growing needs well into the 2020s. This will follow the deal signed in May and another signed last month which will give China more than 30bn cubic metres of gas annually from east Siberia, once the necessary infrastructure is in place. The first Chinese deal was said to be worth $400bn; the second slightly less. The agreement with India also follows last week’s announcement that Russia is considering abandoning the South Stream project to supply gas through a pipeline running through southern Europe in favour of creating a new gas trading hub in Turkey.
The South Stream story may be a political manoeuvre, intended to separate thecountries in southeast Europe — such as Hungary and Bulgaria — which hoped to benefit from South Stream from the rest of the EU when it comes to considering whether to maintain or extend sanctions against Russia to punish its behaviour in Ukraine. In a union of 28, every member country has a veto and the insecure coalition over Ukraine looks very shaky. In the gas market, however, the focus will be on the deal with Turkey and the creation of a new hub through which a strong flow of Russian supplies could swamp the Mediterranean market. >> Read More
27 November 2014 - 6:45 am
Government has finalised details of a package to rescue 16,000 MW of gas-based power plants lying stranded as it looks to increase supplies by raising generation without burdening consumers.
Power Minister Piyush Goyal met Petroleum Minister Dharmendra Pradhan on Wednesday to chalk out the rescue package that may involve rescheduling of loans to power companies as well as making available fuel at affordable price through means like pooling of average cheaper domestic gas price with costly imported LNG.
The two ministers did not divulge details of the rescue package finalised today which may need the Cabinet approval.”Today’s meeting was a precursor to final decisions which will be taken very fast,” Goyal told reporters here after the meeting.”We are drawing up plans to increase the generation of power, to put national assets to good use and keep the energy cost affordable with a sustained policy framework,” he added. >> Read More
20 November 2014 - 10:51 am
The 25% drop in the price of oil since July is likely to lift economic growth prospects, improve terms of trade, and have a potentially positive credit impact for a number of Asia-Pacific sovereigns if the lower prices are sustained below USD90/bbl through 2015, in line with our latest forecast, says Fitch Ratings.
Most major Asian economies – including China, Japan, Korea and Thailand – would see an effective overall income boost from sustained lower oil prices. In addition, countries with large oil import needs facing external adjustment pressures such as Indonesia and India are among the best positioned to see a positive impact on sovereign credit profiles, although the broader policy response will matter too.
All but one of the Fitch-rated APAC sovereigns are net oil importers. Net oil import bills range significantly, from greater than 10% of GDP for Thailand to less than 2% for Bangladesh and Vietnam. Korea, Japan and China have net import bills of 6%, 3% and just over 2% of GDP, respectively.
For consumers, there would be a positive consumption effect from falling retail energy prices. Disinflation as a result of lower oil prices could also contribute to GDP growth less directly in some countries, by facilitating a more accommodative monetary policy than would otherwise be followed. Notably, several key Asian economies, including Japan, have been increasingly relying on liquefied natural gas (LNG) as part of their energy mix, and Asian LNG prices are linked to Brent crude. >> Read More
29 October 2014 - 6:50 am
BP Plc today wrote down the value of its $7.2-billion investment in India’s oil and gas fields made in February 2011 by a little over 10 per cent.
Unveiling its third-quarter results on Tuesday, BP said it had written down the value of its investment in KG-D6 — the deep-water field operated by Reliance Industries in Krishna Godavari basin — by $770 million.
The oil behemoth attributed the charge to the “uncertainty in the future long-term gas price outlook following the introduction of a new formula for Indian gas prices”.
On October 18, the Narendra Modi-government approved a new formula that capped the gas price from deep-water fields at $5.61 per million British thermal unit (mBtu).
The new gas price will come into effect from November 1 but it won’t apply to Reliance Industries, which has filed for arbitration in a dispute with the government over the admissibility of certain cost recoveries on account of the huge shortfall in gas production from KG-D6 gas field. >> Read More
23 October 2014 - 10:16 am
The government will come out with a formula to determine the premium for oil and gas discovered in ultra deep-water and deep-water areas by early next year. The premium will be above the new gas price of $5.61 per million British thermal unit (mBtu).
“Stakeholders will be consulted on the mechanism of premium determination and pricing of these categories. A transparent process will determine this. Apprehensions that there will be discretion will be addressed,” petroleum secretary Saurabh Chandra told reporters here.
The consultations with stakeholders and experts will begin shortly, and the mechanism will be in place in the “coming new year”, he said.
While announcing the new gas price, the government had said a premium would be offered for oil and gas discoveries in ultra deep-water areas and deep-water areas under the prescribed procedure. >> Read More
18 August 2014 - 10:31 am
THE proposed revision in the price of natural gas has run into a fresh controversy, with the Petroleum Ministry denying having made the presentation before the Prime Minister’s Office (PMO) that recommended a new pricing regime of $6-6.5 per million British thermal units (mBtu) for domestic producers.
“No such presentation was made by MoPNG (Ministry of Petroleum & Natural Gas). This is a concocted and fabricated presentation as far as MoPNG is concerned,” wrote Petroleum Secretary Saurabh Chandra in response to an email from the Planning Commission’s former principal advisor Surya P Sethi.
Sethi had emailed a copy to the PMO and other ministers of the ‘Presentation on Gas Price Issues’, saying it had “inaccuracies and misrepresentations” and any decision based on its “selective, misleading and erroneous claims” would be highly detrimental to public interest.
The ministry now plans to write to the PMO that it was a forged presentation and would be asking Sethi to divulge his source of information since “gas pricing is a sensitive issue and such rumours disturb the policy environment of the country”. Chandra has also sought an inquiry into the “forgery”. >> Read More
The trio operating the once-prolific KG-D6 block would collectively defer their massive investment plans in the asset over the indecision on gas price revision, Canadian firm Niko Resources, partner of Reliance Industries and BP for the block, has confirmed.
“If the expected new price for natural gas sales from the D6 block in India is not notified by the government, then a significant portion of the contractor group’s planned investments in the block are expected to be deferred,” Niko said in its annual statement.
Although it was widely expected that any delay in implementing a new, remunerative gas price would foil investment plans of producers in the country including public sector ONGC, this is for the first time an operator is stating this on record.
Last week, the government decided to continue with the current gas price of $4.2 per million British thermal units (mmBtu) till September 30, before which it would hold extensive consultations on the issue of revising gas prices. The UPA government had in January 2014 notified new gas pricing guidelines as per the Rangarajan formula, the implementation of which would have hiked the price substantially from April 1, 2014. The implementation was later put in abeyance due to an Election Commission fiat. >> Read More