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
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
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
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
The government is likely to hike natural gas rates from July 1 after a new price formulation is approved by the Cabinet, a top Oil Ministry source said today.
The first increase in natural gas prices, based on a formula suggested by a panel headed by C Rangarajan, was to be originally effective from April 1.
However, before a new rate could be unveiled, general elections were announced and its implementation got deferred.
“It (gas price revision) is an issue which needs attention. Decision needs to be taken before July 1,” the source said.
The ministry had on April 21 told Reliance Industries, who was made to sell natural gas from its eastern offshore KG-D6 fields at the old rate of $4.2 per million British thermal unit even after its term had expired, that a new rate would be announced by July 1.
“We had told RIL that the earliest possible date for applying the revised price is July 1 and so we have to announce a new price before that,” he said.>> Read More
The new government is looking at all aspects of the gas price controversy, including a relook at the price formula, to resolve the long standing conflict that continues to dampen investor sentiment.
Petroleum minister Dharmendra Pradhan, who was recently briefed on the pricing issue by the senior officials of the ministry, has asked them to come up with all the perspectives on the issue.
“The minister has asked the officials to make presentation on different aspects of the issue, pending cases, including the arbitration notice issued by Reliance Industries, and issues concerning the Rangarajan formula,” officials said.>> Read More
Forced to sell natural gas at a price that has long expired, Reliance Industries (RIL) categorically told buyers of its KG-D6 gas that new rates as and when approved, will apply from April 1.
In a terse one-page letter to urea manufacturing plants, Reliance Industries said it was supplying about 12.5 million standard cubic meters per day of gas since April 1 at provisional price of USD 4.205 per million British thermal unit, and will charge them the difference between this and the new rate as and when it is approved by the government.
The government had in 2007 fixed a price of USD 4.205 per mmBtu for gas from KG-D6 block in Bay of Bengal for first five years of production. Dhirubhai-1 and 3 and MA fields in the KG-D6 began production in April 2009 and the rate approved expired on March 31, 2014.
The Cabinet had last year approved a new formula for pricing of all domestically produced gas from April 1.>> Read More
The Western powers are scrambling to bolster defences against a halt in Russian gas supplies after the Kremlin tightened the energy noose on Ukraine, and paramilitary actions in eastern Ukraine increased the risk of a full-blown sanctions war.
The Geneva deal reached last week to defuse the crisis is close to disintegration, with the US government openly accusing Russia of carrying out covert operations across the Donbass region.
US Vice-President Joe Biden warned that Russia will pay a very high price unless the Kremlin withdraws troops massing on the Ukrainian border. “We will not allow this to become an open-ended process. Time is short,” he said in Kiev.
Two key US senators have already called for sanctions on large Russian banks, mining companies and energy groups, including the state gas monopoly Gazprom. Any such move would freeze gas deliveries to the EU, since few European banks would risk defying US regulators by handling Gazprom transactions.>> Read More
Reliance Industries has made drastic changes in gas supply contracts that will jack up its KG-D6 gas price by 10 per cent over and above the new rate of $8.3 coming into effect from next month.
RIL has circulated a new Gas Sale and Purchase Agreement (GSPA) to urea manufacturing fertiliser units for supply of natural gas from its eastern offshore KG-D6 fields from April 1 upon expiry of current 5-year supply contract at month end.
In the new GSPA, RIL has proposed to charge government- fixed rate for natural gas on Gross Calorific Value (GCV) basis instead of current practice of billing USD 4.205 per million British thermal unit on Net Calorific Value (NCV) basis, sources privy to the development said.
The heat produced from natural gas is measured in calorific value. The heat rate is measured in gross (GCV) or net (NCV) basis. One GCV equals to 0.9 NCV and so on a like to like basis billing urea plants the new price of $8.3 per mmBtu on GCV would mean an actual rate of $9.13 on NCV basis.>> Read More