Oil India Plans to Invest $4B in Five Years to Raise Output

- Oil India Plans to Invest $4B in Five Years to Raise Output

Tuesday, September 13, 2011
Dow Jones Newswires
NEW DELHI
by Rakesh Sharma

Oil India plans to raise its capital expenditure 73% to about INR190 billion ($4 billion) in the five years starting April 2012 as the state-run explorer seeks to sharply raise oil and gas production, its finance director said.

"We are stepping up exploration and development of our blocks in India and overseas," T.K. Ananth Kumar told Dow Jones Newswires late Monday. "We are also seeking producing assets, so we have raised our capital expenditure plans."

The company's capital expenditure in the five years ending March 2012 is likely to be about INR110 billion. It accounted for a 10th of India's total oil output of 754,000 barrels a day and 4.5% of total gas output of 52.22 billion cubic meters in the last financial year. Kumar didn't say how much the company is aiming to produce.

Oil India will mainly fund its investments through internal accruals, but may raise debt, he said.

The company, which was listed on local stock exchanges in September 2009, has cash reserves of INR130 billion, he added.

Oil India and its bigger state-run rival Oil & Natural Gas Corp. need to boost capital spending to bring new fields into production amid falling output at their aging fields. India, which imports about four-fifths of its crude oil requirements, is encouraging explorers to ramp up exploration and production to meet surging demand for energy in the world's second-fastest growing major economy.

"We have been witnessing an increase in capex by oil and gas explorers in India for the past several years as energy security is a focus. This sort of high capex is quite achievable by Oil India considering they have more than INR120 billion of cash and have been generating a cash flow of about INR40 billion per year," Alok Deshpande, analyst with Elara Securities Ltd., said.

Oil India is seeking to acquire producing oil and gas assets in Australia, Russia, Kazakhstan and Canada, Kumar said.

"We have shifted our focus to acquiring producing assets, rather than going for exploration blocks, as we already have our hands full with existing exploratory blocks. Also, we have enough cash in hand and that would be the best use of it," Kumar said.

Oil India is in talks with French explorer Etablissements Maurel et Prom to buy a stake in its Gabon assets and plans to close the deal by March, Mint newspaper reported Monday. Kumar declined to comment on the report.

Copyright (c) 2011 Dow Jones & Company, Inc.

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U.S. Faces Increased Energy Security Risk, Report Shows

- U.S. Faces Increased Energy Security Risk, Report Shows

Tuesday, August 09, 2011
Rigzone Staff
by Barbara Saunders

The U.S. faces heightened threats to its energy security, according to a new report by the U.S Chamber of Commerce that measures risk in four areas—geopolitical, economic, reliability and environmental.

For 2010, the energy security risk index score was 98.0—the fourth highest since 1970 and a 6.5 point increase from the 2009 score of 91.5.

"These are the worst risks we've seen in recent history," said Karen Harbert, president of the Chamber's Institute for 21st Century Energy. "They approach what we saw following the Iranian hostage crisis. . . . Unless we take dramatic action to change the trajectory, America is headed toward an unprecedented level of sustained risk."

The index, updated annually, tracks changes in energy security risk beginning in 1970 and projects future risk through 2035. The 2011 edition of the index incorporates the most current energy data from the U.S. Energy Information Administration (EIA) and other federal agencies.

Of the 37 metrics weighed, 20 showed increased risk in 2010, 11 showed improvement, and six were unchanged. Eight of the top 10 metric with the largest score changes related to energy prices, price volatility and expenditures, the Chamber said, adding that the index projects a sustained period of high risk all the way through 2035. "These risks would be even higher if not for improvements made in energy efficiency, and the potential for shale gas to improve the security of natural gas supplies and lower energy costs," the Chamber added.

"We must maximize all of our domestic energy resources, make clean energy technologies more affordable, and eliminate regulatory barriers that are stalling urgently needed energy projects," Harbert said. "Only by taking these actions will we reduce our energy risks and make the nation and economy more secure."

The 2011 edition includes some adjustments to the index's formula based on feedback from last year's inaugural report. Adjustments also were made to some previous year's scores based on updated data from government sources. Most significantly, the 2009 score was adjusted from 83.7 to 91.5, largely because revised data that showed resurgence in high energy prices occurring more rapidly than originally estimated.

Highlights of the report included:

• Geopolitical energy security risks rose to 97, 13.5 points above the 30-year average of 83.5. Most of the increase in risks seen in this sub-index since the early 2000s is linked to higher crude oil prices and volatility and greater import expenditures. The metrics measuring security of global fossil fuel reserves and production were essentially unchanged from 2009.
• Economic energy security risks increased by 9.3 points in 2010 to 94.0, offsetting a large portion of the 17.1 point drop experienced in 2009. "This level of risk is well above the 30-year average of 73.7 for this sub-index and has been exceeded only in 1980, 1981, and 2008," the Chamber noted.
• Reliability energy security risks increased 5.4 points to 111.0 in 2010, the highest recorded for this sub-index, with crude oil price volatility being responsible for much of the increase. The score for this sub-index has hit 100 points or more every year since 2005, and projections indicate that levels of risk above 95 will be maintained through 2035, even after assuming that crude oil energy price volatility will return to historical averages.

In one bright spot, the Chamber noted that the "potential of shale gas to improve the security of natural gas supplies and lower energy costs and expenditures is beginning to emerge. Recent estimates double the volume of recoverable shale gas resources assumed in past estimates, leading to greater domestic and global supplies and lower gas imports. Increasing shale gas supplies and further improvements in natural gas extraction technologies will further delink the prices of crude oil and natural gas."

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BP employee loses laptop with personal data of claimants

BP employee loses laptop with personal data of claimants



According to a BP (BP) spokesperson, an employee lost a laptop containing personal data belonging to thousands of Louisiana residents who filed claims for compensation after the Gulf oil spill. The laptop contained data of about 13,000 people, who were notified about the potential data security breach.

API: New Energy Policy to Add Jobs for Brazil

Tuesday, March 22, 2011

API President and CEO Jack Gerard said the administration's offer to exchange batteries for oil from Brazil reflects its inadequate and illogical energy policy:

"It is beyond comprehension the administration would encourage trade for Brazilian oil while obstructing U.S. oil and natural gas development, eliminating related jobs here at home, and decreasing oil and natural gas revenues to the U.S. Treasury when the government is trillions of dollars in debt. The message from the White House to America's oil and natural gas workers: we're going to outsource your job.

"The administration is missing the obvious: what makes sense for Brazil also makes sense for the United States. Like every other nation, we should be developing our own oil and natural gas resources. It's good for energy security, good for the economy, good for jobs, and it will help bring down our deficit.

"The administration says it supports more oil and natural gas development here in the United States, then at every turn discourages it. And today, the White House is making a deal with Brazil for the oil it is not allowing companies to produce here. There's nothing wrong with buying Brazilian oil, but there's a big problem when we're forced to because we're held back from producing our own."

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[Oil and Gas] - Libya oil faces steep hurdles before return to global markets

Libya oil faces steep hurdles before return to global markets

March 21, 2011, 8:17 p.m. EDT

By Claudia Assis, MarketWatch

Reuters - Rebels walk past a burning Al-Sedr Oil Terminal after it was hit by pro-Gaddafi forces during clashes between Ras Lanuf and Bin Jawad March 9, 2011.

 The Iraq invasion was a major conflict in which much of the oil infrastructure suffered not only damage through warfare but also through looting.

SAN FRANCISCO (MarketWatch) — Caught between Libyan rebels, outside forces and Moammar Gadhafi, it could take years before much of Libya’s oil flows to world markets, energy analysts cautioned Monday.

The crisis, which deepened after western forces began bombing Libyan defenses Saturday, bears a resemblance to the situation in fellow OPEC-member Iraq, where output was severely disrupted by two Gulf wars and a diplomatic battle over who controlled the revenue from its sale.

Some of the Libyan oil fields could avoid major damage because they are far away from cities and towns, the target of much of the past weeks’ fighting.

“However, there are no guarantees Gadhafi and his motley crew of fellow believers ... will not follow a scorched earth policy,” said Leo Drollas, chief economist at the Centre for Global Energy Studies in London.

That’s one danger facing Libyan oil fields. As Iraqi forces under Saddam Hussein withdrew from Kuwait during the first Gulf war, they burned oil wells, Drollas noted.

The United Nations on Friday authorized military action in Libya to protect civilians amid fighting between forces loyal to Gadhafi and rebels seeking an end to his rule. Fighting is mostly concentrated in eastern Libya -- where most of the country’s oil’s production is located. Even the most optimistic analysts don’t expect Libyan oil back on line until after the first half of the year.

Output has already been severely curtailed. Most estimates point to production down by about 1 million barrels a day, J.P. Morgan said in a note to clients Monday. Production before the uprising was estimated around 1.6 million to 1.8 million barrels a day, mostly exported to Europe and, to a lesser degree, to Asia.

“U.N. sanctions have effectively imposed an embargo on Libyan exports. Based on the experience in Iraq, we continue to emphasize Libyan production will remain low and volatile for many years,” they said.

Support for crude-oil prices is likely to rise as demand ramps up ahead of the Northern hemisphere summer, although experts say most of Libya’s strife has been factored into the recent high prices for oil futures.

Oil futures for April delivery /quotes/comstock/21n!f:cl\j11 (CLJ11 102.21, -0.12, -0.12%)   rose 1.3% to $103.33 a barrel on the New York Mercantile Exchange Monday, extending the year’s gains to roughly 13%. Oil topped the $100 mark as some pro-democracy protests in North Africa and the Middle East turned to violent conflicts with the ruling regimes, particularly in Libya. Brent crude, the European benchmark, has shot even higher.

Iraq comparisons

Iraq’s oil output following the wars is serving as a model for energy analysts trying to determine how long Libyan oil could be unavailable to European and other refiners.

Production in Iraq was around 2.5 million barrels a day right before the invasion in March 2003
It was back at such levels only in 2007, Drollas said. Recent estimates put Iraq’s current production at 2.8 million barrels a day, Drollas added.


In Libya, much hinges on how the oil installations fare as the battles rage on, and how soon foreign workers will be able to return to the country, said Samuel Ciszuk, a senior Middle East energy analyst at IHS Global Insight in London.

Oil installations near the town of Ras Lanuf have been damaged as the conflict escalated, but experts say most infrastructure has been spared.

As for replacements for Libya’s light, sweet crude, the world has available oil from Nigeria and Angola, which are similar to Libyan oil. Unlike 2008, when Nigerian oil disruptions contributed to the record high oil price, these and other African countries have been able to keep their production, he said.

Some of the heavier Saudi Arabian oil, although not a perfect substitute, is also appropriate for refineries previously using Libyan oil with the addition of natural gas liquids and other liquid hydrocarbons.

But the full price impact of the conflict in Libya may yet to be seen, said Sarah Emerson, managing director of Energy Security Analysis Inc. in Massachusetts.

“We’re in the shoulder season,” she said. Heading to peak season, there may not be enough light, sweet oil to go around, she added. “We may not have the right quality at the right time of the year.”

More sophisticated refineries in Europe and elsewhere are able to process heavier crude but there’s only so much tweaking refiners will be able to do, Emerson said.

Switching grades “is more than a little throw off. We lost a very specific light sweet crude and it is not that easy to replace it.”

The spectrum of another conflict elsewhere in the world also haunts markets.

“The extra capacity (from Saudi Arabia) is there but it tights up the world capacity,” Drollas said. If oil suffers another shock somewhere, “then we are back at 2008.”

Oil hit a record high in the summer of 2008, when it soared to $147 a barrel only to fall to below $50 before the year was out.

Oil around $150 a barrel this year would mean “a slip back into the recession next year,” Drollas said. Prices are at a level they may be already hurting global growth, he added.

The only possible resolution for the conflict is a Libya without Gadhafi, Drollas said. “A wounded Gadhafi is worse, metaphorically speaking,” he said.

Claudia Assis is a San Francisco-based reporter for MarketWatch

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