Issue 500

04November2015

Week 44

Election time

Elections this week could spell trouble for a planned oil and gas complex on
Myanmars east coast.

Shale struggle

Little progress has been seen in Indian NOCs efforts to develop the countrys
shale gas resources.

Shallow appeal

Murphy Oil has farmed into a 35% stake in Vietnams offshore Block 151/05, in the Cuu Long Basin.

Tax revamp

The Indian oil ministry has reportedly decided to back an industry call to
switch from a fixed tax on oil production to market-linked rates.

AsianOil

AsianOil

Iran Investment
Special Report
With the conclusion of talks between the UN P5+1 and
Tehran regarding Irans nuclear programme pending,
NewsBase has released its Iran Investment Special Report.
Topics covered in the report include:

Investment
Risk
Key players Field profiles
Services Export options
Pipelines Projects & Tenders
Influential local contact details
A breakdown of the IPC
Click here to to find out more.

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Week 44 04November2011

AsianOil

CONTENTS

AsianOil

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AsianOil
Asia Oil & Gas Monitor

COMMENTARY
Myanmars elections throw Dawei energy projects into question
India struggles with shale

4
6

PIPELINES & TRANSPORT

DSME upbeat on 2016s LNG carrier prospects

INVESTMENT
Murphy Oil farms into block offshore Vietnam

PERFORMANCE
Lower LNG prices lift Japanese importers profits
Forex loss hits Petronas Gas third-quarter profits
Creditors throw lifeline to struggling DSME

8
9
9

POLICY
India expands trade and energy ties with Africa
India mulls revamp of oil production tax
India loses ground to China in Nepal
Pressure mounts on Petronas to hike royalty payments

10
11
12
12

PROJECTS & COMPANIES

Indonesian refinery upgrades to cut into gasoline imports
Lion Energy reports increased oil output from Indonesian block
Petronas awards jack-up contract to UMW

13
14
14

NEWS IN BRIEF

15

OUR CUSTOMERS

22

Have a question or comment? Contact the editor Andrew Kemp (andrew.kemp@newsbase.com)

Copyright 2015 NewsBase Ltd. All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes
internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents

Week 44 04November2011

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C O M M E N TA R Y

AsianOil

Myanmars elections throw Dawei

energy projects into question
With Myanmar heading for the polls this week several planned oil and gas projects on the
countrys east coast look increasingly at risk of remaining in limbo, writes Sam Imphet
MYANMAR

W H AT:

Myanmar, Thailand and

Japan have all committed
to the development
of the Dawei special
economic zone (SEZ) and
associated projects.

W H Y:

The development would

see large-scale investment
in an oil and gas import,
trans-shipment and
refining complex at a new
port.

W H AT N E X T:

The lack of transparency

around the countrys
energy agreements will
likely see any government
led by the hugely
popular National League
for Democracy (NLD)
demand greater specifics
and accountability
around any new projects.

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THE outcome of Myanmars national elections

on November 8 could derail long-held plans
for an oil and gas import, trans-shipment and
refining complex at a new port in Dawei on the
countrys east coast.
The energy infrastructure project, which had
in recent months seemed to make progress with
promises of Japanese involvement, is intended as
part of a new special economic zone (SEZ).
But elections later this week, which are
expected to be Myanmars most democratic in
25 years, could result in political uncertainty for
months and possibly a reversal of some existing
business agreements that were made without
sufficient transparency.
While recent offshore production-sharing
agreements (PSAs) signed by the current government are expected to survive the transition,
owing to what is seen as a more transparent
process adopted in their award, the future of
the Dawei Port projects and the SEZ is looking
increasingly at risk.
Elections
The opposition National League for Democracy
(NLD), led by international human rights icon
Aung San Suu Kyi, is widely anticipated to win
at least 50% of the available seats in parliament,
with the pro-military ruling Union Solidarity
and Development Party (USDP) expected to
lose heavily. Under the constitution, the military
is automatically entitled to 25% of all seats.
Much also might hinge on how many seats
Myanmars ethnic parties representing the Shan,
Chin, Karen, Kachin and Mon people collectively win in the federal parliament.
The issue is not just over ethnicity and religion, but also concerns the economic benefits
that the Myanmar military and the business elite
will have to start sharing with these minorities,
Vriens & Partners Hans Vriens told Singapores
Straits Times.
To come to a political settlement with the
minorities will require the creation of a new and
federal Myanmar based on some form of autonomy and equal rights for the many minorities.
It will also require an end to Burmanisation,
Vriens said.
Dawei is in the Mon region and there has

been increasingly vocal opposition, and mass

street protests, by local people opposed to the
development. Many will be forced to leave their
homes and give up their land to make way for
the SEZ and they claim they have either not
been consulted or have been offered only small
compensation.
Dawei driver
Australian economist and Myanmar analyst
Sean Turnell told NewsBase that he would be
very surprised if things like this were not revisited. Also, to the extent to which this project has
involved involuntarily land seizures, then this is
very much within [the NLDs] concerns.
Turnell, a professor at Sydneys Macquarie
University, believes the plans for Dawei on the
Andaman Sea are primarily being made by strategists and infrastructure developers in Thailand
and will be of limited benefit to Myanmar. He
also doubts if they will ever reach fruition unless
there is massive injection of capital by Japanese
investors.
In June, the Tokyo government signed a
memorandum of intent (MoI) with Naypyidaw
and Bangkok to join in the SEZ development,
saying it might lead to integrated economic
development and enhance connectivity in and
around [the] Mekong sub-region. But Japan first
wants to conduct a new feasibility study.

Image: Bangkok Post

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Week 44 04November2011

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C O M M E N TA R Y

AsianOil

Aung San Suu Kyi during a visit to a polling station in Kawhmu township in April 2012.
Image: Reuters

The Myanmar and Thai authorities have provisionally agreed on the development of an LNG
import terminal at Dawei. Details still remain
sketchy, as do proposals for an oil and gas import
and trans-shipment complex and a refinery.
Most of the imported fuel would be shipped
across the border into Thailand less than 150 km
away. Thailands national oil company (NOC)
PTT considers an LNG terminal at Dawei as less
arduous to secure than an additional facility at
Map ta Phut near Bangkok, where public opposition to such projects is strong.
The Irrawaddy noted last week that while
recent uncertainty surrounding the future of the
Dawei projects is far from unique, Myanmars
next government would have to grapple with
how best, or whether at all, to honour those past
agreements while responding to the concerns of
affected populations.
Risky business
In its October risk report for Myanmar, Business
Monitor International (BMI) said that while the
NLD looked likely to win a substantial number
of seats in the elections, the country remains a
very high risk location for investment.
Foreign businesses must be aware that, in
order to reap the rewards of the countrys largely
untapped market, they must navigate a series of
severe operational risks, largely stemming from
an underdeveloped logistics network, a weak
rule of law and unclear environment for foreign

Week 44 04November2011

direct investment, and numerous layers of red

tape, BMI said.
Many of Myanmars major business agreements in recent years have involved firms controlled by the military, and the lack of public
disclosure has made many in the country doubt
their worth and benefits.
The Suu Kyi admitted recently that her party
knows little about the terms of many such agreements. But she has already said that if the NLD
secures a majority one of the first things it will
do is find out then reveal the details of a hugely
unpopular hydropower project involving Chinese state-owned China Power Investment.
The Dawei SEZ plan was originally drawn up
in 2010 while Myanmar was under full military
control. It involved a now discredited businessman, with close military ties, in a deal with Bangkok-based Italian-Thai Development, which has
never had sufficient capital to do much more
than bulldoze land and displace local people.
NewsBase believes there is a real risk of the
Dawei project remaining indefinitely in limbo.
Until potential Japanese investors can see clear
a political landscape emerging following this
weeks elections then they are likely to avoid
making any firm commitments. Moreover, there
is a good chance of the NLD prevailing in the
elections and forming a government, suggesting
that several difficult questions into the project
partners corporate social responsibility (CSR)
will be asked.v

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Foreign
businesses must
be aware that,
in order to reap
the rewards of
the countrys
largely untapped
market, they
must navigate a
series of severe
operational risks

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C O M M E N TA R Y

AsianOil

India struggles with shale

Early efforts to develop Indias shale gas are running into obstacles, with national oil
companies leading exploration, but little progress seen so far, writes Graham Lees
INDIA

W H AT:

Progress on Indias shale

development has been
slow amid a number of
obstacles.

W H Y:

NOCs are doing the only

work on shale exploration
and foreign interest is
deterred by bureaucracy.

W H AT N E X T:

The government could

open up the industry
to private and foreign
companies if early results
are good.

INDIA is desperately short of natural gas to

help satisfy growing demand yet the country is
thought to be very rich in shale gas, with estimates ranging between 1.8 trillion cubic metres
and 50 tcm. There has, however, been almost
no progress in tapping the countrys unconventional resources and very little information has
been reported on exploratory work carried out
so far by Indias national oil companies (NOCs).
Evidence is emerging, though, that Indias
NOCs are facing the same hurdles that have
slowed Chinas development of shale gas inadequate technology, under-investment, high costs
and the exclusion of private domestic and foreign companies.
Existing laws on development allow only stateowned enterprises (SOEs) to undertake exploration, although foreign companies are interested and
have been involved in supporting roles.
That has left development so far to only two
NOCs, Oil and Natural Gas Corp. (ONGC) and
Oil India Ltd (OIL).
ConocoPhillips signed an agreement with
ONGC in 2012 on co-operation on deepwater
and shale gas exploration and production in
India and overseas. But the terms are unclear
and some Indian reports have suggested that
relations between the two firms may have since
deteriorated.
Neither side responded to enquiries from
NewsBase, but India is not currently listed on
ConocoPhillips world operations map.
Little information
Indias shale exploration effort has been very
opaque. No government or industry official
wants to go on record about the status of the
exploratory wells, an analyst at Indias Centre
for Research on Energy Security at the Energy
and Resources Institute in New Delhi, Siddharth
Singh, told NewsBase.
What little information has been made public
came in a brief statement by Indian Petroleum
and Natural Gas Minister Dharmendra Pradhan
in August, when, according to Singh, he said no
shale gas production had been achieved yet.
ONGC has drilled 10 wells in the Cambay
Basin in western Gujarat State, one of three areas
believed to offer the best shale gas prospects.
The other two are the Assam-Arakan Basin in
northeast India and the Gondwana Basin in the
central region.
These wells are at different stages of development. It is unclear what the status of OIL is,

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but from what I hear, they are far behind ONGC

on this. As of the end of 2014, ONGC had spent
a mere US$12 million on its exploration efforts,
Singh said.
Slow progress
The view among analysts and domestic media
is that ONGC and OIL lack the technology and
expertise to properly tackle shale gas development, and that Indian bureaucracy has not
helped.
At the beginning of this year OIL applied
for permission from two state governments in
the countrys far northeast to carry out hydraulic fracturing in order to assess the areas shale
potential. Although the company already owns
blocks in Assam and Arunchal Pradesh it needs
additional approvals because drilling in forests would be necessary, Calcuttas Telegraph
reported.
Nothing further on these moves has been
heard or disclosed, even though OIL is based
in Assam. OILs chairman, U P Singh, made
only passing reference to shale gas at the companys annual general meeting in September,
when he said it had emerged as an area of
interest. A national shale gas policy was still
being formulated by the federal government,
he said.
What has hit ONGCs efforts most is their
troubled relationship with ConocoPhillips,
which was to help ONGC explore shale. ConocoPhillips officials have stated that they are not
yet sure if shale production has commercial viability in India, Siddharth Singh told NewsBase.
The relationship between the two companies
has been shaky partly because Conoco doesnt
view their deal to be very favourable to itself.
Earlier this year the Indian business news
website Live Mint suggested there was now
virtually no collaboration going on in India
between ONGC and the US company.
Time and again ONGCs partners have
walked out citing poor prospects or the countrys
complex regulations, Live Mint reported.

What has
hit ONGCs
efforts most is
their troubled
relationship with
ConocoPhillips,
which was to help
ONGC explore
shale
Siddharth Singh
Analyst
Centre for Research on
Energy Security

Interest
Despite this, Argentinas Lappco International
last month expressed interest in investing in
Indias unconventional resources. Lappcos
development manager, Mariano Groppo, part of
a Buenos Aires business delegation visiting New
Delhi, urged the Indian government to change
its current policies and permit foreign players.

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Week 44 04November2011

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C O M M E N TA R Y

The Indian government said little in public

about this, but earlier this year, in April, it had
outlined plans to auction off 69 blocks currently held by ONGC and OIL soon. It remains
unclear whether any of those blocks are shale gas
prospects.
Although India has large proven reserves
of both conventional and unconventional gas,
domestic demand growing at about 8% per
year exceeds production and the country is
increasingly dependent on LNG imports. A
major reason for the sluggish domestic production, apart from state bureaucracy in an industry
dominated by NOCs, is the low, controlled price
imposed by the state. This often makes potential
investments uneconomical.
The gas shortage has left more than 14,000
MW of gas-fuelled power generating plant in the
country idle for several years, while hardly any
of Indias gas powered plant runs at full throttle,
NewsBases AsiaElec Monitor reported in June.
What next?
The federal government has promised to reform
the pricing structure, but progress has been slow.
The involvement of international private
players would help drive Indias shale gas development forward, but Singh believes political

AsianOil

concerns about water shortages and potential

environmental impacts of fracking are also putting the brakes on progress.
The government is also likely to wait for
ONGCs shale exploration results in the Cambay
Basin before considering opening up the industry to non-state and foreign players.
The first shale gas discovery in India was
made by US-based Joshi Technologies while
working in a conventional gas field in the Cambay Basin in partnership with ONGC in 2010.
This was followed by a discovery in 2011 by oilfield services company Schlumberger, which was
assisting ONGC in a field in West Bengal.
The subsequent national Shale Gas and Oil
Policy of 2013, established by the previous, less
business-friendly, government, gave NOCs permission to proceed with development of the nascent industry.
The government of Indian Prime Minister
Narendra Modi, elected in May 2014, has declared
itself more business-friendly and has attempted
to loosen some of the states stranglehold on the
countrys energy resources. But NewsBase believes
it will be several years at least before the country is
in a position to start trying to catch up with Chinas
shale gas exploits, let alone seek to emulate the shale
success in the US.v

PIPELINES & TRANSPORT

DSME upbeat on 2016s LNG carrier prospects

SOUTH KOREA

SEOUL-BASED Daewoo Shipbuilding &

Marine Engineering (DSME), the worlds second-largest shipbuilder, expects demand for
LNG carriers to return in 2016 as global efforts
to reduce greenhouse gases (GHGs) increase the
need for cleaner fuel.
The deputy director of DSMEs ship design
department, Kim Nam Soo, said more industries would consider gas as a replacement
for other fuels, adding that his company was
developing new technologies to help improve
fuel savings and efficiency for shipping
companies.
There are a lot of gas projects under development in the world, and that will drive demand
for more ships, Kim said last week.
The executive added: Growing environmental concerns also are pushing demand for more
gas-powered power plants, which means there
will be more demand for gas.
Bloomberg said DSME had won the most
orders for LNG ships among rivals in 2014
as gas projects in countries including Russia
and the US gear up for production and require

Week 44 04November2011

transportation to reach customers. The demand

will help ease a cash crunch at the shipyard,
which has been losing money, and has been hit
by declining orders since the plunge in crude oil
prices dating to mid-2014.
The managing director of Bernhard Schulte
Ship management UK (BSM), Angus Campbell,
also said last week that the move from burning
high-sulphur bunker fuel to the use of clean
LNG as fuel would be a gamechanger for the
global shipping industry. BSM manages a fleet
of over 600 vessels.
Kim said DSME was developing a new
method of making LNG fuel tanks that can be
used in any type of vessel and take up less space
than previous tanks.
The shipyard has also come up with a
new design for the hull and a technology
that creates air bubbles at the bottom of
ships to help improve fuel efficiency. The
company received contracts for 37 LNG vessels in 2014, the most among shipbuilders,
and won orders for nine more vessels in the
first nine months of this year.v

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INVESTMENT

AsianOil

Murphy Oil farms into

block offshore Vietnam
VIETNAM

US-BASED Murphy Oil has farmed into a shallow-water block in Vietnams Cuu Long Basin,
which the company has described as highly
prospective, off the south coast.
Murphy Oil said it had taken a 35% share
in Block 15-1/05, which lies about 40 km offshore, partnering state-owned PetroVietnam
Exploration and Production (PVEP) and South
Koreas SK Innovation, which hold 40% and 25%
respectively.
Oil discoveries previously made in the PSC
are currently under appraisal and PVEP, as the
operator, recently completed the successful drilling and testing of well LDV-4X in two zones and
is currently incorporating these well results into
the resource assessment of the block, Murphy
said in its third-quarter statement.
Oil was discovered on the 3,840 square km
block in November 2009 and September 2010.
Murphy did not disclose how much it paid
to join the partnership. It follows talks with PetroVietnam in July when the two firms signed
a memorandum of understanding (MoU) to
co-operate in oil and gas developments in Vietnam and the US.
The Cuu Long Basin is, to date, Vietnams
main source of domestic oil production, containing the prolific but mature Bach Ho field.
Vietnam has proven crude reserves of 4.4
billion barrels and much of its territorial waters
remain unexplored. Despite this, crude and
condensate output has been rising in recent
years, from around 300,000 barrels per day in
2010 to more than 350,000 bpd in 2014. But a
lack of major new discoveries has led NewsBase
Research (NBR) to conclude that production

Image: Total

will likely plateau in the next few years before

declining to around 310,000 bpd by the end of
the decade.
Murphys quarterly statement also gave a
progress report exploration off the coast of
Malaysias Sarawak State on Borneo. Murphy
has stakes in 11 Malaysian offshore projects,
four of which are in shallow and deepwater
blocks off Sarawak. The firm said it had positive
results in the Merapuh 5 and Marakas wells and
is continuing to evaluate development options.
However, the Paus-Kelasa well drilling found no
commercial-level hydrocarbons, it said.
Murphy did not specify in which blocks it was
drilling exploratory wells at present, but Merapuh is a gas project in the Sarawak Delta Basins
shallow waters.v

PERFORMANCE

Lower LNG prices lift

Japanese importers profits
JAPAN

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NET profits at Japans four biggest gas suppliers surged in the first half of fiscal 2015, which
started in April, as a result of lower LNG import
prices.
During the equivalent period in 2014, from
April to September, revenues at Tokyo Gas,
Osaka Gas, Toho Gas and Saibu Gas fell as a
result of weaker gas demand, especially for
industrial purposes, and lower unit sales prices.

Now that LNG prices have fallen, though,

these companies are seeing the benefit. Toho
Gas net profit increased by 142.7% year on
year.
Industry leader, Tokyo Gas, said its revenue
had reached 901.418 billion yen (US$7.51 billion) in the first half of fiscal 2015, down 12.6%
from a year earlier. But net profit surged 41.3% to
80.6 billion yen (US$667 million).

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PERFORMANCE

Second-ranked Osaka Gas said its revenue

amounted to 641.42 billion yen (US$5.3 billion)
in the first half of fiscal 2015, down 8.1% year on
year. Net profit soared 38.9% to 65.98 billion yen
(US$546 million).
Third-ranked Toho Gas said its revenue had
tumbled 10.6%, to 237.27 billion yen (US$1.96
billion). But the companys group net profit
swelled a staggering 142.7% to 28.99 billion yen
(US$249.9 million).

AsianOil

Fourth-ranked Saibu Gas revenue declined

3.2% year on year in the first half, to 92.12
billion yen (US$762.2 million). Net profit
jumped 68.8% to 3.44 billion yen (US$28.1
million).
Meanwhile, Japans 10 major power companies all increased net profits in the first half of
fiscal 2015, as fuel costs for thermal power generation dropped as a result of declines in crude
oil and LNG prices.v

Forex loss hits Petronas Gas

third-quarter profits
MALAYSIA

MALAYSIAN natural gas transporter and utility

Petronas Gas saw its third-quarter profits tumble
from a year earlier owing to the depreciation of
the ringgit.
Pre-tax profit fell 24% to 415.4 million ringgit
(US$97.3 million), while its net profit declined
by 27% to 304.9 million ringgit (US$71.4 million), the company said in a filing to Bursa
Malaysia on October 30.
The company blamed the sharp declines on
the unrealised foreign exchange loss on finance
lease liabilities totalling 167.5 million ringgit
[US$39.3 million] following the weakening of
the ringgit against the US dollar.
Excluding the impact of the foreign
exchange loss, the companys pre-tax profit
rose by 17.3 million ringgit (US$4.1 million),
or 3.1%, in the third quarter from a year earlier, the gas utility said. Under the same terms,
the companys net profit also increased by 39.6
million ringgit (US$9.3 million), or 9.1% year

on year, the company said, noting that the figures were buoyed by higher revenue and other
income.
Revenue rose 1% year on year in the quarter to 1.13 billion ringgit (US$264 million).
Growth was primarily due to higher regasification revenue attributed from higher storage
fees and higher gas processing revenue in line
with higher performance based structure (PBS)
income, Petronas Gas said. These, however,
were partially offset by lower utilities revenue
resulting from [the] electricity tariff rebate given
to customers.
In the first nine months of this year, Petronas Gas saw its revenue rise 1% year on year
to 3.32 billion ringgit (US$777.8 million). The
company said its pre-tax profit for the period
slumped 9% to 1.51 billion ringgit (US$353.8
million), but its net profit surged 24% to 1.57 billion ringgit (US$367.8 million) owing to lower
tax expenses.v

Creditors throw lifeline to struggling DSME

SOUTH KOREA

SOUTH Koreas Daewoo Shipbuilding & Marine

Engineering (DSME) was thrown a 4.2 trillion
South Korean won (US$3.72 billion) lifeline last
week as its creditors agreed to buoy the struggling shipbuilder with extra funding.
The bailout package extended by staterun Korea Development Bank (KDB) and
Export-Import Bank of Korea includes new
loans, a rights offering and debt-to-equity swaps.
KDB provided an upbeat assessment of the

Week 44 04November2011

shipbuilders longer-term fortunes but warned

that the pain would worsen first.
By 2019, DSME should be fully recovered,
it predicted. Due diligence by the creditors,
however, also suggested that DSME would face
additional losses of as much as 3 trillion won
(US$2.66 billion) from the second half of this
year.
DSME and South Koreas other big shipbuilders have been hit hard by the rout in oil prices

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PERFORMANCE

that started in mid-2014, having only a few years

earlier ventured into building offshore oil rigs
and production facilities to counter a slump in
orders for commercial vessels.
That strategy has backfired as a lack of design
expertise at South Korean shipyards meant that
orders were subject to frequent delays that oil companies have proved reluctant to pay for. At the same
time, a stronger won compared with the Japanese
yen and Chinese yuan has made South Korean vessels more expensive over the past few years.
In the first nine months of this year, cancelled
orders and delayed offshore projects dragged
DSME to a record operating loss of 4.3 trillion
won (US$3.81 billion). The third quarter also
saw Hyundai Heavy Industries (HHI) post a

AsianOil

434 billion won (US$384.1 million) net loss

while Samsung Heavy Industries (SHI) scraped
together a 53.7 billion won (US$47.5 million) net
profit following huge losses in the first half.
Nearly half the revenues at the above shipbuilders now come from offshore projects an
imbalance that the sector is keen to correct.
DSMEs creditors said last week that they would
urge Daewoo to trim offshore projects to 40% of
its portfolio in coming years.
One area where DSME itself is optimistic is
LNG. On October 30, the shipbuilder predicted
that demand for LNG carriers would return next
year amid global efforts to tackle greenhouse
gases. (See: DSME upbeat on LNG carrier prospects in 2016, page 7)v

POLICY

India expands trade and

energy ties with Africa
INDIA

Indian Prime Minister

Narendra Modi is on a
mission to advance his
Make in India campaign.

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INDIAN energy companies are prepping a

major push in Africa at a time when an economic slowdown in arch-rival China - creates
pockets of opportunity on the continent.
Ahead of the pack is ONGC Videsh Ltd
(OVL), which told last weeks India-Africa Business Forum that it aims to double its investment
in Africa over the next three or four years.
ONGC Videsh has invested around US$8
billion in Africa so far, managing director N K
Verma told the forum. We aim to double this
over the next three-four years.
He added: We are willing to invest in both
upstream and downstream projects, but there is
need to resolve the prevalent challenges to our
investment growth. He said that because of
low oil prices and geographical risks, ONGCs
overseas arm needs adequate compensation to
invest in Africa.
OVL is currently looking for oil and gas opportunities in Angola, Algeria and Equatorial Guinea.
State-owned Indian Oil Corp. (IOC) also said
last week that together with partner Delonex
Energy it had won its first oil block in Mozambique. The two were awarded the onshore Block
P5-A in southern Mozambiques Palmeira basin.
Delonex a new Africa-focused oil and gas
explorer led by former Cairn India CEO Rahul
Dhir will be operator of the 9,988 square
km block while IOC will hold a 20% stake.
Mozambiques national oil company (NOC)
will hold the remaining 10%.

The partners have committed US$20 million

of investment for the first phase of exploration,
which will involve gathering 10,000 km of 2-D
seismic data and is due to last three years.
Separately, OIL also said it was looking for
long-term LNG deals with Mozambique of
around 15 years.
The company already has a major investment
in Mozambiques LNG industry, together with
ONGC and Bharat Petroleum Corporation Ltd
(BPCL). The three hold a 30% stake in the countrys Rovuma Area-1, which holds an estimated
75 trillion cubic feet (2.12 trillion cubic metres)
of recoverable gas reserves and represents the
biggest investment by Indian companies in any
single hydrocarbon asset abroad.
They plan to develop the giant field and convert its gas into LNG for export to countries
including India. The three partners say Mozambiques government is co-operating fully towards
the early development of the field.
Delonex, too, has further interests in Africa.
It was recently awarded an exploration licence
in Ethiopia, covering Blocks 18, 19 and 21 in the
Abred-Ferfer area.
The big push by Indian energy majors
into Africa comes at a time when the countrys prime minister, Narendra Modi, is on a
mission to advance his Make in India campaign by highlighting India as an alternative
to China as a trade and investment partner
for Africa.

w w w. N E W S B A S E . c o m

Week 44 04November2011

AsianOil

POLICY

Warm welcome
Indian energy companies can expect a warm
welcome from many African governments,
which are concerned that Chinas slowing economy may make that countrys oil companies,
as well as Beijing itself, less free spending than
before.
Zambian Vice President Inoge Wina, for
example, told the forum that Africa would benefit immensely from Indian energy companies
setting up operations on the continent. She also
assured Indian companies that the government
would create the right environment for them to
thrive.
Namibian Minister of Mines and Energy
Obeth Kandjoze, meanwhile, said his country
would offer liberal policies, repatriation of capital, [a] level playing field and access to foreign
exchange to foreign investors.
Although Indias financial clout is stilled
dwarfed by that of China, its two-way trade with

Africa is growing. Since the first India-Africa

Forum was held in 2008, trade between India
and Africa has more than doubled to US$72 billion. Chinas two-way trade with Africa stands at
around US$200 billion.
And while Beijing has been criticised for
aggressively focusing on Africas extractive
industries to fuel its own growth, India hopes to
market itself as more of an equal partner to the
continent.
Our partnership is not focused on exploitative or extraction point of view, but is one that
focuses on Africas needs and Indias strengths,
according to Indian Ministry of External Affairs
spokesman Vikas Swarup.
We cant match the Chinese in terms of
resources but any engagement we do with
the Africans at least gives them a choice, a
foreign policy commentator at the Observer
Research Foundation in New Delhi, C Raja
Mohan, told Reuters.v

AsianOil

Our partnership
is not focused
on exploitative or
extraction point
of view, but is one
that focuses on
Africas needs and
Indias strengths
Vikas Swarup
Spokesman
Indian Ministry of
External Affairs

India mulls revamp

of oil production tax
INDIA

THE Indian oil ministry has reportedly decided

to back an industry call to switch from a fixed tax
on oil production to market-linked rates.
The [oil] ministry will soon send a proposal, backed with data and arguments, to the
finance ministry, the Economic Times quoted
an unnamed Ministry of Petroleum and Natural
Gas official as saying.
At present, the Indian government levies the
duty on crude oil produced by state-run Oil and
Natural Gas Corp. (ONGC) and Oil India Ltd
(OIL) from fields they received under a nominated basis. The tax has also been imposed on
Cairn Indias Rajasthan block, RJ-ON-90-1. It
has not, however, been applied to areas awarded
under the New Exploration Licensing Policy
(NELP).
The government is in principle in favour
of ad-valorem rates for [the tax], the Business
Standard quoted another unnamed oil ministry
official.
Oil producers currently pay a fixed rate of
4,500 rupees (US$68) per tonne. The rate was
introduced when oil was selling for US$110
per barrel, but has come under increasing fire
now that prices have fallen to around US$50.
Cairn India has argued that the duty is taking

Week 44 04November2011

away a large share of its oil revenue from fields

in Rajasthan State.
But it will not be easy for oil ministry
officials to persuade their finance ministry
counterparts to cut revenue flow. At present,
a large portion of the governments earnings
is understood to come from fuel subsidy
savings and crude oil and petroleum product duties.
The Hindu Business Line recently quoted
an unnamed finance ministry official as saying that calls to shift to a market-linked tax are
often made by domestic oil producers whenever crude prices are low.
No immediate decision can be expected at
this point. Besides, the crude oil prices have
again started hardening. We will see how the
situation pans out closer to the Budget [in February 2016], the official said.
Regardless of how easy it will be the Indian
government needs to do more to encourage
upstream investment. National crude and
condensate production was maintained at
around 770,000 bpd in 2013 and 2014 but,
without material policy changes, NewsBase
Research (NBR) predicts output will likely fall
to around 730,000 bpd by 2020.v

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AsianOil

POLICY

AsianOil

India loses ground to China in Nepal

NEPAL

Nepal is suffering
its worst fuel
crisis in decades,
triggered
by supply
disruptions at
key transit points
at the countrys
border with India

NEPAL has signed a landmark deal with China

to import petroleum products, breaking Indian
Oil Corp.s (IOC) 40-year monopoly on fuel supplies to the small Himalayan nation.
Representatives of the Nepali and Chinese
governments, as well as PetroChina and Nepal
Oil Corp. (NOC), signed a memorandum of
understanding (MoU) on October 28 for the
long-term supply of gasoline, diesel and other
products. The signing took place during a visit
by a Nepali delegation to Beijing last week.
Nepal is suffering its worst fuel crisis in decades, triggered by supply disruptions at key transit points at the countrys border with India.
Kathmandu claims that New Delhi has
ordered an unofficial blockade of trade routes
because of its opposition to the new Nepali constitution, which divides the country into seven
provinces. India denies this, insisting that deliveries of fuel and other vital supplies have been
unable to bypass violent protests by the Madhesi
community, who want to see the constitution
revised.
The disruptions have caused a wave of
anti-Indian sentiment across Nepal. As NewsBase reported in AsianOil Week 41, this has
allowed Beijing to apply soft power in the landlocked country, which is traditionally under
Indias sphere of influence.
With the agreement, the procedure of
importing fuel from China moves ahead,
Nepali Ambassador to China Mahesh Maskey
told reporters.
Finally, we have the second oil trade partner, NOC spokesman Deepak Baral was
reported as saying by the Kathmandu Post. We

can bring any amount of fuel as per our needs

when required from the north.
He added that a more substantial deal
between NOC and PetroChina would be brokered within one and a half months.
In a separate agreement, China will provide
a one-off supply of 1,000 tonnes of petroleum
products to Nepal during the upcoming festival
season.
NOC will send 40 oil tankers into China to
collect the fuel, Baral said. Chinese authorities have informed the state-run firm that they
would handle insurance, transport and labour
law issues once the vehicles arrive in Chinese
territory.
China reopened the border crossing at Jilung
in Tibet with Nepal on October 13, which had
been blocked after a serious earthquake in April.
Given the mountainous terrain between
Nepal and China and the approach of winter, it
is unclear when a deal for substantial supplies
could be implemented. Transport costs are likely
to be considerably higher than those for supplies
from India.
In the long-term, the Nepali government is
reportedly considering the development of at
least two more trade routes linking Nepal with
Tibet. Beijings plan to extend the Qinghai-Tibet railway line to the border with Nepal by 2020
could also allow for greater volumes of fuel to be
transported.
India has made efforts to reconcile matters
with Nepal, offering to airlift some supplies of
fuel products. But New Delhi still insists that
it is not intentionally blocking the supply of
fuel to Nepal.v

Pressure mounts on Petronas to

hike royalty payments
MALAYSIA

P12

PETRONAS is facing calls from legislators to up

its cash contribution to the Sabah State Government to 20% from the 5% it pays currently.
The member of parliament for Sabahs
Tenom constituency, Datuk Raime Unggi, last
week called on a recently established federal
special committee to show that it was capable
of seeking what he claimed was rightly owed
to the state.
Raime claimed Petronas 5% contribution
was incorrectly based on an agreement with
Kuala Lumpur which expired with the rescinding of a state of emergency in 2011.
That agreement, which stated that Petronas

gives 5% in lieu of royalty, is no longer binding

with the lifting up of State of Emergency in 2011,
he said. Therefore, we must go back to the Intergovernmental Committee Report, the Malaysia
Agreement 1963 and the Federal Constitution.
The state governments of Sabah and Sarawak
have demanded Kuala Lumpur reform the system under which Petronas pays royalties for oil
and gas production, and which allocates a share
of federal receipts.
The royalty increase received bi-partisan
backing from Sarawaks state assembly in May
2014, as opposition parties put aside their differences to heap pressure on Kuala Lumpur.

w w w. N E W S B A S E . c o m

Week 44 04November2011

AsianOil

POLICY

But Malaysia Petroleum Management vice

president Adif Zulkifli warned in August 2014
that an increase could endanger some of Petronas operations, ultimately decreasing cash
payments to the states because of industry
shrinkage.
Sarawak is home to the offshore Balai Cluster, which has about 100 million barrels of oil
reserves and 5.6 billion cubic metres of gas
reserves across four separate fields.
Sabah hosts the offshore Gumusut/Kakap,
Kinabalu Deep/East, and Malikai developments,
as well as a 300,000 barrel per day of oil and 28.3
bcm per day of gas terminal.
On October 30, Sabah activist Zainnal Ajamain advised that the royalty increase campaign
would be unsuccessful because Malaysias constitution only provides for 10% royalties.
Ajamain said Sabah and Sarawak would be

AsianOil

Image: Energy-pedia

better pushing for Kuala Lumpur to allocate 30%

of export duties raised on oil produced in their
respective states.
Just imagine how much each state could get
from that 10% as well as the dividend if Petronas export duty is, say, about 10 billion ringgit
[US$2.3 billion], he said.v

P R O J E C T S & C O M PA N I E S

Indonesian refinery upgrades

to cut into gasoline imports
INDONESIA

INDONESIAS Pertamina is to begin cutting

fuel imports this month as it makes adjustments to account for the upgrade of its refinery network.
Indonesias monthly consumption of Premium gasoline currently runs at around 15.4
million barrels, with Pertamina importing
around 9 million barrels each month.
Last week, reports suggested the state-owned
firm would import around 8 million barrels of
gasoline in November, down from 9.86 million
barrels in October.
Pertaminas vice president of corporate communication, Wianda Pusponegoro, told Tempo
on October 30 that the new 30,000 barrel per
day gasoline Residual Fluid Catalytic Cracking
(RFCC) unit at the Cilacap refinery would meet
10% of Pertaminas total import.
The Cilacap RFCC facility underwent an initial production test for high octane output on
September 30, when it reached 70% of its production target of around 9,250 bpd.
Indonesias refining capacity should be further enhanced when the Trans-Pacific Petrochemical Indotama (TPPI) refinery returns to
operation under Pertaminas management.
The facility, which has a nameplate capacity of
61,000 bpd, is expected to re-launch soon at an
initial output of around 20,000 bpd.

Week 44 04November2011

Pertamina operates a network of six ageing refineries which are capable of processing
around 820,000 bpd despite having a nameplate
capacity of 1.04 million bpd.
Pertaminas chief, Dwi Soetjipto, has previously stated that a US$25 billion upgrade programme being undertaken with partners Saudi
Aramco and JX Nippon will boost capacity to
1.68 million bpd.
On October 28, the Jakarta Post reported that
Pertamina would sign agreements this month
to boost capacity at the Cilacap and Balikpapan refineries to 370,000 bpd and 360,000 bpd
respectively.
The report suggested Pertamina would
organise 70% of the Balikpapan development, with JX Nippon responsible for the
remaining 30%.
Pertamina will undertake 55:65% of development at Cilacap, with Saudi Aramco maintaining 35:45%.
Soetjipto said the upgrades, scheduled to
start in December, would each require US$5
billion in investment.
Pertamina also signed a master service agreement with US construction firm Bechtel on
October 29, under which Bechtel will prepare
feasibility studies and engineering designs for
the upgrade programme.v

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AsianOil

P R O J E C T S & C O M PA N I E S

AsianOil

Lion Energy reports increased oil

output from Indonesian block
INDONESIA

PRODUCTION in the Seram (Non Bula) block

in Indonesia surged 17% year on year in the third
quarter, according to one of companies involved
in the project.
The blocks gross crude oil production block
in the July-September quarter averaged 3,488
barrels per day, compared with 2,984 bpd in the
previous three-month period, junior partner
Lion Energy said in a quarterly activities report
on October 30.
Chinas Citic Resources is the operator of the
block with a 51% stake. Kuwait Foreign Petroleum Exploration Co. (KUFPEC), Kuwait-based
Gulf Petroleum Investment and Australias Lion
Energy also hold stakes in the block of 30%,
16.5% and 2.5%, respectively.
The sharp increase in output was driven by the
successful drilling and completion of the Oseil-28
development well, with the wells output logging
766 bpd on September 30, Lion Energy said.
The steady uptrend in production has been
maintained into 2015 and a positive result from
the development well drilling at Oseil-28 has
lifted field daily production above 4,000 [bpd] at
quarter end, Lion Energy said.

Oseil is the principal field of the block, which

covers about 1,524 square km of eastern Indonesias Seram Island.
The 17% jump follows a 4.5% increase in
the April-June period, when output averaged
2,984 bpd, compared with 2,856 bpd in the January-March quarter. The improved performance
in the second quarter was attributed to the successful drilling and completion of the Oseil-27
development well.
The 20-year production-sharing contract
(PSC) for the Seram (Non Bula) block is to
expire in 2019. In 2006, Hong Kong-listed
Citic Resources Holdings acquired a 51%
stake in the block from KUFPEC and became
operator.
In January 2011, Gulf Petroleum Investment
announced that it had signed a contract with an
Indonesian consulting firm to find a purchaser
for its 16.5% stake in the block. But the company
still owns the stake.
Lion Energy said in its latest report that it
and its joint venture partners were currently discussing a strategy for obtaining a renewal of the
Seram (Non Bula) PSC.v

Petronas awards jack-up contract to UMW

MALAYSIA

P14

MALAYSIAN offshore services firm UMW Oil

& Gas has been awarded a contract by Petronas
upstream subsidiary Carigali to deploy a jack-up
rig in a domestic shallow-water project.
Bursa Malaysia-listed UMW said it would
drill seven wells over seven months and has an
option for more. The firm did not say how much
the contract was worth but a stock filing said it
would contribute substantially to earnings this
year and next.
The location of the contract, which began in
mid-October, was not identified. Carigali, the
upstream arm of national oil company (NOC)
Petronas, is engaged in a several active developments off the Sarawak and Sabah coasts of eastern Malaysia. Carigali has recently been working
on extending the life of the mature D18 oilfield
off Sarawak through Petronas enhanced oil
recovery programmes (EOR).
The contract announcement pushed up
UMWs share price by more than 5% in a sign of
confidence in a beleaguered sector.
Malaysia has one of Southeast Asias biggest
offshore services sectors with more than 30 main
operators and dozens of support businesses.

Many of them are dependent on work from Petronas which this year cut 20% off its US$16.5
billion capital expenditure programme for 2015.
UMWs rig contract is likely to be on a daily
charter rate of at least US$110,000, the Malaysian
Insider quoted Alliance DBS Research as saying.
Alliance noted that UMW has four other jack-up
rigs unemployed, one of which is new.
These will continue to weigh on earnings in
the near to medium term as demand for jack-up
drilling rigs continues to be very weak, Alliance
said. Before the global oil price collapse Petronas was seeking to revive declining domestic oil
production by hiring Malaysian offshore service
firms to work on EOR schemes in mature fields
and via risk service contracts (RSCs) to work in
small marginal fields.v

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Week 44 04November2011

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POLICY

Optimising Masela block

development possible
Co-ordinating Maritime Affairs Minister
Rizal Ramli recently called for a review of
the development of gas from the Abadi
field in the Masela production-sharing
contract block, a move that would further
delay the construction of the countrys
largest deepwater gas project. Ramli said the
development of the gas block should be linked
to an on-shore LNG plant on nearby Aru
Island instead of an offshore floating plant as
proposed by the blocks operators, INPEX and
Shell.
Without revealing the basis for his
argument or the feasibility study he used to
support his argument, the minister also said
the development of an onshore LNG plant
and pipeline would be cheaper than the
construction of an offshore floating plant. He
said the onshore plant would cost less than
US$15 billion, as against US$19.3 billion for
the floating plant. Moreover, by building the
plant onshore, it could turn the island of Aru
into a major hub and the operation of the
plant would also provide jobs and boost the
local economy.
JAKARTA POST (INDONESIA), November 2,
2015

UPSTREAM

Santos, Quadrant Energy

sell Stag oil field to Sona
A US$70 million deal struck by Santos and
Quadrant Energy for the sale of their Stag
oil field in Western Australia has brought a
new player into the country and launched
Malaysias Sona Petroleum as an upstream oil

Week 44 04November2011

NEWS IN BRIEF

and gas producer. The sale of the ageing oil

field, as flagged earlier in the The Australian
Financial Reviews Street Talk, has been in
negotiation since mid-year and is not part of
Santoss strategic review process, which is yet
to yield significant results.
It will only make a small dent in the US$3
billion or so that debt-burdened Santos is
looking to raise from the review, which is
considering asset sales or other corporate
transactions, and potentially a capital raising.
Stag had delivered a strong production
performance over the life of the field but it was
now mature and no longer core to the companys
strategy, said Santoss head of WA and Northern
Territory, Joe Ariyaratnam. This sale is
independent of the companys strategic review
and reflects the business units approach to
regularly reviewing its portfolio and rationalising
our asset base where appropriate.
BUSINESS DAY (SOUTH AFRICA), November 2,
2015

ONGC to start cutting costs

as oil price fall hits profit
State-run Oil and Natural Gas Corporation
has embarked on a belt-tightening exercise
following a sharp drop in oil and gas prices
that have started hurting its profit, its finance
chief said. The move is part of a larger
exercise being undertaken by oil and gas
producers globally to curtail costs by shelving
projects, reworking contracts and slashing
jobs to survive the slump that has halved the
commodity prices in a year to about US$45
per barrel.
We cant behave now the way we did when
oil was at US$100, said financial director
AK Srinivasan. We are driving home the
philosophy of optimisation. We are telling our
people to prioritise activities, to phase costs, to
defer costs that can be deferred so that we can
save on operating cost.
ECONOMIC TIMES (INDIA), October 29, 2015

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AsianOil

Concern over apathy to gas

exploration
A group of experts expressed concern
over the governments indifference to the
supply of primary energy and said emphasis
on electricity production alone cannot
ensure energy security. Former professor
of chemical engineering at Bangladesh
University of Engineering and Technology
M Nurul Islam said the name of the power,
energy and mineral resources ministry
should be changed to the energy ministry.
Because of this name, everybody is just
interested in making investment in power,
power and power, and the investment for
primary energy is very small. The ratio is
one-fifth.
Islams comments came at a roundtable
on Bangladeshs energy security and future
challenges at EMK Centre in Dhaka. The
Department of Law and Human Rights of
the University of Asia Pacific organised the
programme in partnership with the American
Alumni Association. If we really want energy
security, we will have to ensure the supply
of primary energy first of all. Islam said the
recently approved seventh five-year plan does
not say anything about the supply scenario
of primary energy for the base year running
from 2016 to 2020.
THE DAILY STAR (INDIA), October 30, 2015

IOC eyes 5-10% stake in

Russias Vankor oilfield
Hot on the heels of OVLs US$1.27-billion
deal to buy a stake in Vankor oilfield of
Russia, state-owned Indian Oil Corp (IOC)
has expressed interest in taking 5-10%
stake in the Rosneft-operated field. ONGC
Videsh, the overseas arm of state-owned
Oil and Natural Gas Corp (ONGC), had
on September 4 agreed to buy 15% stake in
Russias second biggest oil field of Vankor
from Rosneft for US$1.268 billion. While
the OVL deal is yet to be closed, IOC has
expressed its interest in take in stake in
Vankor field, sources with direct knowledge
of the development said.
Besides IOC, Oil India Limited (OIL)
and Bharat Petroleum Corp Limited (BPCL)
too are interested in picking a stake in
Vankor, they said. IOC has dashed off a
letter to Rosneft with an offer to buy 5-10%
stake in Vankor on same terms as of the
OVL deal.
Sources said that originally OVL was
negotiating to buy 25% stake in Vankorneft,
the developer of the Vankor oil and gas
condensate field in Turukhansky district

P15

AsianOil

of Krasnoyak Territor. A 10% stake would

not have given OVL a position on board of
Vankorneft. The Indian firm pressed hard and
got 15% interest with right to nominate two
board members.

NEWS IN BRIEF

a one-stop-shop for those looking to exploit

one of the worlds last great untapped
reserves of easy-to-access oil.
FINANCIAL TIMES (UK), OCTOBER 29, 2015

New Zealand Oil prepares

Pakistani broker fuels Iraqi for expensive drilling
Kurdistan oil exports
BUSINESS STANDARD (INDIA), October 31,
2015

Few regions lamented the collapse in oil

prices this year like Iraqi Kurdistan, where
dwindling investment and irregular crude
sales undermined long-held ambitions for
independence from Baghdad and a door-die fight against Isis along its borders.
But over the past 18 months the fledgling
state has emerged as a major oil exporter,
propelled by the sale of hundreds of
millions of barrels outside official channels
using a shadowy network of fixers and
businessmen to help fulfil the governments
regional ambitions. Helping to orchestrate
these oil sales stands one-time Glencore
agent in Iraq Pakistani oil broker Murtaza
Lakhani, who has become the go-to fixer for
the Kurdistan Regional Government that
controls the semi-autonomous enclave in
the countrys north.
From arranging pipeline shipments
into Turkey to liaising with international
traders seeking to bypass Baghdads
attempts to block sales of Kurdish oil,
Lakhanis involvement has been vital in
transforming piecemeal deliveries into an
international enterprise. I get my hands
dirty, the 53-year-old said, where he
splits his time with Erbil and Vancouver.
Ive been in the Iraq region for 16 years
and in Kurdistan long before anyone else.
Im keeping the KRGs oil sales business
operationally running. Lakhanis contacts
were cemented years before Iraqi Kurdistan
began exporting almost 500,000 bpd, up
from almost zero at the start of last year.
After setting up base in the regional capital
of Erbil just months following the 2003 USled invasion, Lakhani established himself as

P16

NZ Oil & Gas (NZOG) is cutting costs and

hunting for distressed assets to buy, while
also preparing for one of the most expensive
drilling campaigns it has undertaken. The
Wellington-headquartered oil company told
its annual general meeting that in response to
plunging global oil prices, the company had
reduced head office staff numbers, deferred
exploration spending and surrendered low
priority permits. Chief executive of NZOG
Andrew Knight is cautiously optimistic
the company can find partners for drilling
campaign off the coast of Oamaru.
But chief executive Andrew Knight said
NZOG was still actively working to find
partners to share the costs of a well in the
Barque prospect 30 km offshore of Oamaru,
which is expected to cost around US$100
million. The prospect lies in water around 800
metres deep. Under permit conditions agreed
with the Crown, the NZX-listed company
faces a drill or drop decision, drill a well or
give up the permit, in April 2016.
Knight said with oil prices plunging much
of the industry was looking to cut costs,
but the Barque prospect, which potentially
contained hundreds of millions of barrels of
oil and gas, was still attracting interest.
STUFF (NEW ZEALAND), October 29, 2015

Myanmar oil and gas poised

to see business traction
Oil and gas, the mainstay industrial sector
in frontier market Myanmar, is expected to
witness business and investment traction with
over two dozen fresh blocks set to be awarded
next year. Myanmar awarded about 20 oil and
gas blocks in 2013 to international companies
and nearly 26 more will be awarded in 2016,

w w w. N E W S B A S E . c o m

AsianOil

according to local media reports. However,

the sector, which has nearly 160 local
registered players, lags in firms providing
services and logistics given the growth
projections.
Former director general in the ministry
of energy U Soe Myint says, in the oil and
gas sector, most foreign companies eyeing
the Myanmar market are related to trading.
There are many works to be done in services
such as technical works, drilling, laboratory
and transport services. Currently, most of
the businesses are done on trading, he said.
Myanmar needs to make good use of not
only exporting gas but also work on business
relating to services in the sector, he said.
With many of the investors interested in the
country, Myanmar needs to make reforms on
regulations and administration, said secretary
general of Union of Myanmar Federation of
Chambers of Commerce and Industry U Aye
Lwin.
DEAL STREET ASIA (SINGAPORE), October 28,
2015

South Koreas October

crude oil imports up 9.7%
South Koreas crude oil imports in October
rose 9.7% from a year earlier to 81.7 million
barrels, preliminary data from the Ministry of
Trade, Industry and Energy showed. The final
data will be released later in the month by
state-run Korea National Oil Corp (KNOC).
The ministry did not break down imports
by country of origin. South Koreas total crude
imports in September rose 46.7% year on year,
according to KNOC data last month.
REUTERS, November 1, 2015

South Korea October

exports post worst drop in
over 6 years
South Korean exports slumped the most in
more than six years in October, with hefty
drops in shipments to China, the United States
and Europe suggesting a further weakening in
global demand. The trade ministry attributed
the declines mainly to a sharp fall in ship
contracts and low oil prices, but the sharperthan-expected deterioration is likely to add
to fears that a deeper chill is settling over the
global economy.
Exports fell 15.8% on-year to US$43.5
billion (159.6 billion dirham) in October, their
10th straight month of declines and sharpest
fall since August 2009, trade ministry data
showed on Sunday. Imports slumped 16.6%
to US$36.8 billion. Economists polled by

Week 44 04November2011

AsianOil

Reuters expected a 14.5% drop in exports and

a 13.4% fall in imports. The trade surplus fell
to US$6.7 billion in October from a revised
US$8.9 billion in September.
REUTERS, November 1, 2015

MIDSTREAM

Owners of vessel in oil spill

deny wrongdoing
The owners of a fishing vessel which
caused an oil spill in American Samoa
last year have been fined just over US$1
million, but still deny any wrongdoing. Tri
Marine Management, Tri-Marine Fishing
Management, and Cape Mendocino Fishing
have agreed with US Justice Department to
pay civil penalty and to perform fleet-wide
inspections. The spill occurred in Pago Pago
harbour when a purse seiner collided with
two other vessels while trying to dock. RNZIs
correspondent, Fili Sagapolutele, says the
owners deny any wrongdoing, but see it as the
best way to end the dispute.
RADIONZ (NEW ZEALAND), October 30, 2015

Korea Gas gets first LNG

cargo from Gladstone
Korea Gas (KOGAS) said on October 28 the
first cargo vessel containing 60,000 tonnes
of LNG, the first shipment of GLNG project
from Gladstone, arrived in South Koreas
Pyongtaek port on October 27. KOGAS
owns 15% of the GLNG project, for which it
invested 20 trillion won (US$17.72 billion).
Other investors include Australias Santons,
Frances Total and Malaysias Petroliam
Nasional (Petronas). A total of 7.8 million
tonnes of LNG will be produced from the
project every year, which KOGAS and
Petronas will bring in 3.5 million tonnes each,
according to a KOGAS statement.
The GLNG project produces natural gas
from coal seams and converts it into LNG in
Gladstone, located 400 km away, for shipping
to its buyers.

AsianOil

NEWS IN BRIEF

Pradhan said. We already have BS-III,

equivalent to Euro-III specifications, across
the country and BS-IV, in major cities which
will shortly be extended to the entire country.
A revised Auto Fuel Policy is in the offing
which will lead to introduction of BS-VI fuels
by 2020, he said.
Oil refineries will need to invest 800 billion
rupees in upgrading petrol and diesel quality
to meet cleaner fuel specifications by 2020.
Addressing a workshop on carbon emission
management, he said the fuels meeting EuroIV or Bharat Stage (BS)-IV specifications are
to be supplied throughout the country by
April 2017 and BS-V or Euro-V grade fuel by
April 1, 2020.
But now instead of stepwise up-gradation
from BS-IV to BS-V and then from BS-V to
BS-VI, the government is planning to switch
over directly from BS-IV to BS-VI auto fuels
by April 1, 2020.
PTI (INDIA), October 29, 2015

Make excise rates on LPG

uniform: Indias oil min
Petroleum Ministry has asked the Finance
Ministry to make excise rates uniform for
different categories of domestic cooking gas
(LPG), Oil Minister Dharmendra Pradhan
said. There is no excise duty on a 14.2-kg
of subsidised LPG cylinder, but a similar
sized non-domestic bottle attracts 8% levy.
Besides, while a subsidised domestic cylinder
is exempt from customs duty, a 5% import
duty is levied on non-domestic LPG cylinder.
We have sought from Ministry of Finance
a uniform tax pattern for all kinds of LPG
customers, Pradhan said.
LPG, or domestic cooking gas, is sold
in different pack sizes, 5 kg, 14.2 kg and 19
kg. A household customer is allowed 12
cylinders of 14.2-kg each or 34 cylinders of

5 kg each during a year at subsidised rates.

Any need beyond this has to be bought at
market rate.
PTI (INDIA), October 29, 2015

Petrol price cut by 50 paise

per litre
State fuel retailers have cut the price of
petrol by 50 paise a litre but kept that
of diesel unchanged following their
fortnightly review to align local prices with
international ones and adjust for foreign
exchange rates. From October 1, petrol cost
60.70 rupees per litre in Delhi with prices
varying marginally in other places due to
local levies. In the past three reviews, oil
companies had left petrol prices unchanged.
Diesel prices were raised in the last two
reviews by a cumulative 1.45 rupees per
litre. Every fortnight, fuel retailers review
petrol and diesel prices and adjust local
prices to the global rates of the products.
ECONOMIC TIMES (INDIA), October 31, 2015

Hengyi Petrochemical
delays start-up of Brunei
refinery
Chinas Hengyi Petrochemical Co has
delayed the start-up of its 160,000bpd refinery in Brunei to late 2017, the
companys director said. The refinery was
initially expected to start up next year, but
this has now been delayed, said company
director P C Huang.
Hengyi Petrochemical Co, a wholly owned
unit of the East China-based group, plans to
source of its crude supplies from oil major
Shell, the company has said.
REUTERS, October 30, 2015

REUTERS, October 28, 2015

DOWNSTREAM

India to introduce Euro-VI

fuel by 2020
India plans to shift to Euro-VI emission
compliant petrol and diesel by 2020 to cut
carbon pollution, Oil Minister Dharmendra

Week 44 04November2011

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P17

AsianOil

Nghi Son refinery 60%

complete
Construction at Vietnams second oil refinery,
the US$7.5-billion Nghi Son plant, is more
than 60% complete and is on track to be
finished in mid-2017, a source close to the
matter said on October 28. The refinery will
supply mainly to the domestic market and will
take in crude from Kuwait, the source added.
The facility is owned by Japans Idemitsu
Kosan, Mitsui Chemicals, state oil and gas
group PetroVietnam and Kuwait Petroleum
International. The 200,000 bpd Nghi
Son facility will increase the countrys oil
processing capacity to 330,500 bpd by 2017,
but it and a smaller older plant will only be
able to meet half of the nations fuel demand at
that time, PetroVietnam has said.
An official at the projects management
board controlled by PetroVietnam declined
to reveal the current progress of the project,
which is located in northern province of
Thanh Hoa.
REUTERS, October 28, 2015

Japans Idemitsu seeks H1

2016 cargoes
Japans Idemitsu Kosan is looking to buy
naphtha through a six-month contract
starting January 2016, traders said on Monday.
The tender came at a time when naphtha
spot prices on a cost-and-freight (C&F) basis
are in discount levels due to oversupply.
The company could be looking to buy up
to 300,000 tonnes of full-range naphtha for
the six-month delivery period to Chiba and
Tokuyama, they added.
The tender will close on November 6, with
offers to stay valid until November 16. Since
August, several petrochemical firms including
South Koreas YNCC, Lotte Chemical,
LG Chem, KPIC, Taiwanese Formosa

P18

NEWS IN BRIEF

Petrochemical and Malaysia-based Titan have

inked term deals to cash in on weak market
caused by high volumes of European and
Mediterranean cargoes arriving this month.
REUTERS, November 2, 2015

Petronas Dagangans
earnings grow 36% as
margins improve
Petronas domestic retail arm posted a 36.5%
jump in earnings year on year to 218.88 million
ringgit for the third quarter ended September 30
despite its revenue falling 20.6% to 6.53 billion
ringgit. Petronas Dagangan (PetDag) said that
the lower revenue was due to an 18% drop in
average net selling price and 3% slide in sales
volume. The commercial segments revenue,
which in last years corresponding quarter
exceeded the retail segments revenue, this time,
fell below the latter.
The segments average selling price plunged
31% although sales volume improved 3%,
leading to revenue dropping by 29.4% or 1.259
billion ringgit to 3.024 billion ringgit. The
retail segment also saw a decrease of revenue,
but by a smaller percentage; 11.2% or 440.8
million ringgit. On the better profit, PetDag
attributed it to higher margin contribution
from both the retail and commercial
segments, along with lower operating expense
(opex) and higher other income, which helped
to boost operating profit by 30.4% to 300.97
million ringgit.
The higher other income by 20.9 million
ringgit was mainly due to an accounting
reclassification arising from the goods and
services tax implementation, which has no profit
impact as well as higher interest income. As for
the lower opex by 15.9 million ringgit, PetDag
said it was mostly due to lower advertising and
promotion expenses, foreign exchange gain and
other cost-reduction efforts.
THE STAR (MALAYSIA), November 2, 2015

w w w. N E W S B A S E . c o m

AsianOil

Philippines Petron earns

5.1 billion pesos
A surge in sales volume has propelled the
income of Philippine Petron Corporation by
58% increase to 5.1 billion Philippine pesos in
the first nine months from 3.2 billion pesos.
The oil firm has noted that the combined sales
of its Philippine and Malaysian operations
have grown by 14% to 73.6 million barrels
from the year-ago level of 64.6 million.
Petron has emphasised that the climb in its
sales had been due to more stable pricing
environment.
For the Philippine market, it stressed that
sales had been up 22% to 46.6 million barrels
vis-a-vis 38.3 million in 2014. The main
driver of the sales uptrend had been its retail
portfolio, which logged about 12% hike in
sales volume. Petron has similarly reported
about 21% growth in sales for its liquefied
petroleum gas (LPG) business segment,
noting that its Gasul brand has remained the
most preferred in the market.
For Malaysia, it emphasised that it was able
to sustain volume growth in key segments
such as industrial and lubes, growing by 2.6%
and 8%, respectively. Petron President and
CEO Ramon Ang has qualified that despite
challenging business environment, we are
definitely on track to deliver stronger results
in 2015.
MANILA BULLETIN (PHILIPPINES), October 27,
2015

Korean refiners profits

diverge
As difficult market conditions persist amid
sliding crude oil prices and volatile refining
margins, South Korean refiners posted
diverging performances in the third quarter
due to differences in their operational
strategies. Overturning market forecasts, SK
Innovation, the countrys leading refiner,
posted an operating profit of 363.9 billion won
(US$322.12 million) in the July-September
period, up by 644% from the same period last
year. Hyundai Oilbank also recorded high
third-quarter earnings at 100.5 billion won
(US$88.8 million), up by 157.03% from the
same period in 2014, effectively managing to
remain profitable for 13 consecutive quarters.
Meanwhile, S-Oil saw an operating profit
of 12.4 billion won (US$10.9 million) in
the third quarter, an improvement from
its earnings in the same period last year,
yet hovering far below market predictions
of around 50-60 billion won (US$44.2-53
million) in third-quarter earnings. GS Caltex,
scheduled to release its third-quarter earnings

Week 44 04November2011

AsianOil

in mid-November, is expected by analysts to

have recorded relatively low profits as well.
The differences in the local refiners thirdquarter earnings were perceived to be linked
to variations in each firms diverging business
strategies in response to market conditions.
Amid difficult market conditions, SK was able
to overcome falling crude prices and global
oversupply by diversifying its crude imports
and optimising its refining operations, said an
SK Innovation official.

NEWS IN BRIEF

core businesses, Samsung Electronics and its

financial units. Now its up to how Samsung
competes in those core businesses, as well
as biosimilars flagged as a potential future
growth engine.
CHEMICALS TECHNOLOGY (UK), October 30,
2015

MOVES

Chevron to cut jobs in

Lotte Group to buy Samsung Australia
chemical assets
KOREA HERALD (SOUTH KOREA), October 27,
2015

South Korea-based petrochemical company

Lotte Group will buy the chemicals
businesses of Samsung for US$2.6 billion.
Samsungs decision to sell its chemicals
businesses is as a result of its plan to
restructure its businesses ahead of a transfer
of power from Chairman Lee Kun-hee
to his heirs, reported Reuters. Under the
deal, Lotte Chemical will acquire a 90%
stake from Samsung SDI, a 31.5% stake
in Samsung Fine Chemicals, and a 49%
in Samsung BP Chemicals. Samsung is
slimming down under heir apparent Jay
Y Lee to raise competitiveness, and is
selling off whatever has little synergy with
Samsungs core businesses. In a statement
cited by the news agency, Samsung SDI said
it will invest 2 trillion won (US$1.74 billion)
in electric car batteries over five years.
Last year, the company announced that
it would sell stakes in four of its affiliates in
the defence and chemical sectors to another
local company, the Hanwha Group. Research
firm CEO Score head Park Ju-gun was quoted
by the news agency as saying: Samsung is
slimming down under heir apparent Jay Y
Lee to raise competitiveness, and is selling off
whatever has little synergy with Samsungs

Chevron has named Australia as one of the

key areas that will bear the brunt of 60007000 job losses flagged across its global
portfolio, as its two large LNG projects
move into the late phases of construction.
The US giant also pointed to pressure on
the late-2016 start-up target for its second
Western Australian LNG project, the US$29
billion (A$40.6 billion) Wheatstone LNG
project, and has confirmed the first cargo
from its US$54 billion Gorgon venture will
slip into the first quarter of 2016.
One of the key areas for reductions is in
Australia, CEO John Watson told investors
in the US at a quarterly briefing of the
job reductions, which were announced as
Chevron reported a 64% drop in September
quarter profit to US$2 billion on the dive in
oil prices. He didnt specify the job losses to
happen in Australia. The California-based
company also advised of further cutbacks in
capital spending, and flagged US$5 billionUS$10 billion in additional asset sales by
end of 2017. Watson said he was pleased
with the progress in construction at both
huge LNG ventures in Western Australia
but slower start-ups at the plants had
contributed to a downgrade in anticipated
production growth for the oil major over
the next few years.
SMH (AUSTRALIA), November 2, 2015

AsianOil

Divergent views on
optimum staff size
Two major petroleum companies adopt
different perspectives of what constitute
optimum staff size that is required to sustain
their operations in Malaysia. With cost
reduction exerting continuous pressure on
petroleum firms in the current industry
downturn, companies have constantly
grappled with the issue of an optimum
workforce to sustain their oil and gas
operations. Recent news coverage about the
industry highlighted this conundrum in
Malaysia, where oil firm Shell plc cut local
staff as part of a move globally to rein in cost,
while national oil company (NOC) Petroliam
Nasional (Petronas) refrained from doing so
despite facing similar headwinds due to other
internal considerations.
As in other petroleum producing
countries, the industry downturn in
Malaysia has led to a loss of around 2,000
oil and gas jobs between January and July,
or nearly 30% of the 6,547 being laid off in
the country, local daily The Star reported
September 26. Workers in the industry
remain vulnerable to layoffs as major
petroleum firms in Malaysia could include
them as part of any global job cuts if oil
prices do not recover. Vitol Group, the
worlds largest oil trader, believed that it was
unlikely for crude oil to trade above US$60
a barrel in 2016 as the effects of slowing
global demand growth could be exacerbated
by a return of Iranian and possibly Libyan
supplies.
RIGZONE (US), October 29, 2015

Icon CEO and COO step

down; former MISC CEO to
take over
Icon Offshores CEO Dr Jamal Yusof and
chief operations officer Rahman Yusof,
who were on leave recently to assist the
Malaysian Anti-Corruption Commission
in its investigations, have decided to step
down. The offshore support vessel provider
said in a statement that it had appointed
Petronas Lubricants Internationals CEO
Amir Hamzah Azizan, 48, who was
formerly MISC president and Petronas
Dagangan CEO, to replace Jamal effective
March 1, 2016. Amir will also be appointed
to the board. Amir is currently also
Petroliam Nasional Bhds vice-president
(lubricants business) and sits on the board
of South Africas Engen Petroleum.
THE STAR (MALAYSIA), November 2, 2015

Week 44 04November2011

w w w. N E W S B A S E . c o m

P19

26 - 27 January 2016
Raffles City Convention Centre,
Singapore

ASIA-PACIFIC ASSEMBLY
& AWARDS DINNER

www.oilandgascouncil.com/event/asia-pacific

Invitation to Participate in Asias Most Influential Oil & Gas Meeting

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Managing Director,
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Eni

Peter Botten
CEO,
Oil Search

Takayuki Sumita
Director General, Oil, Gas and
Resources,
METI, Japan

Simon Murray CBE

Chairman, GEMS
Former Chairman, Glencore

Sudhir Mathur
CFO,
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Waranon Laprabang
Senior Vice President,
Myanmar Asset, International
Asset Group, PTTEP

Zvonimir Djerfi
President Integrated
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Baker Hughes

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