Europe’s leaders on Friday backed tighter budget policing, with 26 of the 27 EU states signalling willingness to join a “new fiscal compact” to resolve the crisis threatening to crack apart the monetary union. Britain, which does not use the euro, resisted a Franco-German drive to enshrine new budget rules in a modified EU treaty.

“At the end of the day, the summit produced a couple of rules that can seemingly be fudged without end,” analysts from Singapore’s DBS bank said in a commentary. “Is this then the end to the EU debt crisis? One would like to hope it’s a start but frankly the content seems weak.”

Global financial markets have been roiled in recent weeks on worries over the eurozone’s escalating debt crisis, which has engulfed members including Greece, Ireland and Portugal.The pact has led to hopes the European Central Bank will drop its reluctance to use its full arsenal against the crisis.

ECB president Mario Draghi said the summit decisions were a “very good outcome” for the eurozone. “President Draghi had good things to say about the summit on Friday but that seemed more like cheerleading than anything else,” DBS bank analysts said in the commentary.”
Agencies

“The under-recoveries of oil marketing companies were to the tune of Rs 78,000 crore in 2010-11. With crude prices rising and hovering around $120 per barrel, under-recoveries for this year could be in the region of Rs2 lakh crore,” he told reporters in Ahmedabad.

Sundareshan, however, added that it was just the beginning of the financial year and there was no reason to be so pessimistic. He also said that OMCs had been compensated by the government and upstream oil companies, and had made profits.

Sundareshan was in city to take part in a programme organised to mark the 50th anniversary of ONGC’s Ahmedabad asset.

Asked about the sharp decline in gas production from Reliance Industries’ D6 block in KG Basin, the oil secretary said, “The present production from D6 basin is around 50 – 52 million metric standard cubic metre per day (mmscmd), instead of the projected58 – 60 mmscmd.

The government and Director General of Hydrocarbon (DGH) are examining the reasons for the decline in gas output.”

He added that variance in production as against the projections could happen in any field.

Sundareshan also said that crude refining capacity in the country is set to increase in the next year or so.

“The total crude refining capacity in the country is 188 million tonne (mt), which will increase to 240 mt by March 2012. Consequently, exports of petro products from the country will also rise from 40 mt to 90 mt,” he said.

According to Sundareshan, enhancement in crude refining capacity is taking place at an investment of Rs 60,000-65,000 crore.

BPCL’s refinery in Beena, HPCL’s refinery in Bhatinda, IOCL’s refinery in Paradip, and Nagarjuna Group’s refinery in Cuddalore are expected to go on stream in the next one year.

The expansion of Mangalore Refinery and Petrochemicals Limited is also likely to be completed by March.

In response to a question about ONGC’s FPO, Sundareshan said, “The FPO of ONGC is likely to happen in June or July. The government will dilute 5% equity and raise around Rs 11,000 crore through the issue.”

The oil secretary also lauded the performance of ONGC Videsh Limited (OVL) which is engaged in oil exploration and production in 15 countries.

“OVL produced 9 million tonne of oil and oil equivalent in 2010-11, which is equivalent to 20 per cent of the country’s domestic production. ONGC has pumped in $13 billion in OVL, but the company has already repaid 50 per cent of the funds to its parent company,” he said.

He said that the government is distributing LPG cylinders to 50 per cent of the country’s population, and has targeted to provide LPG to 75  per cent of the population by 2015.

While gas was primarily being supplied in west and north India at the moment, distribution of gas would also commence in south and east India in 2012, Sundareshan said.

Agencies

New York’s main contract light sweet crude for May delivery was down 36 cents to US $112.43 in morning Asian trade after soaring to its highest level in more than two years in US trade on Friday.

Brent North Sea crude for delivery in May was off 83 cents to US $125.82.”Oil really rallied late last week. And now we’re seeing some pullback,” said Victor Shum, a Singapore-based analyst with international energy consultancy Purvin and Gertz. “Frankly, oil is overbought at these price levels,” he said. Shum said however that the overall mood in the oil market is for prices to go higher, mainly driven by fears that unrest in the oil-producing West Asia and North Africa region could disrupt supplies.

In strife-torn Libya, deputy foreign minister Khaled Kaim last week accused British warplanes of bombing the country’s biggest oil field at Al-Sarir in the southeast. The bombing, he said, had damaged the pipeline linking Al-Sarir and Tobruk, which is under rebel control. NATO, which is acting under UN mandate to protect civilians against forces loyal to Libyan strongman Muammar Gaddafi, denied the allegation, saying that the fires at the Al-Sarir field were more likely to be linked to skirmishes in the region.

“The unrest in Libya and the greater West Asia and North Africa region continues to be the main driver for oil prices,” Shum said. “There is, however, no imminent threat of supply disruptions beyond what has happened in Libya, so oil futures look to me to be overbought at this time and  profit-taking is causing the pullback.” Popular uprisings have recently toppled the leaders of Tunisia and Egypt, and the unrest has spread to countries like Yemen and Syria.
Agencies

For now, it appears that oil demand would not be as hard hit as previously thought, analysts said. “Crude oil demand (from Japan) will therefore decrease but then Japan will likely boost import of oil products such as fuel oil and diesel fuel for power generation use,” said Victor Shum, senior principal for Purvin and Gertz energy consultancy in Singapore.

Japan, the world’s third largest economy, is also the third largest oil-consuming country.
The Asian powerhouse was hit by a massive 9.0-magnitude earthquake on Friday, unleashing a tsunami that battered the country’s northeast coast and stretched across the Pacific. The quake also damaged nuclear power plants, on which the country relies heavily for energy, with concerns growing that one near Tokyo could go into meltdown following several blasts since Saturday.

Continuing unrest in the crude-producing West Asia is also on investors’ radar, analysts said.
Agencies

According to Sharma, the India-Brazil bilateral trade would increase to US $10 billion in the next few years from US $7.73 billion in 2010. Sharma highlighted a proposal for organizing “India Show” in Sao Paulo in March, 2011. The proposed occasion will serve an ideal platform for a number of Indian and Latin American entrepreneurs / companies to explore and discuss business opportunities and tie- ups in trade and investment, he added.

The minister expressed satisfaction regarding the signing of an Air Service Agreement between India and Brazil. He said there is vast potential for cooperation between the two countries in SMEs, IT, science and technology, engineering, energy, infrastructure and nuclear power.

In the bilateral meeting, Sharma raised the issue of Brazil’s imposition of anti-dumping duties on Indian products such as PET Films (polyethylene terephthalate), jute yarn, jute bags, nitrile rubber (NBR) and stainless steel. He pointed out that currently, no anti-dumping duty has been imposed by India on import of any items from Brazil. Sharma also raised the issue of flexibility in business visas.
Business Line

Even the most bullish analysts are quick to recite a litany of reasons why oil will not surge to near US $150 again this year. Such a sharp spike would deal the world economy a heavy blow it can ill afford.

The list is long: oil companies are stepping up spending plans before supply reaches a crisis point; resource nationalism has eased; the dollar has firmed; and concerns that oil production is near peaking have subsided.

By far the most compelling reasons, however, are short-term supply fundamentals: There is far more oil in storage, far more fuel capacity at refiners worldwide, and far more idle oil wells that OPEC can reactivate when it chooses, braking the market’s rally in a way it could not three years ago.

Analysts expect an additional 8 per cent gain in average prices in 2011, according to the latest Reuters poll, although the conditions for a “super-spike” have dissipated.

“To a substantial degree, oil is not like it was then because there are bottlenecks that have been overcome both in refining and production capacity,” said Edward Morse, managing director at Credit Suisse.

At the same time consumer nations have since built up crude inventories, with stockpiles from members of the Organization for Economic Co-operation and Development now at 60 days worth of demand, compared with 53 days in 2008.

Oil demand growth jumped 2.2 million barrels per day (bpd) in 2010, the biggest rise in six years, and forecasts for an addition 1.5 million bpd of use in 2011, according to a Reuters poll.

Although those gains will boost consumption to beyond the previous record high in 2007, supply has risen far more during the recession after a host of multibillion-dollar projects — ones that had been planned during the boom years prior to 2008 — came to fruition.

Members of the Organization of the Petroleum Exporting Countries currently hold 5 million to 6 million bpd of spare oil production capacity to draw on, up to three times the amount the group had at the lowest point in 2008, primarily from top exporter Saudi Arabia.

While experts debate at what price — or under what conditions — OPEC would willingly begin pumping more crude, there is little doubt that doing so would douse prices. In 2008, OPEC said it was effectively pumping flat out.

“It is not in the Saudi interest to have a global economic recovery jeopardized by $100-plus oil,” said Jan Stuart, a global oil economist at Macquarie in New York.

“Given the spare capacity, I don’t think you are going to have the same upward spiral that you had in 2008.”
Saudi Oil Minister Ali al-Naimi, OPEC’s most influential member, in December reiterated he preferred prices between $70 and $80 a barrel, below current $89 levels and the 26-month peak near $92 hit earlier in the month.

NEW SUPPLY

And while supply from outside the group is set to rise a marginal 400,000 bpd this year, about one-third the rate of 2010, there have been a host of more positive signs of late. In 2008, non-OPEC output actually fell by nearly 400,000 bpd.
The wave of resource nationalism that cut international oil company access to reserves in the middle of the last decade has eased, with Venezuela and Russia now welcoming seeking more investment from foreign companies.

Globally, energy companies are expected to raise exploration spending 11 per cent next year to the highest level in 25 years, according to a Barclays Capital forecast. That could prevent the kind of upstream supply crunch that resulted from a reluctance to invest five years ago.

Further support for non-OPEC production has come from the slower decline of mature fields like Mexico’s giant Cantarell, while discoveries in deepwater off Brazil have added some 26 billion barrels of exploitable reserves — enough to fuel the entire world for about 10 months.

“The big story I think in 2008 was the collapse of supply growth, as non-OPEC supply failed to grow for several years in a row,” said Antoine Halff, first vice president of research for Newedge Group in New York City.

Any shortfall in 2011 could also be met by projected higher output from OPEC members such as Nigeria and Iraq, which has no formal production ceiling like other members and expects to add about 400,000 bpd of output during the year, analysts said.

MIND THE RECOVERY

The fury of fresh speculative money into oil from investors eager to cash in on the commodities rally that started in 2002 has also been widely blamed for oil’s 2008 record run.
Similarly speculators, excited by the prospect of higher fuel consumption as the economy recovers, hit a record net long position in December for crude contracts on the New York Mercantile Exchange.

Analysts say investors interested in energy and commodities have become more sophisticated since 2008 when many poured cash into simple, long-only funds.

According to Barclays Capital, 43 per cent of commodities investors will invest in the asset class through actively managed portfolios in 2011 to try to cash in on recovery-driven gains.

US GDP growth is expected to lead the world in the new year. It is forecast to rise 2.7 per cent in 2011 after 2.8 per cent growth in 2010, according to a Reuters poll, after cratering in 2008 to negative 6 per cent at the low point.

“In 2008, there were quite a few doomsayers who were warning of storms on the horizon, but nobody paid attention,” Halff said. “Now the economy has been in a tentative recovery, but the concerns about the pace and stability of recovery are more widespread.”

REFINERY CUSHION

Investments in global refining should also help keep a lid on prices.

Markets now enjoy the largest volume of spare refining capacity in 10 years due to investments in emerging economies such as India, after the buffer narrowed sharply leading up to 2008, stirring concerns about shortfalls.

Refiners have also invested in more sophisticated units, allowing them to run a wider variety of crude grades to make the higher quality, lower sulfur products mandated in the United States and Europe. Companies were forced to scramble for better quality crude in 2008 to meet specifications, adding upward pressure to prices.

The drop in demand caused by the recession also left nearly 1.4 million bpd of capacity shutdown due to refinery closures at the start of 2010, although some plants are now in the process of being restarted as demand picks up.

Even with so many cushions in place, many experts still expect oil to climb higher in 2011 — just not so spectacularly.

“Oil will continue to go up, it’s going up at a very pleasant pace, not a violent, breath-taking manner,” independent investor Dennis Gartman said.

Thompsonreuters

Reuters

The current structure of the board of directors of BCPL – according to the joint venture agreement among GAIL, Oil India Limited (OIL), Numaligarh Refinery Limited (NRL) and the Assam government – includes 12 directors, of which eight represent promoters GAIL, two from Assam government and one each from  NRL and OIL. The managing director and director (Finance) was stipulated to be the ninth and tenth directors. Two directors each from ministry of petroleum and natural gas and DCPC represent the government.

However, the articles of association entitled to nominate a maximum of 11 directors GAIL (7), Government of Assam (2), and one each of NRL and OIL, as their representative on the board of the company. In keeping with the Department of Public Enterprises guidelines on corporate governance for CPSEs, DCPC has mooted a proposal for reconstitution of the board of BCPL.

The restructured BoD is proposed two Functional Directors, two managing director  and two director (finance) three nominee directors and one each from the three official agencies GAIL India Ltd (major equity holder) represented by its CMD, who will also be the chairman of BCPL, the administrative ministry and the Government of Assam.

Besides two independent directors, two independent directors are proposed to be appointed in consultation with the Department of Public Enterprises. The Rs 5,460-crore gas cracker project in Assam is executed by BCPL in a joint venture promoted by GAIL (India) Limited with 70 per cent equity stake.
The Assam Tribune

“Effective 1 December, ONGC and OIL have been allowed to charge up to US $5.25 per mmBtu for the 7-8 million scm per day of gas that is sold to non-power and non-fertilizer sector,” a senior government official said.

The rates set would be excluding cess, transportation charge, marketing margin/service charge and taxes.

Natural gas produced by ONGC and Oil India Ltd (OIL) from fields given to them on nomination basis is sold at government controlled price or APM.

The APM price for priority sectors like power and fertiliser was in June more than doubled to US $4.2 per mmBtu, but users in other sectors continued get the fuel at 2005 price of up to US $4.75 per mmBtu.

“The anomaly has now been corrected,” the official said.

The decision would result in ONGC revenues going up by about Rs 200 crore annually.

As per the oil ministry order, consumers in western and northern part (states of Maharashtra, Gujarat and other states covered by GAIL’s Hazira-Vijaipur-Jagdishpur and Dahej- Vijaipur pipeline such as Rajasthan, Madhya Pradesh, Uttar Pradesh, Haryana and Delhi) will pay US $5.25 per mmBtu.

Users in Rajasthan, south Gujarat and isolated customers in Gujarat, which are getting gas from identified onshore fields, would be charged US $5 per mmBtu while the same in Tamil Nadu and Andhra Pradesh would pay US $4.75 per mmBtu and US $4.5 per mmBtu respectively. Consumers in North-East region would pay US $4.2 per mmBtu.

The official said the government had in 2005 decided that APM gas will be sold only to power, fertilizer and small users. But some non-priority users not connected to any other source were allowed to continue using the gas subject to they paying a market price.

So, users in western region paid US $4.75 per mmBtu, a rate equivalent to the then prevalent price of gas from privately-operated Panna/Mukta and Tapti fields. Consumers on the east coast paid US $4.3 per mmBtu, the same price as charged by Cairn India for gas from Ravva fields.

Naturally, these rates should have also been increased when Panna/Mukta and Tapti field gas price was revised to $5.73 per mmBtu. But this did not happen. - PTI