Petroscan December

PetroScan-December 2011

PETROSCAN (Monthly e-newsletter)

December 2011

CONTENTS: FOREWORD OIL, GAS & ENERGY NEWS GENERAL INTEREST

1. OIL DATA: China November Crude-Oil Imports Rise To 22.69 Million Tons 2. Iran Threatens to Block Oil Shipments, as U.S. Prepares Sanctions 3. Oil hovers below $98 amid Europe economy concerns 4. Oil companies invested a record $558 billion last year 5. OPEC Holds Output Firm at 160th Meeting 6. World Refinery Capacity to Grow Despite Recession - Hart Energy Study 7. Canadas Petroleum Refining Sector: An Important Contributor Facing Global

Challenges 8. Energy Demand to Grow by More Than 30% from 2010 and 2040 ExxonMobil 9. Slavneft Switching to Euro-4, Euro-5 Fuels 10. First Megafloat Oil Storage in the Works in Singapore 11. Saudi Kayan becomes the first producer of polycarbonates in the Middle East, and

the pioneering effort opens 12. Offshores Top 5 Projects of 2011 13. Saudi Arabia's Diamond Era 14. Kuwait Petroleum Corporation - Playing A Crucial Role In Economy 15. Iran threatens to stop Gulf oil if sanctions widened 16. Prime The Pump And Bailout The Brent 17. Sept-qtr GDP growth seen slowest in over 2 years


NEWS LOCAL 1. Indian Oil Corp tops Fortune India 500 list; RIL at second spot 2. Vedanta completes Cairn India deal 3. ONGC to support in doubling Cairn's capacity: Anil Agarwal 4. India's Petronet to complete Dahej LNG terminal expansion to 15 mil mt/year by

Dec 2015 5. Indias Top Economic Adviser: Diesel Decontrol Would Curb Inflation 6. Home grown Indigenous Innovations 7. Vedanta appoints 3 directors on Cairn India board 8. Raiding PSU reserves unsustainable way of plugging budget deficits 9. Crude, rupee double whammy hits oil companies NEWS GLOBAL 1. High-tech drilling rig arrives in the Gulf of Mexico 2. Marathon Oil grows capital spending 24 percent 3. Chevron might inject steam into Arabian oil field 4. Chevron To Spend Record $32.7 Billion In Capital Projects In 2012 5. Sasol Plans Ethane Cracker in Louisiana 6. Anadarko: Mozambique Gas Find One Of The Most Significant In 10 Years 7. Libya's Waha Oil begins output at two fields 8. High-tech drilling rig arrives in the Gulf of Mexico 9. Iran discovers natural-gas field in Caspian Sea, Shana says 10. Shell, ENI buy Nigeria offshore oil field rights 11. Repsol, Shell, Conoco offer high bids for Alaska oil leases 12. Norway sees record oil spending in 2012 13. PetroPeru Plans Equity Sell-Off, Share Listing to Expand Refinery 14. SOCAR Agrees to Buy ExxonMobils Swiss Subsidiary 15. Bahrain oil refinery output hits record 16. Nord Stream completes world's longest subsea pipeline

NEW & RENEWABLE ENERGY 1. National bio energy mission soon: Farooq Abdullah 2. After quakes, shale fracking faces opposition in U.K 3. GM and BMW in fuel cell talks; Amazon selling GE Wattstation 4. Oil sands operators turn to electric currents 5. For taller wind turbines, generating power is a breeze : NREL 6. API blasts EPA report on hydraulic fracturing 7. Solar power gains foothold in country's energy mix 8. In solar power, India begins living up to its own ambitions 9. China's Shale Gas Development Takes First Steps 10. NZ Co LanzaTech to help IOC, JSPL set up bio jet fuel plant 11. Update: Exxon says natural gas will support energy demand growth 12. Peregrino producing heavy oil for Statoil offshore Brazil 13. Marathon Wants Ohio Refinery to Run 15% Utica Shale Crude


HSE 1. Brazil may fine Chevron $84 million for spill 2. HSE, climate change and sustainability 3. BP products fined us$50 million for emissions release at Texas city refinery 4. Health and nutrition 5. Revend Launches Light Bulb Recycling Vending Machine

SUSTAINABILITY & CLIMATE CHANGE 1. Australian Government introduces price on Carbon 2. The climate may not be as sensitive to carbon dioxide as previously believed 3. Large differences in the climate impact of biofuels, Swedish research finds 4. Carbon capture and sequestration: off to slow start

RELIABILITY & ASSET MANAGEMENT

1. Nine leadership principles for a successful reliability & maintenance program GENERAL READING

Bosses, stop caring if your employees are at their desks Sodium-saturated diet is a threat for all Nutrition: 4 vitamins that strengthen older brains

REPORTS:

EIA: Refiners Should Expect Triple-Digit Crude Through 2012 EIA: Short-Term Energy Outlook (http://205.254.135.7/forecasts/steo/pdf/steo_full.pdf)

DEADLIEST NATURAL DISASTERS OF 2011 CARTOON OF THE MONTH FOR NEW YEAR RESOLUTION LESSER USE OF CELL PHONE


FOREWARD

Dear Patrons of Petrotech,

Change is eternal, non stoppable and so the year. 2011 started with turmoil abroad and ended with at ho,e turf, with small cyclone on the south eastern coast, which made almost entire county wet on the day we stepped into 2012. In 2011 the natural and geopolitical upheavals kept the oil and gas prices on the burner, and it is likely, with the Iranian impasse, to remain on the boil.

Whereas, the high prices of energy affect growth and put lot of hardship on the people all over globe, it also has some good effect, in form of less use of oil and force conserve this scarce natural resources, which also pollutes adding to the process of climate change.

The cost and consequence of climate change on our planet will define the 21st century. With the business as usual, it will have serious implication on the sustainability of our coastal ecosystem, erratic climatic conditions affecting agriculture and food production etc. It will put great stress on the rising population leading to migration and conflict around the world.

It also, however, provides great opportunity and induces research and development for better recovery of oil, less harmful methods of production, improved efficiencies and lifecycle of plants and equipments, newer skills and knowledge etc.

Good or bad, let us thank 2011 for whatever it offered and welcome 2012 , with hope for better. Change is good, and looking at the history of civilizations, it has most of the times proved to have been for good. So here we are in the times of change, and The team Petrotech sends you it's Heartiest Greetings of the Season of Change !!!

To CHANGE is the only way to SURVIVE the CHANGE, and

in order, to SURVIVE the Change, we must INNOVATE

ahead of CHANGE,

Let us go GREEN, Right Away, Right NOW,

Our shadow walks away with us,

but our action leaves behind its imprint, for ever,

Wishing you & your family Greener NEW YEAR, ......Filled with Everlasting HAPPINESS & Eternal BLISS, (Anand Kumar) Director


OIL, GAS & ENERGY NEWS GENERAL INTEREST

OIL DATA: CHINA NOVEMBER CRUDE-OIL IMPORTS RISE TO 22.69 MILLION TONS

BEIJING -(Dow Jones)- China imported 22.69 million metric tons of crude oil in November, equivalent to 5.54 million barrels a day, preliminary data from the General Administration of Customs showed Saturday. Imports were 8.5% higher than the 20.91 million tons of crude shipped in during the corresponding month last year, and up 9.1% from 20.8 million tons in October, according to Dow Jones Newswires calculations. In the first 11 months of the year, crude imports rose 6.1% to 231.86 million tons. Refined oil product imports in November totaled 3.35 million tons, down 4.8% from year-earlier levels, the data showed. -By Wayne Ma, Dow Jones Newswires; +86 10 8400 7714; [email protected]

IRAN THREATENS TO BLOCK OIL SHIPMENTS, AS U.S. PREPARES SANCTIONS

By DAVID E. SANGER and ANNIE LOWREY, Dec 27, 2011 WASHINGTON A senior Iranian official on Tuesday delivered a sharp threat in response to economic sanctions being readied by the United States, saying his country would retaliate against any crackdown by blocking all oil shipments through the Strait of Hormuz, a vital artery for transporting about one-fifth of the worlds oil supply.

The declaration by Irans first vice president, Mohammad-Reza Rahimi, came as President Obama prepares to sign legislation that, if fully implemented, could substantially reduce Irans oil revenue in a bid to deter it from pursuing a nuclear weapons program. Prior to the latest move, the administration had been laying the groundwork to attempt to cut off Iran from global energy markets without raising the price of gasoline or alienating some of Washingtons closest allies. Apparently fearful of the expanded sanctions possible impact on the already-stressed economy of Iran, the worlds third-largest energy exporter, Mr. Rahimi said, If they impose sanctions on Irans oil exports, then even one drop of oil cannot flow from the Strait of Hormuz, according to Irans official news agency. Iran just began a 10-day naval exercise in the area.


In recent interviews, Obama administration officials have said that the United States has developed a plan to keep the strait open in the event of a crisis. In Hawaii, where President Obama is vacationing, a White House spokesman said there would be no comment on the Iranian threat to close the strait. That seemed in keeping with what administration officials say has been an effort to lower the level of angry exchanges, partly to avoid giving the Iranian government the satisfaction of a response and partly to avoid spooking financial markets. But the energy sanctions carry the risk of confrontation, as well as economic disruption, given the unpredictability of the Iranian response. Some administration officials believe that a plot to assassinate the Saudi ambassador to the United States which Washington alleges received funding from the Quds Force, part of the Iranian Revolutionary Guards Corps was in response to American and other international sanctions. Merely uttering the threat appeared to be part of an Iranian effort to demonstrate its ability to cause a spike in oil prices, thus slowing the United States economy, and to warn American trading partners that joining the new sanctions, which the Senate passed by a rare 100-0 vote, would come at a high cost. Oil prices rose above $100 a barrel in trading after the threat was issued, though it was unclear how much that could be attributed to investors concern that confrontation in the Persian Gulf could disrupt oil flows. The new punitive measures, part of a bill financing the military, would significantly escalate American sanctions against Iran. They come just a month and a half after the International Atomic Energy Agency published a report that for the first time laid out its evidence that Iran may be secretly working to design a nuclear warhead, despite the countrys repeated denials. In the wake of the I.A.E.A. report and a November attack on the British Embassy in Tehran, the European Union is also contemplating strict new sanctions, such as an embargo on Iranian oil. For five years, the United States has implemented increasingly severe sanctions in an attempt to force Irans leaders to reconsider the suspected nuclear weapons program, and answer a growing list of questions from the I.A.E.A. But it has deliberately stopped short of targeting oil exports, which finance as much as half of Irans budget. Now, with its hand forced by Congress, the administration is preparing to take that final step, penalizing foreign corporations that do business with Irans central bank, which collects payment for most of the countrys energy exports. The sanction would effectively make it difficult for those who do business with Irans central bank to also conduct financial transactions with the United States. The step was so severe that one of President Obamas top national security aides said two months ago that it was a last resort. The administration raced to put some loopholes in the final legislation so that it could reduce the impact on close allies who have signed on to pressuring Iran. The legislation allows President Obama to waive sanctions if they cause the price of oil to rise or threaten national security. Still, the new sanctions raise crucial economic, diplomatic, and security questions. Mr. Obama, his aides acknowledge, has no interest in seeing energy prices rise significantly at a moment of national economic weakness or as he intensifies his bid for re-election a vulnerability the Iranians fully understand. So the administration has to defy, or at least carefully calibrate, the laws of supply and demand, bringing to market new sources of oil to ensure that global prices do not rise sharply. I dont think anybody thinks we can contravene the laws of supply and demand any more than we can contravene the laws of gravity, said David S. Cohen, who, as treasury under secretary for terrorism and financial intelligence, oversees the administration of the sanctions. But, he said, We


have flexibility here, and I think we have a pretty good opportunity to dial this in just the right way that it does end up putting significant pressure on Iran. The American effort, as described by Mr. Cohen and others, is more subtle than simply cutting off Irans ability to export oil, a step that would immediately send the price of gasoline, heating fuel, and other petroleum products skyward. That would mean that Iran would, in fact, have more money to fuel its nuclear ambitions, not less, Wendy R. Sherman, the newly installed under secretary of state for political affairs, warned the Senate Foreign Relations Committee earlier this month. Instead, the administrations aim is to reduce Irans oil revenue by diminishing the volume of sales and forcing Iran to give its customers a discount on the price of crude. Some economists question whether reducing Irans oil exports without moving the price of oil is feasible, even if the market is given signals about alternative supplies. Already, analysts at investment banks are warning of the possibility of rising gasoline prices in 2012, due to the new sanctions by the United States as well as complementary sanctions under consideration by the European Union. Since President Obamas first months in office, his aides have been talking to Saudi Arabia and other oil suppliers about increasing their production, and about guaranteeing sales to countries like China, which is among Irans biggest customers. But it is unclear that the Saudis can fill in the gap left by Iran, even with the help of Libyan oil that is coming back on the market. The United States is also looking to countries like Iraq and Angola to increase production. Daniel Yergin, whose new book, The Quest, describes the oil politics of dealing with states like Iran, noted in an interview that given the relative tightness of the market, it will require careful construction of the sanctions combined with vigorous efforts to bring alternative supplies into the market. He said that it would add a whole new dimension to the debate over the Keystone XL pipeline, the oil pipeline from Canada to the United States that the administration has sought to delay. The only strategy that is going to work here is one where you get the cooperation of oil buyers, said Michael Singh, managing director of the Washington Institute for Near East Policy. You could imagine the Europeans, the Japanese, and the South Koreans cooperating, and then China would suck up all of the oil that was initially going to everyone else. A broader question is whether the sanctions even if successful at lowering Irans oil revenue would force the government to give up its nuclear ambitions. One measure of the effects, however, is that the Iranian leadership is clearly concerned. Already the Iranian currency is plummeting in value against the dollar, and there are rumors of bank runs. Irans economic problems seem to be mounting and the whole economy is in a state of suspended expectation, said Abbas Milani, director of Iranian studies at Stanford University. The regime keeps repeating that theyre not going to be impacted by the sanctions. That they have more money than they know what to do with. The lady doth protest too much.

OIL HOVERS BELOW $98 AMID EUROPE ECONOMY CONCERNS By ALEX KENNEDY, Associated Press Oil prices hovered below $98 a barrel Tuesday in Asia amid expectations Europe's debt crisis will hurt the continent's economic growth and demand for crude. Benchmark crude for January delivery was up 4 cents to $97.81 a barrel at midafternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract fell $1.64 to settle at $97.77 on Monday. In London, Brent crude was down 2 cents at $107.24 on the ICE futures exchange.


Crude has slumped from $103 last month amid growing investor concern European leaders may be unable to prevent contagion from spreading from debt-ridden countries such as Greece and Italy. Europe has proposed a new treaty to bind members to spending and borrowing controls, but Britain has refused to consider it, raising doubts that the plan will be instituted. Credit ratings agency Moody's said Monday that its ratings for European countries could be cut in coming months, echoing an earlier warning by Standard and Poor's. Citigroup said slowing global crude demand growth and supplies boosted by the gradual return of Libya's output will likely keep oil trading next year within 10 percent of current prices, or between $100 and $120 for Brent. "We are not very optimistic on oil demand growth," Citigroup said in a report. "We are, however, optimistic on supply." A possible supply disruption from Iran and Saudi Arabia's shrinking spare capacity should support crude prices next year, Citi said. In other energy trading on the Nymex, natural gas rose 1.0 cent to $3.26 per 1,000 cubic feet. Heating oil fell 0.4 cent to $2.89 a gallon and gasoline futures rose 0.9 cent to $2.57 a gallon.

OIL COMPANIES INVESTED A RECORD $558 BILLION LAST YEAR Posted on December 5, 2011 at 10:41 am by Dan X. McGraw in Commodity Prices, Commodity Trading, Deepwater drilling, Oil and gas companies spent a record $558 billion last year on finding and developing new supplies because of acquisitions in the U.S. and Latin America, according to an IHS Herold report. Expenditure rose by 47 percent from the previous year, the unit of Englewood, Colorado-based IHS Inc. said today in a statement. Spending on acquisitions rose seven-fold to $125 billion, it said. Exxon Mobil Corp. invested the most, spending $72 billion in 2010, including the purchase of XTO Energy, according to IHS. Petroleo Brasileiro SA spent $62 billion, mostly on securing rights to produce from so-called pre-salt deposits that hold Brazils largest oil fields. These companies were able to aggressively pursue these investments because they had significant cash flow to invest, Nicholas D. Cacchione, director of energy equity research at IHS, said in the statement. Spending and cash flow were closely tied last year, and we expect the same for 2011.

OPEC HOLDS OUTPUT FIRM AT 160TH MEETING The 160th Meeting of the Conference of the Organization of the Petroleum Exporting Countries (OPEC) convened in Vienna, Austria, on December 14 and resulted in a decision to maintain its current production level of 30 million barrels per day including production from Libya now in the future. In taking this decision, OPEC member countries confirmed their preparedness to swiftly respond to developments that might have a detrimental impact on orderly market developments. Given the ongoing worrying economic downside risks, the Conference directed the Secretariat to continue its close monitoring of developments in supply and demand, as well as non-fundamental factors, such as macro-economic sentiment and speculative activity, keeping Member Countries abreast at all times. The conference decided that its next ordinary meeting will convene in Vienna, Austria, June 14, 2012, immediately following the OPEC International Seminar on Petroleum: Fuelling Prosperity, Supporting Sustainability that is to take place at the Hofburg Palace, Vienna, Austria, on 13 and 14 June 2012.


The organizations release also noted that the Conference exchanged views on, inter alia, recent developments in multilateral environment matters and the outcome of the recent UN Climate Change Conference held in Durban, South Africa, as well as the status of the Organizations ongoing energy dialogue with the European Union. The conference applauded efforts being made by member countries climate change negotiators to safeguard the interests of developing countries, in general, and oil-producing nations, in particular, and recorded its appreciation of the crucial work carried out by the secretariat in relation to this very important topic. For more color on the climate-change topic, we direct readers to the related report on comments by Saudi Arabias delegation at Durban in the Compliance Section of this issue of Refinery Tracker. Greg Haas

WORLD REFINERY CAPACITY TO GROW DESPITE RECESSION - HART ENERGY STUDY

Major global refining capacity expansion projects scheduled for completion within three-to-five years, totaling 9 million barrels per day, will add to refining industry distillation capacity surplus, according to a new World Refining and Fuels Study (WRFS) 2011 report by Hart Energy, released December 12. This growth will occur despite recession-related drops in demand for finished fuels and closure of some existing capacity, according to the study. The capacity surplus narrows when it is defined by refined product finishing capacity, such as diesel production and desulfurization capacity for 10-ppm [parts per million] sulfur for gasoline and distillate fuels. This narrow balance of refining finishing capacity is what is keeping global refining margins high. Within India, for example, where export capacity soared in recent years, there will be continued capacity growth (to nearly 5 million barrels per day) prior to 2015. Even in low-growth regions of Europe and North America, major projects initiated prior to the more recent retraction in demand will soon come on-line (by 2012-13), according to the study. The analysis, which quantifies both gasoline and diesel demand and trade flow by sulfur category, concludes that expanding demand for low sulfur diesel will challenge refining capability and be the primary driver behind future refined product markets and margins, according to Hart. Terry Higgins, Hart Energys executive director, refining and special projects, added that growth in demand, led by developing regions in Asia, will outstrip these short-term capacity expansions by 2015-2017. Also, strong growth in Latin American markets, coupled with limited near term refinery projects, will offer market opportunity for surplus U.S. refined products. New Brazilian refineries scheduled for later in the decade (2016-2017) will supply a much larger portion of the regions needs. The study also found that: oDeclining Atlantic Basin gasoline demand will lead to severe competitive pressures in the U.S. East Coast market and rationalization in East Coast and European refining centers; oShale-oil development and increasing global condensate production will provide for near-term improvement in average crude oil quality; oVery heavy crude production, particularly crude from Canadian oil sands, will also expand by as much as 4 million barrels per day, requiring continued expansion of bottoms processing capacity. For more information on the study findings, methodology and geographical coverage, Terrence Higgins is available for comment at 1-703-891-4815 [email protected]


CANADAS PETROLEUM REFINING SECTOR: AN IMPORTANT CONTRIBUTOR

FACING GLOBAL CHALLENGES The Conference Board of Canada, 52 pages, October 2011 Report by Todd A. Crawford This study researches and presents the economic contribution that Canadas refining industry currently makes and the challenges it faces. Our findings suggest that even if oil production continues to grow strongly in Canada, the future economic benefits, job creation, and profits from oil refining and processing are much less assured. Document Highlights Canadas refining industry has undergone a massive restructuring over the past 30 years. Since the 1970s, the number of operating refineries has dropped from 40 to just 18 today. While global demand for petroleum products continues to rise and the outlook for Canadas upstream energy sector is bright, Canadian refiners face a very particular set of challenges, since North American and other OECD markets will likely be characterized by declining demand. The Conference Board of Canada has published a new report titled, Canadas Petroleum Refining Sector: An Important Contributor Facing Global Challenges that researches and presents the economic contribution that Canadas refining industry currently makes and the challenges it faces. The report findings suggest that even if oil production continues to grow strongly in Canada, the future economic benefits, job creation and profits from oil refining and processing are much less assured. Written by Todd A. Crawford, the 52-page paper describes that Canadas refining industry has undergone a massive restructuring over the past 30 years. Since the 1970s, the number of operating refineries has dropped from 40 to just 18 today. While global demand for petroleum products continues to rise and the outlook for Canadas upstream energy sector is bright, Canadian refiners face a very particular set of challenges, since North American and other Organization for Economic Cooperation and Development markets will likely be characterized by declining demand. According to report, Given the competitive pressures that Canadian refiners face, we build a hypothetical scenario under the assumption that, going forward, Canada permanently loses 10 per cent of its refining capacity as domestic production is replaced by imports. Under that scenario, real GDP is reduced by a cumulative total of [U.S.]$4 billion, while 38,300 person-years of employment are lost over the 2011 to 2015 period.

ENERGY DEMAND TO GROW BY MORE THAN 30% FROM 2010 AND 2040 EXXONMOBIL

CEO Rex W. Tillerson, chairman and CEO, ExxonMobil Corp. Photo: 20th World Petroleum Conference Future growth in world energy demand is a cause for optimism because it will signal economic recovery and progress, Rex W. Tillerson, chairman and CEO of Exxon Mobil Corp., said December 6 in Doha, Qatar, where he was addressing the 20th World Petroleum Congress. ExxonMobil is forecasting the global economy to more than double in size between 2010 and 2040, and during that time energy demand will grow by more than 30%. In order to meet that demand, the world needs to invest in and develop all economically competitive sources of energy. Projections of significant population growth combined with expanding trade, new technologies and transformative economic opportunities will drive economic expansion and rising standards of living particularly in the developing world.


The energy and economic challenges the world will face in the decades to come require a business and policy climate that enables investment, innovation and international cooperation. Sound policies and government leadership are critical. When governments perform their roles effectively, the results are extraordinary bringing enormous benefits in terms of investment, enterprise, economic growth and job creation. Tillerson said that the key to unlocking new economic growth was for industry, governments and society at large to focus on their respective roles and responsibilities. By understanding our strengths and proper roles in economic expansion, we can clarify our policy choices, fulfill our core responsibilities and open up economic opportunities for decades to come, he said. Government has a responsibility to provide a stable and fair legal, tax and regulatory framework; industry needs to invest with discipline to develop energy in a safe and environmentally responsible way; and the public also has a role to play, Tillerson said. Citizens and consumers need to understand the importance of energy, the vital role it plays in economic and social development, and how sound policy supports responsible energy development and use, he continued. The debates and discussions in society at large need to be informed by the facts and fundamental realities of the challenges before us. According to Tillerson, the state of Qatar is a prime example of what can be done when policies are in place to enable investment and innovation. In just over a decade, Qatar has risen to become the worlds leading supplier of liquefied natural gas. In the process, the nation has unleashed its own economic growth, supported innovation, spurred job creation and strengthened the energy diversity that allows free markets to maximize the value of national resources for producers and consumers. Qatar is a beacon of energy prosperity. Tillerson also noted that the current economic challenges will not last forever. There is reason for optimism but it is more important than ever that we swiftly take on these challenges with a sound and principled response, he said. History proves that energy policies that are efficient and market-based are the best path to economic growth and technological progress.

SLAVNEFT SWITCHING TO EURO-4, EURO-5 FUELS Slavneft-Yanos announced November 3 that it plans to drop all production of fuels below Euro-4 (50 parts-per-million [ppm] sulfur) starting January 2102. According to a report from Prime-Tass news service quoting Slavneft, starting from January, 2012, all fuels produced by Slavneft-Yanos are to correspond to Euro-4 or Euro-5 [10-ppm sulfur] standards. In 2012, Slavneft-Yanos is expected to produce 2.44 million tonnes of gasoline under the Euro-4 standard, plus more than 4 million tonnes of diesel fuel, 2.8 million tonnes of which are expected to correspond to Euro-5 standards, according to the report. Slavneft plans to invest over US$1.2 billion into the modernization of Slavneft-Yanos in 20112014, Slavneft said, adding that of the total, $310 million is expected to be invested in 2011, with over $910 million to be invested in 20122014. Slavneft, in which Russian oil company Gazprom Neft and oil major TNK-BP each hold a 49.48% stake, invested more than $1.5 billion into the modernization of Slavneft- Yanos in 20022010, according to the report.

FIRST MEGAFLOAT OIL STORAGE IN THE WORKS IN SINGAPORE


The first megafloat at Pulau Sebarok a pilot project to store oil on very large floating structures (VLFS) in Singapore will be government-led but private sector-run, as part of ongoing efforts to develop alternative facilities for oil traders in the land-scarce southeast Asian city-state. According to an October 31 Business Times (Singapore) report, the megafloat will be built and owned initially by the JTC Corp. but operated by Netherlands-based Royal Vopak, one of the largest terminal operators in the region. Under the plan, Vopak will have the option to take over ownership of the floating storage at a later date. Vopak has apparently indicated its intent to do so, although company officials were not available to confirm this, according to the Times. Typically, the megafloat is a floating structure having at least one length dimension greater than 60 meters. Horizontally large floating structures can be from 500 to 5,000 meters in length and 100 to 1000 meters in width, and their thickness can be around 2-10 meters. Royal Vopak is reportedly the logical choice to run the Sebarok megafloat since the VLFS site is located adjacent to an existing surface tank farm. Its among four oil and chemical tank farms which Vopak operates on Jurong Island. Others are located at the Banyan, Penjuru and Sakra sectors, according to the report. JTCs lead in the project will help promote floating oil storage which has no proven track record yet, as far as its commercial viability is concerned, sources told the Times. It is not unlike the Jurong Rock Cavern (JRC) project to store oil underground, with the US$850-million, first phase already being built by JTC. The project is expected to be completed in the first half of 2013, according to the report. JRC has already found its first customer in Jurong Aromatics Corp., which is building a $2.4-billion petrochemicals complex on the island. According to the Times, JTC is expected to call a tender for an operator to run the underground storage facility in coming weeks. The shortage of storage capacity in Singapore with little land available for building more surface tank farms has led many international oil traders to resort to using tank farms sprouting up in neighboring Johor. These include farms at Tanjung Langsat, Pasir Gudang, Tanjung Bin and Pengerang and a $1-billion tank farm that Vopak is building with Malaysias at Pengerang, according to the report. JTC studies on the project started back in 2007, with the first phase covering a preliminary conceptual design of an attached-to-land VLFS. This progressed to phase two covering areas such as environmental impact, marine soil investigation and sea-current monitoring completed in 2010, according to the report. SAUDI KAYAN BECOMES THE FIRST PRODUCER OF POLYCARBONATES IN

THE MIDDLE EAST, AND THE PIONEERING EFFORT OPENS NEW INDUSTRIAL DEVELOPMENT POSSIBILITIES IN THE REGION

Sabic recently marked a historic milestone in the regions industrial development when its world-class manufacturing affiliate Saudi Kayan Petrochemical Company (Saudi Kayan) began production trials of polycarbonate (PC) at its plant in Jubail Industrial City. This is the first time that the material is being produced in the Middle East. Mohamed Al Mady, Sabic vice chairman and CEO, ceremonially received the first sample of PC produced in Saudi Kayan at the corporate headquarters in Riyadh. A Saudi Kayan delegation of senior executives presented the sample to celebrate the startup of PC in the region, and to express the affiliates gratitude to Sabics leadership for its unlimited support in executing the project.


Al Mady congratulated Saudi Kayans management and staff, and handed over the first-run PC sample to The Sabic Experience, the permanent exhibit at the headquarters. Al Mady and other senior Sabic executives have since visited the plant and inspected the production process. With Saudi Kayan becoming the first and only PC pellet producer in the Middle East, Sabic has become the largest PC producer in the global market. Saudi Kayans 260,000 tonnes per year production capacity makes it the fifth largest PC manufacturer in the world. Sabics Innovative Plastics SBU which recently announced the addition of new production lines of its world-renowned Lexan polycarbonate (PC) resins and films in Shanghai and Nansha, China has long established its leadership position in the global PC market. Al Mady says the pioneering effort of Sabic to initiate PC production in the region will contribute to industrial diversification in Saudi Arabia and the Middle East, especially in the field of engineering plastics. Our PC grades are extremely versatile and our Innovative Plastics SBU and Technology and Innovation have been very successful in coming up with innovative new applications for the product. Sabic will continue to explore product innovation and material substitution opportunities to ensure continued growth for this important portfolio, he says. The Saudi Kayan plant is using the most advanced PC manufacturing technology from renowned Japanese technology licensor, Asahi Kasei Company. The green technology has won international praise for effectively recycling and using the greenhouse gas (CO2) produced during the manufacturing process. The Saudi Kayan PC production is also cost effective, offering a vast array of competitive customer-centric PC products for various applications and adding value to other intermediate chemicals produced at the complex, such as phenol, bisphenol-A, CO2 and ethylene oxide. According to general estimates, PC demand is expected to grow at the rate of five percent per annum. However, several new plants are scheduled to come on stream over the coming years in different parts of the world, which raises the possibility of supply growing faster than demand, resulting in tougher competition among producers. Sabic Innovative Plastics ...leading the way PC has diverse applications around the world across multiple industries. The long list of PC applications includes everything from CDs and DVDs to mobile phones, medical devices and automobiles. Globally, the biggest market segments for PC today include CDs and DVDs (estimated to consume 25 per cent of production), blends (15 per cent), sheet extrusion products (15 percent), electrical and electronics (10 per cent) and automotive (8 per cent). It is also finding new applications in aeronautics, military, safety equipment and food storage sectors. PC is known for its unique properties such as durability, strength, high transparency, lightness and high heat resistance. Mahdi Habab Al Bogami, president of Saudi Kayan, says the Saudi plant has started producing various grades of high quality PCs for diverse applications to meet the increasing global demand. We have started producing polycarbonates of general purpose (GP), extrusion, resin and optical film (OQ) grades. Initially, Saudi Kayan PC production will focus on meeting the demand in two key segments: CDs and DVDs and blends, he says. The uniqueness of our PC pellets production is that it is free of phosgene and solvent, and is the greenest PC production technology available, he adds. Al Bogami says that Saudi Kayan is extremely proud that its PC plant marks the beginning of an engineering thermoplastics industry in Saudi Arabia and the region. The PC plant has already


initiated and implemented measures across process, quality, production, logistics and marketing fields to ensure product consistency and highest product standards. Our product mix boasts flexible grades and are cost-competitive, innovative and customer application-friendly, he says. In Europe, Sabics PC manufacturing plants have traditionally exported a significant part of their output to the Asia Pacific (APAC) region. Saudi Kayans PC startup is likely to change that pattern with the affiliate exporting much of its production to the region. Sabics European manufacturing plants are located at Bergen op Zoom in The Netherlands and Cartagena in Spain. During the Chinaplas exhibition in May, Sabics Innovative Plastics SBU announced plans to add new production lines to the companys worldrenowned Lexan* PC resins and films in Shanghai and Nansha, China. These additions are part of the companys strategy to support the dynamic growth of key plastics sectors in this region, particularly the consumer electronics, electrical, solar, security and automotive industries. Announcing the expansion, Sabic stressed that it was building on a powerful legacy in the plastics industry with Innovative Plastics flagship PC material. It is continually developing distinctive new Lexan material solutions to meet evolving technological, environmental, performance and regulatory challenges. Our nearly 60-year-old commitment to polycarbonate remains unmatched from a relentless focus on innovation, to continued investments in global capacity, to a team of polycarbonate experts including a highly trained sales force, application development specialists, and process development engineers around the globe, William Russell, polycarbonate business leader, Innovative Plastics, said at the time. The size and diversity of our performancerich Lexan polycarbonate material portfolio is an excellent case in point, illustrating how we deliver tailored materials solutions to meet our customers specific needs. These expansions will enable Innovative Plastics to provide a stronger, localised supply of Lexan resin and film to meet Asias accelerating demand of these tough, high-performance and versatile material technologies. Sabic is adding dedicated compounding production lines to the Innovative Plastics Lexan PC resin Shanghai facility in early 2012. This capacity increase will ensure ample, reliable supplies of Lexan resins and Lexan speciality copolymers to help drive Asian customer growth. This addition comes on the heels of a similar Lexan compounding expansion in Nansha in late 2010. Lexan resin is known for its broad, global portfolio and is produced to meet increasing capacity demand for key industries including consumer electronics, electrical, solar and automotive. Lexan speciality copolymers provide extreme high heat resistance, excellent flow/ductility and virtually unbreakable impact strength.

OFFSHORES TOP 5 PROJECTS OF 2011 Published: Dec 21, 2011 The editors of Offshore have made their choices for the winners of the Five Star Award, the top five offshore field development projects for 2011. The projects were selected on the basis of best use of innovation in production method, application of technology, and resolution of challenges, along with safety, environmental protection, and project execution. Selecting the winners was no easy task. The geographic distribution of candidates stretched from the Americas to Europe, Africa, Asia, and Australia. Technological innovation was widespread as well. After careful consideration, a consensus has been reached. In no particular order, the top five offshore field development projects of 2011 are:


Nord Stream With the completion of Line 1, developers of the EU 7.4-billion ($10-billion) Nord Stream project have realized the ambitious goal of moving Russian gas to European markets directly through the Baltic Sea. First announced in 2001, the project calls for the construction of two parallel 759-mi, 48-in. pipelines that will move natural gas from Vyborg, Russia, to Lubmin near Greifswald, Germany. The Nord Stream consortium includes Gazprom, Wintershall, E.ON Ruhrgas, Gasunie, and GDF SUEZ. Bruce Beaubouef, managing editor, gives the full details in his report Nord Stream completes worlds longest subsea pipeline. Pazflor The Pazflor field offshore Angola boasts a number of firsts. Foremost among them is that it is the first-ever project to deploy a development plan based on gas/liquid separation at the mudline spanning several reservoirs. This technological innovation is what will make it possible to produce the heavy, viscous oil contained in three of the four reservoirs in this gigantic development in the Angolan deep offshore. Pazflor, operated by French oil company Total, lies 150 km (93 mi) off Luanda in water depths ranging from 600 to 1,200 m (1,968 3,937 ft) and has estimated proved and probable reserves of 590 MMbbl. Eldon Ball, senior editor, technology & economics, further details the project in Pazflor development relies on subsea separation system handling four reservoirs. Karan Saudi Aramcos $8-billion Karan gas field project offshore Saudi Arabia is the first-ever non-associated gas development in the country. Currently, five wells are flowing 120 MMcf/d on the way to a design capacity of 1.8 bcf/d by 2013. The field produces gas via a 110-km (68-mi) long subsea pipeline to the onshore Khursaniyah process facility. Plans call for approximately 20 total wells spread over four production platforms that tie in to a main platform with associated electrical power, communications, and remote monitoring and controls. Gene Kliewer, technology editor, subsea & seismic, provides additional project information inKaran marks first-ever non-associated gas project offshore Saudi Arabia. Peregrino The achievement of first oil from the Statoil-operated Peregrino heavy oil field in Brazil in April marked a major milestone for the operator. It is the first field to be brought onstream by the company in Brazil and its largest operated field outside of Norway. And by bringing Peregrinos 14API crude to the surface, Statoil provided convincing testimony of its heavy oil expertise. Nick Terdre, contributing editor, gives the full details in his report Peregrino producing heavy oil for Statoil offshore Brazil. Who Dat Discovered in December 2007, the LLOG Exploration-operated Who Dat field lies in an average water depth of 3,200 ft (975 m) in Mississippi Canyon blocks 503, 504, and 547, in the Gulf of Mexico. Three wells two in MC 503 and one in MC 547 have been completed, with 10 more infill wells to be drilled and completed in the coming months using the semisubmersible rig Noble Amos Runner. Notable achievements for the field development include the first use of the OPTI-EX design; the first use of an FPU built on spec; and the first use of a privately owned FPU. Jessica Tippee, assistant editor, provides further information in her report Who Dat initiates production in GoM in post-Macondo era.

SAUDI ARABIA'S DIAMOND ERA Saudi Arabia hits oil bonanza in momentous year


SaudiAramco marks the 75th year of oil exploration with a fresh initiative to tap more oil and expand its refineries http://www.oilandgasnewsworldwide.com/pages/article.aspx?aid=24652 SAUDI Arabia celebrates the 75th anniversary of the May 29, 1933, concession agreement with American company, Socal seeing a record oil bonanza of $260 billion and an ambitious five-year master-plan by its flaghip oil company Saudi Aramco to increase its fresh drilling activity by a third and hike investments levels by 40 per cent. Oil revenues were at an average of $43 billion per year throughout the 1990s and amount to nearly $700 million per day. The lower oil prices in 2009 and 2010 mean that some of the headline numbers will not look as good, but the underlying picture will remain very healthy and in real terms economic growth will be stronger. Rising oil prices are expected to have a positive impact on the Saudi economy. The current account surplus may touch an all-time high this year and economic growth and the budget surplus will also be exceptionally strong. Total exports are now projected at $290 billion, compared with just $39 billion in 1998. Aramco will bolster the number of wells drilled around Saudi Arabia to 248, compared with an original target of 187. Investment on projects will be increased to $13.7 billion from $10.7 billion under the plan. Much of the increase in drilling activity will be aimed at sustaining the kingdoms production target of 12.5 million barrels per day, which it expects to reach by the end of 2009. However, given Saudi Arabias success in both discovering fresh finds and redeveloping previously mothballed fields, such as Manifa, it appears the company may seek to boost capacity beyond 12.5 million bpd. Saudi Oil Minister Ali Al Naimi says that as long-term oil demand forecasts fell and alternative fuel supplies increased, there was no need to go beyond next years production capacity level. Saudi Arabia has previously said it could take its production capacity up to 15 million bpd. Naimi says the world has plenty of oil enough reserves today to satisfy demand over the next 50 years and said insufficient investment posed the biggest threat to meet the worlds rising energy needs. The Saudi Aramco plan also includes a $4.1 billion commitment to upgrade existing facilities at the kingdoms landmark Ras Tanura refinery, compared with an initial investment of $2.39 billion. Aramco recently cancelled a planned 125,000-bpd refinery upgrade at Ras Tanura, increasing speculation it is considering a partnership with Saudi Basic Industries Corporation (Sabic) to integrate the refinery with a petrochemicals plant. However, the budget for some plans has been cut. The oil giant has committed $1.45 billion to the Karan gas facility to hit prod-uction of 1.5 billion cubic feet a day (cf/d) by 2012. This marks a $50 million drop from its previous budget and comes despite rapidly rising demand for gas across the region, which has provoked concerns over a potential shortage of supply for industrial users and power plants. In Saudi Arabia alone, natural gas demand is expected to reach 14.5 billion cf/d by 2030, compared with the current 5.5 billion cf/d. The national oil company will spend $2.58 billion on offshore maintenance and new drilling, compared with $2.25 billion previously, marking a new emphasis on the kingdoms offshore fields. Much of Aramcos offshore development has focused on the Safaniyah, Marjan, Berri and Zuluf fields, but further devel-opment is needed, mostly to provide relief to the ageing Ghawar field, the worlds largest onshore field. Aramco has devoted $1.15 billion for maintenance of Safaniyah, the largest offshore oil field in the world, which boasts production of about 1.7 million bpd. It includes the installation of 67 kilometres of crude transmission lines, along with a substation and an offshore sub-sea cable.


Other parts of the five-year programme include a $3 billion investment to cover maintenance work and drilling on Aramcos onshore fields, compared with a previous estimate of $2.2 billion.

KUWAIT PETROLEUM CORPORATION - PLAYING A CRUCIAL ROLE IN ECONOMY Sheikh Ahmad Al Fahad Al Sabah, Minister of Energy and Chairman of KPC's board of directors, highlights the key initiatives of Kuwait's oil sector. Sheikh Ahmad Al Fahad Al Sabah, Minister of Energy and Chairman of Kuwait Petroleum Corporation's (KPC) board of directors, broadly surveys the strategic directions of the oil sector in an interview. He optimistically enthused that the corporation is going through one of its best phases, which promises overall prosperity and development. He believes that the corporation forms the backbone of Kuwait's economy, thus it has an immense responsibility to enhance its performance in all realms so as to become an effective contributor to Kuwait's prosperity. Q. In your opinion, what role does the corporation play in enhancing the national economy? The corporation plays a crucial role in supporting and stimulating the national economy. One of the most important ways it does this is to endeavour to provide good investment opportunities for the private sector in the oil industry by the following means: 1 Privatising some of the corporation's activities: Recently, the corporation conducted several studies on the privatisation of its activities and 'the possibility of involving the private sector with the Corporation's subsidiary companies in whole or in part'. Currently, we are waiting for the required approvals of the outcomes and recommendations of these studies, so that we may proceed with their implementation. Meanwhile, the corporation is taking the required executive steps to privatise the oil blending and local marketing activities. The oil blending activity has peen sold to a private sector company while the first Local Fuel Marketing Company has been established and has offered 76 per cent of its shares for public subscription. In addition, steps have been taken to transfer the whole of the calciner coke project to the private sector. The project tender has been awarded to the Al Mal Group for production of calciner coke. 2 Promoting the participation of the private sector in the corporation's operations: The private sector now participates in the Kuwaiti Petrochemicals Compound, and many steps have been taken to give the private sector a certain share in future petrochemical projects (such as Olefins and Aromatics), and in construction of the proposed new refinery. 3 Relying on the private sector in the contracting and engineering works and in the support services. 4 Encouraging the private sector to exploit the output of the corporation's activities for the creation of a subsequent transformational industry. Q. How do you forecast the corporation's future in light of the increasing world demand for oil? The increasing world demand for crude oil creates several challenges for the corporation; the major one facing us today being to increase production to meet this demand. This will be achieved by developing exploration, development and production work in Kuwait so as to increase reserves and raise extraction rates, by finalising capital projects such as the crude exportation facilities construction project and by increasing exploration, development and production of non-accompanying gas, so that this gas can be substituted for oil in energy production. Q. What future plans and projects would you like to carry out? The corporation and its subsidiaries have defined the strategic goals, which the Kuwaiti oil sector aims to realise in the future. The capital costs for the realisation of such goals have been estimated at KD16.2 billion over the coming 20 years.


Reaching a production level of three million barrels of crude oil per day by the year 2005, and four million barrels per day (bpd) by 2020 is one of the major objectives. To achieve this, several projects will be implemented, some of which have already been identified and will be implemented during the coming five years as follows: 1 Construction of new crude exportation facilities in the Northern and Southern tank farms and at Mina Al Ahmadi and tanker fuel

IRAN THREATENS TO STOP GULF OIL IF SANCTIONS WIDENED TEHRAN: Iran threatened to stop the flow of oil through the Strait of Hormuz if foreign sanctions were imposed on its crude exports over its nuclear ambitions, a move that could trigger military conflict with economies dependent on Gulf oil. Western tensions with Iran have increased since a November 8 report by the UN nuclear watchdog saying Tehran appears to have worked on designing an atomic bomb and may still be pursuing research to that end. Iran strongly denies this and says it is developing nuclear energy for peaceful purposes. Iran has defiantly expanded nuclear activity despite four rounds of UN sanctions meted out since 2006 over its refusal to suspend sensitive uranium enrichment and open up to UN nuclear inspectors and investigators. Many diplomats and analysts believe only sanctions targeting Irans oil sector might be painful enough to make it change course, but Russia and China big trade partners of Tehran have blocked such a move at the UN. Irans warning came three weeks after EU foreign ministers decided to tighten sanctions over the UN watchdog report and laid out plans for a possible embargo of oil from the worlds No 5 crude exporter. If they (the West) impose sanctions on Irans oil exports, then even one drop of oil cannot flow from the Strait of Hormuz, the official Iranian news agency Irna quoted Irans First Vice President Mohammad Reza Rahimi as saying. The US State Department said it saw an element of bluster in the threat but underscored that the US would support the free flow of oil. Its another attempt to distract attention away from the real issue, which is their continued non-compliance with their international nuclear obligations, spokesman Mark Toner said.

PRIME THE PUMP AND BAILOUT THE BRENT Phil Flynn Oh sure, now you go and bail out Europe and drive the Brent Crude versus West Texas Intermediate spread back above $25 wide! Brent crude gets pumped up as global central bank pumps dollar liquidity in to European banks. The reduced risk of bank default and kicking the Greece default can further down the road had the Brent crude supply demand fundamentals tightened in a minute. The decision of the five largest central banks to dump dollars into European banks added to the support for oil but created fears of a tightness of supply in the Brent. Weak production from the North Sea and conflicting reports on the return of Libyan crude seems to be adding to the Brent woes. There is some short term confidence coming out of the Euro zone and this will increase demand or at least expectations of demand almost instantly. The spread between Brent crude and West Texas had previously come in, especially after U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum reserve) fell by 6.7 million barrels which put US supply at 346.4 million barrels which is still well above the five year average. Robert Campbell of Reuters News says writes, "Looking back at the impact of the Libyan civil war on the oil market the most remarkable fact is that the situation did not lead to an oil super-spike. After all, a scramble for sweet crude in 2007 is widely seen as the trigger for the spiral in oil prices until they hit nearly $150 a barrel. Although the data are still coming in, it would appear that the


Atlantic basin refining sector is now more flexible, in part due to weaker demand and in part due to investments in new capacity. Sweet refiners may be suffering because of high crude costs, but the system as a whole is not breaking down." He goes on to say, "The resilience of the market is all the more impressive once the other supply disruptions to the European short-haul sweet crude market are considered. Normal decline of the aging fields in the North Sea is well known, as is the extraordinary sequence of problems at several important production facilities in the area. Less discussed is the reduction in crude oil production in Azerbaijan, an important supplier of very-low sulfur crude. Combined with the conflict in Libya a huge amount of sweet crude oil production was lost to European refiners, many of which rely on short-haul cargoes. In the first half of the year sweet crude output from Azerbaijan, Britain, Libya and Norway was 215 million barrels less than in 2010. With this number in mind, the response of the International Energy Agency to the crisis --a release of 60 million barrels of strategic stocks-- seems almost timid. Doubtless, the IEA would argue that the problems in Azerbaijan, Britain and Norway were not the classic supply disruptions the agency is meant to guard against." Mr. Campbell makes some great points and also provides justification for this year's earlier release of oil from the International Energy Agencies strategic reserves. That was a move that was criticized by many but now looks lke it was important to stop a super spike! We still feel the low for WTI oil is in for the year! Time to call me and open your account and get a trial to my daily trade levels. What are you waiting for? Just call me - Phil Flynn - at 800-935-6487 or email me at [email protected]. Get the "Power to Prosper" by tuning into the Fox Business Network where you can see me every day!

SEPT-QTR GDP GROWTH SEEN SLOWEST IN OVER 2 YEARS Mon, Nov 28 2011 REUTERS FORECAST - The Indian economy probably grew an annual 6.9 percent in the quarter through September, at its weakest pace in more than two years, the median forecast from a poll of 22 economists showed. Gross domestic product (GDP) growth in Asia's third-largest economy slipped from 7.7 percent clocked in the previous quarter, dragged down by the central bank's 13 interest rate increases in the past 18 months to contain near double-digit inflation and faltering global growth. The forecasts ranged from 5.6 percent to 7.5 percent. The last time the economy grew at sub-7 percent was in the quarter through June 2009, when western economies were stepping out of the global financial crisis of 2008. FACTORS TO WATCH * India's industrial output grew by a meagre 1.9 percent in September from a year earlier, the slowest pace in two years. * The Indian services sector contracted at its fastest pace in over two years during October, knocked by a slump in global demand and tight monetary policy. * The partially convertible rupee hit a record low of 52.73 against the U.S. dollar on Nov. 22, as investors fled risky assets and its recent weakness is expected to spike India's import bill and in turn, push up prices. * The Reserve Bank of India may hold rates in its December policy review as growth risks from a slowing economy and a fragile global economic environment take centre stage. It had said in the October review that further rate increases may not be needed, if inflation starts to ease from December.


* Indian exports in October probably slowed to just over 10 percent from a high of 82 percent in July, reflecting risks to growth coming from the euro zone beset with sovereign debt woes. MARKET IMPACT * Government bond yields are likely to ease if GDP growth slips below 7 percent, traders said, adding the new benchmark 10-year bond yield could trade in a 8.70-8.75 percent range. * The short-term overnight indexed swaps (OIS) rates are also likely to fall, and the one-year rate is seen trading around 8 percent, traders said. * If the number comes around 7 percent or a tad higher, the markets are likely to shrug it off, traders said. (Reporting by Deepti Govind; polling by Bangalore polling unit; editing by Malini Menon)


NEWS LOCAL

INDIAN OIL CORP TOPS FORTUNE INDIA 500 LIST; RIL AT SECOND SPOT

Published: Monday, Dec 12, 2011, 19:37 IST :: Place: New Delhi | Agency: PTI : State-run Indian Oil Corp has emerged as the country's biggest company in terms of annual revenue, followed by Mukesh Ambani-led private sector giant Reliance Industries at the second place, as per an annual list of Fortune 500 companies in India. This year's list of the country's 500 largest corporations, compiled by the global business magazine Fortune's Indian edition, features as many as 57 new entities. All the 500 firms together recorded a collective turnover of Rs45,79,911.38 crore in the latest financial year. Indian Oil Corp (IOC) was the biggest with annual revenue of Rs3,23,113.12 crore, followed by Reliance Industries (RIL) with a full-year revenue of Rs2,72,923.36 crore. Both IOC and RIL have retained their top-two ranks from the previous year, Fortune India said. In this year's list, the two are followed by Bharat Petroleum (Rs1,56,580.12 crore) at the third and State Bank of India (Rs1,47,843.92 crore) at the fourth place. Other entities in the list are Hindustan Petroleum (5th rank), Tata Motors (6), Oil & Natural Gas Corp (7), Tata Steel (8), Hindalco Industries (9) and Coal India (10).There are as many as six state-run companies in the top-ten positions, as against four from the private sector. The magazine said that the total sales of the country's 500 top corporations have grown by 21.5% from the last year, while their median growth has been even higher at about 25%. "The good news, however, is that many of the Fortune India 500 companies are now beginning to shape the world's opinion of India for the better. And they may just be doing a better job than their Chinese counterparts," it added. However, Fortune India said, some hint of impending trouble can be seen in profit growth, which has fallen from 27.1% last year to 21.6% this year."For most of the Fortune India 500 companies, erosion in profitability has been severe. This is evident from a low 6.4%profit growth for a median-sized Fortune India 500 company. "These could be early signals of a deterioration in financial ratios, with all sizes of companies reporting a slower growth in their networth and asset creation," Fortune India said about the list. Companies have been ranked by their latest annual audited total income for the financial year ending on or before June 30, 2011.For the ranking, audited results declared before October 31, 2011, have been used. Other companies in the list include ICICI Bank (12th spot), Bharti Airtel (13), Essar Oil (15), Bharat Heavy Electricals Ltd (17), Infosys (27), Reliance Communications (35) and Tata Power (40).

VEDANTA COMPLETES CAIRN INDIA DEAL Published on Thu, Dec 08, 2011 at 15:56 | Source : Reuters Vedanta Resources Plc completed its long-delayed USD 8.7 billion purchase of a majority stake in Cairn Energy Plc's Indian unit, more than a year after the deal was first announced, in a move that turns India-focused Vedanta into a diversified resources group. London-listed Vedanta now holds 58.5% of Cairn India , it said on Thursday, of which 20% is held through its Sesa Goa unit. Cairn Energy, which will retain a 22% stake in Cairn India, confirmed it would return around USD 3.5 billion to shareholders. Cairn Energy agreed in August last year to sell a majority stake in Cairn India to Vedanta. But the sale, one of the largest in India's energy sector, was delayed for months due to a disagreement over royalty payments.


"Today marks a key milestone for Vedanta as it puts to bed a deal drawn out for well over a year that has contributed to underperformance on fears of deal terms uncertainty and balance sheet stress," analysts at Liberum said in a note. "Oil has been a solid performer over the course of 2011 ... we see the Cairn India inclusion as the key factor in repairing Vedanta's balance sheet and boosting bottom-line performance."

ONGC TO SUPPORT IN DOUBLING CAIRN'S CAPACITY: ANIL AGARWAL Published on Thu, Dec 08, 2011 Moneycontrol.com Anil Agarwal, Chairman of Vedanta Group is breathing a sigh of relief after16 months labour. Vedanta today finally acquired a controlling stake inCairn India , 16 months after announcing this proposed transaction. In an interview to CNBC-TV18, Agarwal said that the group is going gung ho on Cairn and has all infrastructure to double its production. He, however, points out the group has to complete certain government formalities before ramp-up. On a very confident note, Agarwal says, " ONGC is going to fully support us in doubling capacity." Cairn energy, which had in July sold a 10% stake in Cairn India to Vedanta for about USD 1.4 billion, got another USD 4.1 billion from the sale of the remaining 30%. Vedanta group now holds nearly 60% in Cairn India and Cairn Energy has retained 22%. The Vedanta group funded 50% of this USD 8.67 bn deal via debt and remaining 50% from its own resources. Here is an edited transcript of his interview with CNBC-TV18s Shereen Bhan. Also watch the accompanying video. Q: Its been over a year that you have been labouring to get this deal done. You finally got this done. How relieved are you feeling today? A: I am feeling great. I was always confident that this is going to go through. This is a question of energy security of our country. We only produce 14% of our oil. Even China produces 50%. I am looking forward to double Cairns capacity and making it a very important for the oil and gas area to make more discoveries. Q: You talked about doubling the capacity at Cairn India and this has been a long-standing issue. It was held back on account of differences with your partner ONGC, all sorts of other clearance issue and regulatory approvals. Now that everything seems to really have been put behind you, how soon do you believe you are going to be able to hike production at Cairn? A: Very soon. We have the entire infrastructure. We have certain formalities to complete. Of course we have to take the permission of the government and which we are working on it. ONGC is going to fully support and we will start as soon as all the clearances. Q: So, what is the initial estimate? By when do you actually believe you are going to be physically hike the production and by how much? A: We believe that we can go up to 240 thousand barrel probably in 2012-2013. Q: Now going to be a net debt company and atleast you will be net debt company for the next two to three years. So far that hasnt been the case. Is there any plan to raise equity at the Vedanta level? A: Not at all, we are gearing below 40% which is very comfortable. We have enough dividends down the line in the company to throw the dividend to service all our debt. Out of the total, we have put 50% of our own money to acquire Cairn and the rest is funded through debt. W are very comfortable about it and have no plan to raise equity.


Q: You have no plans to raise equity, but you also talked about dividend. Cairn India has not had a history of paying any dividend. Is that going to change now with you being the new owner. Are we actually going to see a dividend policy by Cairn? A: Absolutely, you said it. There will be a dividend policy, which the Cairn India management will put through the board because there was no production.. They have very good cash flow and surplus and they will be proposing for the dividend in coming year. Petronet LNG Output FY 12 at 11m tonne; may rise in FY13: Published on Fri, Dec 09, 2011 Moneycontrol.com RK Garg, director of finance at Petronet LNG tells CNBC-TV18 that he is happy with the deal that LNG has got with GDF (GAZ de France) at 13-14% of crude price. Supply is likely to start in 2012, he says. Garg sees spot prices softening for crude. Below is the edited transcript of the interview. Also watch the accompanying video. Q: There are some rumors in the market that the Petroleum and Natural Gas Regulatory Board (PNGRB) has actually initiated discussions to put a control on marketing margins. Have you heard anything in this regard? A: No, I dont think so. As per the adjusting regulation of PNGRB, they have the right to register the RLNG terminal, but as far as the regulation of that part is not there, it is not happening. We had neither received any communication nor has there been any information with us that there is anything happening on that account. Q: What would your marketing margin be? A: Basically, we are doing the regasification for long-term cargo, and the regasification charge is a likely charge as per the contract. In addition to that, when we bring away spot cargos, those spot cargos depend on a particular market situation, and accordingly, small marketing margins are added. Since we take a call at that particular time based on risk at that time, these are not very big margins. However, since there is a spot deal, and depending upon where we are buying and where we sell, we have small margin on that. Q: Whats your sense on pricing? You recently signed a deal with GAZ de France (GDF) at 13-14% of crude. The recent deal at Taiwan and Qatargas happened at 15%. You have had a lot of spot cargos selling at 17 per mmbtu. What do you think is the pricing trajectory for LNG? A: There are different markets for different kind of cargo. If you are buying spot cargo, the spot prices are applicable at that particular point of time, and when we deal for a short-term cargo, like you have mentioned for GDF, yes, of course we had a good deal. Supply will be coming in 2012; its a very good deal in this current market. Yes, of course, these LNG suppliers are looking for prices linked with crude, and those are ranging between 14-15%. So there are different prices, but we have seen over the last few days that the spot market is softening up. We are hopeful that maybe we will be able to get some better deal in future. Q: What kind of volumes are you expecting to do in second half of FY12, but more importantly FY13? A: We are operating currently in more than 100% of capacity. In fact, last November, we even touched 105-108%. There is a limitation up to which we can stretch ourselves and we cant go beyond this. Yes, we are bringing our second LNG jetty, which is likely to be commissioned sometime in October 2013, then there is a possibility that we will increase our output from our existing terminal probably by 12-12.5 million tonne. Currently, we cant go beyond 11 million tonne. Q: Whats your expectation on total volumes in the 3rd quarter? How may spot cargos have you already done and would you be looking at a capacity utilization of somewhere around 110% this time?


A: We will be definitely doing the capacity at the same level as we have done in the first half. I think we will operate at this level, maybe a little bit better. The market is good and we have already tied up the cargos for the next half year. As far as capacity is concerned, if our input and the output remain quite constant, then we can do better, but the market conditions actually work differently. We are hopeful that we will be able to manage our output very close to what we have done in the first half and better hopefully. Q: You are sitting on a decent amount of cash. Will you want to lower debt or for that matter plan more expansions? A: Actually, we have lowered the debt. We have done early repayment of Rs 500 crore to our inland lender last month. Yes, of course there is a possibility. Q: So whats the debt now? A: Our debts are quite low. The Debt-equity ratio is more or less 1:1. So we are very comfortable. Q: Any word on the possibly the Gaz-prom deal? Any deals in the works that you would be signing soon? A: Yes, we are discussing. Actually, a long-term deal generally takes a longer time, and the Gaz-prom in any case, they are going to supply from their new facility which they are creating. So supply would commence sometime in 2016-2017, so we have plenty of time. This Memorandum of Understanding (MOU) was signed nearly six months ago and now we are in discussion with them with respect to specific terms and conditions, so matter is moving positively. And of course, we will continue to raise certain rates as the market would need more gas and we are ready with our capacity. INDIA'S PETRONET TO COMPLETE DAHEJ LNG TERMINAL EXPANSION TO 15

MIL MT/YEAR BY DEC 2015 Mumbai (Platts)--14Dec2011/150 am EST/650 GMT India's Petronet LNG has received approval from its board to raise the capacity of its LNG import and regasification terminal at Dahej to 15 million mt/year and expects to complete the expansion by December 2015, R.K. Garg, the company's finance director said Tuesday. Work on the expansion has begun, though formal approval from the board came through just on Monday. The Dahej terminal in the state of Gujarat, west coast of India, has been consistently operating above its nameplate capacity of 10 million mt/year with the utilization rate averaging 105-108% over the last two quarters. Global demand for LNG continues to be strong and two buyers -- utilities GAIL and Gujarat State Petroleum Corp. -- have committed to take part of the increased supply from the Dahej terminal following the expansion, Garg said, without providing further details. The terminal's nameplate capacity is likely to increase to 12.5 million mt/year by October 2013, when it commissions its second jetty, Garg said. Petronet will also add two storage tanks at the terminal with completion expected by December 2015, he added. The cost of expansion is estimated at Rupees 30 billion ($565 million) and the company plans to raise around Rupees 21 billion through domestic or overseas debt just before it awards the engineering, procurement and construction contracts, Garg said.


Petronet LNG is also working on setting up a 5 million mt/year LNG terminal on the east coast and is likely to finalize a location by the end of January 2012, he said. Meanwhile, it is in the process of setting up a 5 million mt/year greenfield LNG terminal at Kochi, on the west coast, likely to be commissioned by the fourth quarter of 2012. The company is also looking for a minority stake in LNG and natural gas companies overseas, including the US, mainly to ensure LNG supply, Garg added. "Our main objective is to get committed LNG supplies. But these plans are not at a stage right now to be discussed," he said. The major shareholders in Petronet are state-owned GAIL, Oil and Natural Gas Corp., Indian Oil Corp. and Bharat Petroleum Corp., each with 12.5% equity. France's GDF holds a 10% stake and the Asian Development Bank 5.25%, with the public holding the remaining 34.8%. --M.C. Vaijayanthi, [email protected] Similar stories appear in Oilgram News. See more information athttp://www.platts.com/Products/oilgramnews

INDIAS TOP ECONOMIC ADVISER: DIESEL DECONTROL WOULD CURB INFLATION

Indias chief economic advisor Kaushi Basu announced November 4 that the government ought to decontrol diesel prices in order to cut government fiscal deficits and (as a consequence) suppress inflationary pressures. I personally believe that we should decontrol diesel prices, which will take some pressure off the fiscal burden. And in the long run, it will cause inflation to go down, Basu said in an interview with Express India. The government needs to explain to voters that if we subsidize diesel artificially, by running up a large fiscal deficit, that would also exert an upward pressure on prices, he added. In September, Indias inflation was measured at 9.72%, according to the report. Indias oil companies raised gasoline prices last week, as allowed by government policy, but the government still doesnt allow price freedom on diesel, kerosene on liquefied petroleum gas (LPG). Earlier this month, Petroleum Minister S Jaipal Reddy has sought a meeting of the Empowered Group of Ministers (EGOM) to devise ways to cut the mounting losses to oil [refining and marketing] companies due to the pricing of diesel, domestic LPG and kerosene as oil companies. Prices of the cooking fuel and diesel were last revised in June, according to the report. Basu, who also heads a Prime Minister-appointed panel on inflation, said deregulating diesel prices will make India a more responsible country environmentally, because then we will not encourage over-consumption of diesel vis--vis other more environment-friendly energy substitutes, according to the report.

HOME GROWN INDIGENOUS INNOVATIONS Sujit John, Times of India| Nov 29, 2011 He learnt from his father early on that many challenging intellectual tasks could be accomplished by people who do not have major academic degrees. So in 1990, after an MA in economics from JNU in New Delhi and an MBA from Wharton, when Aroon Raman wanted to start an R&D unit in


Mysore, he turned to very ordinary people. Youngsters from the villages around Mysore who had only completed standard 10 or 12, or had a diploma. Today, Raman runs a Rs 25-crore business that does materials and composites research, and manufactures materials for companies like ABB, Rane, Exide, Amco, and for institutions like the Defence Research & Development Organization (DRDO). "They have become masters in the manipulation of materials," Raman says of the youngsters he hired. "They may not be masters in theoretical chemistry. But they do experiments that run into hundreds. A smart youngster doing experimental work for years and years picks up a fantastic feel of the interrelationships between compounds. So, he has an instinctive feel of what is required to solve a problem. People always think of an R&D unit as white-coated folks with PhDs, but that doesn't have to be." Today, his head of R&D, G K Natesh, is someone from Udipi with a polytechnic diploma in plastics and rubber. Krishnachari, who joined Raman early, was a carpenter in Nanjangud near Mysore. His used to make crates. Raman saw that the way he sawed, he used the minimum amount of wood. "That was application of thought. His ability to envisage how a crate would look was high." So Raman picked him and trained him. He started with drawings, later did tooling, and over the years Krishnachari has been key to the development of many value added products. "Among my other top people are Girish and Krishna, both of who have passed no more than class 12. They are in their mid-30s now and they have filed four patents between them this year." Raman looks for locals with a sense of curiosity, high IQ and native intelligence. Some youngsters grasp very quickly, others take time. Raman picks the exceptionally bright ones. And this strategy keeps costs and attrition low. "If we hired PhDs, we wouldn't be able to retain them. A GE or Akzo Nobel or Dupont could come and take them. Or they would go for post-doctorals. Since my boys are from local villages, their parents are around, and they have no incentive to move. But I send them to events in places like Mumbai to open their eyes to bigger things." Raman's firm Raman FibreScience has multiple capabilities in the area called wet-laid composites. Normal papers, tissue paper, cardboard are all made by a wet-laid process. In wet lay, you take a fibre, mix it with water and additives, and run it through a mesh-like conveyor belt. When the slurry moves along the mesh, the water runs off, and you are left with a wet mass on the belt, which is then dried, and made into the final product. You can also wet-lay glass, carbon fibre and organic fibres. When you do that and combine them with performance additives, you can get very special products, such as high-end filtration solutions. These can give you very pure air or be used for blood filtration, or in a nuclear power station that requires air filters that must trap very fine particles, including bacterial content. Raman's firm grew out of his conviction that there is scope for a full-service independent R&D unit, a rarity in India. Most Indian companies do their R&D in-house, occasionally approaching universities for help. Indian research institutions like CSIR typically do not have the ability to commercialize their research. "I can make a material in a lab, but how do I start making it in tonnes, at a cost that the market will accept? For that, you need to build special purpose machines, you need a host of skills, engineering skills, plant development skills, process skills, costing ability." Raman FibreScience combines these skills. The company has had particular success with a unique separator (filter) developed for backup power batteries. "We developed the separator in 2-3 years; a global company like Nippon Sheet Glass still does not have such a product. For us it is innovate


or die. We don't have deep pockets, so we have to be on our toes. For Nippon, they are so big, even if they do not innovate, they think they will survive," Raman says.

VEDANTA APPOINTS 3 DIRECTORS ON CAIRN INDIA BOARD Close on the heels of completing acquisition of Cairn India, London-based mining group Vedanta has appointed three nominees, including its vice chairman Navin Agarwal and Priya Agarwal, on the company board. Billionaire Anil Agarwal, Chairman of Vedanta Group, has decided to stay away from Cairn India and has in stead put his brother Navin as the head of the company. His close confidant Tarun Jain and daughter Priya Agarwal will be the other nominees on the company board, Cairn India informed the stock exchanges today. "This is to inform you that post the sale of majority shareholding by Cairn UK Holdings Limited to the Vedanta Group, the Vedanta Group Companies, i.e. Twin Star Mauritius Holdings Limited, Sesa Goa Limited and Sesa Resources Limited are the new Promoters of the Company," Cairn India said in a regulatory filing to the stock exchanges. "Consequent to this change, the Board of Directors has today appointed Navin Agarwal, Tarun Jain and Priya Agarwal, as Additional Directors on the Board of Cairn India Limited. Navin Agarwal has also been appointed as the Chairman of the Board," it said. Bill Gammell, Chairman of Cairn Energy plc, which sold 40% of its stake to Vedanta Group, has resigned as Chairman of Cairn India. Jann Brown, the other nominee Director of Cairn UK Holdings Limited, too has quit. Cairn Energy, which still holds 22% stake in Cairn India, will not have any representative on the company board. "All the existing independent Directors and Rahul Dhir, Managing Director & CEO will continue to be Directors of the Company," Cairn India said. The four independent directors on Cairn India board -- Omkar Goswami, Ed Story, Aman Mehta and Naresh Chandra -- will continue on Cairn India board.

RAIDING PSU RESERVES UNSUSTAINABLE WAY OF PLUGGING BUDGET DEFICITS

The fiscal deficit looks like widening by at least one percentage point above the budgeted 4.6% of GDP. Economic growth could slow down next year. Meanwhile the government has ambitious but expensive new schemes in mind, for food security and universal health. So, many analysts want the government to take advantage of tens of thousands of crores lying in the reserves of public sector undertakings (PSUs). When a private sector owner is in trouble, without a second thought he transfers sums from profitable companies to meet his current spending. Many analysts think the government should do the same. However, such transfers are one-off affairs and cannot be sustained over time. They can be justified in difficult times, but should not become a habit. Spectrum sales have in the past been taken to be current revenue, whereas they should actually be shown in the capital account as a reduction of assets. In the case of manufacturing PSUs, their cash surpluses are not large in relation to their investment plans, and these should not be commandeered by the government. But many PSUs in mineral extraction have large, rising surpluses well in excess of investment needs. It makes sense to save part of this for future generations by investing abroad (as ONGC, Coal India and OIL have been doing) and spending part of it for current social purposes via the


budget. We need a policy on how to apportion that bonanza. There are three ways in which PSU reserves can be transferred to the government. One is the declaration of huge special dividends. The second is a buy-back of shares by the PSU. The third is for PSU to use their surpluses to buy out minor stakes of the government in other PSUs. A special dividend will benefit all shareholders. A buy-back could in theory be restricted to buying back government stakes and not publicly-held stakes, but that would be unethical and Sebi should say no. The third route also cuts out private shareholders and should be avoided altogether. Better than all these will be quick enactment of a goods and services tax, which can bring in additional revenue and plug the fiscal deficit sustainably.

CRUDE, RUPEE DOUBLE WHAMMY HITS OIL COMPANIES Murali Gopalan ...from the pages of HINUD BUSINESS LINE newspaper. The fear within oil industry circles is that if the status quo persists over the next six months, there will be serious liquidity issues which could affect daily operations. Mumbai, Dec. 14: Oil companies are wilting under the double whammy of the weakening rupee and high crude prices. It is just not the losses on sale of subsidised fuels which are an area of concern. Combined borrowings of IndianOil, Bharat Petroleum Corporation and Hindustan Petroleum Corporation are rapidly inching towards Rs 140,000 crore. At this rate, they could even touch Rs 160,000 crore by the end of this fiscal. What is especially worrying is the complete sense of inaction by the Government. With Parliament in a permanent state of disarray, we are expected to fend for ourselves in these difficult times, an oil sector official told Business Line. Things have come to such a head that the companies are believed to be in no mood to comply with advance tax payments or the mandatory interim dividend to the Government, their owner and majority shareholder. How can we possibly be expected to cough up money when there are no profits to show? the official asked. The fear within oil industry circles is that if the status quo persists over the next six months, there will be serious liquidity issues which could affect daily operations. In the process, bigger and more critical investments relating to infrastructure will be put on hold. This is happening at a time when the estimated spend of IOC, BPCL and HPCL over the next four years is nearly Rs 200,000 crore. The other concern for the refining trio relates to policymaking, which has literally screeched to a complete halt. Nobody within the Government has a clue on what to do at a time when the oil companies are facing their worst-ever crisis in recent times. All we can do is to borrow more and more because we have no idea if we will get any compensation for losses incurred. The interest burden is gradually killing us in the process, an executive said. In contrast, 2008-09 almost seems sedate though this period is better remembered as the worst year for the oil industry when crude touched $147 a barrel. The rupee was not in the best of health either except that this state of affairs did not last too long. During the latter part of the year, crude prices started falling and the rupee settled to a more comfortable mid-40s (to the dollar) level. Crude prices However, this time around, crude prices have been constantly over the $100/bbl-mark and there is nothing to suggest that they will fall

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