Article: Saudi Aramco plans to enter Indian oil sector, eyes 30% stake in OPaL Project

Big news as Saudi Aramco is planning on entering the Indian oil and gas sector.  Saudi Aramco is obviously the dominant global player in the production of oil so its presence within Indian borders, and in a major project, is likely to shake up the sector and challenge market norms.  It’s certainly something to watch with intent, and domestic stakeholders and professionals will be wise to be proactive if the proposal is successful.

NEW DELHI: The world’s biggest oil producer, Saudi Aramco, plans to acquire up to 30% stake with a key management role in a giant petrochemicals project in Gujarat, and is negotiating with ONGC Petro additions Ltd (OPaL) for the stake that can pave the way for the behemoth’s entry into the Indian oil and gas sector.

The proposed deal, currently at an advanced stage, will be mutually fruitful as Middle-East oil suppliers are looking for closer links in large Asian markets, with the American continents likely to depend less on crude oil imports as domestic shale production and deep-sea oil and gas output pick up.

Aramco also aspires to be a world leader in chemicals and is partnering Dow Chemicals in a $20-billion venture to build the world’s biggest petrochemicals complex in the east of the kingdom. It partners Exxon, Total and other firms in refining and chemicals ventures too.

For India, investment in the Rs 19,500-crore project by the Saudi behemoth will come as a shot in the arm for the business climate, which has suffered as the rupee has tumbled, markets have crashed and foreign investors are jittery.

Saudi Aramco, which has 54,000 employees across 77 countries, is held in awe by the global oil industry as it pumps a staggering 9.5 million barrels per day (bpd), or eight times the capacity of Reliance’s Jamnagar complex that processes 1.2 million bpd.

“Saudi Aramco is likely to pick up a significant minority stake between 20% and 30 % in OPaL and will become a strategic investor in the company,” a person close to the deal told ET.

This would be the first equity investment by the Saudi major, which virtually dominates the global oil market

The Gujarat project, likely to be completed by 2014, is being funded with a debt-equity ratio of 60:40.

Deal to Boost Business Climate

It needs a debt of about Rs 12,000 crore and equity capital of approximately Rs 8,000 crore, another person familiar with the deal said.

“However, Saudi Aramco has in principal agreed to pay significant premium to become the partner in the JV that was started in 2006,” he said. The proceeds will be used to fund the completion of the project.

“The proposed transaction will be completed through fresh issue of shares by OPaL and resources mobilised through this route will be used to complete the project, which is expected to be commissioned in the second half of 2014,” said another person.

ONGC and OpaL did not respond to ET’s queries while Aramco said it would not comment on “speculation”. However, executives in the domestic and international oil industry said talks were on but the deal was yet to be concluded.

Saudi Aramco’s proposed entry into India and joining hands with state-run ONGC in an equity alliance are significant developments for India’s hydrocarbon sector, which has also attracted global majors BP and BG. According to an industry veteran in India, ONGC is currently involved in multi-level discussions in various hydrocarbon sectors with Saudi Arabia. “Aramco is also looking at entering Indian markets through co-operation in oil and gas sectors,” he said.

Aramco has already invested in other major Asian markets such as China, where it has a joint venture for refining and petrochemicals with Sinopec and ExxonMobil. It also has similar business interests in other Asian countries such as Korea, Vietnam and Indonesia.

ONGC is the lead promoter of OPaL while GAIL and Gujarat State Petroleum Corp (GSPC) are the other partners of the joint venture. Currently, ONGC owns 26% while GAIL has 19% and GSPC 5%. Since Indian promoters are looking for a strategic partner, they have not yet frozen the paid-up capital of the JV, said one of the sources.

Prior to the ongoing negotiations with Aramco, ONGC was negotiating with Kuwait Petroleum. However, the discussions were called off due to differences over price, people familiar with the development said. “At a country level, ONGC was interested in forming equity alliance with one of these Gulf countries – Saudi Arabia, Kuwait and Qatar – as they have a long-term association with India,” said the official.

By Arun Kumar – The Economic Times

The full article is visible via the link below – By Pankaj Oswal

http://economictimes.indiatimes.com/news/news-by-industry/energy/oil-gas/saudi-aramco-plans-to-enter-indian-oil-sector-eyes-30-stake-in-opal-project/articleshow/22079410.cms

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Article: Taiyo Oil picks UOP technology to improve flexibility at Japan petrochemical plant

In an encouraging sign for reform of petrochemical production, Japanese company Taiyo Oil has adopted UOP and its Tatoray processTatoray is widely professed as a positive solution in cost-efficiency, speed and flexibility and is a system to look out for.

Honeywell’s UOP has been selected by Japan’s Taiyo Oil to supply technology and catalysts to improve operational flexibility and increase petrochemical production at the Shikoku complex in Ehime, Japan.

The plant will install UOP’s Tatoray process technology to allow it to boost yields of certain petrochemicals by more than 70%, and give the plant more flexibility to produce petrochemicals or gasoline as demand changes.

“Demand for petrochemicals in Asia is growing, while gasoline demand is expected to decrease due to stricter fuel specifications and increased demand for fuel-efficient vehicles,” said Pete Piotrowski, senior vice president and general manager of UOP’s process technology and equipment business.

“The Tatoray process will significantly increase mixed xylene and benzene production, allowing Taiyo to respond to the region’s growing petrochemical demand, and it will give them the operational flexibility to also produce high-quality gasoline as needed,” he added. “We look forward to continuing our longstanding relationship with Taiyo as we work to complete this project.”

UOP noted that it has worked with Taiyo for nearly 30 years, and has provided almost all of the process units for its Shikoku site.

The new Tatoray unit is expected to produce 300,000 tpy of mixed xylene and high-purity beneze, which will require no further processing. The unit is expected to start up in 2014.

The Tatoray process converts toluene and C9 aromatics to mixed xylenes and high-purity benzene without the need for sulfolane extraction, according to UOP officials. The process can more than double mixed xylene production from a given naphtha feedstock, while significantly reducing the overall cost of production, making it one of the most economical ways to increase xylene and benzene yields in an aromatics complex.

UOP says the latest-generation Tatoray catalysts have also demonstrated superior activity and stability in multiple commercial applications. These catalysts enable higher on-stream efficiency with minimum cracking and the lowest hydrogen consumption for petrochemical-grade benzene and mixed xylene production.

As of 2013, UOP has licensed more than 95 aromatics complexes, including 60 Tatoray units.

The full article is visible via the link below – By Pankaj Oswal

http://www.hydrocarbonprocessing.com/Article/3240914/Latest-News/Taiyo-Oil-picks-UOP-technology-to-improve-flexibility-at-Japan-petrochemical-plant.html

Article: Petronas to delay $19 billion petrochemicals project to 2018

Reuters has reported that Petronas will be delaying the commencement of its USD$19 billion Malaysian petrochemicals project until 2018.  This will be second delay announced for the project and it is looming as a bit of an awkward scenario, made worse by the fact that this is slated to be Malaysia’s largest-ever infrastructure project.

(Reuters) – State oil firm Petronas PETR.UL will start up its $19 billion petrochemicals complex in Malaysia in 2018, the company told Reuters on Tuesday, signaling a further delay in the country’s largest-ever infrastructure project.

A delay to the project in southern Johor state could deal a potential blow to the economy of the Southeast Asian nation as well as local oil and gas services firms hoping for work on the massive complex.

A source familiar with Petronas’ business strategy told Reuters the project had been complicated by a need to secure water supplies as well as cater for proposed international partners.

Petronas had already put back the project from late 2016 to early 2017 in June and revised the final investment decision (FID) to the first quarter next year, citing state government problems in relocating villages and graves from the 2,000 hectare-site, five times the size of New York’s Central Park.

“As a result of the revised FID date, the RAPID refinery is scheduled to be ready for start-up in Q4 2017 and the remaining plants within the complex is scheduled to be commissioned in 2018,” Petronas said in a statement to Reuters on Tuesday.

This is at least six months later than market expectations after local media had cited Petronas CEO Shamsul Azhar Abbas in June as saying the start date for phase one of the RAPID project had been pushed back to early 2017.

BIGGEST INVESTMENT

Delays in the project – a cornerstone of Prime Minister Najib Razak’s Economic Transformation Programme aimed at doubling Malaysians’ incomes by 2020 – could slow an economy whose oil and gas sector makes up a fifth of GDP.

The complex is the largest single investment in Malaysia, and aims to grab a chunk of the $400 billion global market for specialty chemicals used in products from LCD televisions to diapers.

Its location at the southernmost tip of the peninsula, just 10 km (6 miles) from Singapore’s east coast, is part of a vision for a “Greater Singapore” energy trading hub that would rival competitors such as China.

“This massive project is getting more complicated as we move forward,” said the source, who declined to be named as he was not authorized to speak to the media.

“We will need to spend to secure the water supply and now parts of the project may need to be redesigned to cater for incoming project partners,” he added.

Petronas, Malaysia’s only Fortune 500 company, has signed heads of agreements with Italy’s Versalis SpA, Japan’s Itochu (8001.T) and Bangkok-listed PTT Global Chemical PTTGC.BK to build speciality chemical plants.

Germany’s Evonik (EVn.DE) also stepped in to the project after rival BASF (BASFn.DE) – the world’s top chemicals group – pulled out after differences in business strategy.

NOT SO RAPID?

Petronas unveiled the Refinery and Petrochemicals Integrated Development (RAPID) project in May last year. The plan was to construct a 300,000 barrel per day refinery, which would supply naptha and liquid petroleum gas to the chemical plants and produce gasoline and diesel for European markets.

France’s Technip (TECF.PA) was awarded the front end engineering and design (FEED) contract, which was slated for completion in the second quarter of 2013. The financial value of the job was never disclosed.

Petronas will use the design specifications to reach a final investment decision, after which the major construction works usually begin. BNP Paribas (BNPP.PA) is the financial advisor for project financing.

The June decision to postpone a final investment decision to Q1 2014 knocked the shares of local mid-sized oil and gas services companies, and analysts said the latest delay could weigh on firms like SapuraKencana (SKPE.KL) and Wah Seong (WAHE.KL).

Petronas has yet to award the engineering, procurement and construction jobs, although preparation work for the site started on October 18.

It is expected to award about 20 construction job packages valued at about 2-3 billion ringgit ($620 million-$930 million) each, two other sources familiar with the company’s plans said.

The contracts for the refinery are expected to be awarded in November or December this year.

“Anyone with a license from Petronas will benefit, if they can meet the specifications,” said one of the sources.

“Delays just means the party starts a little late for some of these companies. These projects are generally complicated and can have a longer gestation period.” ($1 = 3.2260 Malaysian ringgit)

By Niluksi Koswanage and Yantoultra Ngui

Edited by Stuart Grudgings and Richard Pullin

The full article is visible via the link below – By Pankaj Oswal

http://www.reuters.com/article/2013/07/30/us-petronas-delay-idUSBRE96T07220130730