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ONGC Videsh to set up crude oil trading desk in Singapore
As part of a move to monetise its overseas hydrocarbon production, state-run ONGC Videsh Ltd (OVL) plans to set up a crude oil trading desk in Singapore. This comes in the backdrop of transporting crude oil to the world’s third-largest oil market posing a logistical challenge from some geographies. OVL has been exploring oil trading as a viable route to monetise its produce. Currently, it has been following the tender route, which is time consuming and also proves disadvantageous in terms of flexibility. An OVL spokesperson, in an emailed response, said, “In the long run, we intend to develop our own trading team to market our produced crude to maximise benefit to the company. It might be located in Singapore.”
OVL recently signed a pact with SOCAR Trading SA for oil trading aimed at optimising crude price realisation from its portfolio. SOCAR Trading is the international marketing and development arm of the State Oil Company of Azerbaijan Republic (SOCAR), headquartered in Baku. The overseas arm of Oil and Natural Gas Corp. (ONGC) Ltd has built up a significant overseas energy portfolio of 37 projects in 17 countries with an investment of around $23.81 billion. It has also set a target to achieve 20 million tons (MT) by 2017-18 from the current 8.36 MT of oil and oil-equivalent gas. “We will be coming up with an oil trading desk at our subsidiary office in Singapore,” said a person aware of the development, requesting anonymity.
“The subsidiary office in Singapore was initially set up for Vankorneft transactions,” added the person quoted above. OVL acquired a 15% equity stake in Russia’s JSC Vankorneft from Rosneft Oil Co. in 2015 for $1.27 billion. In addition, OVL also plans to acquire another 11% stake in Russia’s second-largest field by production. This also comes in the backdrop of a fall in international crude prices, which has made oil-producing countries financially vulnerable. Russia is particularly at risk because it has to additionally cope with the impact of the sanctions imposed by Western nations.
Another state-run firm GAIL (India) Ltd opened a liquefied natural gas trading desk in Singapore in November 2011. “ONGC Videsh Ltd and SOCAR Trading SA signed a memorandum of understanding (MoU) on 27 May 2016 at Geneva. The objective of the MoU is to explore possibilities of joint marketing of ONGC Videsh’s crude oil portfolio by leveraging SOCAR Trading’s experience in oil trading,” OVL said in a 31 May statement. Experts think this is a prudent step as OVL can leverage Singapore’s advantage as a location. “Singapore is the trading hub and an established place for oil trading where the company can hire local experts and employ Indian experts as well. It is an apt place for setting up an oil trading desk because of its protected and transparent nature. Oil prices keep varying every minute; therefore, it is better to set this up at a place where both buyers and sellers are present,” said Ranbir Singh Butola, OVL’s former chairman and managing director.
Butola added that he was unaware of any such development. From its 14 producing assets, OVL has produced 4.137 MT of oil and 2.558 billion cu. metres of gas for the first nine months of financial year 2015-16. India imports one-third of its energy requirements. The country imported 202.85 MT of crude oil in 2015-16 for Rs.4.16 trillion. For 2014-15, India imported 189 MT of crude oil at a cost of Rs.6.87 trillion. Kwon Alexander Jersey
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