Reliance Industries seeks pricing, marketing freedom for CBM output
Private explorer Reliance Industries (RIL), which is targeting to start production of coal bed methane (CBM) from its Sohagpur (West) block in Madhya Pradesh in FY17, has sought marketing and pricing freedom for the commodity. Private explorer Reliance Industries (RIL), which is targeting to start production of coal bed methane (CBM) from its Sohagpur (West) block in Madhya Pradesh in FY17, has sought marketing and pricing freedom for the commodity. On May 17, petroleum minister Dharmendra Pradhan reviewed the CBM output in the country that is still lagging way behind targets with the output being a meagre one million standard cubic metres per day (mmscmd). The Mukesh Ambani-promoted firm wants the government to roll out the marginal fields policy, which was put in place by the Narendra Modi government last year, for the CBM blocks. “The CBM exploration is tricky and much more difficult than the marginal fields. The explorers are of the view that the absence of gas infrastructure and gas markets make the CBM projects more challenging. The blocks are situated in West Bengal, Jharkhand and Madhya Pradesh,” said an official, who took part in the minister’s review meeting. Other than RIL, the companies taking part in the meeting include Essar Oil, ONGC and GEECL, among others. In September last year, the Modi government introduced the revenue-sharing and uniform licensing models for 69 marginal fields. Of these, 67 fields would be put under the hammer on May 25. The developers of these fields will benefit from ‘market-determined prices’ sans any government interference. Moreover, the bidders for marginal fields are given the right to sell gas to customers of their choice, unencumbered by the government’s allocation policy. Currently, GEECL’s Raniganj (South) and Raniganj (East) held by Essar Oil are the only two blocks under production. The firms have informed Pradhan that CBM blocks are planning to spend nearly Rs. 90 billion in FY17 and FY18. This would help to ramp up the output to about 2.4-2.6 mmscmd from 1 mmscmd now. Of this, RIL has given projections to invest to the tune of Rs. 30 billion in Madhya Pradesh. Public sector explorer ONGC proposes to invest about Rs. 16 billion towards drilling CBM from Bokaro and North Karanpura blocks. The field development plan (FDP) for Bokaro has been approved by ONGC Board, said another government official. The PSU plans to spend Rs. Rs. 8.67 billion in the Bokaro block and the peak output is expected at 0.7 mmscmd. The block is envisaged to commence production from FY18. The FDP for North Karanpura block is still in works, where ONGC plans to invest Rs. 6-7 billion and achieve a peak output of 0.36 mmscmd. Ruias-owned Essar Oil has committed to spend nearly Rs. 26 billion to pump out more gas from its CBM blocks in West Bengal. Prada said about Rs. 100 billion have been invested in CBM in India. “By 2017, it is likely to contribute 5% of national gas production,” the minister said after the meeting. India offered 33 CBM blocks. However, 17 of them, or 50% of the blocks, have been relinquished. Though two other firms producing CBM — Essar Oil and GEECL — have a pre-approved price for their gas, RIL and ONGC would have to follow the natural gas pricing formula put in place by the government in October 2014. This means RIL and ONGC would have to sell CBM at $3.06/but, compared with more than $5-6/mBtu enjoyed by Essar Oil and GEECL. Keyshawn Johnson Jersey
Indian Oil working out review of diesel procurement for railways
Indian Oil Corporation (Indian Oil), the nation’s largest fuel retailer is working with Indian Railways on a proposal to cut down the transporter’s mammoth fuel bill through a review of its diesel procurement practices. The proposal by the railways includes importing crude oil and procuring refining capacity from Oil Marketing Companies (OMCs) on lease and cutting down diesel inventories by a third to mere five days. “We want to cut down our total diesel bill from around Rs 180 billion last financial year to Rs 165 billion this year. With that objective in mind, we are trying to work out a few ideas – sourcing crude on the High Seas basis, seeking refinery capacity for our use, and even cutting down inventory costs at the Railway Consumer Depots (RCDs),” a senior rail ministry official said. Business Standard was the first to report on March 4 the railway plan to review diesel procurement processes over zonal units as part of a larger reform drive. Railways has also floated a tender for selection of a consultant to identify alternate procurement strategies enabling the transporter to procure diesel at market linked prices. “These may include but are not limited to High Seas procurement of either diesel or crude (feasibility, taxation, logistic and process aspects, optimum nature (such as blocking refining capacity) and period of contract for improving price discovery with the Oil Marketing Companies (OMCs),” Indian Railway Organization for Alternate Fuel (IROAF) said in its Expression of Interest. High Seas procurement refers to a mode of transaction where the buyer sells his consignment to a third party during transit. A senior IOC official confirmed the development and said discussions have been going on for quite some time – on railways proposal to pay tolling charges to IOC for the refining capacity to be booked — and are yet to be finalized. He said IOC has set up a Joint Working Group of officials along with railways which is looking at the proposal and working out the modalities “in right earnest”. Some of the issues that need to be sorted out include the offtake. “The Railways can give us guaranteed offtake of diesel for their requirement if refinery capacity is booked as per plan. But what about other petroleum products which will be produced apart from diesel?” Besides, the railways procure diesel from oil companies at multiple locations across states. “The changed scenario may require modifications in inter-state transport of the fuel which would give rise to taxation issues. We plan to talk to the state governments on this subject,” the IOC official said. Indian Railways consume around 2.8 billion litre diesel annually at a cost of RS 180 billion – around 18% of Net Ordinary Working Expenses. The procurement price is governed by a rate contract settled through an open tender by the railway board. Through the contract with the OMCs, which is valid for a year, zonal railways place diesel orders on OMCs for supply at RCDs. The RCDs are built by OMCs but railways provides commitment to buy diesel through them for a fixed number of years. The depots maintain at least 7 days of inventory on an average, the cost of which is borne by railways. Ryan Shazier Authentic Jersey
Shell says will expand investments in India
Royal Dutch Shell Plc. will be committing further investments in India after its February merger with BG Group Plc., a spokesperson for the oil and gas company said. Shell has so far invested around $1 billion in its India operations. A Shell India spokesperson said by email, “We have a long history in India and have consistently looked to expand our investments. I can assure that our overall approach towards investment in India remains positive.” Shell announced its merger plans with BG Group in April 2015 and completed the same in February 2016. On Monday, Shell India announced the appointment of Nitin Prasad as its new chairman after Yasmine Hilton retires in September. Shell is one of the few international oil companies in India present in the downstream and midstream segments. With BG Group’s assets in tow, Shell becomes an upstream player too through the Panna Mukta and Tapti (PMT) oil and gas fields where Shell now partners Oil and Natural Gas Corp. Ltd (ONGC) and Reliance Industries Ltd (RIL). Shell holds a 30% interest in the mid and south Tapti gas fields and the Panna/Mukta oil fields, while ONGC holds a 40% stake and RIL 30%. Production from the PMT fields has been falling and Shell and its partners may have to invest around $1 billion to arrest it. Added to this will be extension to the production sharing contract (PSC) that the consortium has been seeking for the past few years. The PSC expires in 2019 and for further investments to be viable and attractive it would have to be extended by at least five years, an ONGC official said. “No decisions will be taken about specific locations where BG had operations until we have a good understanding of their potential. We look forward to entering into a close dialogue with the government about the future of the operation, and any areas of uncertainty, as soon as we are in a position to speak with some authority,” Shell added in the emailed reply. Another asset added to Shell’s portfolio is the country’s second largest compressed natural gas (CNG) retailer Mahanagar Gas Ltd (MGL). MGL is in the process of launching its initial public offer (IPO) of around Rs. 12 billion shortly. Shell India and state-owned GAIL (India) Ltd, the promoters, will sell 12.5% each in the IPO. The promoters currently hold a 49.75% stake each in MGL, while the Maharashtra government holds a minor 0.49% stake. MGL sells CNG to automobiles and piped cooking gas to households in Mumbai and its adjoining suburbs. It has 128 CNG filling stations in Mumbai and greater Mumbai and 45 in Thane, Navi Mumbai and Panvel. Last month, Shell said it is nearly doubling its headcount to 1,000 at its Shell Technology Centre Bangalore, (STCB) to insource more work. The centre is one of its three global hubs for technology, after Houston and Amsterdam. STCB provides access to Indian talent and resources to Shell worldwide. The STCB currently employs around 900 engineers. Shell is also the only global oil company to have a fuel retail licence in the country. The company has a marketing licence from the centre to set up a network of up to 2,000 fuel retail stations in India. Currently, about 77 Shell fuel retail outlets are operational. Through its Rs. 30 billion Hazira Liquefied Natural Gas (LNG) storage and re-gasification terminal with a capacity of 5 million tons per annum (mpta), the company is a significant player in the downstream segment. The terminal is being expanded to 7.5 mtpa by March 2017 with the capacity to be further expanded to 10 mtpa. Royal Dutch Shell through its unit Shell Gas holds a 74% stake in Hazira LNG, while Total Gaz Electricite France, a unit of France’s Total, holds the remainder. Shell also has a 26% stake in building the Kakinada LNG terminal on the east coast. AP Gas Development Corp., a joint venture company between the Andhra Pradesh government and GAIL and GDF Suez hold 48% and 26% equity in the project, respectively. “It is a good time to be in India. It is the largest consumer market in all segments of energy and Shell is in a good position to gain significantly from the Indian market,” said an energy consultant at a large consulting firm on condition of anonymity, as he is not allowed to talk to the media. Brynden Trawick Jersey