New technology to help thermal power generation companies quickly switch source
A new technology will enable thermal power plants to start up in as little as an hour, a fraction of the 24 hours currently needed, allowing for greater integration of renewable energy sources in the national electricity production system, which now runs primarily on coal. Thermal plants retrofitted with this equipment can start generation as soon as power from solar units starts to reduce with decreasing sunlight, replacing it with coal-fired electricity. It will balance power flow into the network and keep it stable. Such flexibility isn’t possible now since thermal power plants need 24 hours to start and cannot replace a fall in solar generation at a short interval. Last week, India Power Corporation Ltd (IPCL) and Germany-based Uniper floated an equal joint venture company, India Uniper Power Services, which will source this proprietary technology from Uniper and offer it to Indian plants. “It is being successfully used at Uniper power station at Ratcliffe in the UK. Ratcliffe daily uses start and stop cycles in response to renewable generation. It is commonly used across EU countries, both for coaland gas-fired plants,” said Hemant Kanoria, Chairman of IPCL. “The technology is a complete approach involving upskilling of people, modification of procedures, training, modification of systems and rigorous risk assessment.” The government has set a 100 gigawatt capacity addition target for solar power, which cannot yet be gainfully used to supply electricity to towns and cities because such plants cannot operate continuously. If stored in batteries, solar power will increase costs manifold and make it uneconomical. The Central Electricity Authority and other government agencies have been looking for a solution and this new technology could help at marginal additional cost. Analysts said if this technology is successfully installed in existing plants, electricity exchanges could offer power in the hour-ahead market, depending on the day’s demand surges. Trades in Indian power exchanges are settled on a dayahead basis – buying and selling commitments are made a day earlier and power is supplied the next day. This cycle could be bought down to an hour. “It will also allow idle plants to start generation as soon as they see a fall in supply or a rise in demand during a day. At present, a number of independent power producers are idling their plants due to lack of power demand. These plants generally start only after demand has been on the rise for a day or two. With this technology retrofitted, this cycle can shorten and it can help them get relatively better returns on their investment,” said an analyst. An official from NTPC said it needs to verify if this technology works with equipment provided by Bharat Heavy Electricals Ltd., which has built a majority of its thermal power plants. Kanoria of IPCL said it can be retrofitted on all plants, both coal and gas based. ET View: Boost R&D investment The development is welcome as it allows coal power plants to serve as ancillary units, stepping in when there is a dip in renewable energy supply. It also signals the need to invest in cutting edge research. Public and private entities and the government would do well to invest in and work with research institutes. Logan Forsythe Womens Jersey
Petroleum products to come under GST regime
Petroleum products, including crude and some intermediate products, could be taxed under the proposed goods and services tax (GST), a move that will reduce the imperfections in the new levy and also narrow the inflationary impact of the tax. A proposal favouring imposition of a modest tax on these products is being examined and is expected to be taken up by the newly constituted GST Council where the government will try and convince states of its merit. The idea is to have some minimal tax of about 2-3 per cent so that seamless flow of credit is not broken and cascading is removed. These products are at present proposed to be covered within the GST but zero rated till the time the council decides to impose a tax. States will continue to have freedom to levy local sales tax on it. States have been opposed to a change in tax regime for petroleum goods, an easy way of quickly mopping up revenues if needed. But now thinking has veered around to having some minimal tax from the beginning as it could help in bringing down the overall tax rate and allow the industry to get credit. The Arvind Subramanian committee has recommended a standard GST rate of around 18 per cent. There are concerns GST could stoke inflation. ET had reported some policymakers are in favour of rate as low as 16 per cent. Tax at marginal rate would not hurt consumers much but will benefit industry in a big way. “If the petroleum products are taxed at a GST rate which is equivalent to the input GST cost, the cascading of taxes would be mitigated and the final price of the products may reduce,” said Bipin Sapra, partner, EY. Credits to power, airlines sectors Sapra said this will allow some credits to the sectors such as power, airlines, transport of goods and passengers, which will help in reducing the cost of these services. “There have been discussions on having some tax on petroleum products…,” said a government official, adding that the final decision would rest with the GST Council. This would be in addition to local state sales tax on these products. “This would reduce cascading to some extent and allow for some flow of credit,” the official added. The committee headed by Chief Economic Adviser Arvind Subramanian, which had suggested revenue neutral rate in the 15-15.5per cent range with a lower rate of 12per cent anda standard rate of 18 per cent, had said its inclusion could make the industry more competitive. “Bringing electricity and petroleum within the scope of the GST could make Indian manufacturing more competitive,” the report had said. The government has put implementation of GST, which seeks to replace plethora of central taxes including excise duty, service tax, cesses and state taxes such as value-added tax, octroi, entry tax with a single levy, on fast track and the newly set up GST Council will meet later this month to take a call on crucial issues. Prime Minister Narendra Modi will also attend a presentation on the GST framework and issues connected with it on Wednesday. Justin Britt Womens Jersey
Investors seek bigger area under small oilfields
Some companies interested in small discovered fields being auctioned by the oil ministry are keen to explore adjoining areas also but government officials say they can expand their exploration area subsequently with a competitive bid under the new licensing policy. The government is seeking investors for 67 small oil and gas fields in an auction that is underway and allows participants until October 31 to place their bids. The government is hosting roadshows in India and key global financial centres such as London and Singapore to showcase the opportunity these fields offer and explain in greater details the nuances of the new policy governing these fields. Some of the potential investors have raised concern about the smaller size of the contract areas on offer and urged the government to consider offering a bigger area. “The area being offered is too small. That limits our opportunity,” said a top executive at an oil firm seriously considering a bid. The private sector executive has been involved in the country’s oil and gas sector for two decades and said the contract areas offered under previous bid rounds were in hundreds of square kilometres while in this it is mostly just a few square kilometres, making it less attractive. On the other hand, officials say that a proven field cannot be considered less attractive than a bigger exploration area where oil and gas has not been discovered. About 40 of the 67 fields being offered are less than 25 square kilometres in area. Nearly 20 are less than 10 sq km with one field being as small as 2.35 sq km. All 67 fields have been grouped in 46 contract areas that are being auctioned. A senior oil ministry official said some investors have indeed raised this concern but the government will not be able to do anything about it. “We can’t make any changes in the way the fields have been marked or are being offered. Investors should understand that these are discovered fields and not exploration fields. Bigger areas are offered when exploration blocks are auctioned,” said the official. The additional areas surrounding these discovered fields will be auctioned in future separately for exploration under the government’s new exploration policy, Hydrocarbon Exploration and Licensing Policy (HELP), the official said. “The winners of these discovered small fields can participate in that HELP auction and expand their area of operation. They will probably be better placed to offer more accurate bids as they would have superior access to data in those areas,” he said. Government officials are travelling from Singapore to Dubai, Houston, London and Canada to attract bidders for these small fields, which have been lying idle for decades after discovery by state-run Oil and Natural Gas Corporation and Oil India Ltd. Last year, the government took away these fields from state firms and brought out a new policy to auction these to private players. The new policy allows contractors the freedom to market natural gas and cuts out bureaucratic micromanagement by introducing revenue-sharing between companies and the government. Brett Hull Jersey
KG-D6 case: ONGC won’t accept Shah Panel report, will contest key findings
Oil and Natural Gas Corp (ONGC) will likely question the role the Directorate General of Hydrocarbons (DGH) played while Reliance Industries (RIL) was pumping out gas from the state firm’s fields, and argue strongly that its claim for compensation can’t be wished away just on the ground that the firm hadn’t developed the then commercially unviable fields, signaling that the state firm will not quietly accept the government panel’s recommendations. The board of the country’s largest oil and gas producer recently discussed the report of the government panel, headed by retired judge AP Shah, which found that RIL had unjustly gained by producing gas from the fields operated by ONGC. The board has decided to contest some of the key findings of the Shah panel report, which criticised the company for delayed field development and also recommended further scrutiny of “long periods of alleged inactivity on the part of ONGC in this case particularly”. The company will shortly write to the oil ministry rebutting key charges that the company had prior information but didn’t act on it promptly, and that it can’t claim compensation as it had not developed the field yet. The company will also question the role of DGH in this matter, arguing that the government arm has access to all seismic data available with all operators and it should have acted in time, executives said. “ONGC had data only about its own fields. But DGH had access to seismic data of our fields as well as that of RIL’s. It knew exactly where the wells were being drilled by RIL. It should have acted in time,” said an executive. Robbie Ray Jersey
India’s August fuel demand rises 11.4 pct y/y
India’s fuel demand in August rose 11.4 percent from a year. Earlier, driven by a spurt in transportation fuels, data released by the Petroleum Planning and Analysis Cell (PPAC) of the oil ministry showed. Local fuel consumption, a proxy for oil demand, totalled 15.80 million tons in August, the data showed. Diesel consumption, which accounts for more than 40 percent of local fuel sales, rose by 13.2 percent while that of gasoline surged by about 25 percent. Pat O’Donnell Authentic Jersey
OMC’s free-cash flow to remain negative on high capex plans: Fitch
The free-cash flow of the state-owned oil companies likely to remain negative due to high capex plans, said a Fitch Ratings report. According to the report, the rating agency expects high capex for all state-owned oil marketing companies (OMCs) over the medium term as the companies are planning to upgrade and expand refining capacity. his year in March, amid the low crude prices, Dinesh K Sarraf, Chairman and MD of Oil & natural gas (ONGC) had said that the company will be incurring a “multi-billion dollar” capital expenditure programme to bolster exploration, development and production of crude oil and gas, a Forbes report had said. However, Muralidharan R, Analyst, APAC Energy and Utilities, Fitch Ratings, in a note titled ‘India Oil & Gas Downstream Dashboard’ said, “However, We expect the FCF of Reliance Industries Ltd to turn positive after FY17, when it will complete its capex in petrochemicals and telecom investments.” The OMCs aim is to improve refining complexity and meet new fuel standards. Another example of high capex plan is, Indian Oil Corporation (IOC) and Bharat Petroleum Corp Ltd (BPCL) planning to acquire upstream assets in this month, the report said. Will rising capacity lead to fall in exports? According to the Fitch report, the higher refining capacity will boost the volume which will meet the rising demand for products in the next 12-18 months. This will again be driven by expansion plans of three OMcs, namely, IOC, BPCL and Hindustan Petroleum Corporation (HPCL). The rating agency expect that these companies’ expansion plans will lead to fall in further exports by FY17. In FY16 the exports fell by 5.3% as compared to 5.9% in FY15. Following the increase in refining capacity, Fitch expects gross refining margins (GRM) of all Indian oil refining companies will moderate in FY17 from the strong levels achieved in FY16. “However, Fitch expects GRMs to remain stronger than the historical average, which together with higher volumes, is likely to support strong operating cash flow in FY17,” Muralidharan said. Further, as per the report, the agency does not expect any under-recoveries, which is the difference between market prices and state-controlled selling prices, as long as current crude prices surge from the current levels. “The net share of under-recoveries for the OMCs was nil in FY16, reflecting low oil prices and price deregulation of diesel”, Muralidharan said. Consumption growth The consumption growth for petroleum products to remain strong over the medium term in the current financial year as compared to previous fiscal year, the report said. The consumption of the petroleum products increased by 7-8% in the first quarter of the current fiscal ended on June 30, compared to 10.9% in FY16. However, the rating agency expect the growth to moderate to around 5-6% in FY17 and thereafter. “We expect continued strong gasoline consumption growth of around 9%-10% over the medium term, supported by robust passenger-vehicle sales amid low crude-oil prices. Furthermore, Fitch expects an improvement in India’s GDP growth, which is likely to boost demand for diesel”, Muralidharan added. Colin Kaepernick Womens Jersey
India’s next big push for oil — tripling of strategic storage
The perfect cocktail of low global crude oil prices and galloping domestic demand has prompted India’s petroleum ministry to carve out a detailed plan that will help the country’s strategic oil reserve storage capacity to more than triple over the next five years. India’s petroleum minister Dharmendra Pradhan told S&P Global Platts in an exclusive interview late Friday that with the new plan in place, India would be able to raise its oil storage capacity and take advantage of low oil prices. “We want to join the high table as far as strategic oil storage is concerned,” Pradhan said on the sidelines of his Singapore visit for a roadshow seeking potential investors for India’s small oil and gas fields. “With the new plan in place in the next five years, we should be able to sharply raise our storage. But that target could get even bigger because of refinery and pipeline expansions that will be on the way during the coming years.” Under the first phase, India has set up strategic petroleum reserves, or SPRs, in three locations — Visakhapatnam, Mangalore, and Padur — in southern India. They will have a combined capacity of 5.3 million mt, or 38.8 million barrels, of crude oil. The Visakhapatnam facility on the eastern coast began filling its underground caverns last summer. The Mangalore and Padur facilities are expected to be completed later this year. Pradhan said his ministry had finalized plans to set up two new larger storage facilities, each with about 5 million mt of capacity, in the eastern state of Odisha and in the northwestern state of Rajasthan. It would involve a total cost of about $2 billion. “To set up the new storage facilities, we are open to both private and foreign participation,” Pradhan said. “Work on the new storage facilities will start this financial year (April 2016-March 2017). It will take our overall storage capacity to more than 15 million mt in the next five years. We can use the reserves as and when required.” The Indian Strategic Petroleum Reserves Limited, a special-purpose legal entity owned by the Oil Industry Development Board, manages all the SPR facilities in the country. The US Energy Information Administration had recently said in a report in July that the significant drop in international oil prices since mid-2014 had provided India with an incentive to speed up construction and filling up of SPRs. India is seeking to finance the second phase of its SPR partially through commercial agreements with foreign oil producers who can lease storage, it said. As such, New Delhi was currently negotiating with the UAE’s Abu Dhabi National Oil Company to lease 5.5 million barrels of the Mangalore facility. Two-thirds of this volume would be available for India, and ADNOC could store the remaining volumes or sell it in the domestic market, said the EIA report. OVERSEAS INTEREST IN RETAIL SECTOR Pradhan said that with demand for oil products growing in double digits, many oil multinationals — such as Saudi Aramco, BP and Shell — had evinced interest to either expand or set up shop in India’s retail oil sector. “Our size is a big attraction to a lot of these companies,” Pradhan said. “Also, providing clear and transparent polices through market reforms is helping us to attract those companies.” “Shell is already there in our retail sector but in a smaller scale. BP has applied for licence and others are discussing,” Pradhan said. “They are all keen to bring in the investment and set up their infrastructure. There will be healthy competition between these players and domestic companies and ultimately, the consumer will reap the benefits.” The minister’s remarks came just three days after Trafigura’s CFO for Asia Pacific, Nicolas Marsac, told Platts in an interview that the surge in Indian oil demand was just the start of a story that promises to run for long, prompting the commodities trader to put together a strategy and a team on the ground in place to win in the South Asian nation. India’s oil products demand grew 8.5% year on year in 2015 to 177 million mt, or 3.81 million b/d, as gasoline, LPG and naphtha saw double-digit growth in consumption. Over January-July this year, India’s oil products demand rose 10.1% year on year to 112.50 million mt, or 4.15 million b/d, according to India’s Petroleum Planning and Analysis Cell. The IEA expects Indian oil demand to average at 4.3 million b/d in 2016. The government’s clear policies for the oil sector, strong and sustained GDP growth, and a huge push towards making India a manufacturing hub were not only playing crucial roles in accelerating oil consumption but were also whetting appetite of leading multinationals to set up shop in the nation. “The oil demand growth we are witnessing is phenomenal. Transparent policies can attract more investment into the sector,” Pradhan said. Some of other policy reforms India had recently undertaken for the oil sector — such as gradually raising the price of kerosene in an effort to promote cleaner fuels and expanding the LPG network — was moving ahead swiftly as per plan. “All these have to be gradual. For example we can’t raise the price of kerosene at one go,” he added. India deregulated diesel prices in October 2014, but continues to subsidize LPG and kerosene prices. The BJP-led government has recently also given the go-ahead to state-run companies to raise prices of kerosene, which accounts for more than 40% of the total petroleum subsidies, by a small amount every month until April 2017. The government has also announced 2016 as the “year of LPG consumers” and has set an ambitious target to open 10,000 new LPG dealerships across the country this year, in addition to the 16,000 that already exist. Terrance Williams Womens Jersey
Petroleum ministry moots market price for CBM gas
In a boost to hydrocarbon exploration firms Reliance Industries (RIL) and ONGC, the petroleum ministry has proposed to offer market price for natural gas produced from the coal bed methane (CBM) blocks. RIL is targeting to start production of CBM from its Sohagpur (West) block in Madhya Pradesh in FY17, while state-run ONGC is developing the Bokaro block in Jharkhand. The petroleum ministry has proposed a revised policy for CBM blocks which is in similar lines to the policy rolled out for the ongoing auction of 67 discovered small and medium oil and gas fields. “The Cabinet note has been moved for inter-ministerial consultation last week,” a source told FE. The Narendra Modi government has unveiled a policy for the small fields that provide an investment opportunity in already discovered fields with no signature bonus, no requirement of prior technical experience and no mandatory work programme. The new policy is based on revenue sharing contract model with the aim of simplifying the operating regime and making it more transparent. In addition, the explorers would get market price for the hydrocarbon produced. The standing committee on petroleum and natural gas under the 16th Lok Sabha found anomaly in pricing of gas produced from CBM blocks currently. Two firms producing CBM — Essar Oil and GEECL — have a pre-approved price for their gas. RIL and ONGC, which are gearing up for production, 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/mBtu, compared with more than $6-15.5/mBtu enjoyed by Essar Oil and GEECL. “I would not say that pricing challenge is not there. However, the investment to be made by ONGC for CBM is less than Rs. 10 billion and therefore we are going ahead with it,” D K Sarraf, chairman and managing director of ONGC, told FE, hinting that the government is expected to roll out a new policy that would make CBM business economically viable. ONGC is investing Rs. 6.59 billion to develop the Bokaro block with reserves of 4.098 bcm. India offered 33 CBM blocks. However, 17 of them, or 50% of the blocks, have been relinquished. The natural gas output from CBM blocks was reported at 1.0734 mmscmd in FY16 and it is currently hovering 1.3757 mmscmd. Petroleum ministry has set a target of 5.77 mmscmd in FY18. The standing committee has recommended that the petroleum ministry should formulate a separate pricing and marketing mechanism which also considers availability of small gas volumes, requirement for higher drilling and remote locations, among others. Josh Bynes Jersey