APAI terms govt’s decision to charge levy to fund RCP as”regressive & unwarranted”
Apprehending a “spiralling” effect on airfares in view of the government’s decision to charge a levy up to Rs 8,500 per flight on major routes to fund the ambitious regional air connectivity, fliers body (APAI) has termed the move as “regressive and unwarranted”. The Regional Connectivity Plan (RCP) packaged as a scheme “to make flying a reality for the small town common man” is more a welfare and inclusive measure, which, based on its objective, should be spearheaded by the Central and state governments, Air Passenger Association of India (APAI), said. Civil Aviation Secretary R N Choubey had last week announced government’s decision to levy up to Rs 8,500 per flight on major routes to fund the regional air connectivity scheme from December 1. With the levy, that would be collected from the airlines for each domestic departure to major routes, the government estimates to have Rs 400 crore for Regional Connectivity Fund (RCF), Choubey said. “Another 20 per cent (funding) will come from state governments. We are roughly looking at around Rs 500 crore per year available in the kitty,” he had said. “The reported statement of the Civil Aviation secretary that the government would collect Rs 400 crore from air carriers annually by charging additional levy on scheduled flights between major cities starting from December 1, 2016, to fund RCF is most unfortunate since APAI had vehemently opposed the imposition of regressive levy at all times,” APAI President D Sudhakara Reddy said. Nicklas Lidstrom Jersey
Flexible fuel pricing in arena
The fuel retail market is heading towards dynamic pricing- where companies will charge different rates and even frequently change them according to demand and supply. India is set to implement the regime following the entry of global players such as Rosneft and BP Plc in petrol and diesel retailing, which is expected to give state-owned firms tough competition. “With international entities such as Rosneft OAO and BP Plc coming in the retail scenario, we might see dynamic pricing for petrol and diesel as competition is sure to increase,” a senior petroleum ministry official said. BP has recently got a licence to set up 3,500 fuel stations, while Rosneft has inherited 2,700 retail outlets, following a deal to acquire Essar Oil Ltd. Though the prices of domestic cooking gas and kerosene are fixed by the government, those of petrol and diesel have been deregulated. Dynamic, or real-time pricing, means the cost of a product can be flexible. It can be a market changing phenomena where other retailers may have to follow suit. Analysts said a price war might soon ensue at the petrol pumps, benefiting consumers of petrol and diesel. Globally, fuel retailing companies such as Shell, Caltex and Total sell petrol and diesel at varying prices in different locations to attract consumers. The same practice may soon come into force in the country with increasing competition in the sector. “As new players enter retail marketing, the pricing methodology is expected to change and global practices will be followed. Customer offerings and product differentiation will change. With crude oil prices going up, dynamic pricing will be seen, too. Retailers will track customer behaviour more closely to tailor offerings,” said Deepak Mahurkar, director (oil and gas) of PwC India. State-owned HPCL has already launched dynamic pricing at a few of its retail outlets on a pilot basis. It could be extended to other outlets at a later stage. “(The company) expects it to become a significant tool to sustain profitability/market share in the next 2-3 years as private competition strengthens,” Ambit Research said in a report. After registering the fastest pace of growth in 15 years, the country’s fuel demand is likely to rise 7.3 per cent in 2016-17, led by robust expansion in the consumption of petrol and diesel. Fuel consumption, which rose 10.9 per cent to 183.5 million tonnes (mt) in 2015-16, is projected to rise to 190.03mt, according to oil ministry estimates. Diesel demand, which soared 7.5 per cent to 74.6mt last fiscal, is projected to go up 7.7 per cent to 78.11mt. Petrol consumption is estimated to rise 12.4 per cent to 24.14mt. Richard Rodgers Jersey
India to reduce gestation period for hydrocarbon exploration
In what may help India’s energy security efforts, the ministry of petroleum and natural gas plans to minimise the gestation period for hydrocarbon exploration. Gestation period is the time taken from the discovery of hydrocarbons in a block to its commercial production. “On average, a discovery has a gestation period of at least a year if not more,” said a top Oil and Natural Gas Corp. Ltd (ONGC) executive requesting anonymity. According to the website of the Directorate General of Hyrdocarbons, 225 hydrocarbon discoveries have been made in the last five years till January 2016. “In order to fasten the process between discovery and production, we are trying to bring in new technologies. This will not only reduce manpower needed but will also bring down the gestation period significantly as well,” said a petroleum ministry official requesting anonymity. India is grappling with falling domestic production of hydrocarbons. The government has made energy security one of its primary focus areas in order to achieve fast and sustainable long-term development. The government has also set up an ambitious target to halve the country’s energy imports by 2030. Another official from the ministry of petroleum and natural gas, requesting anonymity, said, “A lot of projects get delayed due to long gestation periods. We hope to minimise it in the future.” India has 26 sedimentary basins covering an area of 3.14 million sq. km. out of which 7 basins have established commercial productions in progress. India has total reserves of 763.476 million tonne of crude oil and 1,488.73 billion cu. metres of natural gas. According to experts, once a discovery is made it involves long procedures before the field actually gets operationalised adding cost for explorers. “Gestation periods are taken into consideration while going for exploration. However, the lesser the time taken, the better,” said Dilip Khanna, partner at EY, a consultancy. Queries emailed to the spokespersons of the petroleum ministry and ONGC on 11 November remained unanswered. According to BP Global data, India has emerged as the third largest consumer of crude oil with a consumption of 4.2 million barrels per day (mbpd) for calendar year 2015, after the US (19.39 mbpd) and China (11.96 mbpd). Jermey Parnell Womens Jersey
Revisiting India’s gas pipeline diplomacy
In recent years energy has become an increasingly-important driving factor in relations between nations. However, these energy politics are also influenced by the relative power changes between countries, fluctuations in oil and gas prices, and the condition of respective nation’s energy infrastructure. These factors play an important role in allowing energy to flow from resource-rich nations to energy-hungry countries. India’s pipeline diplomacy, conceptualised during the 1990s, to import natural gas from countries like Iran, Turkmenistan and Myanmar, is an example of these limiting factors in practice, with none of the pipelines emanating from these three countries – Iran-Pakistan-India (IPI), Turkmenistan-Afghanistan-Pakistan-India (TAPI) and Myanmar-Bangladesh-India (MBI) – yet activated. Nevertheless, the lack of success to date has not affected India’s sanguinity towards pipelines. And two out of the three pipelines are now either moving forward or in the process of being revived, as is the Oman-India Natural Gas Pipeline (OIP), initiated by former Indian Prime Minister, the late PV Narasimha Rao, during his visit to Muscat in 1993. The only exception is the IPI gas pipeline, which should be abandoned according to Iran’s Ambassador to India Gholamreza Ansari. In the case of the TAPI pipeline, the project’s steering committee unanimously endorsed Turkmengaz as consortium leader of TAPI Pipeline, the entity officially in charge of building, financing, owning, and operating the pipeline. This development, together with the signing of TAPI’s shareholding agreement and the conclusion of an investment agreement by parties from the respective countries, have helped TAPI move forward. However, the issue of security, amid deteriorating relations between India and Pakistan and increased terror attacks in Afghanistan, has once again discouraged the efforts being made towards accomplishing this project. The government is also exploring ways to revive the MBI pipeline project. An Rs. 1300 billion plan, involving the north-eastern part of the country, has been proposed as part of the broader Hydrocarbon Vision 2030 initiative. This initiative aims to create an energy corridor connecting neighbouring states such as Myanmar, Bangladesh, Nepal and Bhutan. But the MBI project still faces hurdles. Earlier in the process, India and Myanmar concluded an MoU, which selected the Gas Authority of India Limited as a preferential buyer of gas from the A1 and A3 blocks in Andaman Sea offshore Myanmar. Despite this, China ended up clinching the deal by signing a 30-year agreement to import natural gas in 2008. Indecision from Bangladesh at the time further delayed the project. As regards the OIP project, the Joint Comprehensive Plan of Action (the ‘Iran deal’), together with recent technological advances made in laying deep-sea gas pipeline, which can now go to a depth of 4000 metres, are the two biggest factors allowing natural gas to flow from the Chabahar port in Iran to the Gujarat coast via Oman. This pipeline, as revived by South Asian Gas Enterprises (SAGE India), has been named the Middle East to India Deepwater Pipeline (MEIDP). To date, therefore, out of several proposed transnational gas pipelines only the MBI and MEIDP hold promise, with the latter regarded as the best bet despite India’s efforts to look for cheaper LNG imports, until the gas glut scenario fades away, most likely after 2020. While current landed LNG prices of below $5 per one million British Thermal Units (MMbtu) has prompted strong demand from large energy users such as fertiliser producers, power plants and in glass manufacturing, increases in spot prices would prompt India to look for cheaper and longer-term solutions through pipelines to be constructed by the SAGE India. According to SAGE India, this pipeline will save up to $3.5-4.5 per MMbtu on liquefaction and regasification, as well as around $1.0 per MMbtu on transportation of LNG. This pipeline can also provide access to the additional export markets being sought by other Middle East countries and, in doing so, mitigate the geopolitical tensions created by onshore cross-country pipelines, such as the TAPI and IPI. In addition, SAGE India will enable the flow of 30 billion cubic metres of gas from Moscow to New Delhi through Iran by means of natural gas swap. Moreover, Iran has already started to build a pipeline from Turkmenistan to its Chabahar port and has plans for a gas swap with Turkmenistan to be transported to India through the MEIDP. Iran, which has the largest natural gas reserves in the region and has signed several agreements with India regarding the Chabahar port, would be best placed to support India’s gas-based economy plans, which could contribute to securing India’s energy needs at a rate that outstrips its population growth. Fred Lynn Jersey
Amid $1.5-billion penalty claim, RIL partner Niko puts KG-D6 stake on sale
Reliance Industries’ partner Niko Resources of Canada has put on sale its 10% stake in the flagging KG-D6 gas block off the east coast. Financially strained Niko had in February last year announced plans to sell its 10% stake in the KG-DWN- 98/3 or KG-D6 block to pay off $340 million debt. It had planned to sell off the interest by April 30, 2015 but later extended it to May 31 and then to September 15, 2015. It allegedly called the sale off because it could not find a buyer. The firm’s interim Chief Executive Robert Ellsworth said the company had “re-launched the sales process for our interest in the D6 Block” due to “favourable developments with respect to natural gas pricing applicable to the company’s undeveloped deep water fields”. While gas from existing producing fields are priced at rate equivalent to price prevailing in gas surplus economies like Russia, US and Canada, the government has given a pricing freedom subject to a cap for undeveloped gas finds in deep-sea blocks. KG-D6 has several undeveloped gas discoveries. “As previously communicated to shareholders, the company is in the midst of a strategic plan to enhance the value of our core assets with the objective of ultimately monetising these assets for the benefit of the company’s stakeholders,” he said in the earnings statement for the quarter ended September 30. RIL is the operator of KG-D6 block with a 60% interest, while BP plc of UK owns 30% stake. Ellsworth said Niko believes the KG-D6 block offers “a number of compelling attributes to potential bidders” but the sale “will inevitably be complicated” by the $1.55 billion claim made by the government against the three firms in respect of gas reckoned to have migrated from neighbouring blocks of ONGC into D6. “While we believe the D6 Block offers a number of compelling attributes to potential bidders, the sales process will inevitably be complicated by the recent claim made by the Government of India against the contractor group of the D6 production sharing contract in respect of gas said to have migrated from neighbouring blocks to the D6 Block,” he said. Niko, he said, believes the contractor group is not liable for the amount claimed and “is working with the contractor group to defend against the claim by invoking the dispute resolution mechanism in the D6 Block production sharing contract.” RIL says the government’s claim was based on misreading and misinterpretation of key elements of the production sharing contract and is without precedent in the oil and gas industry, anywhere in the world. “The liability of the contractor has not been established by any process known to law and the quantification of the purported claim is without any basis and arbitrary,” it had stated after the government slapped a $1.55 billion demand notice for “unfairly enriching” by producing ONGC’s share of gas. Bennie Logan Womens Jersey