India to test gas-fired plants as ‘peakers’ to smooth power grid
India will test a plan to operate its underutilized natural gas-fired power generators as “peaker” plants that can switch on quickly when there’s high demand, according to the country’s power planning body. The project will start with four NTPC Ltd. plants with a combined capacity of 2.3 gigawatts that will run only in the evenings, Central Electricity Authority Chairman Pankaj Batra said in New Delhi. The agency envisions 20 gigawatts of gas-fired capacity being used as peaking stations to even out supply fluctuations from the large amount of renewable energy that’s set be built by 2022, he said. “The government will start testing the plan this month by operating one of NTPC’s gas-based power plants as a peaking station” for nearly four hours in the evening, Batra said in an interview last week, adding that the three other plants will be online by the end of the year. State-owned GAIL India Ltd. has agreed to supply gas to the four plants, he said. India has an ambitious goal of installing 175 gigawatts of renewable energy by 2022, or a little more than the country’s current peak demand, as part of its Paris climate pledge to cut carbon emissions. Gas-fired power plants can play a role balancing the grid by maintaining uninterrupted electricity supply, especially when solar-fired generation peters out in the evenings and coal plants take time to ramp up. The gas facilities will be run on fuel produced in India, which is in short supply, and running them as peakers will optimize use of the fuel, Batra said. A shortage of domestic gas has kept the utilization of India’s 25 gigawatts of gas-fired plants at about a fifth of total capacity, according to CEA data. The cost of gas imports for India makes the fuel uncompetitive with other sources of baseload power. Chris Long Authentic Jersey
Will HPCL be on par with ‘parent’ ONGC?
A bumper profit of over ?60 billion for the second straight year has helped State-run oil refiner Hindustan Petroleum Corporation Ltd (HPCL) stake its claim for the coveted ‘maharatna’ status. However, the ‘maharatna’ status will also put HPCL and its holding company ONGC (already a ‘maharatna’) on a par on decision-making powers. This would further complicate a disinvestment deal from earlier this year when the State-run oil and gas explorer acquired 51.11 per cent of the government’s stake in HPCL for ?369.15 billion. HPCL is yet to recognise ONGC as its promoter. ONGC is shown to be a public shareholder with 51.11 per cent stake in HPCL, in its most recent share-holding pattern submitted to the Bombay Stock Exchange. ONGC has only one member on HPCL’s board. For HPCL, a ‘maharatna’ status will potentially curtail ONGC’s powers to take business decisions for the oil marketing company, in which the explorer holds a controlling stake, say oil industry sources. The ‘maharatna’ status bestows greater freedom from government control for the PSU to incur capital expenditure on purchase of new items, or for replacement, without any monetary ceiling, and to forge technology joint ventures (JVs) or strategic alliances. The status also allows the PSU to make equity investment to establish financial JVs and wholly-owned subsidiaries, undertake mergers and acquisitions (M&As) in India or abroad, subject to a ceiling of 15 per cent of the net worth of the PSU, and limited to ?50 billion in one project. The board of directors of a ‘maharatna’ PSU will also have powers for mergers and acquisitions, subject to the conditions that it should be as per the growth plan and in the core area of functioning of the PSU and the Cabinet Committee on Economic Affairs (CCEA) is informed in case of investments abroad. Mumbai-based HPCL posted a net profit of ?63.5707 billion for the financial year 2017-18. In fiscal years FY17 and FY16, it had net profits of ?62.0880 billion and ?37.2616 billion, respectively, thereby enabling the firm to show an average annual net profit of more than ?50 billion for the last three years, one of the six criteria required to become a ‘maharatna’ central public sector enterprise. The lack of an average annual net profit of more than ?50 billion for the last three years was the only qualification criteria holding up its pursuit of a ‘maharatna’ status. “HPCL has applied for maharatna status,” a company official said. HPCL is already a ‘navratna’ PSU with an annual average turnover and net worth for the last three years way above the limit set for ‘maharatna’ companies. In fiscal years 2016, 2017 and 2018, HPCL’s turnover from operations was ?1970 billion, ?2130 billion and ?2430 billion, respectively. To become eligible for ‘maharatna’ status, a PSU must have an average annual turnover of more than ?250 billion for 3 years. The oil refiner also meets the criteria for having an average annual net worth of more than ?150 billion for the last 3 years, besides having significant global presence. HPCL’s imminent anointment as a ‘maharatna’ PSU will put it in an elite PSU club that includes oil and gas sector compatriots such as Oil and Natural Gas Corporation Ltd, Gas Authority of India Ltd, Indian Oil Corporation Ltd, and Bharat Petroleum Corporation Ltd. National Thermal Power Corporation Ltd, Bharat Heavy Electricals Ltd, Coal India Ltd and Steel Authority of India Ltd are the other ‘maharatna’ companies. J.R. Richard Jersey
Government notifies incentives to state-owned oil firms in pre-NELP blocks; new rule applies to 11 fields
The government has notified a new policy requiring state-owned Oil and Natural Gas Corp Ltd (ONGC) and Oil India Ltd (OIL) to pay royalty and cess tax only to the extent of their equity holding in certain pre-1999 oil and gas fields. The ‘Policy Framework for Streamlining the Working of Production Sharing Contracts in respect of Pre-NELP and NELP Blocks’ was notified in the Gazette of India on Tuesday. Till now, ONGC and OIL had to pay a 100 percent royalty and a cess tax on 11 pre-New Exploration Licensing Policy (NELP) fields that were given to private firms prior to 1999. The government had awarded some discovered oil and gas fields to private firms in the 1990s with a view to attracting investments in the country. To incentivise such investments, the liability of payment of statutory levies like royalty and cess was put on state-owned firms, who were made licensees of the blocks. ONGC and Oil India Ltd were allowed right to back in or take an interest of 30-40 percent in the fields, but were liable to pay 100 percent of the statutory levies. The new rule, approved by the Cabinet last month, will apply to 11 fields like the Dholka field in Gujarat that is operated by Joshi Oil and Gas. It will also apply to the Hindustan Oil Exploration Company (HOEC)-operated PY-1 field in the Cauvery basin. “In pre-NELP exploration blocks, the National Oil Companies, as Licensee are liable for payment of royalty, cess and other statutory charges on entire production of oil and gas. “To facilitate further investments, the Government has decided that the contractors in pre-NELP exploration blocks will be allowed to share the liability of the statutory levies including royalty, cess and any other charges in proportion to their respective participating interests (PIs) in the block,” the notification said. All the constituents of the blocks would become licensees and payments made towards such statutory levies shall be eligible for cost recovery. It means that like capital and operating expense, the statutory levies can now be first recovered from the sale of hydrocarbons before sharing the profits with the government. These are the same conditions that ONGC had insisted upon in 2010 when Vedanta bought Cairn Energy Plc’s 70 percent stake in the prolific Barmer basin oil block in Rajasthan. ONGC, which held a 30 percent stake in the block, gave approval to the deal only when Vedanta agreed to pay a royalty and cess on its 70 percent share. Royalty for an on-land block is presently 20 percent. An equivalent amount of cess is also levied. Also, the notification extended the time period given to oil and gas companies to develop hydrocarbon blocks in the northeast. Production from these blocks will be linked to market prices of natural gas. It also extended tax benefits under Section 42 of Income Tax, 1961 prospectively to operational blocks under pre-NELP discovered fields for the extended period of the contract. Section 42 of Income Tax allows the companies to claim 100 per cent of expenditure incurred under a production sharing contract (PSC) as tax deductible for computing taxable income in the same year. While signing PSC of pre-NELP discovered fields, 13 contracts out of 28 contracts did not have provision for tax benefit under Section 42 of Income-tax Act. Now, this will bring uniformity and consistency in PSCs and provide an incentive to the contractor to make an additional investment during the extended period of PSC, it said. The approvals given are expected to help in ensuring the expeditious development of hydrocarbon resources. Matt Moulson Jersey