Will Ennore LNG Terminal should go the same way as Kochi LNG Terminal in India?
Indian Oil Corporation (IOC) has announced that the LNG ( liquefied natural gas) import terminal project in Ennore near Chennai in Tamil Nadu with the investment of over Rs.6000 crore would be commissioned by end 2018. This project has already been much delayed and as per original schedule, it should have been ready at least 3 years earlier. This LNG terminal of the capacity of 5 million tonnes per annum can be fully utilized, only if the pipeline would be laid for evacuation of. regasified natural gas, which should be ready by the end of 2018. This is unlikely to happen. At present, Indian Oil Corporation is laying pipeline from Ennore terminal to Manali Industrial belt for the distance of around 23 kilometer, as the first phase of the natural gas pipeline project,, where the companies like Madras Fertilisers Limited, Chennai Petroleum Corporation, Tamil Nadu Petroproducts and others would be utilizing the natural gas as feedstock and fuel to the extent of around 1.5 million tonnes per annum, against the Ennore LNG terminal’s installed capacity of 5 million tonnes per annum . The requirement of natural gas of Manali industrial belt would not be adequate to utilize the entire capacity of the Ennore LNG terminal. In all, Indian Oil Corporation has to lay 1,385 Kilometer natural gas pipeline, originating from the Ennore terminal to Nagapattinam in Tamil Nadu via Puducherry with branch pipelines to Madurai, Tuticorin, Trichy and Bengaluru. For laying these pipeline across Tamil Nadu, geographical locations in districts in Tamil Nadu including Salem, Kanchipuram, Tiruvallur, Cuddalore, and Nagapattinam have been identified by the Petroleum and Natural Gas Regulatory Board. These pipelines have to be divided into primary, secondary and tertiary network and the pipeline has to necessarily pass along roads including village road and state highway across Tamil Nadu. However, necessary infrastructure facilities are not there at present. While IOC says that it would lay pipeline of around 1385 kilometer length in phases, full capacity utilization of Ennore LNG terminal cannot be achieved, until the entire 1385 kilometer length of the pipeline would be laid for full evacuation of the imported natural gas. Protest even against first phase pipeline project : While it would be so, it is causing concern that even the first phase of pipeline laying project from Ennore terminal to Manali industrial belt of distance 23 kilometers is now facing opposition from the local people and the activists. The pipeline between Ennore terminal and Manali industrial belt runs on a large stretch of Ennore creek wetland. The local fishermen are protesting against laying of the pipeline across the wetland of Ennore creek, that is said to have been ordered by National Green Tribunal to be cleared of fly ash and intermediates. Activists say that there is no permission to lay pipeline in this environmentally sensitive zone. However, IOC says that it is not carrying out any work in the 600 meter stretch in the Kosathaliyar river, where the CRZ clearance is yet to be obtained. IOC further says that it is using the sophisticated trench line technology under the river to lay the pipeline. It further says that utmost safety precautions have been taken and pipelines are designed as per stringent norms. The thickness of the pipeline would be increased depending upon the density of population in the area. While IOC is providing the necessary clarifications and explanations, it is doubtful whether the protestors and activists would relent and they may continue the protest to prevent laying of the pipeline. What fate awaits further pipeline project? When IOC is facing so much problem in laying a pipeline of even 23-kilometer length due to the protest by the activists, one wonders whether IOC would be able to lay down the pipeline to the length of around 1385 kilometers across Tamil Nadu that has to pass through village roads and highways. Fate of pipeline project in Tamil Nadu from Kochi LNG terminal : In the recent past, the proposed natural gas pipeline from Kochi LNG terminal to Tamil Nadu to a length of around 300 kilometer have been suspended due to protest from agriculturists and activists in Tamil Nadu. They have refused to listen to the explanation given by GAIL authorities who are the pipeline contractors and it appears that this natural gas pipeline project in Tamil Nadu has virtually been given up. In the process, Tamil Nadu has lost investment opportunity of around Rs. 15,000 crores that would have been possible by utilizing the natural gas from Kochi terminal as feedstock for setting up several petrochemical projects and ancillary industries in Tamil Nadu. Because of this protest in Tamil Nadu, Kochi LNG terminal with an investment of around Rs. 4000 crores is unable to evacuate the imported natural gas and has been operating at around 5% of capacity and is incurring huge losses. Pipeline project from Kochi terminal to Karnataka forging ahead : While the gas pipeline from Kochi LNG terminal through Tamil Nadu have been stranded, the pipeline is now being laid from Kochi LNG terminal to Karnataka state and is now fast nearing completion. Due to the availability of gas from Kochi LNG terminal, several thousand crore rupees of investment based on natural gas would happen in Karnataka in the near future. Concern about the future of Ennore LNG terminal : In the circumstances, one cannot but be concerned that Ennore LNG terminal project should not meet the same fate as that of Kochi LNG terminal, which happened due to the protest from the activists against laying a gas pipeline in Tamil Nadu. In all probability, the politicians and media in Tamil Nadu will jump into the fray and the protestors and activists would intensify the protests against laying gas pipeline from Ennore LNG terminal, that may threaten the future of this Rs. 6000 crore invested vital project. 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India’s oil demand growth to slow down over next decades: Reliance
India will continue to depend on oil as a mainstay of its energy but its oil demand growth will likely slow as the government pushes for cleaner energy and renewables, Harish Mehta, president, refining & marketing at Reliance Industries said on Tuesday. India is pushing for intervention to support renewables, grid electrification, and the government is trying popularize natural gas and shared mobility, said Mehta said during the Asia Pacific Petroleum Conference (APPEC) in Singapore. “This will lower down the growth of oil consumption (in India) over the next decades,” he said. However, oil consumption will still increase to 480 million tonnes by 2040 as the renewable push will not completely halt oil demand growth, he said, citing official statistics. To meet that consumption, India has been boosting its overall refining capacity with first production from its upcoming West Coast refinery expected in 2022. India has plans to add 190 million tonnes per year of refining capacity over the next 10 years to its existing 228 million tonnes per years, he said. “Over a period of time, some additional refining capacity would also come and some of the exports which are happening through the private sector will probably get curtailed and would get consumed in the country itself,” he said. Mehta said he is optimistic about the possibilities in the Indian retail fuel sector because of a conducive regulatory environment in the country at the moment. Cam Neely Womens Jersey
Rising Petrol Prices: Reforms At Cross Roads
Petrol price has reached an all-time high in mid-September and do not show any sign of reduction in future. It is an essential consumer and producer good. Its rising price has worried people. The present government is at the center of criticism as the domestic price is historically high when crude oil price in the international market is relatively low. It is true that petrol price is driven by international market prices of crude oil, as 85 percent of our consumption demand is met through imports. Before 2002, the government used to intervene in the domestic market through Administrative Price Mechanism (APM). Under this mechanism, the government was in control of the petroleum sector in all four stages i.e. production, refining, distribution and marketing and thus could be able to influence domestic price through indirect subsidies particularly during high fluctuations in both international market prices of crude oil and domestic currency rates. Post APM, the government has started withdrawing its interventions from the domestic market for petroleum products. Deregulation of domestic petrol price started in 2010 which is followed by subsequent withdrawal of government intervention in diesel pricing in 2014. With the deregulation of these two important commodities, the petroleum sector became completely open to the international market. The Oil Marketing Companies (OMCs) continue to change the domestic prices from time to time looking at the variation in international market prices. However, from 2017, the prices continue to follow the international market prices on a daily basis and change accordingly. With various reform measures taken by various governments as discussed above, the post-2014 period seems to be a more liberal regime in the petroleum sector and domestic prices look to be more sync with the international market prices. However, information obtained from the Petroleum Planning and Analysis Cell (PPAC), MoPNG tells a different story. Example of petrol prices in the domestic market and crude oil prices in the international market could be used to explain the possible link between the two. The figure below provides an annual trend of petrol prices and crude oil prices since 2002-03. An analysis is made about the existing link between the two variables for two regimes, i.e. pre-2014 and post-2014. The pre-2014 period starting from 2002-03, witnessed a smooth ride of the domestic prices of petrol. But, the annual fluctuation of international market prices was not so smooth. In the year 2008-09, when the international market price of crude oil reached a maximum of $ 138 per barrel (bbl, 1 bbl= 159 liters) the domestic petrol price was allowed to crawl in a specific range of Rs.48 to Rs.52 per liter. From the year 2010, the domestic price witnessed a rising trend following more closely with the international market prices. The Co-efficient of correlation (R) of the two variables was 0.82 during 2002-03 and 2013-14. The value is positive and found to be highly significant for being closer to 1. The result shows that the two variables followed a close relationship during a regime when the petroleum sector was relatively less liberal. The years following 2014 witnessed a declining trend in international market prices for crude oil. The price came down from $109 a barrel in 2014-15 to $55 a barrel in 2016-17. But, the prices scaled up by a small margin i.e. $67 a barrel in 2017-18 to $75 a barrel by August 2018. However, domestic prices of petrol did not follow the similar trend during these years. When the international market price fell by 50 percent during the 2014-15 and 2016-17, the domestic prices showed a reduction of only 4 percent. This asymmetry in a relationship is too observed during 2017-18 and 2018-19. In this period the international market price rose by 12 percent (by August 2018), but domestic prices jumped up by 27 percent. The Co-efficient of correlation (R) of the two variables is estimated to be 0.25 during 2014-15 and present. The value is positive and less significant for being distant from 1 and closer to 0. This shows a weak relation between international market price and domestic price during the period when the petroleum sector is completely deregulated. The weak correlation questions the policy of regulatory reforms undertaken by the government during post-2014. It seems that there is a proxy regulatory mechanism working in behind which delinks the two variables. Some of the government interventions though are not part of reforms in the petroleum sector but act as shadow regulatory mechanism to influence domestic prices and delinks its association with international market prices. A few of them can be discussed in the following. First, taxing power of the union and state governments on petroleum products work as a regulatory mechanism for domestic prices. The Union Government collects central excise duty levied on petroleum products. It is one of its important sources of revenue. In 2014-15, central excise collected from petroleum products was Rs. 1.08 lakh crore. In 2018-19, the government has projected to collect Rs. 2.57 lakh crore as central excise duty, which is more than 200 percent of the revenue collected from the same levy in 2014-15. Higher growth in central excise revenue is possible through levy of higher tariff rates on petroleum products. In 2014-15, central-excise tariff rate on petrol was Rs. 9 a litre and it increased to Rs. 19 a litre in 2018-19. In addition to central excise duty, the state governments collect Value Added Tax (VAT) on sale of petrol. VAT rates differ from states to states. That is the reason petrol prices are not uniform across states. For example, in Delhi, VAT rate on petrol is Rs. 21 a litre, while in Maharashtra it is Rs.33 a litre. VAT on petrol constitutes a major source of states’ tax revenue. Both central excise and state VAT constitute approximately 50 percent of petrol prices and thus contributes to a weak link with international market prices. Second, some of the factual evidences show that in few instances, the Union Government used its disguised autonomy power
Refiners look at cutting inventory as oil prices rise
Private and state-run refiners are jointly considering cutting their inventory and increasing their collaboration in finding and sharing cheaper sources of crude, in a strong signal to key producers that high prices could hurt global demand. Oil prices have climbed above $80 a barrel, rising about a third in a year. Oil traders have begun talking about $100 a barrel now after the producers’ cartel OPEC and allies led by Russia decided over the weekend not to raise output to plug the supply gap that might arise due to sanctions on Iran. India, the third-biggest importer of oil in the world, has for years resented the higher prices or the so-called Asian premium it and other Asian buyers pay for the Middle-East oil. Now with soaring oil prices, falling rupee and heavy taxes sending domestic fuel rates to record highs, oil companies are looking for ways to influence international oil prices. Indian government officials and company executives believe a joint action by all Indian refiners may send a strong signal to the oil producers who have been controlling output to support prices for more than a year, people familiar with the matter said. Executives of state and private refiners met recently to discuss the possibility of reducing their inventory levels significantly, and increasing their collaboration in finding and sharing cheaper sources of crude, IndianOil chairman Sanjiv Singh told ET, without elaborating. Indian state refiners use spot purchases to source about 30 percent of their crude and therefore, can begin cutting their inventory immediately by halting some of their spot purchases. Company executives didn’t give inventory reduction targets or a time frame for achieving those. A smaller refiner planned to cut its inventory by about a fifth. Refiners also planned to draw from the strategic petroleum reserve if the need arose, executives said. Cutting inventory wouldn’t expose Indian refiners to supply risks because there was no global supply crunch in the offing, and refiners could share crude with each other in the event of any company getting short on supplies temporarily, an executive said. Current inventory levels at refineries were ‘safe’ and not necessarily ‘optimal’, leaving scope for reduction, executives said. Jointly sourcing crude from beyond the usual suppliers would also give refiners some scope on keeping domestic fuel prices low, executives said. India imports about 83 percent of its supplies and takes about a tenth from Iran. Refiners are also preparing themselves to deal with the US sanctions on Iran. The sanctions related to the petroleum sector are set to take effect from November 4. Hunter Henry Authentic Jersey
India enters new deep-water era
Sparked into action by prime minister Narendra Modi’s grand plan for India’s manufacturing industry, the oil and gas industry has embarked on an era of deep-water exploration. To date, the Satellite field lying at 1,700m is where the main action is, but there’s more on the way. In late April, BP and India’s Reliance Industries sanctioned the second phase of development of this cluster of deep-water gas fields on the east coast. The first phase, the “R-Series” field, went ahead in mid-2017. When the third phase starts up, the result of a $6bn investment, the field is slated to deliver a total of about one billion cubic feet a day of gas by 2022. In another sign of confidence in deep-water India, in June Reliance invited bids for the construction of a floating production storage and offloading (FPSO) for its so-called MJ gas and condensate field. As Rystad Energy’s oil field service research analyst Jo Friedmann reports, India’s deep-water exploration sector is driving industry. “Activity in shallow water and onshore sectors is expected to continue to represent the largest markets in terms of oil field service spending in India, but large new field developments in deeper waters are emerging as the key driver for growth and recovery in the market.” According to Rystad’s forecasts, future greenfield spending will be almost entirely down to deep-water projects – that is, at depths of 125m or more. The consultancy expects compound annual growth rate of 24% in greenfield capex right through to 2021. Big ambitions Right on cue, state-owned Oil and Gas Corporation (ONGC) drilled 503 wells during the 2017-18 financial year-the highest in 27 years. The group has big ambitions in deep-water drilling. “There is a significant upside in the number of deep-water development wells planned by the company,” says chairman and managing director Shashi Shankar. In the new financial year, ONGC plans to drill 24 deep-water wells in its Cluster 2 development off the east coast. The issue is whether oil companies can bring up enough oil to meet Modi’s grand vision for the energy sector to support for his ambitious manufacturing industry plan, Make in India. By 2022, domestic manufacturers are to contribute 22% to the country’s overall gross domestic product, a rise of 15% today. That is to happen in tandem with a 10% cut in oil imports by the same year. The goal has put a lot of pressure on the domestic oil and gas industry—and the plundering of ONGC by the government hasn’t helped. As reported by Bloomberg in June, the $4.3bn in cash that the group held in reserves last year had shrunk by more than 90% to $148m in March after the government ordered it to buy the state’s stake in a refiner. “ONGC is heavily leveraged now”, former chief financial officer Aloke Kumar Banerjee, told Bloomberg. The numbers are moving too slowly in the intended direction, however. According to BP’s latest statistical review, India’s gas production rose 4.5% in 2017, reversing a six-year trend of decline. But that only restores gas production to its 2006 level. The next couple of years should reveal how successful the new fiscal regime designed to revive investments in the upstream sector really is. As an early 2018 study by the Oxford Institute for Energy Studies points out, the Hydrocarbon Exploration Licensing Policy (HELP), “changed the regime from a profit-sharing to a revenue-sharing model”. But as the OIES points out, citing a study by Platts, the latest round of bids for both shallow and deep-water fields won’t produce the required results: “Although a second [round] is proposed, these quantities are unlikely to make more than a dent in India’s oil import requirements.” The government is examining a range of other options, but the targets still look too ambitious, especially for imports. Andrus Peat Authentic Jersey
Piped gas to fuel kitchens in 44 lakh Chennai homes soon
Chennaiites have something to look forward to in these days of high fuel prices. They will get more than 44 lakh piped natural gas connections and 333 Compressed Natural Gas (CNG) pump stations over the next few years under the Centre’s city gas distribution (CGD) project. The Petroleum & Natural Gas Regulatory Board recently finalized the ninth round of bids under the project and Torrent Gas Private Limited and AG&P LNG Marketing Pvt Ltd will set up the facilities in Chennai, including the pipeline for uninterrupted supply of natural gas. Adani Gas Limited, Indian Oil Corporation, and a few other private players have won the tender to set up similar pump stations and PNG connections in other parts of Tamil Nadu. These projects aim at making Indian cities greener by putting up a gas grid by 2020. Like in Delhi and Mumbai, people in Chennai would be able to use CNG, which costs Rs 40 a kg, instead of petrol and diesel to run their vehicles. The average mileage for Compressed Natural Gas is also high: around 20-25km per kg. Piped natural gas too works out cheaper than liquefied petroleum gas. “At present, users in Delhi pay Rs 5,000 as a one-time-installation fee and are charged on a monthly basis based on their consumption level or usage. Taps with meters will be fitted to the pipelines for supplying gas,” a senior PNGRB official told TOI. Another PNGRB official said that since it would take time for the entities to set up infrastructure, they can rent pipelines already laid by GAIL, the state-owned natural gas processing, and distribution company, on an hourly basis. “As far as Tamil Nadu is concerned, natural gas supply might be routed through GAIL pipelines, which run from Kochi through the western districts,” he added. Another possible route is Ennore-Tuticorin line. An LNG terminal is under construction at Ennore. Bids were floated in 86 geographical areas (GAs) including seven in Tamil Nadu and each area requires an investment of Rupees 300-500 crore over an eight-year period. Derek Wolfe Jersey