IndianOil to invest Rs 5 billion in Karnataka
Indian Oil Corporation (IOC), a public sector oil marketing major, plans to invest ₹5 billion at Chitradurga in Karnataka. The company said the investment is for setting up a terminal for receiving, storage and distribution of petroleum, oil and lubricants (POL) under a common user facility (CUF) spread across an area of about 120 acres. A Memorandum of Understanding (MoU) was signed by the Executive Director and State Head, IndianOil, Karnataka, DL Pramodh and Principal Secretary Commerce and Industries, Gaurav Gupta, and exchanged in the presence of Chief Minister BS Yediyurappa, Minister of Parliamentary Affairs, Coal and Mines Pralhad Joshi, Minister of State for Railways Suresh Angadi, and Minister for Large and Medium Scale Industries Jagadish Shettar at the recently-concluded ‘Invest Karnataka’ meet at Hubballi.
Positive outcome likely for GAIL India on AGR issue
The ultimate outcome in the ongoing Adjusted Gross Revenue (AGR) issue may turn out to be favourable for natural gas transmission utility GAIL India, with the Supreme Court not asking the company to pay AGR dues like it did for telecom companies. The apex court had last week asked GAIL, from whom department of telecommunications (DoT) has demanded AGR dues, “to seek appropriate remedy before the appropriate forum”. This means the SC is not asking GAIL to pay AGR dues like it has asked unified license telecom companies and the company is now likely to appeal to TDSAT against the dues demand, according to equity research firm ICICI Securities. “Thus, the AGR issue is likely to remain an irritant until TDSAT or a higher court to which the matter may be taken rules on it. However, we expect the eventual ruling to favour GAIL establishing that it is not required to pay license fee on its non-telecom revenues,” ICICI Securities said in a report. In provisional assessment orders, DoT has raised a demand on GAIL of Rs 1.83 lakh crore towards annual license fee including interest and penalty on AGR. DoT is demanding license fee from GAIL at 8 percent of its total revenue and not just on its miniscule optic fibre revenue. The company had on 22 January filed an application in the apex court to seek clarification on the applicability to GAIL of the court’s 24 October 2019 order asking unified license telcos to make payment of AGR dues within 90 days. In its last week order, the court had also pulled up the DOT for failing to implement its October order. The department later sent notices to Airtel and Vodafone, who were slapped with a demand of Rs 1.47 lakh crore, asking them to clear the dues immediately.
Qatar delays partnerships for natural gas expansion amid price collapse
Qatar has delayed choosing Western partners for the world’s largest liquefied natural gas (LNG) project by several months after surprising the industry with a big expansion plan despite a collapse in global gas prices, four sources said. State-run Qatar Petroleum (QP) declined to comment on the reported delay, which comes as the global gas industry faces the major challenge of a supply glut due to booming U.S. production and a drop in Chinese demand. Qatar, the lowest cost producer of LNG, sits on the world’s largest gas field and offers terms that led oil majors ExxonMobil and Royal Dutch/Shell to invest tens of billions of dollars in the past. The big energy firms have waited a decade for a new opportunity to invest in Qatar after the country put further development on hold to ensure the giant North Field could sustain production. The moratorium was lifted two years ago and QP shortlisted six Western majors for the next phase of expansion. QP didn’t disclose the names but said it would announce partners in the first quarter of 2020. But late last year QP said it had decided to expand LNG production by 60 per cent to 126 million tonnes a year by 2027 instead of the original plan for a 40 per cent increase. QP did not say it would delay the partnerships, but four sources involved in the talks said the company planned to take more time. “I think Qatar has decided to firm up the capex of the project before they go to international oil companies. I think the decision should be ready by the end of 2020,” one of the sources involved in talks said. Three other sources familiar with the talks confirmed a delay to at least the middle of 2020 because the scaling up of the expansion combined with a much lower gas price outlook were affecting every aspect of potential partnerships. “The conversation is centered on the valuation of the project which affects equity and financing,” said one source. “Qatar’s cost base is very low compared to other projects but in today’s environment, every project has to compete for capital,” said another source. Qatar, which has a wealth fund in excess of $320 billion, has said it would build the facilities alone if necessary, but would prefer to have partners to share risks and costs as well as give access to new customers. TOO MUCH GAS Global LNG prices collapsed to an all-time low in Asia in January as China reduced energy consumption because of the spread of coronavirus. Lower demand from China undermined hopes that the biggest user of the fuel would soak up excess supply to reduce its dependence on coal. The United States is rapidly increasing LNG export capacity to drain a large domestic surplus. Gas prices have been so low for so long in the United States that many shale-gas firms have struggled to raise debt and pioneers such as Chesapeake Energy are battling to stave off bankruptcy. U.S. gas producers had hoped that exports would raise the value of their fuel, but instead they are contributing to a supply glut is pushing down prices worldwide. QP did not say how much it would cost to build six more LNG trains and develop offshore production facilities. One standard LNG train with capacity of 8 million tonnes a year costs around $10 billion, meaning QP would need to spend at least $60 billion on the expansion. Exxon, Shell, Total and ConocoPhillips have been partners in Qatar’s existing LNG plants since the country began its journey toward becoming a top player only 20 years ago. Some of these firms have signed deals over the past year giving Qatar stakes in their oil and gas projects. But the lower outlook for natural gas prices led energy majors to lower their projections for the rate of return on Qatar’s expansion phase, making it less lucrative than previously expected, according to the three sources involved in the talks. A slew of LNG projects around the world from Canada to Mozambique and Nigeria is expected to lead to an even bigger oversupply later this decade. “People began to worry where all this gas is going to go,” one of the three sources said.
Plans afoot to replace coal–based furnaces with PNG in Moradabad brass units
In an attempt to curb air pollution due to emissions of toxic fumes from brass furnaces in UP’s Moradabad, the Pollution Control Board in collaboration with Moradabad’s district administration and civic authorities is chalking out a plan to replace use of coal to fire furnaces with piped natural gas (PNG). According to officials at the Pollution Control Board in Moradabad, there are approximately 5,000 big and small metal manufacturing units operating in the city and some are running in residential areas. They coal furnaces are used to smelt copper and zinc for manufacturing brass and molding it into shapes. Aluminum and silver are also smelted. Most of the units flout pollution norms. Despite frequent crackdowns on erring operators, not much has been achieved. This time around, efforts are being made to replace the pollution emitting units with gas furnace to reduce air pollution. A private gas agency has been roped in for the purpose, said officials. Uttar Pradesh Pollution Control Board, regional officer, Moradabad, Ajay Kumar Sharma told TOI, “The pollution board, district administration and Moradabad Municipal Corporation are jointly working on a plan to completely eliminate the coal furnaces from the city and replace them with gas-based furnaces. The PNG-based furnaces are expected to reduce level of air pollution as compared to coal furnaces that emit a huge amount of carbon dioxide.” Speaking with TOI, deputy commissioner (industries) Anuj Kumar said, “Around 5,000 big and small metal units are currently operational in Moradabad and all of them use coal-based furnaces for smelting metals. According to the Central Pollution Control Board (CBCB), the city was among the 10 most polluted cities (persistently recording ‘severe’ AQI levels) in the country in 2019. It is a matter of concern and, therefore, a plan is underway to control the air pollution. The work will be taken up in phases. Initially, all coal-based furnaces will be converted into PNG-based furnaces.” Kumar added, “The gas supplying agency will soon be applying for an NOC from the nagar nigam to undertake digging work in parts of city in order to lay the gas pipelines for supply of PNG to these units. All the areas where the coal-based furnaces are being used will be covered under the project. By doing so, the livelihood of those working in the brass units will not suffer as these will not be shut down. The use of green fuel will also help in environment conservation.” Recently, residents of Rehmat Nagar under Katghar police station limits had lodged a complaint with district administration regarding air pollution from metal furnaces in residential areas and had demanded closure of such units. So far, around 80 metal manufacturing units flouting pollution board norms have been shut down by Moradabad Pollution Control Board.
$60 billion investment lined up in natural gas sector: Oil minister Pradhan
India is likely to witness investments to the tune of a whopping $60 billion in the natural sector as part of efforts to transform the country into a gas-based economy using natural gas a transition fuel, oil minister Dharmendra Pradhan has said. “Our government is working towards increasing the share of gas from 6.2 per cent (currently) to 15 per cent in the energy mix by 2030,” he said at an industry event here, adding an.estimated investment of $60 billion is being lined up in the sector, developing a “one Nation one Gas Grid”, cross-country pipelines, rapid expansion of LNG infrastructure, City Gas Distribution (CGD) network expanding to cover over 70 per cent of the population covering 407 districts across 28 states and union territories. He also said the government is actively encouraging use of LNG, among others, for long-haul trucking along expressways, industrial corridors and inside mining areas, marine applications, apart from making natural gas easily available at doorsteps for users through mobile dispensing. The government is trying to “Reform, Perform and Transform” the sector through policy and market reforms in key areas including exploration and production, refining, marketing, natural gas and global cooperation, the minister said. The overall area under oil and gas exploration has increased from 90,000 square kilometer in 2014 to 227,000 square kilometer at the end of 2019. India is also promoting the use of Compressed Biogas (CBG) in a big way for automotive, industrial and commercial uses in coming years given the abundance of biomass in the country. Around 5,000 compressed biogas plants are being set up, mostly by private entrepreneurs, under the SATAT scheme that provides assured price and offtake guarantee by oil marketing companies. These plants will help tackle the problem of agricultural waste burning and increase farmers’ earnings.
Plans redrawn to end city gas distributors’ monopoly
The downstream regulator is planning to end marketing monopoly of Indraprastha Gas, Mahanagar Gas, Gail Gas, Gujarat Gas and more city gas distributors in at least 30 license areas by declaring their network as ‘common carrier’, which would force them to reserve a part of their capacity for third party, people familiar with the matter said. In the next few months, the Petroleum and Natural Gas Regulatory Board (PNGRB) will likely be ready with a regulatory framework for elimination of monopolies, they said. “If you look around, every monopoly or oligopoly has certain checks – in the power sector, there is regulatory oversight on tariff while in the telecom sector, limited competition keeps tariff in check – but in city gas, the monopoly is unfettered,” a person familiar with the thinking at PNGRB said. Several CNG and piped cooking gas distributors have enjoyed exclusive marketing rights far longer than the usual 3-5 years that licenses permit. Introducing competition was necessary for market efficiency and increased consumer benefit, the person said. Plans redrawn to end city gas distributors’ monopoly PNGRB is unlikely to terminate all eligible monopolies in one go. “The regulator will pick one or two cases in the beginning as test cases,” the person said. “Obviously, there will be challenges by the affected companies and that will have to be overcome, which will also make the process more robust.” The regulator’s attempts at ending monopoly in previous years failed as distributors relied on the absence of a regulatory framework to stonewall such a move. Which is why PNGRB is now arming itself with a regulatory framework for this. The board will have to publish its intent to end marketing exclusivity and then hear the distributor as well as other stakeholders in a fixed timeframe before taking a final decision on this, as per a draft regulation for declaring city or local natural gas distribution networks as common carrier or contract carrier it had floated in August last year. Once a network is declared a common carrier, the distributor will have to reserve a fifth of its capacity for third parties, including suppliers and customers, as per the draft. Existing CNG stations will continue to be exclusively operated by the licensee. But third-party entities can install new CNG stations, which will be permitted firm access by licensees. CNG stations shall receive natural gas only through the city gas network of the authorised entity. The license holder shall declare on its website its own requirement and the capacity allocated on a firm contract basis which may be verified by the PNGRB every month or at any other intervals the board desires, as per the draft.