HPCL sees more energy stability under Biden
The election of Joe Biden as US president should bring more stability to energy, and will promote crude oil and LNG trade between India and the US, the chairman of India’s third-biggest state-run refiner Hindustan Petroleum Corp. Ltd told S&P Global Platts on Nov. 8. “The nature of the verdict will propel the policy framework towards more stability as far as energy is concerned,” M.K. Surana said. India is the world’s third biggest energy consumer, and state-owned gas utility major GAIL regularly sources LNG from the US while state-run refiners buy crude from the US when the price turns competitive against other sources. “India and US partnership has grown in recent times,” Surana said. “This partnership can only grow further with the US turning an exporter of crude oil and LNG, and also because India being the market with the largest potential for both fossil and non-fossil energy sources.” BP recently reiterated it was planning to play a much bigger role across India ‘s energy transition, including in renewables. “India is set to nearly double its energy consumption over the long term,” Prime Minister Narendra Modi told the recent India Energy Forum by CERAWeek. “Our energy sector will be growth-centric, industry friendly and environment-conscious.” Modi said plans are in place to grow the country’s refining capacity from about 250 million mt/year currently to 400 million mt/year by 2025. Terming Biden’s victory “spectacular,” Modi said in a Nov. 8 tweet: “As the VP, your contribution to strengthening Indo-US relations was critical and invaluable. I look forward to working closely together once again to take India-US relations to greater heights.”
Oil & Gas reform – Firms will soon be able to sell gas via auction platforms: Secy
As part of the larger reforms in the natural gas sector aimed at smooth trade of natural gas in the country, companies will soon be allowed to sell gas through auction platforms, oil secretary Tarun Kapoor said. “The policy and regulatory framework has to come very fast, so that buying and selling of gas becomes easy. Auction platforms will be there. There will be a panel made by the DGH and thereafter those who produce gas can use any of these platforms to bid out gas,” Kapoor said, speaking at the Virtual Natural Gas Conclave organized by PHD Chamber of Commerce and Industry. He added this is a major step towards marketing freedom which is being given to the producers of gas in India. The government had recently issued a notification allowing producing companies to sell natural gas through open auction. “The idea is that anyone who wants to sell gas in India, anyone who wants to transport gas in India and anyone who wants to buy gas from a particular source should be able to do this freely,” Kapoor said. The secretary also said a formal natural gas exchange will become a reality soon. “There is a platform where gas exchange in a very elementary form has already come and some transactions are taking place but PNGRB has brought out the regulations and with that a formal exchange would come up,” he said. The ministry is also working to set up a Transport System Operator (TSO) for gas. In order to transition India towards a gas-based economy and boost the share of natural gas in India’s energy basket from the current 6 per cent to 15 per cent, the government is trying to establish the supporting infrastructure. As part of the plan a gas grid is coming up through a trunk pipeline system which will be 34,000 kilometers long. Of this, work on around 17,500 kilometer of pipelines has already been completed. Kapoor said this massive expansion of gas supply infrastructure is a major business opportunity for the domestic manufacturing companies and also a chance for industries currently using fuels like diesel and petcoke to shift towards gas as a clean fuel.
Vedanta’s Cairn Oil & Gas gets 3-month extension for Rajasthan oil block
Vedanta Ltd’s oil and gas arm Cairn has got a further three-month extension of license for its prolific Rajasthan oil block pending settlement of a dispute over USD 520 million cost recovery. The license to explore and produce oil and gas from Barmer was due to renewal in May this year, but pending settlement of the dispute the government has given five extensions, the latest till January 31, 2021. In notes to its second quarter earnings statement, Vedanta said it believes “the company is eligible for automatic extension of production sharing contract (PSC) for Rajasthan (RJ) block on same terms with effect from May 15, 2020.” The government had in October 2018 agreed to extend by 10 years the contract for Barmer fields in Rajasthan after the expiry of the initial 25-year contract period on May 14, 2020. This extension was subject to the Vedanta Group firm agreeing to raise the share of the government’s profit from oil and gas produced from the block by 10 per cent. While Cairn protested against the additional payout and took the government to court, the extension was subsequently held up due to the government claiming additional profit petroleum after re-allocating Rs 2,723 crore common cost between different fields in the block and disallowance of Rs 1,508 crore cost on a pipeline. The government wants the company to clear the dues before the extension is granted. “One of the conditions for extension relates to notification of certain audit exceptions raised for FY16-17 as per PSC provisions and provides for payment of amount, if such audit exceptions result into any creation of liability,” it said. Vedanta said it has disputed such demand. “The company has reasonable grounds to defend itself which are supported by independent legal opinions,” it said. “The company has also invoked the PSC process for resolution of disputed extensions and has issued notice for arbitration,” it noted. The arbitration tribunal has been constituted. “Further, on September 23, 2020, government of India has filed an application for interim relief before Delhi High Court seeking payment of all disputed dues. The bench was not inclined to pass any ex-parte orders and now the matter is scheduled for hearing on November 11, 2020,” it said. The company said due to extenuating circumstances surrounding COVID-19 and pending signing of the PSC addendum for extension after complying with all stipulated conditions, the government has permitted it to continue petroleum operations in the RJ block with effect from May 15, 2020 until extension is signed or for a period up to January 31, 2021, whichever is earlier. Pending resolution, the government first gave the company a three-month extension of the PSC for the Rajasthan block, which houses the prolific Mangla, Bhagyam and Aishwariya oilfields, till August 15, 2020. It subsequently extended the PSC by 15 days and then to September 30 and October 31 through monthly extensions. Sources said, the Directorate General of Hydrocarbons (DGH), the upstream nodal authority of the Oil Ministry, on October 26, 2018, granted its approval for a 10-year extension of the PSC for the Rajasthan Block, with effect from May 15, 2020 subject to payment of additional profit petroleum. Cairn challenged it before the Delhi High Court and the matter is sub-judice. The company also had a dispute with its partner state-owned Oil and Natural Gas Corp (ONGC) over investments made in the block, which held up the computation of the government’s share of profit petroleum for fiscal years ending March 31, 2019, and March 31, 2020. ONGC holds 30 per cent interest in the block while Cairn Oil & Gas, a unit of Vedanta Ltd, is the operator with a 70 per cent stake. Sources said DGH had way back in May 2018 raised a demand for additional share of profit oil for the government after disallowing Rs 1,508 crore out of the cost incurred on laying a heated-pipeline to transport Barmer crude and Rs 2,723 crore in the reallocation of certain common costs. These costs pertain to only Cairn’s share in the Rajasthan block as ONGC has agreed to pay the government if these costs are disallowed. In all, Rs 4,828 crore, including interest, is being sought to be disallowed for the 2017-18 fiscal. The company believes that it has sufficient as well as a reasonable basis for having claimed such costs and for allocating common costs between different fields, sources said adding it believes that the conditions linked to PSC extension are untenable.
ONGC puts mature oil, gas fields on block; Invites bids from global firms
State-owned ONGC has invited bids from global oil and gas companies for undertaking work to boost production from its ageing fields as it looks to reverse declining output. The 15-year Production Enhancement Contract (PEC) will require firms to commit to investing in capital and operating expenditure to increase production, higher than the existing baseline output, according to the tender document. A tariff will be paid in USD per barrel of oil and USD per million British thermal units for gas for any incremental hydrocarbon produced and saved over the baseline. ONGC on October 27, issued the expression of interest (EoI) notice offering 15-year PECs to outside contractors for an unidentified number of “mature” fields. The company made no mention of oil or gas field names in the EoI notice, but sources said the fields are largely in Assam and Gujarat, the country’s oldest producing basins. “ONGC intends to undertake production enhancement from its onshore mature fields under ‘Production Enhancement Contract (PEC)’ with suitable oil and gas companies of global repute who have technical expertise, financial capability and resources to increase production by improving the recovery from such fields,” the tender said. Companies, it said, will be required to commit investment in capital and operating expenditure “to increase production from the existing production by introduction of new technologies.” They will have to do reservoir modelling, reserves assessment and execution of a development plan to enhance production. All the oil and gas produced will belong to ONGC and anyone interested has until December 1, 2020 to respond. This is the second attempt by ONGC to induct partners in its ‘mature’ or ageing fields. On December 28, 2018, it had invited PEC bids for Geleki field in Assam and Kalol in Gujarat. But only Schlumberger responded for Geleki and no bid was received for Kalol. Schlumberger sought deviations which ONGC turned down. ONGC re-launched the PEC process for Kalol and Geleki with a request for information (RFI) notice on July 22, 2020. The government has been pushing ONGC to hire international oil service companies to raise output from its mature oil fields as it saw the foreign companies as the answer to declining production from ageing fields. ONGC is looking to raise domestic output quickly to meet Prime Minister Narendra Modi’s target of cutting import dependence by 10 per cent by 2022. India currently imports about 85 per cent of its oil needs. Originally, ONGC had on December 7, 2016, signed a Summary of Understanding (SoU) to give Kalol field to Halliburton and Geleki field to Schlumberger for raising production above the current baseline output. Though the contracts were signed in presence of Oil Minister Dharmendra Pradhan, ONGC rescinded them in 2017, on fears of courting controversy for handing fields on nomination basis. Thereafter, the company in June 2017, floated an expression of interest (EoI) from service providers for undertaking production enhancement. Schlumberger Asia Services, Halliburton Offshore Services Inc and Baker Hughes Singapore PTE Ltd were shortlisted as the firms were meeting pre-qualification criteria. Bids were originally sought by May 25, 2018, but saw several extensions and final bids came in 2019. At the close of bids, only Schlumberger made a financial bid for Geleki field.
Biden win means Iranian oil supply to India may resume, but it will take time, say experts
A Joe Biden presidency could lead to resumption of Iranian oil supply to India, which would reduce prices, but any such move would take time and the US shale industry is likely to oppose steps that make oil cheaper, industry experts said. The US administration would continue to value India as a major energy market that lures oil and gas producers in the country, while Indian refiners are happy to reduce their dependence on oil from the Middle East. Low oil prices are crucial for India that imported $100 billion worth of crude oil last fiscal year. Lower prices helped the government raise resources by increasing fuel taxes in a year the pandemic hit public finance. “Prices will remain benign in general,” Hindustan Petroleum chairman MK Surana said. “Producing countries are already producing less than capacity. Supply from Libya is increasing. If Biden is soft on Iran, it will bring more supplies to the market.” Crude oil is currently trading around $40 a barrel, with prices varying barely a few dollars per barrel since June as producers have adjusted supplies while demand has returned in many economies. The shock of the pandemic had sent prices below $20 a barrel in late April from nearly $70 at the beginning of the year.
Reliance’s stake sale talks with Saudi Aramco gaining momentum
Reliance Industries Ltd and Saudi Aramco are resuming talks over a 20 per cent stake sale by the Indian conglomerate in its oil-to-chemical business after a brief pause due to COVID-19 pandemic, ET Now reported on Monday, citing sources. Both the companies were committed to the deal and Aramco wants to do physical inspection of Reliance’s assets in India, the report said. Earlier in July, Reuters had reported that Reliance’s stake sale in its oil-to-chemicals business to Aramco had stalled over price. Reliance Chairman and Asia’s richest man Mukesh Ambani told shareholders in July that the deal had been delayed due to “unforeseen circumstances in the energy market and the COVID-19 situation.” The initial deadline for completion of the deal, announced in August 2019, was March 2020. Reliance in October reported a 15 per cent drop in September-quarter profit on Oct. 30, as the coronavirus crisis hammered its oil business, although the company reaped double-digit revenue growth at its Jio telecom service. Meanwhile, Reliance has approached investors to take stakes in its retail business and has already raised around $20 billion from global investors this year by selling stakes in its Jio Platforms digital business.