Govt asks ONGC to give 60% stake in mainstay oil fields to foreign firms
The petroleum ministry has told ONGC to give away 60% stake plus operating control in India’s largest oil and gas producing fields of Mumbai High and Bassein to foreign companies, according to an October 28 letter to the state-owned company. Amar Nath, additional secretary (exploration) in the Ministry of Petroleum and Natural Gas, wrote a 3-page letter to ONGC Chairman and Managing Director Subhash Kumar, saying productivity of the Mumbai High and Bassein & Satellite (B&S) offshore assets under state-owned firm was low and international partners should be invited and given 60 per cent participating interest (PI) and operatorship. This is the second time since April that Nath, who is part of the ONGC management as the longest-serving government nominee director on its board and often considered a potential candidate to replace Kumar next year, has written an official letter, painting a poor picture of the company’s performance. According to the October 28 letter, reviewed by PTI, he said the redevelopment projects will raise recovery of the mature and continuously declining Mumbai High field from 28 per cent to 32 per cent, “which is quite low”. “The field has substantial potential to contribute to domestic production,” he said adding the infrastructure such as pipelines and platforms on the fields are “ageing and leaking and need replacement/revamping”. “The ONGC will, however, find this challenging as its improvement/development projects have lagged behind schedule. Procedural aspects and other constraints will not encourage ONGC to take quick decisions,” he said. The company “should bring a joint venture partner of international experience and farm out 60% PI and operatorship of the field,” he wrote. While projects on B&S Assets, which encompasses Bassin field–the largest gas producing field in India, envisage raising recovery factor to 70% from the current low of 45%, “ONGC can plan for a substantial increase from this field” and “can provide an entry point to international players to India to invest in gas and energy infrastructure,” he wrote. “ONGC should plan to invite experienced international partners and give 60% PI and operatorship,” he added. Mumbai High, which was discovered in 1974, and B&S, which was put into production in 1988, are Oil and Natural Gas Corporation’s (ONGC) mainstay assets, contributing two-thirds of its current oil and gas production. Without these assets, the company will be left with only smaller fields. Nath also reiterated his earlier demand for ONGC to “divest its drilling and well services arms” to become asset lite and increase capital efficiency. However, such a move would entail ONGC having to pay GST every time it would hire a rig or any other service from the hived off unit. Nath had on April 1 written to Kumar to sell stake in producing oil fields such as to Ratna R-Series to private firms, get foreign partners in KG basin gas fields, monetise existing infrastructure, and hive off drilling and other services into a separate firm to raise production. He gave a seven-point action plan, ‘ONGC Way Forward’ to Kumar, who had taken over as the head of the company on that day. The action plan, reviewed by PTI, called on ONGC to consider the sale of stakes in maturing fields such as Panna-Mukta and Ratna and R-Series in western offshore and onshore fields like Gandhar in Gujarat to private firms while divesting/privatising ‘non-performing’ marginal fields. It wanted ONGC to bring in global players in gas-rich block KG-DWN-98/2 where output is slated to rise sharply by next year, and the recently brought into production Ashokenagar block in West Bengal. Also identified for the purpose is the Deendayal block in the KG basin which the firm had bought from Gujarat government firm GSPC a couple of years back. It also wants the company to explore creating separate entities for drilling, well services, logging, workover services and data processing entities. The two letters by Nath are the third attempt by the oil ministry to get ONGC to privatise its oil and gas fields under the Modi government. In October 2017, the Directorate General of Hydrocarbons, the ministry’s technical arm, had identified 15 producing fields with a collective reserve of 791.2 million tonnes of crude oil and 333.46 billion cubic meters of gas, for handing over to private firms in the hope that they would improve upon the baseline estimate and its extraction. A year later, as many as 149 small and marginal fields of ONGC were identified for private and foreign companies on the grounds that the state-owned firm should focus only on big ones. The first plan couldn’t go through because of strong opposition from ONGC, sources aware of the matter said. The second plan went up to the Cabinet, which on February 19, 2019, decided to bid out 64 marginal fields of ONGC. But, that tender got a tepid response, they said adding that ONGC was allowed to retain 49 fields on the condition that their performance will be strictly monitored for three years. Nath in both April 1 and October 28 letters stated that two years have elapsed since the Cabinet decision but ONGC is yet to initiate the process for partnerships. ONGC produced 20.2 million tonnes of crude oil in the fiscal year ending March 31 (2020-21), down from 20.6 million tonnes in the previous year and 21.1 million tonnes in 2018-19. It produced 21.87 bcm of gas in 2020-21, down from 23.74 bcm in the previous year and 24.67 bcm in 2018-19.
Relook at oil taxation possible: Sitharaman
Rising crude oil prices remain a cause for concern and a relook at taxes on petroleum products is possible, according to finance minister Nirmala Sitharaman. “It is a major concern. We are looking at ways in which we can assess what is going to happen. We are keeping a watch on the global fuel situation, particularly the Indian basket,” she says in an exclusive interaction with Fortune India. In FY21, the Centre collected ₹2332.96 billion excise on diesel and ₹1015.98 billion on petrol. This is more than five times the amount collected from diesel (₹428.81 billion) and nearly three times the amount collected from petrol (₹292.79 billion) in FY2015. On whether a relook at taxation of petroleum and diesel products is possible only after the economy revives, she says, “There can be a re-look even without the economy picking up. If it picks up, it’s all the better. But what will be the outcome of the relook, we will have to wait to hear for it.” How far will the Centre let fuel prices run away? “I will not be able to say anything on the cut-off. Because a few years ago, petrol at ₹50 a litre, or ₹60, or ₹70 would have been a cause of worry. It is matter of relative position in the economy and component of fuel in inflation-determining basket of goods,” she says. Sitharaman also drives home the point that the government has “limitations in thinking what can be done about it,” despite the impact on the common man, as it is an imported good and not a luxury like gold. With the onset of the Covid pandemic, the Centre had increased excise duty on petrol and diesel in March and May last year as a revenue mobilisation measure. This did not have any impact on retail prices as state-run oil marketing firms adjusted the increase against the fall in global crude prices. Ahead of the lockdown in March last year, the excise duty on petrol was ₹22.98 per litre. The Centre raised it to ₹32.90 per litre on February 2 this year. Similarly, excise duty on diesel was ₹18.83 per litre on March 14, 2020. It was raised to ₹31.80 per litre on February 2 this year.
Gail India logs a whopping 87% yoy growth in Q2 PAT to Rs2,863cr as performance improves across segments
State-owned Gail India reported a standalone net profit of Rs2,863cr in the quarter ending September 2021 (Q2FY22) compared to Rs. 15.30 billion of Q2FY21 – rising by a whopping 87% yoy. On a quarterly basis, standalone Turnover increased by 24% to Rs. 214.77 billion in Q2 FY22 as against Rs. 173.52 billion in Q1 FY22. In the quarter, the physical performance improved across all segments. Natural Gas Transmission increased to 114.32 MMSCMD in Q2 FY22 as against 107.66 MMSCMD in Q1FY22, up by 6%. Natural Gas Marketing increased to 97.72 MMSCMD during the quarter as against 95.95 MMSCMD in Q1 FY22, up by 2%. Petrochemical production sales were at 221 TMT in the quarter as against 138 TMT in Q1 FY 22, clocking an increase of 60%. Manoj Jain, Chairman & Managing Director, GAIL informed that during the H1 FY22, GAIL has incurred a Capex of Rs. 31.80 billion mainly on Pipelines, Equity and Petrochemicals etc. On a consolidated basis, Turnover in Q2 FY22 was Rs. 217.39 billion in comparison to Rs. 175.51billion in Q1 of FY22, up by 24 %. The PBT in Q2 FY22 was Rs. 37.28 billion vs. Rs. 25.40 billion in Q1 FY22, up by 47 %. The PAT in Q2 FY22 is Rs. 28.83 billion vs. Rs. 21.38 billion in Q1 FY22, up by 35%. The company registered its highest ever Half Yearly Turnover and profit in H1 FY 22, clocking a turnover of Rs. 388.29 billion as against Rs 256.71 billion in the last fiscal, an increase of 51%. The Profit before Tax increased by 201% to Rs 57.36 billion vis a vis Rs 19.07 billion in H1 of previous year. Profit after Tax also jumped by 194% to Rs 43.93 billion for the half year as against Rs 14.95 billion in H1 FY 21. He stated that performance of all segments of the company have improved significantly during the quarter and further added that a sustainable future performance is expected.
No investment in Petroleum sector in 2 yrs caused hike in fuel prices
Union Minister Dharmendra Pradhan who has previously served as Minister of Petroleum and Natural Gas, on Saturday asserted that there has been almost no investment in the petroleum sector for almost two years due to the COVID-19 pandemic which led to the increase in fuel prices. Speaking to the media in Kanpur, BJP Uttar Pradesh’s election in charge said, “India imports around 80 per cent petroleum products. There has been no investment in the petroleum sector for past two years due to COVID-19 pandemic which caused increase in fuel prices.” He further said, “the cost of imports has also been increased, so the Government of India is trying to bring more plans for the use of renewable energy.” As per official data, Petrol prices in Delhi stand at Rs 109.69 per litre (up by Rs 0.35) and diesel prices are Rs 98.42 per litre (up by Rs 0.35) today. Meanwhile, petrol and diesel prices in Mumbai stand at Rs 115.50 and Rs 106.62 respectively, while petrol and diesel prices in Kolkata are Rs 110.15 and Rs 101.56 respectively. In Chennai, petrol prices are Rs 106.35 and diesel prices are Rs 102.59 on Monday. Apart from talking about fuel prices, the minister also asserted that there is no shortage of Diammonium phosphate (DAP) and other fertilisers in Uttar Pradesh. “There’s no shortage of DAP (di-ammonium phosphate), the situation had arisen temporarily. Yesterday I spoke with Chemicals and Fertilizers Min Mansukh Mandaviya,” said Pradhan. The developments in the state come ahead of Assembly polls due to be held early next year.