Haryana government inks pact with Indian Oil Corporation to set up bio-CNG plants
The Haryana government Thursday signed a memorandum of understanding with Indian Oil Corporation (IOCL) for setting up bio-CNG plants based on paddy straw and other agri-waste in the state. The first such compressed biogas plant (CBP) is likely to be set up in Kurukshetra. The MoU, which was signed in the presence of Chief Minister Manohar Lal Khattar here, will open opportunities for setting up of 200 CBPs in the state by 2023, with total capacity of about 1,000 tonnes per day of compressed biogas, an official statement said. This will result in annual production of about four lakh tonnes of compressed biogas per annum, it said. Chairman, Haryana Renewable Energy Development Agency (HAREDA) Shailendra Shukla signed the MoU on behalf of the state government, while Executive Director Subodh Kumar signed on behalf of IOCL. Subodh Kumar also requested the chief minister to lay foundation stone of the first compressed biogas plant in Kurukshetra in November this year. He said that with the signing of MOU, the IOCL would start work on the setting up of this plant. The chief minister said that the government intends to promote agriculture waste based biomass or waste to compressed biogas or Bio CNG plants in the state to tackle the issue of crop residue burning and scientific disposal of agriculture waste. This, Khattar said, will not only increase farmers’ income by sale of crop residue but also create rural employment opportunities. Additional Chief Secretary, New and Renewable Energy P K Mahapatra said that the production of compressed biogas on a commercial scale will have several benefits, including reducing pollution due to crop burning and providing an economic alternative to crop residue, providing additional sources of revenue to farmers, rural employment and value creation in the rural economy. He said that the compressed biogas is similar to the commercially available CNG in its composition and energy potential and hence it could be utilised as a green automotive fuel. Kumar said that a 100 tonnes per day agro residue feed stock capacity biogas plant could produce about 10 TPD compressed biogas and 30 TPD dry manure. The cost of such a plant is about Rs 35 crore and requires six to ten acres of land, he added. He further said that they intend to promote compressed biogas with about 96 per cent methane content which would be better than CNG (about 86 per cent methane) and would have better combustion qualities.
Russia, Pakistan sign MoU on gas pipeline from Iran
Moscow, Russia and Pakistan signed a memorandum of understanding (MoU) on implementing a project to build an underwater gas pipeline from Iran to Pakistan and India, the Russian Energy Ministry said in a statement on Thursday. “The memorandum provides for the identification of authorized organisations through which the project will be supported, including during the development of a feasibility study, identification of the resource base, configuration and route of the gas pipeline,” the statement said, Xinhua reported. Russian Deputy Energy Minister Anatoly Yanovsky and Pakistan’s Ministry of Energy Additional Secretary Sher Afgan Khan signed the document in Moscow. Now Russia will have to inform Iran and India about the signing, after which it expects to sign a similar document with India, Yanovsky said in the statement. The project was frozen in 2013 due to the imposition of sanctions against Iran, but its revival started in 2017. In November 2017, Russia and Iran signed a memorandum that envisaged Russian support for gas supplies from Iran to India. In March, a Russian-Iranian working group on the implementation of the project had its first meeting. According to Yanovsky, Russia and Pakistan were holding consultations on another project of building the 1,100 kilometer North-South Gas Pipeline (NSGP) between Pakistan’s Karachi and Lahore to transport 12.3 billion cubic meters of gas per year. The implementation of an agreement signed in October last year between Russia and Pakistan on Russian liquefied natural gas (LNG) supplies “can become a promising direction of cooperation,” he said. The governments of the two countries were also considering signing an agreement on Russian oil products supplies to Pakistan, Yanovsky said. In addition, Russian electric power industry has shown interest in the Pakistani market, he said.
Bangladesh shelves mini-FSRU projects as LNG imports ramp-up
Dhaka — Bangladesh has shelved plans for three small-scale floating storage and re-gasification units following objections from the country’s main port authority, and as LNG imports at its first full-sized FSRU ramp up. The cancellation comes as a disappointment for the commodity traders and shipping companies who were in talks with state-run national oil company Petrobangla for building the small-scale LNG projects or supplying gas to them. The relatively high cost of small-scale LNG projects, the cost of gas supplies from these terminals and delays from interested sponsors, contributed to the shelving of the project by the energy ministry, according to industry executives. “We are not considering these small FSRUs now as the previously planned floating LNG terminal has already been commissioned, and is supplying re-gasified LNG to consumers,” Petrobangla’s chairman Abul Mansur Md Faizullah told S&P Global Platts Tuesday. Faizullah said commodity traders Trafigura, Gunvor and Vitol, as well as Belgium-based shipping company Exmar NV were in final talks with Petrobangla and its subsidiary, Rupantarita Prakritik Gas Company Ltd, to build the mini FSRUs and sell the gas to Petrobangla. RPGCL is in charge of monitoring LNG imports and its facilities in Bangladesh. In December last year, Petrobangla had inked preliminary agreements with Trafigura and Gunvor for the supply of around 200,000 Mcf/day of regasified-LNG each for over 10 years. In early May, Petrobangla abandoned the preliminary deal with Trafigura due to delays in agreeing to the terms of the SPA, including the LNG specification and the location for any potential dispute settlement, Platts reported previously. A preliminary deal with Gunvor also did not progress further. “We don’t have any binding agreement with any of these firms to award contracts to build small FSRUs and supply re-gasified LNG to us,” Faizullah clarified. The small-scale FSRUs were meant to supply gas ahead of the commissioning of Excelerate Energy’s Moheshkhali FSRU in the Bay of Bengal, and the end-users of natural gas from both projects are the same in the port city of Chattogram, according to Petrobangla. PORT CONSTRAINTS The Chittagong Port Authority has warned that the navigability of the adjacent River Karnaphuli might be badly affected if the small FSRUs were docked there, a senior official at the country’s energy ministry said this week. The official added that Bangladesh’s energy ministry was planning to build mini FSRUs with a capacity of around 150-200 MMcf/d of natural gas each, adjacent to an existing platform and jetties on the River Karnaphuli. “We sent our observations over building of the FSRUs to the concerned authorities,” Chittagong Port Authority’s member for administration and planning Md Zafor Alam said Monday. Chittagong Port is Bangladesh’s largest sea port that handles 90% of the country’s trade and is also used by India, Nepal and Bhutan for transshipment, according to CPA statistics. It ranked as the 71st busiest port in the world in 2017, according Lloyd’s List of London. State-run Petrobangla started LNG imports from Qatar’s RasGas from September 9 via Excelerate Energy’s FSRU Excellence, which is Bangladesh’s first LNG import facility, located at Moheshkhali Island in the Bay of Bengal.
Petronet LNG seeking 9 cargoes for 2019: document
India’s Petronet LNG Ltd is looking to buy 9 cargoes of liquefied natural gas (LNG) for delivery in 2019, according to a company document reviewed by Reuters on Thursday. The firm is looking for the cargoes on a cost-and-freight (CFR) or delivered ex-ship (DES) basis to be unloaded at Dahej, Gujarat or Kochi, and Kerala, according to the document. The cargoes are to be delivered in January, February, April, June, July, August, October, November and December. Offers are due by Thursday.
Rising crude in poll time to further erode PE of OMCs
Higher oil prices are not only pinching the average Indian. Investors in motor-fuel retailers aren’t happy either, and should brace for more pain as the Street believes politics could overshadow the cold logic of economy in the run-up to state and national polls. Oil marketing companies (OMC) such as Indian Oil (IOC), Hindustan Petroleum Corp. (HPCL), or Bharat Petroleum Corp. (BPCL) could face marketing margin compression as the political calendar over the next six-nine months gets poll heavy. These stocks have shed 22-41 per cent since the beginning of the year, while the benchmark index Nifty rose 4 per cent in the same period. Marketing margin is the money earned from the retailing of motor fuels, and it contributed nearly 40-60 per cent of the total operating profit of OMCs. Stocks have largely been victims of derating as earnings contribution of the marketing operations has remained hitherto unhurt, with OMCs passing on higher crude prices to consumers. In the run-up to polls, the Street believes, state-run OMCs may not have the luxury to pass the increase in input prices on to retail consumers. HPCL, BPCL and IOCL are trading at 6.03, 7.5, and 7.3 times, respectively, based on their 12-month projected earnings, 19-34 per cent lower than their 10-year average PE. Firming crude oil prices could further depress marketing margin, and several factors indicate that global oil prices are likely to remain elevated in the medium term. The Indian crude basket rose 29.6 per cent to $80.74 so far in 2018, according to Petroleum Planning and Analysis Cell (PPAC). Indian crude basket comprises of sour-grade Oman and Dubai sweetgrade Brent processed in Indian refineries in the ratio of 75:25. Rising crude in poll time to further erode PE of OMCs Historically, OMCs have not been able to pass on higher crude oil prices to consumers ahead of state elections. For instance, in the past four big state elections of Bihar (November 2015), UP (April 2017), Gujarat (December 2017) and Karnataka (May 2018), OMCs kept their prices frozen for about a couple of weeks, and this depressed their marketing margins. Due to the price freeze before the Karnataka election, OMC lost nearly Rs 400 crore of revenues, and marketing margins reduced from an estimated Rs 3.4 per litre to Rs 0.6 per litre for petrol and from Rs 3.8 per litre to Rs 0.8 per litre for diesel. With five critical state elections in the next two months and impending general elections next year, higher crude prices could impact the OMCs’ ability to maintain their normative marketing margins. OMC are currently making a marketing margin of Rs 1.63 and Rs 2.68 per litre on petrol and diesel, respectively. The Street is currently pricing in blended marketing margin of Rs 1.6-1.8 on auto fuel for the current fiscal year.
Will lose Rs 2,200 crore a year if fuel prices cut by Rs 1/litre: Maharashtra govt
On a day when diesel prices crossed the Rs 80-mark in Nanded, the BJP-led state government said the state would lose revenue of Rs 2,200 crore per year if it slashes the petrol and diesel prices by Re 1 per litre. Will lose Rs 2,200 crore a year if fuel prices cut by Rs 1/litre: Maharashtra govt Finance minister Sudhir Mungantiwar said the government had already slashed taxes on petrol and diesel to check the surging prices at the state level. He said the government was in the favour of bringing petrol and diesel under the ambit of the GST, “but the Congress-led governments were against such move”. The next meeting of the GST council meeting is scheduled on Friday. If the fuel prices is brought under GST, the rates could fall drastically. “Maharashtra brought down taxes on petrol by Rs 2 per litre and on diesel by Re 1 in October last year, whereas states like Rajasthan, Karnataka and AP have cut their taxes recently,” said Mungantiwar, while speaking to reporters on the sidelines of a BJP meeting on Wednesday. He blamed the “global forces” for unabated surge in fuel price in India. Petrol price has already crossed the Rs 90-mark in more than 30 cities/towns in Maharashtra, while diesel is also at an all-time high at many places. In Mumbai, petrol price remained unchanged on Wednesday at Rs 90.22 per litre, the same as on Tuesday, while diesel price was Rs 78.69. In the state, diesel rate was highest in Nanded at Rs 80.13 per litre. Nationally, the other city that had crossed the Rs 80-mark a few days back was Hyderabad; it was priced at Rs 80.62 per litre on Wednesday. Sources said if diesel price shoots over Rs 80 in Mumbai, tourist bus operators and transporters are likely to protest. Tourist bus operators are unable to hike their rates due to a cap by the government. “We want the state to intervene and reduce VAT, taxes on diesel or bring it under GST,” said a transporter.
India looking for investors to back strategic oil reserves: executive
India will start international road shows next month seeking potential investors for the second phase of its strategic oil reserves estimated to cost nearly $2 billion, the head of the operator of country’s reserves said on Wednesday. India Strategic Petroleum Reserves Ltd (ISPRL) will hold the road shows in the last week of October in Singapore, London and New Delhi, Chief Executive H.P.S. Ahuja said on the sidelines of the Tank Storage Asia Conference. India’s government approved the two strategic petroleum reserve (SPR) sites with a total capacity of 6.5 million tons in June. One site will be located in Chandikhol in the eastern state of Odisha with a capacity of 4 million tons at an estimated cost of about $941 million, Ahuja said. The second site will expand an existing SPR at Padur in the southwestern state of Karnataka by adding 2.5 million tons of storage at a cost about $662 million with construction and filling planned through a public-private partnership model, Ahuja said. The existing Phase 1 of the Padur storage site, with a capacity of 2.5 million tons was commissioned last week, he said. “During the Phase 2 constructions, we also plan to take up the filling of Padur Phase 1. So any player who is interested should submit their interests during the road shows,” said Ahuja. The two sites will add to India’s other two SPR sites at Vishakhapatnam and Mangalore, which hold a combined 2.8 million tons. ISPRL, a wholly-owned subsidiary of India’s Oil Industry Development Board, in an agreement with Abu Dhabi National Oil Company (ADNOC) received its first consignment of 2 million barrels of oil in May to fill one of the compartments at Mangalore. The current capacity of India’s SPR can meet about ten days of the country’s requirements and together with the two additional reserves, which will be finished in another six to seven years, would be able to meet about 22 days of the country’s needs, Ahuja said. The country currently imports 82 percent of its crude requirements, he added. India’s stockpiling of crude should not be affected by the loss of Iranian oil imports because of sanctions by the United States. “We’re not dependent on state oil companies to get the reserves. It’s the government of India, who decides when to fill it up. It’s a call by the government and can be done from anywhere in the world,” Ahuja said.
More deals like ONGC-HPCL? Govt mulling mega PSU mergers to met divestment targets
Faced with the uphill task of mobilising disinvestment revenue in excess of the target of Rs 800 billion in volatile market conditions, the Centre may sell its majority stakes in one or two PSUs to other PSUs, in what could be a repeat of last year’s ONGC-Hindustan Petroleum Corporation deal. The companies the Centre could divest its stakes in include NHPC (which may be sold to NTPC), SJVN (to NTPC) and GAIL India (Indian Oil/Bharat Petroleum). Consolidation of power financing firms PFC and REC is also under consideration, though it is not immediately clear which one will be the acquirer (net worth and market caps of these firms are similar). The Centre’s 73.64% stake in NHPC is worth about Rs 175.65 billon now while its 65.61% equity in PFC is valued at Rs 137.18 billion and 73.64% in hydropower producer SJVN at Rs 69.04 billion at current market prices. The value of the government’s 53.34% stake in gas marketer and transporter GAIL is about Rs 459.67 billion. In the case of GAIL, however, the realisation to the government could be substantially lower as the company’s pipeline business would be separated before the sale. ONGC had bought the Centre’s 51.11% stake in HPCL for Rs 369.15 billion or about 37% of the government’s record Rs 1000 billion disinvestment revenue last year. In a presentation to Prime Minister Narendra Modi in April, PSU chiefs had proposed the creation of public sector behemoths by consolidating firms based on commonalities of functions to benefit from economies of scale, global competitiveness and access to cheaper capital. Given the volatile market conditions and few big stocks being available for offer for sale (OFS) of minority stakes, deals similar to ONGC-HPCL are being considered by the government, an official said. The country’s largest oil retailer IOC as well as BPCL have shown interest in the government’s stake in GAIL (India), the dominant gas marketer. NTPC, the largest thermal power producer in India, has also ventured into the hydropower generation business and a merger with hydropower firm NHPC would be synergistic. Similarly, an amalgamation of power financing firms PFC and REC could allow leveraging of common resources. The pipeline of probable deals would depend on the cash position of the acquiring PSUs, which are also undertaking huge capex to expand their businesses organically. NTPC has capex plans of Rs 22,300 while that of IOC’s is over Rs 200 billion in FY19. Recently, finance minister Arun Jaitley expressed confidence that the tax collection target for FY19 would be met, if not exceeded, and disinvestment receipts too would be in excess of the target of Rs 800 billion. However, the shortfall in goods and services tax collections and the fact that disinvestment receipts so far have been below Rs 100 billion are causes for concern. ONGC seeks lower royalty outgo to boost coffers Given the newfound stress on its books due to two mega expenditures incurred during the last financial year, state-run ONGC is looking at all possible ways to boost its coffers, including seeking an upward revision of the post-wellhead cost to reduce its royalty outgo on crude oil produced from nomination blocks. In 2007, the ministry of petroleum and natural gas through a gazette notification said that the wellhead price —on which royalty payment to the government will be calculated — of crude oil for nominated blocks of ONGC and Oil India shall be ascertained by deducting Rs 1,250 per ton of oil for onshore blocks and Rs 947 for offshore blocks as operational expenditure. “The amounts specified…shall be the post-wellhead cost which shall be valid for a period of three years with effect from 1st April, 2007 or such period till the revised rates are notified,” said the notification. These operational expenditures haven’t been revised since. In contrast, however, for all blocks offered after the nomination era, actual cost of production is allowed to be set off before calculating royalty payment to the government. ONGC has sought a revision with effect from April 1, 2010. Fields nominated to ONGC and Oil India account for 70% of domestic oil output. But production from these fields have stagnated around 25 million ton per annum for years. ONGC produces almost 87% of its crude oil production from nominated blocks. An ONGC source told FE that royalty should be calculated after deducting the actual operational cost as the firm is at present paying royalty on even the cost. “The operational expenditure are around four times the amount fixed,” said the source, adding that the ministry is still to respond on the issue. ONGC did not respond to an email seeking comments on the issue till the time of going to press. As reported by FE earlier, ONGC has also sought reimbursement for royalty and cess paid by it on behalf of its exploration partners for the pre-New Hydrocarbon Licensing Policy, soon after the Union Cabinet in July decided that these taxes will now be paid by all contractors as per their participating interests in blocks signed before 1999. In the 1990s, the government awarded some discovered oil and gas fields to private companies in order to attract investments in the hydrocarbon sector. As an incentive, however, the liability of payment of royalty and cess was put on state-run explorers (ONGC and Oil India) and they were made the licensees of the blocks. While ONGC and Oil India had the option to take PIs of 30-40% in the blocks or just remain the licensees without any stake, they were required to pay 100% of the statutory levies. An official from the ministry of petroleum and natural gas, confirming the development, said that though the government is still to deliberate on the issue, the company should limit its production costs as it reduces the government’s share. For oil explorers, production costs include pre-wellhead and post-wellhead expenses such as applicable operating costs of support equipment and facilities, apart from depreciation. A zero-debt firm till late last year, ONGC had to borrow Rs.250 billion
SCI eyes stake in Swan Energy’s Jafrabad LNG port project
Shipping Corporation of India Ltd (SCI) is weighing a plan to buy stake in a 10 million tonnes (mt) a year capacity floating storage and regasification unit (FSRU)-based new LNG port being constructed by Swan LNG Private Ltd off the Jafrabad coast in Gujarat’s Amreli district with an investment of ?40 billion, a least two officials at the Mumbai-based firm said. “We are evaluating a proposal to invest in the Jafrabad LNG port project,” a director-level official at the company said, asking not to be named. Japan’s Mitsui O.S.K Lines Ltd, the long-standing partner of state-run SCI in four LNG tankers leased to Petronet LNG Ltd, has an 11 percent stake in Swan LNG Pvt Ltd. Swan Energy Ltd, a textiles and real estate group, has a 63 percent stake in Swan LNG Pvt Ltd. MOL is one of the world’s largest LNG carrier operators and Japan’s only FSRU owner and operator. The project involves building LNG port facilities utilizing a new build FSRU along with a floating storage unit (FSU) for receiving, storing and regasifying LNG with an initial capacity of 5 mt. The FSRU and FSU will be leased on a long-term bareboat charter basis and connected by ship-to-ship transfer equipment. The 180,000 cubic meter storage capacity FSRU serving the project is being constructed at South Korea’s Hyundai Heavy Industries Co Ltd. It will be owned by Swan Energy through its subsidiary Triumph Offshore Pvt Ltd and MOL has an option to participate in the FSRU joint ownership. The FSU will have a capacity of as much as 145,000 cubic meters. Besides, MOL will participate in many facets of the project—billed as India’s first new building FSRU project—as technical partner including operation and maintenance of the FSRU and FSU. The terminal is slated to start operation in early 2020. FSRUs are drawing attention as a solution for flexibility and mobility in the LNG supply chain. In October 2017, Swan Energy Pvt Ltd was awarded the rights by the Gujarat government to develop and operate the LNG port for an initial period of thirty years which can be extended by another 20 years. By participating in the Jafrabad LNG project, SCI is looking to strengthen its presence in the LNG shipping business. It is the only Indian shipping company with experience in LNG transportation. The company, in partnership with Japan’s Mitsui O.S.K Lines, NYK Line, and K-Line, has leased four LNG tankers to Petronet LNG Ltd to transport LNG to its facilities located at Dahej in Gujarat and Kochi in Kerala. It holds a 29.08 percent stake each in two LNG ships and a 26 percent stake each in the other two LNG carriers. It is also the technical and commercial manager of two of the four LNG ships.“We are definitely going to manage that project (the FSRU and FSU). We are the only ones in India capable of doing that. We are open to picking up a stake in the Jafrabad LNG port project,” the SCI official mentioned earlier said without giving details on the quantum of the stake and the investment. Terrell McClain Jersey
Increased gas use could reduce diesel demand, says Indian Oil executive
India’s biggest state-owned refiner Indian Oil Corp said on Wednesday that a gradual rise in India’s natural gas consumption could reduce local diesel demand. “Rising use of gas to begin denting diesel demand in five to seven years,” said B V Ramagopal, the director of refineries at Indian Oil. Keeping in mind the increasing demand of natural gas in the country, the company is currently in the process of expanding its natural gas business, said Ramagopal. Indian Oil is building up a liquefied natural gas terminal in the eastern coast of India and has been aggressively bidding for city gas distribution projects in the last few months. Kam Chancellor Womens Jersey