Open up petroleum marketing as well
It is welcome that public sector oil retailers plan daily revision of automotive fuel prices in five cities from May 1, with nationwide rollout of the “daily dynamic pricing” policy planned later this year. It would be in line with global practice, and better align the going rates for crude oil imports with retail prices of petroleum products. It is essential to do so, to determine domestic scarcity value, as much of our growing requirement of crude is met by way of imports. However, in tandem, it is also vital to reform and overhaul market design for retailing However, in tandem, it is also vital to reform and overhaul market design for retailing petro-products. The continuing policy of ring-fencing retail sales of petro-products exclusively for oil companies is both anachronistic and incongruous. It is also not as per the best international practice. Worse, it implies a huge national cost. Given the large and fast-growing domestic oil sector — India is now the third-largest importer of crude — the tight effective monopoly in retail sales of petro-products creates scope for padding costs. Abroad, in the mature markets, independent oil retailers account for about half the offtake of oil. We need to speedily integrate oil into the larger retail industry. It would lead to more competitive oil prices, boost convenience and likely improve service quality as well. In parallel, we also need speedy rationalisation of taxes on oil. We need to drop the perverse tax-on-tax and cascading rates across the value chain in oil. Petroleum products are to stay out of the goods and services tax framework, for now. But the Goods and Services Tax Council needs to firm-up consensus to bring petro-products into the goods and services tax regime at the earliest. However, it would be sensible to duly cap input tax credits for oil products, to factor in externalities like pollution and impact on climate change. Odell Beckham Jr Authentic Jersey
Is India ready for the U.S. LNG trade?
The U.S. is expected to become a net exporter of natural gas in a period between 2017 and 2018. The growth of domestic natural gas production in the U.S. is pushing it for speedy development of its liquefied natural gas (LNG) export terminal, as evident from the increase in long term application received and approved by Department of Energy (DoE)/Office of Fossil Energy (FE). For instance, the total number of non-FTA applications approved by DoE/FE have already increased from nine from September 2014 to 24 as of March 1, 2017. Presently, 95% of the U.S.’s total gas exports are moved through pipelines to Mexico and Canada. While natural gas exports through pipeline to Canada is already declining, pipeline gas exports to Mexico are expected to flatten before it starts decreasing due to development of Mexico’s own production capacity. Energy Information Agency (EIA) has predicted U.S.’s net exports of LNG to reach 6.7 trillion cubic feet (tcf), constituting 16% of its total gas production. Given its robust production of shale gas, U.S. has started to diversify its natural gas exports through LNG to consistently seek for the new markets. This is relevant at a time when global LNG industry itself is invigorating, where on one hand, traditional demand from countries, such as Japan, Korea and China is slowing down, with rolling off a long-term oil indexed contracts, on the other hand, the new LNG supply projects from countries like India, Pakistan and Egypt are picking up. This signifies a shift from a seller’s market to a buyer’s, wherein the latter having a greater say in LNG market dynamics. Buyers are now using their power not only to re-negotiate their long-term contracts with destination flexibility but also consistently looking for smaller and short-term deals. Moreover, reduced regassification cost, increase investments in small scale LNG terminals, increased investments in floating LNG, an urge to move towards clean energy systems through greater use of natural gas is working as a catalyst for increased demand for LNG, worldwide. In addition, opening of the expanded Panama Canal in June last year is termed as a potential supply-chain game changer, particularly for LNG sailing through Gulf Coast. This route offers shorter and less costly route to Northeast Asia, a primary destination for the U.S. LNG exports. Though, for India, Suez Canal or around the southern tip of Africa remains the more cost effective option compared to Panama Canal. Currently, shale and tight oil plays make up about 50% of natural gas production of the U.S., which has contributed significantly towards its natural gas production growth during the last decade, wherein, it has successfully increased its production of dry gas from 18 trillion cubic feet (tcf) to 27 tcf. In case of India, according to International Gas Union’s 2017 World LNG Report, it is the fourth largest LNG importer with 19.2 million tonnes per annum, having a global market share of 7.4%. According to Petroleum Planning & Analysis Cell, India’s LNG imports increased by 15% in 2015-16 on y-0-y basis to 16.08 million metric tons (mmt), while over the last five years. LNG imports increased by 38% since 2011-12. In September 2014, under a non-FTA category, nine American LNG terminals have been approved to export LNG of which two have inked deals to sell to Gas Authority of India Limited (GAIL). GAIL has signed two agreements with U.S. firms to import LNG. One agreement will bring 3.5 mtpa or 168 billion cubic feet (bcf) from Cheniere’s Sabine Pass in Louisiana, while the other is for 2.3 mtpa or 110.4 bcf from Cove Point in Maryland. Thus, while GAIL was one of the first companies to buy U.S. LNG from Sabine Pass and Cove Point, it bought the second shipment of LNG from Cheniere Energy to become the first Asian importer of U.S. shale gas. For the U.S., India could thus become one of the biggest LNG markets with flurry of U.S. shipments Cheniere-operated terminals at the US Gulf Coast over the coming months, provided the landed cost of LNG successfully competes with coal, for use in power generation. However, if U.S. LNG fails to compete with coal it would be difficult for India to easily expand the usage of LNG in price sensitive sectors such as power and fertilizer. This was already visible from the recent decision taken by the government when on March 31, 2016, when it scrapped subsidized imported LNG scheme in a backdrop of low gas prices and state governments withdrawing from the scheme. This scheme which helped LNG imports surged by 15% to 16.08 mt (Figure) in 2015-16 and to 17 mt in first 11 months in 2016-17 is now set to dip in the absence of this scheme. Decisions like this can have a significant impact on government’s plan to shift towards gas based economy, where import of LNG is a significant component. Further, India’s LNG expansion plan, is also burdened by taxes, irrespective of reduction of import duties from 5% to 2.5%. Gujarat, a destination for three of India’s four import terminals, namely, Dahej, Dabhol and Hazira, has withdrawn the tax benefit for imported LNG consumed outside the state. Moreover, GAIL, which is set to receive U.S. LNG cargoes from the Cove Point terminal in Maryland has called for imports to be made more economic to the domestic consumers so that sectors outside power, such as fertilizers, chemical plants and city gas distribution are encouraged to use natural gas. These efforts will contribute largely in stabilizing the environment and curb emissions. Thus, while the U.S. is gearing up to expand the base of its natural gas exports by increasing LNG exports, India would do well to gear itself to optimize the benefits of U.S. LNG trade by providing tax reliefs to sectors which needs to be pushed for greater natural gas usage. The U.S. on the other hand would be happy to narrow the trade deficit on its side while exporting LNG to India to mutually gain from LNG trade. Eric Fehr
PPLC policy is to encourage suppliers and service providers to progressively adopt
The Union Cabinet chaired by the Prime Minister Narendra Modi has approved signing of Framework of Understanding (FoU) on Cooperation in the Hydrocarbon Sector with Bangladesh, setting up of Indian Institute of Petroleum and Energy (IIPE) at Visakhapatnam in Andhra Pradesh as “an Institute of National Importance” through an Act of Parliament and also approved the Policy to provide Purchase Preference (linked with Local Content PP-LC) in all Public Sector Undertakings under Ministry of Petroleum & Natural Gas on 12th April, 2017. The Secretary for Petroleum and Natural Gas, K D Tripathi said that the ‘Make in India’ initiative was launched by Prime Minister in September, 2014 as part of a wider set of nation-building initiatives devised to transform India into a global design and manufacturing hub. In tune with the campaign, the Government has decided to incentivize the growth in local content in goods and services while implementing oil and gas projects in India through a policy for providing Purchase Preference to the manufactures/services providers who meet the local targets in oil and gas business activities. Under the policy, progressively increasing targets of Local Content are being stipulated for procurement of goods, services and EPC contracts for oil and gas business activities. The manufacturers/service provider who meet the local content targets and whose quoted price is within 10% of lowest valid price bid, would be eligible for 10% purchase preference for a stipulated portion of the purchase order, on matching such price. For example, Drilling/Workover Rigs/WSS units construction in the onshore sector the local content would be pegged at 50% in the first year and progressively increased to 60% in the next two years and they to 70% in last two years. Similarly, for premium bids as wells as specialized drilling and completion services the local content stipulated is 10% in the first year and progressively increased to 15% in the next two years and then to 20% in the last 2 years. He added that the policy is expected to encourage suppliers and service providers to progressively adopt ‘Make in India’ practices and add value to their goods and services within the country. It will facilitate growth of activities related to manufacturing, services and EPC in the Indian economy. This will boost productivity and help in growth of employment at all levels in the oil and gas sector. Tripathi said that this policy is applicable to all the Public Sector Enterprises and their wholly owned subsidiaries under the Ministry of Petroleum and Natural Gas; Joint Venture that have 51% or more equity by one or more Public Sector Enterprises under the Ministry of Petroleum and Natural Gas; attached and subordinate offices of MoPNG. The Cabinet had approved a Framework of Understanding on Cooperation in the Field of Hydrocarbons. This was first discussed during the visit of Petroleum Minister Dharmendra Pradhan to Dhaka in April 2016 with the objective to work as an umbrella framework to initiate, monitor and pursue activities of mutual interest in the oil and gas sector. It will give an institutional mechanism for our engagement with Bangladesh in the Hydrocarbon sector. Salient Features of the proposed Framework document include: Promotes the energy trade and integration of oil and gas grids of the two countries Promotes investments in each other’s countries as well as in third countries, technology transfer, R&D, conducting joint studies and capacity building of human resources. Provides increased trans-border economic cooperation and connectivity. Promotes bilateral cooperation at the sub-regional and regional levels Exchange of information to energy policy formulation in the region. This Framework of Understanding shall remain in force for a period of five years, and shall be automatically renewed thereafter for a period of every five year. The visit of PM Sheikh Hasina which took place on April 8-10 has given a further impetus to the Indo Bangladesh relations, as 22 documents were signed, including many in the field of oil and gas. Minister of State (I/C) for Petroleum and Natural Gas, Dharmendra Pradhan had visited Bangladesh during 18-19 April, 2016 and in the last two years there have been at least 7 meetings between him and his counterpart in Bangladesh. There is an institutionalised Energy Dialogue at the level of Secretary which met last month in Dhaka. The comprehensiveness of the relationship between India and Bangladesh comes from the fact that we are already engaged in Supply of HSD from Siliguri to Parbatipur, Setting up LNG Terminal at Kutubdi island, Setting up LPG Terminal in Chittagong / Kutubdi island, Providing gas for the Khulna Power plant in Bangladesh, Working of gas grid connectivity, Refurbishment of refineries, Building of pipelines and Upstream activity in Bangladesh by Indian companies etc. India and Bangladesh have signed three Documents: Sale Purchase Agreement between Numaligarh Refineries Ltd (NRL) and Bangladesh Petroleum Corporation for supply of High Speed Diesel to Bangladesh; Setting up of an LNG terminal in Kutubdia Island by Petronet LNG Ltd and Setting up of an LPG Terminal by IOCL in partnership with Petrobangla. In addition to these Hon’ble Prime Minister Narendra Modi along with Prime Minister of Bangladesh flagged off the Rail Rake carrying 2200 MT of HSD from Radhikapur in India to Parbatipur in Bangladesh. The rail rake travelled on the newly constructed rail route. The length of the new route is around 260 kms, almost half of the old route. Justin Bethel Womens Jersey
Iran launches offshore natural gas projects in Gulf to produce 150 mcm gas
Iran on Sunday launched several projects in the Gulf which it said would produce 150 million cubic metres of gas per day from the world’s largest natural gas field which the country shares with Qatar. In a ceremony carried live on state television President Hassan Rouhani inaugurated five new projects which officials said would put Iran on an equal footing with Qatar in exploiting the offshore gas field, which Tehran calls South Pars and Doha calls North Dome. Rouhani, and other officials at the event including oil minister Bijan Zanganeh, did not give a timeline. Iran also launched four petrochemical projects with an annual production of two million tonnes worth about $2 billion, state media said. Earlier this month, Qatar said it had lifted a self-imposed ban on development of the joint field, as the world’s top LNG exporter looks to see off an expected rise in competition. Qatar declared a moratorium in 2005 on the development of the North Field, to give Doha time to study the impact on the reservoir from a rapid rise in output. Luke Kuechly Jersey
HPCL resumes work on Rs 41,000 crore Rajasthan oil refinery
State-owned Hindustan Petroleum Corp Ltd (HPCL) today decided to resume work on the Rs 41,000 crore Rajasthan oil refinery after its board agreed on reduced fiscal incentives from the state government. “HPCL Board at its meeting held today has approved resumption of Rajasthan refinery project and signing of revised MoU with the Government of Rajasthan for implementation of the project,” the company said in a filing to the stock exchanges. It however gave no details. Oil Minister Dharmendra Pradhan had earlier this month stated that fiscal incentives for the project have been revised and a memorandum of understanding (MoU) is likely to be signed in Jaipur later this month. “The fiscal package negotiated by the previous (Congress) government had put a big burden on Rajasthan. Now, that has been balanced,” he had said. The fiscal sops offered previously were in favour of the company but now they have been reworked in favour of the state, he said. The project, which has been in the works for nearly five years, is projected to cost Rs 41,000-42,000 crore, up from the previous estimate of Rs 37,320 crore. HPCL, in March 2013, had signed an MoU with the Rajasthan government for setting up the refinery-cum-petrochemical complex in the Thar desert near the oil discoveries made by Cairn India. The refinery however never took off as a change of guard in the state led to the Rajasthan government putting on hold the fiscal incentives for the project. While the size of the refinery remains the same, the unit will cost more because it now has to be built to produce Euro-VI grade petrol and diesel, officials said. Engineers India Ltd (EIL) is doing a feasibility study. The HPCL board, in March 2013, had approved setting up of the complex at a cost of Rs 37,320 crore. Half of the crude oil requirement at the proposed refinery at Barmer was to come from the neighbouring oil fields of Cairn India. The rest was to be imported crude. At that point, HPCL had asked the state government to extend fiscal benefits like the ones extended by Gujarat and Odisha to new refinery projects to make the Barmer unit viable. The concessions included 50 per cent exemption in excise duty, waiver of VAT on products sold in Rajasthan and the state government picking a small stake in the project. Originally, the state-owned Oil and Natural Gas Corp (ONGC), which owns 30 per cent interest in the Barmer oil fields of Cairn India, in 2005 had committed to building the refinery, but later started soft-pedalling the project. In 2012, HPCL entered the fray and proposed to take 51 per cent stake in it. ONGC, which originally had the authorisation from the government for processing the Barmer crude at the proposed refinery, willingly made way for HPCL. Cairn India, which holds 70 per cent interest in the fields, produces about 1,60,000 barrels per day oil (8 million tonnes a year) from the Rajasthan fields. For HPCL, which has only two refineries in Mumbai and Visakhapatnam, the project will help meet fuel demand in the north. Joel Bitonio Womens Jersey
Delaying an Air India flight can cost you a fine of up to Rs 15 lakh
After the Shiv Sena MP snub, Air India is going all out on unruly passengers with a new set of rules that includes steep fines. The airline, according to a TOI report, is planning to fine Rs 5 lakh for delaying a flight up to an hour; Rs 10 lakh for delay between one and two hours and Rs 15 lakh for delaying beyond two hours. “Recent incidents of unruly behaviour and assault on AI employees by passengers (whether VVIP or otherwise) have caused severe damage to the morale of employees. Even a hotel has right of admission reserved. AI must have a procedure for handling unruly passengers,” said an official. The airline took this step after three cases of high-handedness by MPs in past one year, the latest and the most-talked about was Shiv Sena MP Ravindra Gaikwad’s action who beat up a 60-year-old staffer with sandals. Not just that, the national carrier plans to provide more autonomy to its managers at airports under a stricter framework being prepared to deal with unruly fliers. Since the incident of Gaikwad, the national carrier as well as the government have been exploring ways to bolster the existing mechanism to rein in unruly passengers. Providing more autonomy for Air India managers at airports, stronger mechanism to report incidents of untoward behaviour and possibility of seeking monetary compensation from the unruly flier are being looked at under the new framework, airline officials said. “The draft guidelines, which have been prepared with the assistance of Air India’s legal department, are now with the CMD Ashwani Lohani for his approval. Once we get the go-ahead from him, we will make them public,” one official said. According to the official, under the new guidelines, the airport manager would be empowered to take any “action” against a passenger showing unruly behaviour either onboard or on the ground without waiting for approval of the Chairman and Managing Director. “The draft guidelines also have a provision for seeking financial compensation from any such passenger for the loss of revenue if the flight is held up due to such incidents,” the official added. Duke Dawson Jersey
NTPC power generation cost drops 39.5 paise to below Rs 2/unit
The state-owned NTPC has managed to bring down its cost of electricity generation by an average 39.5 paise while for the Mauda project, it was a decline of Rs 1.65 per unit, mainly because of improvement in coal quality and supply. Data available with NTPC showed that the overall cost of power generation has come down to below Rs 2 last fiscal, driven by improved quality of coal and its supplies, a power ministry official said. The overall cost of power generation of the company has come down by 39.5 paise. It does not include taxes and cess primarily imposed to finance protection of environment, the official explained. According to the data, the overall cost of power production for the company stood at Rs 2.01 per unit in 2014- 15, which has declined to Rs 1.94 in April-February of 2016- 17. Elaborating, he said the actual reduction was 6.4 paise per unit, but if increased levies and charges are taken into account, the total drop in power output cost translates into 39.5 paise. The data further showed that NTPC’s Mauda project registered an overall fall in cost of power generation at Rs 1.65 per unit, taking into account the impact of revision in levies and charges. The official explained that new projects and plants with high dependence of imported coal have benefited the most. The other plants which gained due to improved quality and supplies of coal are Barh Stage-II (Rs 1.24 per unit), Badarpur (Rs 1.16) and Tanda (93.6 paise). The official said the NTPC plants represent a quarter of thermal power generation projects in the country and indicate an encouraging trend in power generation cost. Brandon Fusco Jersey
Flying overseas from India becomes cheaper as airfares fall
Flying on overseas destinations such as London, Singapore, Sydney, Kuala Lumpur from India became cheaper this summer with airfares going down up to 28 per cent amid capacity addition on international routes. The entry of foreign carriers including Brussels Airlines have also helped the airlines keep their ticket prices lower in April this year compared to same period of 2016, Tour and travel firm Cox & Kings said in a study. As per the study, the airfares for a Delhi-London journey came down to Rs 31,800 in April this year as against Rs 39,497 in the same month last year, a drop of 19 per cent. Similarly, airfares from New Delhi to Singapore also dropped by 22 per cent to Rs 22,715 in April this year from Rs 29,069 in April 2016. “Our research has indicated that fares this summer have been cheaper compared to the same period last year,” John Nair, Head of Business Travel at Cox & Kings said. The ticket prices for Mumbai-Kuala Lumpur saw the sharpest decline with airfares going down by 28 per cent to Rs 20,377 from Rs 28,342, it said. Airfares on Mumbai-Dubai route declined 11 per cent while Mumbai-Paris and Mumbai-Hong Kong route saw a drop of three per cent each this summer as compared to April last year, the report added. The ticket prices for Sydney from Mumbai decreased 16 per cent to Rs 60,345 from Rs 72,169. The key factor behind this is the increase in capacity from India thereby leading to increased competition amongst airlines, he said. “This has resulted in fares coming down. Secondly, airlines have also reduced fares due to a decrease in fuel prices,” he added. New airlines such as Brussels Airlines has entered India while Ethiopian has increased capacity. Besides, African nation Rwanda’s national carrier Rwanda Air has also started its flight services from Mumbai to Kigali. According to the report, even Air India’s flights to Madrid which started operations in December last year have become very popular amongst Indians. Tyson Alualu Jersey
Air India plans stricter framework to tackle unruly fliers post Ravindra Gaikwad incident
Air India plans to provide more autonomy to its managers at airports under a stricter framework being prepared to deal with unruly fliers. Since the incident of Shiv Sena MP Ravindra Gaikwad assaulting an Air India staffer last month, the national carrier as well as the government have been exploring ways to bolster the existing mechanism to rein in unruly passengers. Providing more autonomy for Air India managers at airports, stronger mechanism to report incidents of untoward behaviour and possibility of seeking monetary compensation from the unruly flier are being looked at under the new framework, airline officials said. “The draft guidelines, which have been prepared with the assistance of Air India’s legal department, are now with the CMD Ashwani Lohani for his approval. Once we get the go-ahead from him, we will make them public,” one official said. AAccording to the official, under the new guidelines, the airport manager would be empowered to take any “action” against a passenger showing unruly behaviour either onboard or on the ground without waiting for approval of the Chairman and Managing Director. “The draft guidelines also have a provision for seeking financial compensation from any such passenger for the loss of revenue if the flight is held up due to such incidents,” the official added. Officials also said the airline has changed the log book entry format to ensure that exact reason for delay in flights are recorded rather than having generic explanations. Now, all details, including the specific reason for the delay, especially in cases of unruly passenger behaviour would be furnished in the eventuality of a flight failing to depart on time due to an unruly passenger, one of the officials said. The government is planning to come out with a ‘no fly’ list as part of stronger measures to deal with unruly behaviour by individuals on board flights. Following the Gaikwad incident, Air India and other domestic airlines had barred him from flying with them. The ban was later revoked. JC Tretter Jersey
Government’s coal reforms begin to pay off, reduce power costs
Coal sector reforms initiated by the Narendra Modi government are beginning to pay. Initiatives to improve coal quality and efficiency in the supply chain have brought down the cost of power from coal-fired plants in spite of revisions in coal prices, central cess and railway freight in the last three years. Decline in the cost of power has accrued mainly from power stations burning less coal to generate each unit of electricity on assured quality of domestic fuel. There is also import substitution worth Rs 23,349 crore, which saves fuel costs. Since cost of coal makes up 54%-60% of the price charged by power producers and is passed on to consumers, coal consumption has a bearing on tariffs and environmental dividend in terms of emissions. According to government data, power stations are now burning 8% less coal than they used to three years ago for each unit of electricity. State-run NTPCBSE -2.40 %, which accounts for 17% of all generation capacity in the country and is the key supplier to states, reduced its coal consumption by 5.5% in 2016-17. NTPC’s coal cost stood at Rs 2 per unit in 2014-15 and should have risen by 33 paise due to revisions in coal price, government cess and railway freight. Remarkably though, it stood at Rs 1.94 per unit for 2016-17. In other words, even after paying 33 paise more since 2014-15, NTPC’s power costs 6 paise less today. For discoms then, this actually means a saving of 39 paise per unit, taking into account the impact of the revisions, and translates into hundreds of crores of rupees. Lower cost of power ultimately benefits consumers by way of lower tariff. That happens only in an ideal situation. In reality, discoms coping with sagging bottomlines and commercial losses may not be able to reduce monthly bills of consumers immediately. But they will find it hard to justify demand for tariff hike to state regulators. In the long run, however, cheaper power will result in lower traiffs once the discom reforms take root. J.T. Compher Jersey