ONGC bets on its relinquished blocks under new hydrocarbon exploration policy
Under criticism for falling production, state-run Oil and Natural Gas Corp. Ltd (ONGC) is betting big on the new hydrocarbon exploration policy based on a revenue-sharing model. ONGC’s strategy stems from some of the blocks on offer under the new Hydrocarbon Exploration and Licensing Policy (HELP) been relinquished by the state-run explorer, even as it had done work on them. Surrender of blocks is mandatory once an explorer exhausts the time period allotted for it. With the New Exploration Licensing Policy unable to attract the desired level of investments, the National Democratic Alliance approved marketing freedom for crude oil and natural gas under HELP in March this year. “The ongoing activities will continue. At the same time, we are waiting for HELP so whenever the new areas are offered we will be bidding. Lot of mandatory relinquishment has happened for last several years, those areas will be available and then of course some of the deep-water areas as well. These areas will be targeted and as far as our past experiences are concerned, we should be able to win some of these areas,” said a senior ONGC executive requesting anonymity. “Past experiences say so,” confirmed another ONGC executive aware of the strategy who also didn’t want to be identified. The first HELP round is expected next year. This also comes at a time when production is declining from ONGC’s assets. Its crude oil output fell to 6.34 million tonne (MT) in the June quarter compared with 6.48 MT last year. Similarly, its gas production was down 5.6% to 5.49 billion cu. meters. The new policy marks the culmination of the government’s bet for a revenue-sharing model from the controversial cost-recovery model which involves cost recovery by firms before the government receives its share of the revenue. The cost recovery model was also criticised by the Comptroller and Auditor General of India due to it being inadequate to incentivise private contractors to reduce capital expenditure. The new policy also allows for exploration for all types of hydrocarbon resources including coal-bed methane or gas hydrates under a single licence. Moreover, an open acreage approach would finally allow firms to choose the areas of their liking for exploration. Experts remain circumspect about the new exploration policy. “It shall be interesting to see how HELP pans out. The government has come up with a new licensing policy replacing the old one with open acreage policy. It is only once the bids are over and production begins will it be open for analysis,” said Raju Kumar, partner at EY, a consultancy. Queries emailed to an ONGC spokesperson on 5 October remained unanswered. ONGC is grappling with fall in domestic production due to sliding yields from its ageing fields. Worried that the falling natural gas prices will affect its profitability, ONGC also plans to approach the government to seek concessions such as lower taxes and levies to shore up its finances, InfraCircle reported on 6 October. This comes in the backdrop of the natural gas price being cut by 18% to $2.50 per million British thermal unit on 30 September for a period of six months till March helping consumers. According to ONGC’s Perspective Plan 2030, it plans to produce 130 million tonne (MT) of oil and natural gas with 70 MT coming from its domestic production and the rest from its overseas subsidiary, ONGC Videsh Ltd. ONGC’s turnover slid 21.41% to Rs.177.84 billion in the first quarter of financial year 2016-17. It had posted Rs.226.28 billion as turnover during the same period last year. Seth Roberts Authentic Jersey
OVL to raise $900 million bridge loan to finance Vankor buy
ONGC Videsh Ltd (OVL) will raise a bridge loan of close to $900 million overseas to fund acquisition of an additional 11 per cent stake in Russia’s Vankor oilfield. OVL, the overseas arm of state-owned Oil and Natural Gas Corp (ONGC), last week got government nod to raise its stake in Russia’s second biggest oil field of Vankor to 26 per cent at an investment of $930 million. It will buy the sake from Russian national oil company, Rosneft. “The acquisition needs some approvals by the Russian government. Once they come in, we will make the payment,” an official said. The company, he said, will raise a bridge loan of 6 to 9 months from overseas financial institutions. A long term financing through foreign currency bonds, will be raised to replace the bridge loan. “The deal is effective May 2015. It is a producing field. So the profits that accrued from sale of oil (to Rosneft for the 11 per cent share) for one-and-half-years will be deducted from sale consideration and payments will be made,” he said. The amount of bridge loan to be raised will depend on this final number, he said. OVL, which had previously bought 15 per cent stake in Vankor from Russian national oil firm Rosneft for $1.268 billion, will an additional 3.2 million of oil equivalent on top of 4.11 million tons secured earlier. Besides OVL’s 26 per cent, a consortium of comprising Oil India (OIL), Indian Oil Corporation (IOC) and Bharat PetroResources (BPRL) has acquired 23.9 per cent stake in the field at a cost of $2.02 billion, giving them 6.56 million tons of oil. Jason Croom Authentic Jersey
Get Ready! Petrol, Diesel Prices Set To Go Up Sharply
Get ready to pay more for petrol and diesel when their prices are revised later this month. Oil marketing companies are likely to revise their prices sharply higher, following a jump in global oil prices. Get ready to pay more for petrol and diesel when their prices are revised later this month. Oil marketing companies are likely to revise their prices sharply higher, following a jump in global oil prices. Petrol currently costs Rs. 64.72 a litre in Delhi and diesel Rs.52.61 per litre. Global oil prices have jumped to over one-year highs of around $53 a barrel on growing expectations of an output cut by major oil producers. Oil prices firmed up after Russia said it was ready to join the Organization of Petroleum Exporting Countries (OPEC) in limiting crude output and Algeria called for similar commitments from other non-OPEC producers. Global oil prices have gained almost 15 per cent since OPEC provisionally agreed last month to cut production for the first time in eight years. The Indian crude basket, composed of 73 per cent sour grade Dubai and Oman crudes, with sweet grade UK Brent making up the rest, breached the psychological level at $50 per barrel on Friday. Petrol and diesel prices are deregulated in India, which means they are linked to market rates. Normally, state-owned fuel retailers Indian Oil Corp (IOC), Bharat Petroleum Corp and Hindustan Petroleum Corp revise rates of the fuel on a fortnightly basis based on the average oil price and foreign exchange rate in the preceding fortnight. India imports more than three-fourth of its crude oil requirements. So apart from global oil prices, the value of the rupee as well as the margins of oil marketing companies and the various government levies determine the final price of petrol and diesel price in India. The Organization of the Petroleum Exporting Countries aims to agree on cutting about 700,000 barrels per day (bpd), bringing its output to 32.5-33.0 million bpd by the time it meets in Vienna for its policy meeting on November 30. It will be OPEC’s first output reduction in eight years and comes two years after prices crashed from highs above $100 a barrel. Global oil prices have been very volatile this year. They had dropped to 12-year-lows of below $30 per barrel in February before currently hovering around over one-year high levels of $53. Josh Morrissey Womens Jersey
GAIL places order for 345 km pipeline laying job
GAIL India, the nation’s biggest gas marketer, has placed orders for laying work of a 345-km section of the Jagadishpur-Haldia-Bokaro-Dhamra gas pipeline, helping expedite the Rs 13,000-crore project. “GAIL has initiated a major step towards the construction of the Jagadishpur-Haldia-Bokaro-Dhamra natural gas pipeline (JHBDPL) by approving placement of orders for pipeline laying work of 345 km from Phulpur to Dobhi,” the company said in a statement. The cost of the 345-km stretch would be Rs 3.06 billion and contracts have been placed on JSIW Infrastructure Pvt Ltd and IL&FS Engineering & Construction Co Ltd. Laying work would commence by the end of October and is targeted to be completed by December 2018, it said. The government is supporting the project by providing 40 per cent of the project cost or Rs 51.76 billion as capital grant over a five year period. The project will cost Rs 129.40 billion. The first phase at a project cost of Rs 32 billion and will span 755 km to cover Phulpur, Mani, Gorakhpur, Varanasi, Dobhi, Silao, Patna and Barauni. Pipeline construction is already under progress along Gaya-Barauni-Patna section. The 2,539 km long JHBDPL is scheduled for completion by December 2020 and will connect major cities and towns enroute for commencing piped natural gas to homes across Uttar Pradesh, Bihar, Jharkhand, West Bengal and Odisha. John Kuhn Jersey
Small oil and gas field auction date may be extended
Fearing poor response, the government is likely to extend by at least one month the last date of bidding for the auction of 46 small oil and gas fields that were “given up” by state-owned ONGC and Oil India. Bidding for the auction, the first in over four years, is to close on October 31. There are apprehensions about the response after prospective bidders complained about the quality and amount of data being made available on the fields that have been put on offer, sources privy to the development said. For bidders to make decisions, more data, particularly about the size of reserves, is required and making that available would require extending the deadline, they said. Also, some prospective bidders have raised concerns about the size of the blocks or fields on offer. They say 10 square kilometer offering, one-tenth of the smallest block ever offered in the previous bid rounds, was too small. Sources said the bidders feel the block area has to be larger to give them room for probing for oil and gas reserves. After holding roadshows in India and abroad, the Oil Ministry’s technical arm, the DGH will on October 19 hold an “outreach” even on the Discovered Small Fields Bid Round 2016 in the national capital. A ‘Bidder Facilitation Workshop’ is planned at the event to “resolve queries of the bidders”, they said adding the extension of the bid deadline may be announced there. The auction, which was announced on May 25, is to be conducted on simpler contractual terms together with pricing and marketing freedom. India liberalised its exploration and production regime almost two decades ago when in the early 1990s, it auctioned about 28 fields to private and public investors. In the late 1990s, it further liberalised its E&P sector with the introduction of New Exploration Licensing Regime (NELP) regime that allowed 100 per cent FDI and offered a level playing field to private and national oil companies. NELP was based on Production Sharing Contract (PSC) that meant sharing of revenues with government post recovery of cost by contractor. This regime was marred by disputes over cost recovery and regulatory inflexibility. Now the bid round is being held under a new regime that will offer discovered fields to those who offering the maximum share of oil and gas to the government. The fields on offer hold an estimated 625 million barrels of in-place oil and gas reserves. Sources said the 46 fields that are offered are actually 67 small and marginal discoveries that have been clubbed. Oil and Natural Gas Corp (ONGC) and Oil India Ltd (OIL) “surrendered” these as they could not develop them because of huge overhead cost and uneconomic size. Last exploration licensing round concluded in March 2012. That was the Ninth round of bidding under NELP. A total of 256 blocks were awarded in the nine rounds of NELP. In the new round, as many as 67 idle discoveries of state-owned ONGC and OIL have been clubbed into 46 fields for offer in the international bidding round. Of these, 28 discoveries are in Mumbai offshore and another 14 are in the prolific Krishna Godavari basin. As many as 10 discoveries are in the Assam shelf. The discoveries were given up as late as 2012-13. These in-place reserves are estimated to have about 88 million tonnes of oil and oil equivalent gas. The biggest discovery among the lot is the D-18 in Mumbai Offshore that alone holds 14.78 million tonnes of in-place oil reserves. Among the gas discoveries, the largest is ONGC’s B-9 find in the offshore Kutch basin that has an in-place reserve of 14.67 bcm. Sources said the auction will be done on a new revenue sharing model where bidders will be asked to quote the revenue they will share with the government at low and high end of price and production band. The new revenue sharing regime will replace the controversial PSC model where oil and gas blocks are awarded to those firms which show they will do maximum work on a block. The PSC regime allowed all their investments to be recovered from sale of oil and gas before profits are shared with the government. This model was criticised by CAG which said it encouraged companies to keep raising cost so as to postpone higher share of profits to the government. Also, single licence for exploration and exploitation of conventional and non-conventional hydrocarbons will be issued and operators will have freedom to sell oil and gas on arms on arms length market price, they said, adding that there would be no cess on crude oil. Matt Paradis Jersey
Key to urbanisation is monetising land value: NITI Aayog CEO
The key to urbanisation is the ability to monetise land value, NITI Aayog CEO Amitabh Kant said on Friday. “If you look at the two bordering cities across Delhi – Gurgaon and Noida – they have not been able to monetise land value and plough it back to develop the cities,” Kant said at a session on ‘Cities as engines of growth’ at the India Economic Summit here. Gurgaon was urbanised without basic infrastructure, the land value shot up but the gains were captured by developers, Kant said, adding that in Noida as well, the monetisation wasn’t ploughed back in the city and was captured by the political parties. As India urbanises, it must learn from the Singapore and Yokohama models to create dense compact and liveable cities, he said. “We can’t copy the American model. When America urbanised, land, gas and water were cheaply available and hence the country created the most polluting cities. India, which has just embarked on the urbanisation process, cannot make the same mistake,” Kant stated. Moreover, India needs determined political will to drive urbanisation, he added. Dave Robinson Jersey
Air India wants to rejoin lobby group
Two years after government-owned Air India (AI) walked out of the Federation of Indian Airlines (FIA), citing differences in opinion, it has approached the lobby group to return, said three sources. They say chairman Ashwini Lohani feels it will give more muscle to AI’s demands when it approaches the government as part of a group. FIA is now a lobby group of the country’s private airlines, which presses for change in public policy and regulations. At present, IndiGo, SpiceJet, Jet Airways and GoAir are members, together almost 80 per cent market share. AI’s joining will give a shot in the arm to the group, which has been strongly opposing the move for relaxing the 5/20 rule for plying abroad. The rule, described by aviation minister Ashok Gajapathy Raju as anti-business, made it mandatory for an airline to have plied for at least five years and having 20 aircraft before being allowed to fly abroad. It was partially diluted in June, with the norm of five years being removed. According to a senior AI executive, Lohani has written to the group, “expressing interest to join the group”. “Air India is facing similar issues as the FIA members are, such as high airport charges or oil companies increasing the price of air turbine fuel arbitrarily,” the official said. However, the official added, AI would be cautious against becoming a party to any case which the lobby group files against the government. FIA is currently engaged in a legal tussle with the government against the decision on reducing charges for extra baggage allowance. A senior executive of a private airline which belongs to FIA confirmed the AI development. “The FIA board will decide on the request in a special meeting this month,” he said. AI left FIA in November 2014, citing discomfort on taking a stance against the government and differences among member carriers on policy issues. Rohit Nandan, then chairman of AI, felt they were unnecessarily being dragged to court against the government. Blaine Gabbert Jersey
GoAir-IndiGo legal battle: Bombay HC judge questions use of generic word during hearing
The Bombay High Court has questioned the claim to right over using generic terms after domestic carrier GoAir and IndiGo have been involved in a legal dispute. GoAir had alleged ‘similarity’ in domain names used by rival carrier IndiGo airlines. In 2014, GoAir had filed a lawsuit against InterGlobe Aviation Ltd (which manages IndiGo airlines). It had asked the Bombay High Court to direct the rival carrier to remove “Go” from its web address “GoIndigo.in”. The Wadia-group airlines claimed that the similarity in the portal domain of both the carriers was causing confusion in passengers, who wanted to book air tickets online. It also claimed that passengers were getting diverted to Indigo’s website, which led to revenue loss to GoAir. Dion Jordan Womens Jersey
Centre mulls aviation emission offsets
India is examining possible mechanisms to offset higher emissions from rising civil aviation traffic, even as it has firmly opposed a global pact for curbing aviation emissions proposed by the United Nations’ International Civil Aviation Organisation (ICAO) that is currently being negotiated in Montreal. “India’s aviation sector is growing at 22 per cent to 23 per cent over the last year and we expect it to continue to grow very rapidly over the next decade and a half, so emissions would rise,” said Jayant Sinha, Minister of State for Civil Aviation Jayant Sinha said at the World Sustainable Development Summit on Wednesday. “We have begun consultations in the ministry to see what we can do to offset the emissions,” he said. India has ratified the COP21 accord on climate change this Sunday, but while approving its ratification, the Union Cabinet had last week empowered the civil aviation ministry to flag India’s concerns about the proposed aviation emissions pact, including the move to cap aviation emissions at 2020 levels. Human Resources Development Minister Prakash Javadekar had pointed out, while briefing about the cabinet’s decisions, that capping emissions from aviation would be unfair for developing countries where the civil aviation market is not mature and the number of airlines is limited compared to the developed world. Bobby Wagner Authentic Jersey
Air Costa in stake sale talks
Air Costa is in advanced stages of discussions with foreign carriers, including those from the Gulf, for a possible stake sale, as the Vijayawada-based airline seeks to spread its wings after securing a flying permit for pan-India operations. The carrier is also in the process of sealing a deal for the leasing of six aircraft from GE Capital Aviation Services of Singapore, which is expected to be in place by this month, CEO Vivek Choudhary said. The airline operates from eight airports, mainly in southern India, as a regional carrier with a fleet of three Embraer 190 aircraft. Air Costa plans to induct a fourth Embraer this month. On Monday, the airline secured a pan-India operator permit from aviation regulator DGCA, putting it in the league of budget carriers such as SpiceJet, IndiGo, GoAir and AirAsia India. “We are in talks for (stake sale), which are in advanced stages, with carriers from the Gulf and an airline from Southeast Asia,” Choudhary said, adding the quantum of stake to be diluted has not been decided yet. The top Air Costa official said securing a national flying permit would boost the airline’s prospects of taking a foreign partner on board. Chris Wormley Womens Jersey