ONGC evaluating stake buy in Russia’s Vostok Oil project
India’s Oil and Natural Gas Corp is evaluating the purchase of stake in Russia’s massive Vostok Oil project, a company official said on Thursday, as the two countries seek to deepen their economic ties in the energy sector. Vostok is one of Russia’s biggest oil projects, comparable in size with the exploration of West Siberia in the 1970s or the U.S. Bakken oil province over the past decade. “We are still in the evaluation stage … We are looking at it (Vostok Oil), it is a very large complex project,” A.K, Gupta, managing director of ONGC Videsh Ltd, the overseas investment arm of ONGC, told Reuters. He did not give any further details on the deal. Russian oil major Rosneft is in talks with several players about participation in Vostok, which according to initial estimates could require the investment of more than 10 trillion roubles ($137 billion). Global commodities trader Trafigura has a 10% stake in Vostok Oil and a consortium of traders Vitol and Mercantile & Maritime have shown interest in taking a 5% stake in the project. Indian Oil Minister Hardeep Singh Puri, who is in Russia for an economic forum, met Russian Energy Minister Nikolai Shulginov and Rosneft chief Igor Sechin. The forum in the Russian Pacific port of Vladivostok was also attended by Russian President Vladimir Putin. “Look forward to further strengthening strategic cooperation across the entire value chain of the energy sector with Russia,” the Indian minister said on Twitter after meeting Shulginov. Gupta said Russia was a “preferred destination” for energy investment by India. ONGC Videsh owns 26% stake in Russia’s Vankor field and a 20% stake in Sakhalin-1 project. In 2009, it acquired Imperial Energy, an independent exploration and production company in Russia. Russia aims to begin shipping oil from the planned Vostok project in 2024 via the Northern Sea Route, an alternative to the Suez Canal which shortens travels to markets in Asia.
India’s gasoline demand seen hitting record as COVID curbs ease
India’s gasoline demand is set to hit a record this fiscal year, with consumption accelerating as more people hit the road for business and leisure travel after easing of COVID-19 curbs. Shunning trains, buses and planes, safety-conscious Indians are buying more cars and increasingly using personal vehicles to commute as they embark on ‘revenge travel’ – flocking to tourist destinations after months of restrictions, despite record high fuel prices. Annual passenger vehicle sales in India rose by 45 per cent to 264,442 units in July, driven by pent-up demand, according to data from the Society of Indian Automobile Manufacturers. The stronger-than-expected gasoline consumption growth could prompt Indian refiners to import the fuel or boost gasoil exports in coming months. Indian refineries are traditionally configured to maximise production of diesel, where demand is still below pre-COVID levels, hurt by an uneven economic recovery. [O/INDIA2] “We may have to import some quantity of petrol if momentum in demand continues,” said an official at an Indian state-run refiner, who declined to be identified as he is not authorised to speak to the media. “We cannot increase crude throughput as some refiners have high levels of diesel inventory and export margins for diesel are not attractive.” The expected rise in India’s gasoline imports could support Asian refiners’ margins for the fuel. The country, which has a refining surplus, has shunned gasoline imports since May and raised gasoil exports by a fifth in July from April, government data showed.
Puri says over Rs 1.5 lakh cr UPA-era oil bonds need to be repaid
Amid fuel prices continuing to remain stubbornly high despite international rates falling, Petroleum Minister Hardeep Singh Puri on Thursday said over Rs 1.5 lakh crore of oil bonds issued by the previous UPA government remains to be paid, limiting fiscal space and restricting financial freedom of oil firms. A day after Congress leader Rahul Gandhi launched a scathing attack on the government for raising cooking gas prices, Puri took to Twitter to blame the “rampant impunity and policy paralysis” of the UPA government. “In ‘India’s Lost Decade’ known for rampant impunity & policy paralysis, UPA Govt saddled future govts with Oil Bonds. More than Rs 1.5 lakh cr of these remain to be repaid, thus tying up crucial resources, limiting fiscal space & restricting financial freedom of OMCs,” he tweeted. Puri, a 1974 batch Indian Foreign Service officer who served as the Permanent Representative of India to the United Nations from 2009 to 2013, said the exploration and production (E&P) sector was “fund-starved”. “The important E&P sector was fund-starved. As a result, our import bill continues to be high. Nearly Rs 3.6 lakh cr profits of oil companies was instead used for price stabilisation by a remote controlled govt of ‘economic experts’ to hide behind a ‘All is Well’ smokescreen,” he tweeted. On Wednesday, Gandhi had attacked the government over the rising fuel prices saying Rs 23 lakh crore has been collected in the last seven years by increasing prices. His party rejected the oil bond burden theory, first floated by Finance Minister Nirmala Sitharaman, for not lowering the prices, saying the Rs 1.3 lakh crore are not even due for payment so far and the government had collected much more revenue in seven years from excise duty hikes. Last month, Sitharaman had ruled out a cut in excise duty on petrol and diesel to ease prices, saying payments in lieu of past subsidised fuel pose limitations. Petrol and diesel as well as cooking gas and kerosene were sold at subsidised rates during the previous Congress-led UPA government. Instead of paying for the subsidy to bring parity between the artificially suppressed retail selling price and the cost that had soared because of international rates crossing USD 100 per barrel, the then government issued oil bonds totalling Rs 1.34 lakh crore to the state-fuel retailers.
India to offer indemnity to Air India bidder(s) over Cairn claim
India is set to absolve bidders for its loss-making flag carrier from any liability arising out of a lawsuit filed by Cairn Energy Plc, which has claimed the state-run airline’s assets over a long-running tax dispute with the government, according to people familiar with the matter. Prime Minister Narendra Modi’s administration will offer so-called indemnity to the financial bidders of Air India Ltd., which the government has repeatedly tried to sell without success, the people said, asking not to be identified as the matter is confidential. In the latest attempt, a group of bureaucrats cleared a final sale purchase agreement on Saturday, and that plan is likely to be approved by a group of ministers this week, they said. The government expects to receive financial bids by Sept. 15, junior Civil Aviation Minister V.K. Singh told parliament in July. Air India, unprofitable since a 2007 merger with state-owned domestic operator Indian Airlines Ltd., has total debt of 600 billion rupees ($8.2 billion) and loses 200 million rupees every day, straining government finances even as the South Asian nation’s budget deficit widens. A Finance Ministry spokesperson declined to comment. Potential bidders for the airline — identified by local media as conglomerate Tata Group and the owner of local budget carrier SpiceJet Ltd. — may welcome any assurance from the government on not having to encounter any surprises on further liabilities. Cairn, which last year won an arbitration award for $1.2 billion plus interest over a controversial retrospective tax demand from the Indian government, has called Air India “an alter ego” of the country in a U.S. court, and held it responsible for the government’s liabilities, including any arbitration awards. Devas Multimedia Pvt., a company seeking over $1.2 billion it won in international arbitration from India over a dispute with state-run Antrix Corp., is also seeking to seize Air India’s assets abroad. India last month approved legislation that will allow firms relief from the tax demands if they agree to drop litigation. The government is in talks with Cairn to settle the dispute, Revenue Secretary Tarun Bajaj said in a subsequent interview.
Japan, Russia to cooperate in hydrogen, ammonia to fight climate change
Japan and Russia on Thursday agreed to work together on hydrogen and ammonia production, the Japanese industry ministry said on Thursday, as the long-time partners in oil and natural gas shift the focus to cleaner alternatives to fossil fuels. Japanese Industry Minister Hiroshi Kajiyama and Russian Energy Minister Nikolai Shulginov signed a statement on cooperation after a virtual meeting as part of the Eastern Economic Forum, which started on Thursday in Vladivostok, Russia. The two nations will cooperate in research and development and on technology to reduce planet-warming emissions in the atmosphere, including carbon capture and storage (CCS) and carbon capture and utilisation (CCU). While Russia is energy rich, resource-poor Japan is accelerating its efforts to build global supply chains of potentially carbon-free future fuels. Russia accounted for about 10% of global ammonia production in 2020. Japan’s industry ministry also signed a memorandum of cooperation (MOC) with Russia’s largest LNG producer Novatek on hydrogen, ammonia, CCS and CCU. The ministry aims to sign similar MOCs with a major Russian oil producer and another of its major gas producers later this month, a ministry official said. Japan, an investor in Russia’s Sakhalin liquefied natural gas (LNG) facility and importer of Russian oil, has a target of carbon neutrality by 2050, while Russia has said it will cut its 2030 emissions to 70% of 1990 levels, a target it should achieve because of de-industrialisation since the Soviet Union broke up in 1991. Hydrogen is mainly used in oil refining and ammonia is used for fertiliser and industrial materials, but both are considered to have potential to replace higher carbon fuels in future. Japan has been experimenting with hydrogen to displace natural gas and in replacing some coal with ammonia. It aims to increase its annual hydrogen demand to 3 million tonnes by 2030, and 20 million tonnes by 2050 from about 2 million tonnes now, and to grow its ammonia fuel demand to 3 million tonnes a year by 2030 from zero now.
ONGC pumps first gas from U1B deep-water well in KG basin
State-owned Oil and Natural Gas Corp (ONGC) has pumped first gas from its deep-water U1B well in Krishna Godavari block KG-D5 in the Bay of Bengal. The well, in KG-DWN 98/2 Block’s Cluster-2, has an estimated peak production of 1.2 million cubic meters per day of gas, the company said in a statement. “Secretary, Ministry of Petroleum and Natural Gas, Tarun Kapoor flagged off maiden production from the deep-water gas well U1B on August 31,” it said. ONGC’s KG-DWN-98/2 or KG-D5 block, which sits next to Reliance Industries’ KG-D6 block in the KG basin, has a number of discoveries that have been clubbed into clusters. The discoveries in the block are divided into three clusters- Cluster-1, 2 and 3. Cluster 2 is being put to production first. The Cluster 2 field is divided into two blocks namely 2A and 2B, which are expected to produce 23.52 million metric tonne of oil and 50.70 billion cubic meters (bcm) of gas. Oil production is likely to start shortly. The firm is investing USD 5.07 billion in developing the oil and gas discoveries in the block. It will cumulatively produce around 25 million tonne of oil and 45 billion cubic meters of gas with a peak production of 78,000 barrels per day of oil and 15 million standard cubic meters per day. U1B is the deepest well of the Cluster. Dedicating the gas well to the nation, Kapoor congratulated Team ONGC led by its chairman Subhash Kumar. He said the extensive experience of ONGC in exploration and production (E&P) brings confidence in the successful operation of the deepwater gas well. Stating that there is a lot of production potential in deep-water, he said this monetisation holds special national significance as the first priority of the government is to ensure enhancement of domestic production and reduction of oil and gas imports. “We look forward to production enhancement, especially from ONGC,” he said expressing hope for monetisation of many more such wells in the near future. The KG-DWN 98/2 block is situated offshore the Godavari river delta in the Bay of Bengal. It is located 35-km off the coast of Andhra Pradesh in water depths ranging from 300-3,200 meters. Cluster 2A is estimated to contain reserves of 94.26 million tonne of crude oil and 21.75 bcm of associated gas, while Cluster 2B is estimated to host 51.98 bcm of gas reserves. Cluster 2A is anticipated to produce 77,305 barrels of oil per day (bopd) and associated gas at a rate of 3.81 million metric standard cubic meters per day (mmscmd) over 15 years. Cluster 2B is expected to produce free gas of 12.75 mmscmd from eight wells and has a 16-year life.
Coal India starts pilot project to replace diesel with LNG in dumpers
CIL on Wednesday said it has begun the process of retrofitting LNG kits in its dumpers — big trucks engaged in transportation of coal, a move that will help the PSU to save around Rs 5 billion annually. “In a big push to reduce its carbon footprint, national miner Coal India Ltd (CIL) has initiated the process of retrofitting Liquefied Natural Gas (LNG) kits in its dumpers,” the company said in a statement. This is a significant move, as the world’s largest coal miner uses over 4,00,000 kilolitres of diesel per annum with an annual expense of over Rs 35 billion. The company in association with GAIL (India) Ltd and BEML Ltd has taken up a pilot project for retrofitting LNG kits in its two 100 tonne dumpers working at CIL subsidiary Mahanadi Coalfields Ltd (MCL). CIL on Tuesday signed a memorandum of understanding (MoU) with GAIL an BEML to get this pilot project executed. Once the LNG kit is successfully retrofitted and tested, these dumpers will be able to run on dual fuel systems i.e. both on LNG and Diesel, and their operations will be significantly cheaper and cleaner with use of LNG. LNG will replace the use of diesel by about 30 to 40 per cent and reduce the fuel cost by about 15 per cent. “The move will reduce carbon emission significantly and also save around Rs 5 billion annually if all existing Heavy Earth Moving Machines (HEMMs) including dumpers are retrofitted with LNG kit. Getting rid of diesel pilferages and adulteration are other added advantages,” the company said. Based on the outcomes of this pilot project, CIL will decide for bulk use of LNG in its HEMMs, especially dumpers. The company has also planned to buy HEMMs with only LNG engines if this ongoing pilot project is successful. This move will help CIL reduce its carbon footprint drastically and achieve sustainable goals. Notably, major mining dumper manufacturers worldwide are now switching for manufacturing of dumpers having engines with dual fuel (LNG-Diesel) systems.
Self-reliance in gas is the way forward
Delivering the 75th Independence Day address, Prime Minister Narendra Modi set the country a target to achieve self-reliance in energy production through a mix of electric mobility, gas-based economy and making the country a hub for hydrogen production by 2047. Electric mobility and hydrogen are futuristic areas. Aboutgas-based economy, pursuit of this goal will involve increase in gas consumption to meet additional energy needs for sustaining high growth and replacing polluting fuels such as coal. This could result in increased dependence on gas import which is already high at 50 per cent. So, there is need for a massive push to domestic production of gas. India has 26 sedimentary basins (SBs) covering an area of 3.14 million square kilometres. Only six of these are under commercial exploitation but are sub-optimally utilized. An overwhelming share of throughput comes from fields discovered over four decades ago in the 1970s, namely Bombay High and the South Bassein fields and so on, with no major discoveries in recent times. The only exception was the find in the Krishna Godavari (KG) basin in early 2000s, touted as ones that would contribute nearly 50 per cent of the country’s total gas production. Even that turned out to be a damp squib with the high-profile KG-D6 operated by Reliance Industries Limited (RIL) ending up with meager reserves of about two trillion cubic feet (Tcf) against an initial estimate of 10 Tcf. The current production is 28.6 billion cubic metres (BCM) (2020-21). While two-thirds of this is contributed by State-owned Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL) from blocks or areas given to them on ‘nomination’ basis, the remaining one-third comes from blocks given under the New Exploration and Licensing Policy or NELP (the policy was launched in 1999; since then, nine bidding rounds have been held to assign blocks) and pre-NELP blocks given to private entities before 1999. The production sharing contracts (PSCs) under NELP offered lucrative terms including among others allowing operators to fully recover the cost incurred in exploration and development of the field before they start sharing profits with the Union Government. Yet, global firms did not come forward and Indian private firms such as RIL who came in have not delivered. The domestic gas production declined from a high of about 52 BCM during 2010-11 to 28.6 BCM during 2020-21 (the reduction was mainly due to KG-D6 exhausting almost all of its reserves within 5 years of starting production in 2009-10). In March 2016, the Modi Government gave a special package for deep/ultra-deep and high-pressure/high-temperature (D/UD/HP/HT) fields (KG-D6 and neighboring KG-DWN-98/2 operated by ONGC fall in this category). Supplies from these fields are allowed a ‘premium’ price linked to the prices of alternate fuels, viz., fuel oil, naphtha and imported LNG. This is almost double the ‘normal’ price (effective from Nov 1, 2014, normal price is a weighted average of the costs at four global locations- the UK, the US, Russia and Canada). Even this special dispensation has not helped in reversing the declining trend in production. The Hydrocarbon Exploration and Licensing Policy (HELP) also known as the Open Acreage Licensing Policy (OALP) launched in July 2017 (under it, operators have freedom to choose new areas; they also enjoy freedom of pricing and marketing) has not lifted the sentiment either. As per the Exploration & Production Action Plan prepared by Directorate General of Hydrocarbons (DGH) – the technical arm of Ministry of Petroleum and Natural Gas (MPNG) monitoring production of oil and gas – India will be able to reach 50 BCM by 2023-24 only which is even short of what it achieved in 2010-11. The logjam has to do with regulatory hurdles, multiplicity of prices, and controls on supply and distribution. Till date, as many as 37 processes and procedures were required to be followed by a firm exploring oil and gas in a block awarded under NELP or pre-NELP rounds. These covered almost every stage — declaring a discovery (albeit commercially viable), annual work program (AWP), appraisal, field development plan (FDP) including its revision, and extension of the contract. No wonder that work in the assigned fields got stuck for years. For instance, KG-DWN-98/2 was discovered in 2004/05 but production from this field has commenced in this year. Only recently, these procedures have been cut to 18. The DGH claims certain approvals such as declaring a discovery, submission of quarterly reports, insurance & indemnity and bank guarantees, etc., are now allowed on self-certification where as appraisal, FDP or its revision are allowed on ‘deemed’ approval basis. As for multiplicity of prices, there are at least half-a-dozen prices. Apart from normal price for fields given on nomination to ONGC and OI Lunder pre-NELP and NELP; premium price for so called D/UD/HP/HT fields; market-based price for fields under HELP/OALP; special price for unconventional stuff like shale gas, coal bed methane (CBM); yet another for small and marginal fields recently transferred from ONGC/OIL to private firms. This is an open invitation to discretion and bureaucratic red tape. With regard to controls on supply and distribution, who gets how much gas and from which field is decided by an inter-ministerial committee. It creates a fertile ground for intense lobbying by interest groups from both the suppliers and users. For instance, a urea manufacturer tries to get all of his needs at the lowest price where as, a supplier firm is ever keen to sell all of its output at much higher premium price. While the latter has little interest in maximizing production, there is no compulsion on the former to use gas efficiently. To conclude, the objective of gas-based economy supported by domestic production is laudable. However, an ‘incremental’ approach (some relaxations or incentives here and there) will not get us there. Instead, the Government should go in for major reforms by dismantling the existing regime of gas allocation and administered prices. The suppliers should be free to decide their marketing and pricing strategies. Gas import should be deregulated and
IEX logs all time high trade volume of 9538MU in August
Indian Energy Exchange (IEX) has recorded an all-time high monthly trade of 9,538 million units (MU) in August which is 74 per cent higher compared to the same month last year. “The electricity market at the Indian Energy Exchange achieved a new milestone with a record all time high monthly volume of 9,538 MU achieving 74 per cent YoY (year on year) growth in August 2021,” an IEX statement said. While growth in the economic and industrial activities led to an increase in demand for power, the supply side constraints such as high cost of imported coal and LNG as well as lower wind power generation led to the increase in the electricity prices discovered on the Exchange, the IEX stated. The day-ahead market traded 6,649 MU volume during the month with average price of electricity at Rs 5.06 per unit. The market saw 48 per cent YoY growth. The term-ahead market comprising intra-day, contingency, daily & weekly contracts traded 617 MU during the month recorded 401 per cent YoY growth. The real-time electricity market continued to see exceptional performance with the monthly volumes of 1859 MU seeing a significant 116 per cent YoY growth. The average monthly price of the market was Rs 4.64 per unit. On 21 August, the Green Market segment completed one year and achieved a cumulative volume of 2867 MU since commencement on 21 August 2020. During the month, the green market segment traded 412.94 MU volume comprising 146.85 MU under the solar segment and 266.09 MU under the non-solar segment. The market saw Rs 3.56 per unit as the average price in solar and Rs 4.85 per unit in non-solar segments with overall average price being Rs 4.21 per unit. There were 43 market participants during the month which included distribution utilities from West Bengal, Bihar, Haryana, Telangana, Karnataka, Uttar Pradesh, Goa, Maharashtra, Punjab, DNH, Daman & Diu, Assam and Tamil Nadu among others.
In climate reversal, Biden okays new oil and gas mega auction
US President Joe Biden’s administration on Tuesday announced plans to open more than 80 million acres in the Gulf of Mexico for oil and gas exploration after a court ruled against the administration’s pause in leasing. The decision represents a significant step back for the White House’s ambitious climate agenda and was quickly challenged by a coalition of environmental groups. The Interior Department’s Bureau of Ocean Energy Management expects a final notice of sale in September, “with a lease sale to follow in the fall of this year,” the agency said in a statement. In January, Biden announced a moratorium on new drilling from federal land pending a review, as the Democrat sought to place the climate crisis at the heart of his presidency. But in June, a Louisiana judge appointed by former president Donald Trump stepped in to rule that the administration required approval from Congress for its pause. According to a Record of Decision posted online, the government projects up to 1.1 billion barrels of oil and 4.4 trillion cubic feet of gas from the auction. It noted a new report by the Intergovernmental Panel on Climate Change “detailing observations of a rapidly changing climate in every region globally,” but said it did not present sufficient cause to change the environmental impact statement for the drilling at this time. Environmental groups led by the Earthjustice advocacy group sued the Bureau of Ocean Energy Management and Interior Secretary Deb Haaland after the notice. “In the aftermath of Hurricane Ida, it is clear that we need to be doing everything we can to transition away from fossil fuels to reduce the impacts of climate change such as stronger, more frequent hurricanes,” said Healthy Gulf’s executive director Cynthia Sarthou. “This lease sale is deeply disappointing. The Biden administration has folded to the oil industry based on its campaign of disinformation and political pressure, ignoring the worsening climate emergency we face,” added Brettny Hardy, Earthjustice attorney.