BPCL stake sale: No reason to believe Numaligarh excise duty benefit will be withdrawn, firm says
A few months before the union government sells its stake in Bharat Petroleum (BPCL), executives at the company told analysts that there is no sun-set clause around excise duty benefits enjoyed by Numaligarh Refinery (NRL) and the company does not believe excise duty benefits enjoyed by NRL will be withdrawn. Replying to a question on whether the company’s investment in expanding NRL’s refining capacity is contingent on government’s commitment on continuity of excise duty benefits, a BPCL executive said: “There is no sunset clause for NRL benefits. NRL margins are robust without concessions; they have the best margins among other refiners in the country, about $10 per barrel in Q2. Excise duty concessions are an added incentive for improving NRL’s margins, but we have no reason to believe that excised duty benefits will be withdrawn as all other NE refiners are getting it.” The executives added that NRL’s expansion will be completed in four years and substantial capex will also be deployed in laying of crude oil pipeline from Paradip to Numaligarh and petroleum product pipeline from Numaligarh to Siliguri. The government, in a bid to meet its disinvestment target of Rs 1.05 trillion for this fiscal year, plans to disinvest its stake in a slew of Central Public Sector Enterprises including Bharat Petroleum. Finance Minister Nirmala Sitharaman said in an interview last week the government would wrap up the sale of the fuel retailer by March 2020. While the Department of Investment and Public Asset Management (DIPAM) has initiated the process for engaging asset valuer for BPCL, the government is yet to officially reveal the fine-print of the planned strategic sale and the jury is still out on the benefits of the move as well as the pace at which the centre will be able to complete the disinvestment process. Analysts had earlier told ET EnergyWorld that interested investors would require clarity from the government on continuity of excise duty benefits accorded to NRL and whether the North-Eastern refinery will be a part of BPCL disinvestment proposal. “As it is a remotely located area without fiscal support, huge margins cannot be sustained. Whoever wants to buy BPCL may want some clarity on policy continuity. Other partners and the state government may also have a say in Numaligarh being sold to a private company. If the other stakeholders are not comfortable, there are chances the refinery may not be a part of BPCL’s disinvestment exercise. Such complications may not be there with other JVs and subsidiaries of BPCL,” K Ravichandran, Senior Vice President at ICRA told ET EnergyWorld. BPCL management cleared the plan to expand refining capacity of NRL to 9 million tonne per annum (MMTPA) from 3 MMTPA currently at a cost of Rs 22,594 crore. The total project cost will be financed by a mix of debt, equity and Viability Gap Funding. NRL will raise a debt of Rs 15,102 crore apart from its internal accrual of Rs 2,307 crore. Promoters of NRL – BPCL, Oil India and the government of Assam — will contribute to the equity and the project will be supported by VGF of Rs 1,020 crore from the Centre government. Other Highlights Company executives informed analysts that BPCL will witness 57 per cent jump in capital expenditure at Rs 12,488 crore next fiscal year (2020-2021), from Rs 7,950 crore proposed to be spent in the current fiscal year ending March 2020. “The company is spending Rs 7,950 crore in the current financial year. Rs 2,058 crore will be spent on refineries, Rs 1,825 crore on petrochemicals, Rs 310 crore on pipelines, Rs 2,490 under marketing and Rs 800 crore on exploration and JV companies,” executives said. BPCL said that Kochi and Mumbai refineries will be completely ready to supply BS VI fuel by the end of 2019 and the Mumbai refinery will undertake a planned shut-down from 15 November to December. “Kochi has already taken a shutdown in the month of September and is now ready to produce BS VI grade fuel. Mumbai refinery will undertake shutdown from 15 November to December, already they are supplying BS VI fuel for the national capital region. However, we will be 100 per cent BS VI fuel compliant by the end of the calendar year, post the shutdown,” executives said. They also said the slowdown in the economy has impacted the demand of diesel in the country and the company is not sure on when the demand for the motor fuel will pick up. “On the diesel side, there is a slowdown in the Indian economy and there is no denying that and that is reflected in the de-growth of diesel. We do not know for how long this slowdown will continue, and as on second quarter the de-growth in diesel is around 2.5 per cent and for BPCL the de-growth is around 2.4 per cent and we do not know how long it will take for the revival to happen. Ideally for us diesel growth should be around 3-4 per cent for a country with a GDP growth rate of about 6-7 per cent,” executives said. Diesel demand growth during the first seven months (April-October) of the current financial year declined 0.17 per cent, lowest for this period since 2013-2014. A slowdown in the economy coupled with floods and an extended rainfall pulled India’s overall petroleum consumption growth down to 1 per cent during the April-October period of the current financial year — lowest for the seven months’ period since 2013-2014, an ETEnergyworld analysis of historical data showed.
Haryana gets 38 proposal to generate biogas from stubble
Haryana Power and New and Renewable Energy Minister, Ranjit Singh said that agreement has been signed with Indian Oil Corporation Limited (IOCL) for setting up a Compressed Biogas (CBG) plant in the state for disposal of Stubble. About 24 lakh metric tons of stubble will be consumed in 200 projects for the production of 1000 TDP CGB. He said that 24 firms have given a proposal for 38 project to set up a CBG plant of 234 tonnes per day capacity in Haryana. Apart from this, stubble will also be used in thermal plants. About 50 to 55 lakh tonne of stubble is produced in the State every year. For its disposal, several ambitious projects are being started in the State, in which about 40 lakh tonne of stubble will be consumed, the Minister added. After the meeting, Mr. Ranjit Singh while interacting with the media said that Chief Minister Manohar Lal has entrusted on him an important task and now it is his duty to live up to the expectation of the Chief Minister and the State people. He said that no officer or employee will be harassed unnecessarily and if anyone has any problem, he can come and meet him directly at any time. However, no laxity in work will be tolerated. He said that the officers doing good work will also be encouraged.
GAIL, regulator at odds over Rs 1.5K crore pipeline
GAIL and the downstream regulator are headed for a clash after the latter cancelled the state-run firm’s sole bid to lay a Rs 1,500-crore pipeline in Rajasthan citing unviably high tariff, and launched in its place the bidding process for another pipeline with altered route, according to people familiar with the matter. Petroleum and Natural Gas Regulatory Board (PNGRB) said on November 6 that it had cancelled the bid process for Langtala-Jodhpur-Bhilwara pipeline “as the tariff quoted by GAIL (India) Ltd (as a sole bidder) was found to be excessively high, impacting the viability of the gas itself.” That very day, the board also invited bids for laying a new gas pipeline on altered route from Langtala to Pali via Jodhpur. This has upset GAIL, which feels the ‘excessively high tariff ’ and ‘viability of the gas’ are subjective considerations and can’t become ground for cancellation of bid under the current regulatory framework, according to sources close to the company. GAIL may soon request PNGRB to review the decision that it considers unfair, sources said. But sources close to PNGRB have rejected the charge, saying the regulator has acted as per the law and GAIL was free to challenge it in court. PNGRB can’t allow GAIL to ‘squeeze the market’ and hurt the development of domestic gas market, sources close to the regulator said. GAIL defends the high tariff, saying it was due to higher risk perception in the project, sources close to the company said. The pipeline was supposed to evacuate gas only from Focus Energy’s block in Langtala, Rajasthan and if the actual production from this were to fall short of expectation, as has happened in some upstream gas projects in the past, the proposed pipeline would end up with much less business than anticipated, they said, adding that higher tariff could have let company recover cost quickly. GAIL, regulator at odds over Rs 1.5K crore pipeline Yet if the PNGRB felt that the proposed tariff was too high, it should have formally approached GAIL and discussed the possibility of cutting it to acceptable levels, they said. However, sources close to PNGRB said the regulator had held discussions with some senior GAIL executives before cancelling the bid. PNGRB’s suo motu move to seek bids for a pipeline with altered route without holding public consultation as is necessary under the regulations is questionable, sources close to GAIL said. The new pipeline will connect at Pali with the proposed Mehsana-Bhatinda pipeline, being built by a joint venture led by Gujarat State Petronet Ltd, a subsidiary of Gujarat State Petroleum Corp (GSPC). Indian Oil, HPCL and BPCL are other shareholders in the joint venture. Mehsana-Bhatinda pipeline, authorised by PNGRB in 2011, has been delayed for years. GAIL and PNGRB didn’t respond to ET’s request for comment. A GSPC official said the first phase of Mehsana-Bhatinda pipeline has been completed and the second phase of 950 km will be completed by October 2020. He further said the pipeline is interconnected with GSPC’s Gujarat pipeline network at Palanpur in Gujarat. Sources close to GAIL say the project would take more time. By proposing to connect a new pipeline with one that has not been completed many years after the project was awarded, the regulator is introducing uncertainty, which would help neither the producer nor consumers, sources close to GAIL said. The cancelled-pipeline proposed to connect to GAIL’s operational Hazira-Vijaipur-Jagdishpur pipeline, connecting the producer with a very wide base of consumers from all sectors, sources close to GAIL said.
Essar, Adani, GAIL buy bulk of Reliance gas; fertiliser companies skip
Essar Steel, Adani Group and state-owned GAIL have bought majority of natural gas from Reliance Industries’ newer fields in the KG-D6 block at USD 5.1-5.16 per unit but fertiliser companies skipped the auction that could have helped save at least Rs 8 billion subsidy annually. Essar Steel picked up 2.25 million standard cubic metres per day or about half of the available volumes in the country’s first transparent and dynamic forward auction that lasted for about five-and-half-hours on November 15, industry sources said. Gujarat State Petroleum Corp (GSPC) picked up 1.2 mmscmd while Adani Group and Mahanagar Gas Ltd bought 0.3 mmscmd, sources said, adding GAIL, acting on behalf of fertiliser companies, bought 0.3 mmscmd of gas. Fertiliser companies directly did not participate in the auction that could have helped them replace expensive imported liquefied natural gas (LNG). These companies buy some 3 mmscmd of gas on short-term LNG import contract at a price of over USD 9 per million British thermal unit and another 23 mmscmd on long-term contracts at delivered price of USD 11.5 per mmBtu. Reliance’s gas that they will get through GAIL will come for a delivered price of between USD 6.5 and USD 7 per mmBtu, they said, adding had they bid directly and bought more volumes they could have replaced expensive LNG, helping save at least Rs 8 billion in fertiliser subsidy annually. Hindustan Petroleum Corp Ltd (HPCL) bought 0.35 mmscmd and 0.10 mmscmd went to Gujarat State Fertilizers & Chemicals Ltd (GSFC)/Gujarat Narmada Valley Fertilizers & Chemicals Ltd (GNFC), sources said. In all, 15 customers across sectors such as steel, petrochemicals, city gas, glass and ceramic got gas in the tender, they added. Reliance and its partner BP Plc of the UK had sought bids from potential users for the 5 mmsmcd of natural gas they plan to produce from the R-Cluster Field in KG-D6 block from mid-2020. Bidders were asked to quote a price (expressed as a percentage of the dated Brent crude oil rate), supply period and the volume of gas required. Dated Brent means the average of published Brent prices for three calendar months immediately preceding the relevant contract month in which gas supplies are made. Sources said Reliance had set a floor or minimum quote of 8.4 per cent of dated Brent price — which meant that bidders had to quote 8.4 per cent or a higher percentage for seeking gas supplies. In the November 15 auction, bidders quoted between 8.5 and 8.6 per cent slope to corner all of the 5 mmscmd supplies available. This translates into a price of between USD 5.1 per mmBtu and USD 5.16 per mmBtu rate at Brent oil price of USD 60 per barrel. Sources said while bankruptcy-hit Essar bought gas to feed its steel plants, other buyers including Adani Group picked up the volumes for their city gas operations of retailing CNG to automobiles and piped cooking gas to households. The volumes are mostly planned for usage in western India, particularly Gujarat where the gas can be delivered through a single pipeline — East-West pipeline. The delivered price in Gujarat is likely to be around USD 6.50 per mmBtu, they said. Sources said GAIL bid at 8.5 per cent slope — the maximum fertiliser firms had mandated it to do. Initially, Reliance had set a floor of 9 per cent of dated Brent price, which translated into a gas price of USD 5.4 per mmBtu at USD 60 oil price. But consumers saw this as a very high price considering that imported LNG in the spot market is available at around USD 4 per mmBtu rate currently. To pacify the consumers, Reliance lowered the floor/minimum quote to 8.4 per cent of dated Brent price. The company did not immediately respond to an e-mail sent for comments. According to the bid document, the gas price will be subject to the ceiling price mandated by the government. The ceiling price for gas from difficult fields such as those in deep-sea currently is USD 8.43 per mmBtu. The government-mandated rate for other fields currently is USD 3.23 per mmBtu. Reliance and BP are developing three sets of discoveries in KG-D6 block — R-Cluster, Satellites, and MJ by 2022. R-Cluster will have a peak output of 12 mmscmd while Satellites, which are supposed to begin output from mid-2021, would produce a maximum of 7 mmscmd. MJ field will start production in second half of 2022 and will have a peak output of 12 mmscmd. Reliance has so far made 19 gas discoveries in the KG-D6 block. Of these, D-1 and D-3 — the largest among the lot — were brought into production from April 2009 and MA, the only oilfield in the block was put to production in September 2008. While the MA field stopped producing last year, the output from D-1 and D-3 has fallen sharply from 54 million standard cubic metres per day (mmscmd) in March 2010 to 1.68 mmscmd in July-September. Other discoveries have either been surrendered or taken away by the government for not meeting timelines for beginning production. Reliance is the operator of the block with 66.6 per cent interest while BP holds the remaining stake.
Cairn Oil and Gas second quarter production disappoints; Cuts FY20 guidance
Vedanta-owned Cairn Oil and Gas, the country’s largest upstream player in the private sector, has posted a 4 per cent decline in average gross production to 178,744 barrels of oil equivalent per day (boepd) during the second quarter ended September 2019 as compared to the corresponding quarter a year ago, mainly due to operational issues in the flagship Rajasthan asset. The production posted was much below the projections made by the company to investors during the release of first quarter (April-June) financial results when it had projected output to reach around 200,000 barrels of oil equivalent per day (boepd) by September end. Post the company’s first quarter financial results, it had projected production to reach in a range between 260,000 boepd and 270,000 boepd by the end of March 2020. However, that has has now been cut to 225,000 boepd in light of the operational issues. Chief Executive Officer (CEO) Ajay Dixit told analysts during the company’s second quarter investor presentation that power-failure coupled with delay in capex projects has led to decline in production during the quarter and overall production guidance for the year. “In the oil business our guidance has been based on the development projects which we have been giving, in the past few months we had a couple of topics coming up simultaneously. One was a very significant power failure; besides normal decline we had certain failures in the asset because of this power failure. Once the total supply goes the entire reservoir sinks and it takes time to recover,” Dixit told analysts. He said that delay in execution of capex projects also resulted in flat production. “Our exit-rate would be in the range of 225 and it will steadily go beyond that in the next year. You will start seeing an increase in production from January when the commissioning of surface facilities start coming up and more wells get hooked-up,” Dixit said. The company had projected to hook-up 185 wells by the end of March 2020 during the first quarter of the current financial year but it has revised that projection downwards to 150 wells owing to operational issues. “As far as guidance is concerned, on surface facilities we are well on track but we have been facing some delays when it comes to drilling of wells, due to surprises in the geology. From the previous guidance if you noticed we are down on the number of wells to be drilled,” Dixit said. The oil ministry’s monthly production report has flagged deficit in production from Cairn Oil and Gas’ Rajasthan fields over the past year due to delay in upgrading of Mangala Processing Terminal (MPT), delay in hooking up online of 45 infill wells, closure of wells, as well as operational issues in Bhagyam, Aishwariya and ABH fields. Dixit had in October told ET EnergyWorld in an interview the company remains confident of achieving 260-270,000 boepd of production by end of March 2020. “We are not giving up on the exit rates so far. There are two parts of this. One, what we are currently producing could it have been better? The answer is yes. Where are we facing the problem? We are facing problems in the infrastructure part. We had a transmission line failure recently; we have only one incoming line from Rajasthan State Electricity Board, it collapsed. We have had a number of such failures happening repeatedly, in Bhagyam field and Rajashtan, this is one of the problems we face,” he had said. The CEO also said that a major jump in production is expected to come from the turnkey projects which are under implementation including drilling and hooking-up of wells and connecting them to the surface facilities. The company has said in its second quarter investor presentation it is investing close to $3.2 billion on blocks under Production Sharing Contracts (PSC) and $0.8 million on 51 Open Acreage Licensing Policy (OALP) blocks. The firm plans to drill 250 wells, hook-up 150 wells, and increase liquid handling capacity to 1.25 million barrels of liquid per day (mblpd) from 1.10 mbldp currently and expand gas processing capacity to 150 million standard cubic feet per day (mmscfd) from 80 mmscfd currently. Dixit had told ETEnergyworld in order to increase production in the near-term, the government should take some of the best practices or guiding principles from Hydrocarbon Exploration Licensing Policy (HELP) as well as Open Acreage Licensing Policy (OALP) and apply those to the current Production Sharing Contracts. He said multiple layers of administrative approvals cause the country to lose probable and potential resources and self-certification will help companies to produce faster. Commenting on the status of blocks won under OALP and environment clearances, Dixit said: “We do not want to avoid any process but the question also is whether for just exploration do you need to undertake land acquisition? Our request therefore is something must be done on the regulatory side and land acquisition must not be made mandatory for exploration or for data collection.” He informed Cairn had received environment clearance for 14 of the 51 blocks won under OALP and it may be unreasonable to expect them to start producing within 2-3 years.
Saudi Aramco still undecided on BPCL stake purchase
The world’s largest oil company Aramco is yet to make up its mind to participate in disinvestment of Indian fuel refiner and retailer Bharat Petroleum Corporation Ltd (BPCL) where government intends to sell its entire 53.29 per cent stake to a strategic investor. Sources privy to the development said that Aramco, which kicked off the final phase of its $25 billion IPO on Sunday, is focused on Indian investment primarily to conclude the purchase of 20 per cent stake in Reliance Industries’ oil to chemical division and expansion of its upstream business in high growth markets including India. Entering India with a large scale investment in a public sector oil refiner and retailer is not on the horizon as on now, sources said. When asked specifically on its plan to acquire majority stake in BPCL whether solely or in a consortium, Saudi Aramco declined to comment. Aramco’s lesser focus on BPCL disinvestment may be a cause of worry for the Indian government that is betting big on the oil giant to takeover its entire equity in BPCL. In fact, Finance Minister Nirmala Sitharaman has indicated that BPCL disinvestment may be completed in current fiscal. While government is expected to launch a roadshow for BPCL disinvestment in key global markets soon, there is a strong belief that Aramco fits the bill perfectly with its sheer scale of operations and large size of the balance sheet. “For Aramco, its huge IPO is of prime concern now. It is selling 1.5 per cent stake in the market that could fetch over $25 billion.Other things, including investments in key markets would come thereafter. Moreover, with BPCL disinvestment requiring investor to pump in close to Rs 1lakh crore (about Rs 60,000 crore for government’s stake and balance for open offer), even a company of the size of Aramco will think twice,” said an global oil and gas analyst who did not wish to be named on the issue. Aramco in the past has remained upbeat about the prospect of investment in the Indian market, which is among the largest oil consumers in the world and where demand scenario is expected to remain firm next few decades.This mood has also reflected in the 658 page prospectus filed by the company in the run up to its IPO where apart from its intention to invest in RIL, it has said that company is focussing its downstream investments in areas of high-growth, including India. Indian government is also looking at Aramco’s investment in $60 billion oil refinery proposed in Maharashtra as well get its investment in oil marketing and retailing in the country. “The bag seems too full for Aramco already and if at all a decision of BPCL stake purchase is taken, Aramco may join hands with some other Indian or overseas player to pick government of India’s equity in the company,” said the source quoted earlier. Public sector Indian Oil Corporation (IOC) has also not ruled out its interest for BPCL but is waiting for a green signal from the government to consider placing its interest. However, IOC may not have the financial muscle to for large stake buy and government does not want to add debt burden on PSUs. In such a scenario, analysts believe a possible collaboration between Aramco and IOC may work out. IOC also has started limited foray in Saudi Arabia by helping set up few fuel stations. However, government officials denied build up of any such collaboration at this juncture. Government’s stake is worth over Rs 60,000 crore at prevailing price of BPCL shares on BSE. If the buyer has to further acquire 25 per cent share in an open offer as per takeover code, the total amount with rise close to Rs 1 lakh crore. This is considered too high even by international standards. On its part, DIPAM is working out a plan to offload entire government equity to a strategic partner, possibly a large overseas oil entity like Saudi Aramco, Total, ExxonMobil, Shell. However, with oil market globally facing a slowdown with demand not picking up despite supply squeeze, the appetite for a large acquisition becomes difficult. BPCL operates four refineries at Mumbai, Kochi in Kerala, Bina in Madhya Pradesh and Numaligarh in Assam with a combined capacity to convert 38.3 million tonnes of crude oil into fuel. It has 15,078 petrol pumps and 6,004 LPG distributors. The government proposes to raise Rs 1.05 lakh crore from disinvestment in the current financial year. It had exceeded asset-sale targets of Rs 1 lakh crore in FY18 and Rs 80,000 crore in FY19.
IOC, GAIL to pay Adani 5% more charge than their own LNG terminal: Pradhan
State-owned Indian Oil Corp (IOC) and GAIL India will pay Adani Group 5 per cent more in hiring charges for using the private firm’s upcoming LNG import facility at Dhamra in Odisha than their own similar terminal, Oil Minister Dharmendra Pradhan said on Monday. India’s largest oil firm IOC, which recently commissioned a 5 million tonne liquefied natural gas (LNG) import terminal at Ennore in Tamil Nadu, as well as gas utility GAIL have “both technical and financial capability to develop their own LNG terminal,” he told the Lok Sabha. The two firms have, however, hired capacity in Adani’s under-construction LNG import terminal at Dhamra. IOC had in 2015 signed to use up to 60 per cent of the terminal’s capacity for importing gas for its refineries at Haldia in West Bengal and Paradip in Odisha. GAIL too had signed up for 1.5 million tonne of the terminal’s regasification capacity. “GAIL and IOC have agreed to pay the tolling charge of Rs 60.18 per million British thermal unit for the regasification facility at Dhamra LNG terminal with annual escalations in line with their respective contractual provisions,” he said in a written reply to a question. This charge compares to Rs 57.38 per mmBtu regasification charges for Ennore LNG terminal, he said. GAIL’s own Dhabhol LNG terminal in Maharashtra levies Rs 49.28 per mmBtu regasification charge. In addition, there are other charges such as terminal charges, vessel-related charges and port charges for utilization of the Dabhol LNG terminal. “The regasification charges for Ennore and Dhamra terminals are inclusive of terminal charges, vessel-related charges, port charges, and any other port-related charges,” Pradhan said. Originally, IOC and GAIL had on September 21, 2016, signed a ‘non-binding’ agreement to buy 50 per cent stake in Adani Group’s Rs 5,500-crore Dhamra LNG project in Odisha. But that agreement expired on September 20, 2018, without being translated into a firm pact apparently because of differences over valuation. “It has been informed that the regasification charge for Dhamra terminal is Rs 60.18 per mmBtu for the first contract year (year of commissioning) which is likely to be in FY 2021-22,” Pradhan said. “GAIL has executed a Tolling Agreement in line with its procedures to meet the supply commitments of customers located in the eastern parts of the country along JagdishpurHaldia/Bokaro-Dhamra Pipeline (JHBDPL) project. IOC has also booked capacity at Dhamra Terminal after considering its captive requirement of Paradip, Haldia and Barauni refineries.” He said the booking of regas capacity is being done after “protracted techno-commercial discussions with the promoters of Dhamra LNG Terminal and after considering the location of the terminal, availability of gas evacuation pipelines, affordability of regasification charges and capturable demand in the catchment area.” The September 21, 2016 “non-binding MoU” followed GAIL dropping plans in March 2015 to set up a floating LNG import terminal at Paradip. IOC too had in 2012 signed an MoU with Dhamra LNG Port Corp Ltd (DPCL) to develop an LNG terminal at the port. Also, Petronet LNG – a firm in which GAIL and IOC are promoters, had shelved plans to set up a 5 million tonne a year LNG import facility at Gangavaram in Andhra Pradesh. After shelving their respective plans, IOC and GAIL signed a pact with Dhamra LNG Terminal, a firm owned by Adani Group. “GAIL and IOC have both technical and financial capability to develop their own LNG terminal,” Pradhan said. “GAIL has an equity stake in Konkan LNG Pvt Ltd and is the owner’s engineer as well as the operator of this terminal at Dabhol. IOC has recently commissioned a 5 million tonne LNG terminal through a joint venture at Ennore in March 2019.” The two firms also have an equity stake in Petronet LNG which operates two LNG regas terminals, one at Dahej in Gujarat and the other at Kochi in Kerala, he added.
Ahmedabad: Ceramic makers propel growth with propane gas
Ceramic makers in Morbi, who had to switch to piped natural gas (PNG) following a National Green Tribunal order in March have found a cheaper alternative in propane gas or LPG. For the past three months, ceramic companies have cashed in on the falling prices of LPG which helped them increase their profit margins while promoting cleaner fuel option. LPG prices are about 30% cheaper than the gas being supplied, they claim. A change in trend may however force these companies to go back to PNG. “The prices of LPG soften during monsoon due to low demand. However, in winter they shoot up due to demand from countries with cold climates. Already the prices of LPG have begun rising and in the next one month or so, it will become costlier than PNG,” said an industry expert. While the demand for gas has gone up almost threefold in the last two months following the NGT order regarding closure of coal-based gasifiers, Gujarat Gas, the country’s largest city gas distribution (CGD) company in terms of volumes, has been the biggest beneficiary of this change. The use of LPG by ceramic units has also impacted Gujarat Gas’s growth story in Morbi, which supplies PNG to ceramic units there, said sources. Morbi PNG consumption volumes have declined from the high of 6 million metric standard cubic metre per day (mmscmd) in July to less than 5 mmscmd currently as ceramic production tapered due to macro slowdown/monsoon, according to a November report by Edelweiss on Gujarat Gas. “Around 60 to 70 units in Morbi currently use propane gas. These units have installed required infrastructure for propane gas consumption,” said K G Kundariya, former president, Morbi Ceramic Association. The cost of infrastructure for propane gas ranges for Rs 80 lakh to Rs 1.5 crore depending upon propane gas requirement of a unit. Currently, propane gas is cheaper by Rs 6 per standard cubic meter (SCM) than industrial piped natural gas (PNG). The difference may narrow down to Re 1 when the demand for propane gas increases in winter as its price is linked with the international market. “On yearly basis, the average cost of savings comes to around Rs 3 per SCM. If this increases to Rs 6 per SCM, several other units may also switch to propane gas,” said an industry player. Those who use propane gas are mainly into manufacturing of vitrified tiles, where gas requirement is higher. “Wall tiles and floor tile makers require 5,000-7,000 SCM per day. Vitrified tiles unit consume 12,000 to 15,000 SCM a day. The cost-benefit is viable only when propane gas consumption is higher,” said a source. “Previously, fewer units were using propane gas. However, the consumption of propane has increased ever since the closure of coal gasifiers in Morbi,” said Mukesh Ughreja, president, vitrified tiles division, Morbi Ceramic Association (MCA). According to Morbi’s ceramic players, the price of propane gas remains lower than the natural gas for as many as 7 months in a year. Last month, it was cheaper by Rs 6 per SCM and the cost difference this month is up to Rs 2 per SCM. “The savings of Rs 6 per SCM is considerable and it helps bring down the cost,” said an industry player. “Those who can afford are using propane gas and leading companies including IOC currently supply propane to ceramic
Maharashtra: 15 CNG fuel stations to be set up by March next year by MNGL
The Maharashtra Natural Gas Limited (MNGL) is planning to set up 15 compressed natural gas (CNG) stations in the district by March next year. Of the 15 stations, 12 will be set up in the premises of existing fuel stations of oil marketing companies like IOC, HPCL and BPCL. The remaining three would be established on the land to be provided by the Nashik Municipal Corporation (NMC). All the stations will be operated by MNGL. Headquartered in Pune, MNGL is a joint venture of GAIL (India) and BPCL. Last year, it had won bids to create infrastructure and provide CNG for vehicles and piped natural gas (PNG) for households in Nashik. The bids were floated by the Petroleum and Natural Gas Regulatory Board. “The infrastructure for supplying CNG at two Indian Oil petrol pumps at Dodi in Sinnar taluka and Talegaon in Igatpuri taluka is ready. We are awaiting the mandatory nod from Petroleum and Explosives Safety Organisation (PESO) before we start supplying CNG to vehicles by end of this year,” M V Ramnarayan, MNGL CEO, Nashik, told TOI. According to Ramnarayan, the MNGL’s outlets at remaining 10 existing fuel stations will also be operational by the end of March next year. He said that the NMC has agreed to provide land for setting up of three CNG outlets in the city. These stations will be managed and operated by MNGL staff. “We are in advanced stage of negotiations with oil marketing companies. Of the 10 CNG stations, majority would be in the city,” said Ramnarayan. The senior functionary of MNGL said that the company has chalked out plans to undertake an awareness drive about the usgae of green fuel for vehicles as inorder to reduce air pollution in the district. “Our focus would be on autorickshaws, cars and vans that ply in the city and rural areas. We will organize sessions with the owners of such vehicles to create awareness about green fuel instead of conventional ones,” added Ramnarayan. MNGL staff will guide vehicle owners about ways to use green fuel. “We have also requested the civic body to provide empty spaces within bus depots so that we can start supplying CNG to new buses that the NMC is planning to introduce in the near future. These buses will run on green fuel,” said Ramnarayan.
Gujarat rolls out green carpet for India’s natural gas-based economy
In 2008-09, billboards were displayed across Ahmedabad claiming Gujarat will show the way to the rest of India how to be pollution-free by use of compressed natural gas (CNG). The campaign was aimed at discouraging autorickshaw drivers and owners who mixed kerosene with petrol to fuel their vehicles, causing heavy air pollution, said a senior government official. In June this year, Gujarat chief minister Vijay Rupani announced the ‘CNG Sahbhagi Yojana’. It aims to resolve the issue of long queues at CNG stations by adding another 300 stations in two years. Further, the state government recently gave its nod for what it claims to be the world’s first compressed matural gas (CNG) port terminal. The facility, to come up in Bhavnagar, will be set up jointly by the UK-based Foresight Group and the Mumbai-based Padmanabh Mafatlal Group. Gujarat rolls out green carpet for India’s natural gas-based economy The central government, while planning to cut down on oil imports, is shifting to creating a gas-based economy. And Gujarat, which is considered a gas hub for over two decades now, may offer some answers. With new infrastructure facilities coming up and the state pushing for cleaner fuel options, Gujarat is likely to consolidate its position further. It became the first and only Indian state so far to be completely covered under the piped gas distribution network after the ninth round of bidding by petroleum and natural gas regulator in 2018. Producing 47% of the nation’s natural gas, it is home to 19.6 lakh piped natural gas users who account for 42% PNG customers in India. Companies like Gujarat Gas, Adani group, Torrent group, Petronet LNG, Shell group, Gujarat State Petronet Ltd, Shapoorji group, IRM Energy and Sabarmati Gas have invested in various infrastructure facilities from LNG terminals to CGD networks to pipeline infrastructure to power plants, creating an ecosystem for a gas-based economy. Gujarat-based companies bagged rights to retail CNG and PNG in a number of cities during the 9th and 10th round of auctions by PNGRB. Torrent Gas bagged licences for 18 cities, while Adani Gas won 15 areas on its own and 10 in joint venture with Indian Oil Corporation. State-run Gujarat Gas bagged rights for seven cities. The cumulative investments by these players to develop CGD networks in these cities will be more than Rs 25,000 crore over the next few years. Apart from developing natural gas pipeline supply infrastructure, Gujarat is the only state with two operational LNG terminals — Dahej, run by Petronet LNG, and Hazira terminal by Shell group. It currently holds about 25% share of natural gas consumption in total gas supplies on pan-India basis. While these two terminals handle about 70-80% of total gas and LNG supply in the country, a third one, set up jointly by Gujarat government, is all set to be commissioned soon. Two more LNG terminals, one by Shapoorji Pallonji group and another one by Swan Energy are under construction. Another terminal with a re-gasification capacity of 5 million metric tonnes per annum (mmtpa), built jointly by Gujarat government and Adani group at Mundra, is expected to be commissioned shortly. “The presence of LNG terminals has acted as a catalyst and enabled Gujarat to position itself as the prominent gas corridor of the country with majority of LNG imports being sourced through these terminals,” said Gujarat energy minister Saurabh Patel. The state houses 10 gas-based power projects with a capacity of 4,050 mega watts that have been developed by government and private companies. “Torrent group has a long-standing commitment to promoting natural gas, going back more than 25 years, when we set up India’s first private sector gas-based power plant. Torrent has the largest gas-based power capacity of 2,730MW in the country, all of which is in Gujarat,” said Jinal Mehta, managing director, Torrent Power Ltd. While Gujarat Gas is the largest CGD of the country in terms of volumes and customer base, the Adani Group, which forayed in 2004, is biggest in terms of licenced areas. The group aims to add 9 lakh households and set up 100 additional CNG stations in next few years. After setting up a huge pipeline network in the state, Gujarat State Petronet is currently implementing two cross-country natural gas trunk pipelines for an estimated investmenwwwt of Rs. 6,500 crore. Our overarching aim of entering this domain was to make cleaner and affordable fuel available to the remotest corners of India and the state of Gujarat has played a pivotal role in this journey. Going forward, our strategic partnership with world’s energy major Total would bolster this ambition. By contributing to India’s vision of becoming a gas-based economy, we wish to shoulder the nation’s climate goals Pranav Adani | MD, agro, oil and gas, Adani Group Thanks to the visionary leadership, Gujarat is a role model for the gas-based economy. Today, Gujarat is the only state with 100% coverage of CGD development authorisation. The enabling state policies and its conducive eco-system made Gujarat Gas the largest city gas distribution company in India Nitin Patil | CEO, Gujarat Gas Limited About 70-80% of the country’s LNG comes from terminals in Gujarat. Very soon, more terminals will get operational. To back this up, we have developed a gas grid covering all districts. With gas-based power plants and fertilizer units, the state has an entire ecosystem ideal for a gas-based economy Saurabh Patel | Gujarat energy minister Gujarat has been a pioneer in creating a gas-based economy and natural gas usage across various applications has grown exponentially over the last two decades. Continuing with our firm belief in the future of natural gas and in line with our prime minister’s vision of turning India into a gas-based economy, the Torrent group has recently forayed into the CGD sector with the mission to supply clean fuel to its authorised areas spread across 32 districts in seven states Jinal Mehta | MD, Torrent Power Ltd The State Produces 47% Of India’s Natural Gas And Its LNG Terminals Handle