Domestic gas pricing to be freed as global rates decline
In one of the last reform initiatives in the oil and gas sector, aimed at scaling up local production from fields of ONGC, OIL, Reliance and Vedanta, the government is set to open pricing of domestic gas. According to sources in the oil ministry, freeing up gas pricing is being looked in the present context where global oil and gas prices have fallen. A panel, led by the NitiAayog vice-chairman, has also suggested free-market pricing for natural gas produced from domestic fields to boost output. “We are looking at proposals on bringing out domestic gas production from pricing regulations. A cabinet note proposing changes would soon be finalised to put in place the new system at the earliest,” said an official privy to the development. But the removal of price regulation in the gas sector will be done gradually as suggested by the Kelkar panel. It means the system of regulated gas pricing for domestic production would continue for at least 3 more years, but during the period producers would be given freedom to sell a portion of the total output under negotiated pricing deals (market determined) with their customers. The NDA government’s reform initiatives have already allowed free gas pricing for production from small and marginal blocks, difficult high pressure/deep water blocks and output from the newly bid blocks under the hydrocarbon exploration licensing policy (HELP). The pricing and marketing from pre-NELP exploration blocks and those under the new exploration licensing policy (NELP) are still regulated. This will be lifted gradually, once the new policy is approved. The current gas pricing method for pre-NELP and NELP blocks is based on a 2014 formula that takes average rates from global trading hubs to determine domestic prices twice a year – in April and in October. Under the formula, the current gas price is at $ 3.36 per million metric British thermal unit (mmBtu). Gas producers have been critical of this low pricing that impacts upstream investments. “It’s about time when the government frees up gas pricing, if it’s serious about developing a gas-based economy. Apart from lifting pricing restrictions on domestic gas, the government should also do away with price caps for market-determined price. It would enable market forces and competition to offer best available prices to consumers,” said a senior official of a private sector oil and gas explorer. At present, producers can charge market rates for gas from deep sea and other difficult fields but rates must stay below a government-prescribed ceiling that’s linked to prices of alternative fuels. The price ceiling is currently at $7.67 per mmBtu. The new policy will look into this ceiling price as well, sources said. India is looking at investor-friendly policies in the oil & gas sector to attract investments that has remained miniscule for the last several years. Due to this, domestic oil output has stagnated and gas production has failed to pick up. In fact, domestic gas output shrank by 1 per cent in April-October of FY19 raising the demand of expensive imported liquefied natural gas (LNG). The government is aiming to increase gas production by two-and-a-half times by 2030, which would help raise the fuel’s share in the energy mix to 15 per cent from 6 per cent. At present, of the 310 exploration blocks awarded under various bidding rounds (discovered field, pre-NELP and NELP), 189 blocks/fields are operational. 17 blocks under nomination are being operated by Oil and Natural Gas Corporation and Oil India Limited. The petroleum exploration licences (PEL) for domestic exploration and production of crude oil and natural gas were granted under four different regimes over a period time: nomination basis – PEL, pre-NELP discovered field, pre-NELP exploration blocks and NELP. As many as 117 entities — 11 public sector undertakings, 58 private firms and 48 foreign companies — are operating in these blocks after the ninth NELP round.
500 compress biogas plants to come up by 2023: Dharmendra Pradhan
Union Minister of Petroleum and Natural Gas Dharmendra Pradhan on Sunday said plans are afoot to set up 5,000 compressed biogas (CBG) plants across the country by 2023. The Centre intends to move towards gas-based economy by increasing the share of natural gas in India’s energy basket from present 6-7 per cent to 15 per cent by 2022. With the rising demand for natural gas in transport and industrial sector, CBG has been identified as a potential route, Pradhan said. Speaking at a road show organised by three oil marketing companies here to sensitise the stakeholders to participate in the SATAT (Sustainable Alternative Towards Affordable Transportation) initiative, the Petroleum Minister said the proposed CGB plants meant for extracting biogas from agricultural residue, cattle dung, sugarcane press mud, municipal solid waste, sewage treatment plant waste and municipal solid waste will have an estimated annual gas production of 15 million ton. He said the OMCs have already conducted road shows in Chandigarh, Lucknow and Pune to sensitise the stakeholders and they have received an overwhelming response. Noting that Odisha has great potential to generate CBG, Pradhan said with an investment of about Rs.1700 billion, this initiative is expected to generate direct employment for 75,000 people and produce 50 million tons of bio-manure for crops. He said CBG is a replacement for natural gas and can be used in the transportation sector in place of compressed natural gas (CNG). Presently, consumption of natural gas in India is around 140 million metric standard cubic meter per day (MMSCMD) out of which domestic production is only 70 MMSCMD and remaining 70 MMSCMD is imported which is around 50 per cent of total consumption. As city gas infrastructure is laid in 19 district of Odisha, the Union Minister said the State will have 1,730 km gas pipeline with investment of Rs 45 billion. Out of this, 900 km will be for city gas pipeline worth Rs 5 billion. “It is estimated that around 500 CBG plants in Odisha may come upon immediate basis. They can supply gas to our PSUs or to local industries. It is added value to the Bargarh 2G Ethanol Plant, being set up by BPCL,” he said. Chairman of Indian Oil Corporation Limited (IOCL) Sanjiv Singh said ‘SATAT’, a transformational initiative in the green energy space, aims to revolutionise transport sector by introducing CBG in this segment. It will help India achieve self-reliance in the energy sector by enabling the country in drastic reduction of crude imports which currently constitute over 80 per cent of its total energy consumption.
Kuwaiti oil minister’s resignation accepted: Media reports
Kuwaiti oil minister Bakhit al-Rashidi’s resignation has been accepted by the prime minister, local newspaper Al-Anbaa said, citing sources. Rashidi’s departure would not imply any change in the oil policy of Kuwait, which is decided by the country’s Supreme Petroleum Council. Rashidi was not immediately available to comment and there was no official confirmation of his resignation. Al-Anbaa didn’t say when Rashidi presented his resignation to prime minister Jaber Mubarak Al-Sabah.
Fuel tax disparity could lead to Rs 700-cr revenue loss to Punjab: Dealers
Petroleum dealers of Punjab on Monday urged Finance Minister Manpreet Singh Badal to bring uniformity in taxation on fuel, saying that high tax rates in the state was leading to rampant smuggling of petrol and diesel which would cause a revenue loss of Rs 700 crore to the state exchequer. A delegation of the Punjab Petroleum Dealers Association met Badal here and apprised him of problems being faced by fuel pump owners because of prevailing high tax rates in Punjab in comparison to neighboring states. Association member Ashwinder Singh Mongia said Punjab levies 17.28 on diesel and 36.85 on petrol which was more than what neighboring states Himachal Pradesh, Haryana, Jammu and Kashmir and UT Chandigarh levy on petroleum items. Citing an example, he said that the difference between retail petrol price in Punjab and Chandigarh was Rs 9.53 per litre and similarly diesel is costlier by Rs 3.85 per litre in Punjab than Chandigarh. “Because of a big difference between the retail price of fuel, rampant smuggling of fuel is taking from Chandigarh to several parts of Punjab. Besides, it has led to a decline in the sale of petroleum products in the state as well. If it goes unabated, then the state will face a revenue loss of about Rs 700 crore in a current fiscal year,” said Mongia. “Punjab has lost 175 crores of revenue collections in 2017-18 whereas other states have grown by 9 to 20 percent during the same period. This is attributed to the shifting of business, loss of sale and rampant smuggling. Other states are growing at the expanse of Punjab,” he said. He further said other states are gaining revenue at the cost of Punjab and the petrol pumps in the state are bleeding. “About 1,600 petrol pumps situated in border areas and the highways shall soon shut down if immediate steps are not taken,” Mongia said.
Demand for diesel, cooking gas shrinks in November
The demand for diesel fell 5 per cent and that for cooking gas shrank 8 per cent, contracting India’s total oil demand in November. A combination of higher prices, drop in vehicle sales and decreasing use of polluting industrial fuels is said to have contracted oil demand by 0.87 per cent. Demand for diesel, cooking gas shrinks in November The consumption of cooking gas, or liquefied petroleum gas (LPG), fell in November after rising for 62 months in a row mainly due to higher prices, an executive at a state oil company said. The price of subsidised cooking gas varies just a few rupees in a month but that of nonsubsidised cylinders varies sharply. The rate of the nonsubsidised cylinder, used by about 20 million customers, had risen by ₹63.5 in November to ₹942.5 in Delhi. Price of the non-subsidised cylinder went up by ₹201 between January and November. The rate is now down to ₹809.5. The sale of diesel, the key transportation fuel that makes up 40 per cent of the country’s oil demand, dropped 5 per cent in November from the previous year. Petrol sales, however, were up 8.72 per cent. Petrol accounts for 13 per cent of total oil sales in the country. Domestic fuel prices follow international trends with a lag since state oil companies take the average of the trailing fortnight to determine local prices daily. A dramatic decline in international rates was slowly showing up in local prices, which were still high, deterring higher consumption in November. Petrol pump dealers may have cut their inventory, hoping to replenish stock later when prices fall further, resulting in lower sales by oil companies in November, an executive said. A drop in vehicle sales also contributed to lower diesel sales, the executive said. Passenger vehicle sales fell 3.4 per cent in November while the sale of medium and heavy trucks, the key consumers of diesel, dropped 11 per cent. A cyclone in Tamil Nadu, which disrupted transportation for some time, and severe pollution levels in Delhi also weighed on the demand for diesel. Pollution in the National Capital Region had stalled the entry of trucks into Delhi for a few days. The availability of grid power as well as the level of farm activity also influences diesel demand in the country. The consumption of polluting fuel oil and pet coke fell in November due to official efforts at cutting its use by industries. Increased air traffic, however, pushed up the use of aviation turbine fuel by 5 per cent.
Russia’s Novatek launches airport, staff recruitment tenders for Arctic LNG 2
Russia’s top liquefied natural gas (LNG) producer Novatek has launched tenders for the construction of an airport and recruitment of personnel for its second large-scale project, Arctic LNG 2, the company said on Monday. Novatek plans to start producing sea-borne LNG at the Arctic Gydan Peninsula that juts into the Kara Sea in 2022-2023, with production volumes reaching 19.8 million tonnes per year. It is near the existing Yamal LNG which launched a year, producing 16.5 million tonnes annually. According to tender documentation published on Novatek’s web site and on the trading platform of Gazprombank, the company is searching for a recruiting firm and a firm to build an airport for Arctic LNG 2. Last month it also declared a tender for construction of a housing complex for Arctic LNG 2, which would accommodate 1,500 people at the Utrenneye gas field, the main source of gas for the project. It said there is no drinking water and cellular communication service at the gas field, located well north of the Arctic circle where temperatures fall to almost minus 60 degrees Celsius (minus 76 Fahrenheit). LNG is a strategically important business for Russia which aims to capture a fifth of the global market for the fuel next decade. French energy major Total holds a 10 percent stake in Arctic LNG 2. Russia also offered a role in the project to Saudi Aramco.
ONGC, OIL spend Rs 13,000 cr on 115 discoveries govt took away from them: Pradhan
State-owned Oil and Natural Gas Corp (ONGC) and Oil India Ltd (OIL) spent over Rs 13,000 crore on 115 oil and gas discoveries which were taken away from them by the government for auctioning to private companies, Oil Minister Dharmendra Pradhan said Monday. The present BJP-led NDA government took away so-called idle small and marginal discoveries of ONGC and OIL and auctioned them to private firms under Discovered Small Field (DSF) bid rounds. Under DSF bid round-1, 67 discoveries, mostly of ONGC, were auctioned, while in the second round, bids for which are due next month, another 48 finds are being auctioned, he said in a written reply to a question in the Lok Sabha. “As informed by ONGC, an amount of Rs 12,826 crore has been spent by ONGC on the discoveries/fields identified in the first and second round of Discovered Small Field Policy. An amount of Rs 224.27 crore has been spent by OIL in this regard,” he said. ONGC and OIL are not compensated for the amount they had spent on discoveries of these oil and gas reserves. Unlike state-owned firms, the private players are allowed pricing and marketing freedom to make these discoveries viable. ONGC and OIL have stated that they could not produce from the discoveries as they are uneconomically at current cap prices. “With a view to increasing domestic production of oil and gas, the government in May 2016 launched Discovered Small Field Bid Round-I under which 67 discoveries of ONGC and OIL, which had not been put into production, were offered for auction through international competitive bidding,” Pradhan said. “The policy has now been extended to its second round to include 48 un-monetised discoveries of ONGC and OIL under DSF Bid Round-II.” Under DSF-I, 47 companies participated in the bidding process, he said. ONGC and OIL were also allowed to participate in the auction to get back their own discoveries. “The 67 discoveries under DSF Bid Round-1 are estimated to have in place reserves of 86 million tonne of oil and gas equivalent. In DSF-II, 48 discoveries of ONGC/OIL offered for bid are estimated to have in place reserves of 163.08 million tonne of oil and gas equivalent,” he said. Pradhan said the government has notified the Hydrocarbon Exploration and Licensing Policy (HELP) on March 30, 2016, which is based on revenue sharing model wherein explorers offering a higher share of oil and gas to the government are awarded blocks. The salient feature of HELP include single license for exploration and production of conventional and unconventional hydrocarbons like shale oil, he said adding also included in HELP is an Open Acreage Licensing Policy (OALP) wherein investors can carve out the area of their interest for exploration and production of oil and gas and submit expression of interest throughout the year. HELP has easy to administer revenue sharing model and marketing and pricing freedom for crude oil and natural gas has been guaranteed for operators, he said. Also, it provides for zero royalty rates for deepwater and ultra-deepwater blocks for first seven years, he added.
France asks Engie to take hedging positions over gas price freeze
The French government said on Sunday it had asked utility Engie to take hedging positions to ensure gas prices do not rise until June next year. Unlike power prices, which typically move once a year, gas prices move every month in France and are set using a formula that takes into account production costs. Many French governments have postponed tariff increases to protect consumers and their own approval ratings in the past, but legally the government has no authority to set prices. Earlier this month, the government suspended increases to fuel taxes for at least six months in response to weeks of sometimes violent public protests against President Emmanuel Macron’s policies and said it would keep gas and power prices unchanged this winter. The environment ministry said on Sunday it wanted to ensure Engie’s gas prices do not change until June 2019 but gave no explanation on the new timeframe of the requested price freeze. Officials at the environment ministry were not immediately available to comment. “Engie has taken notice of the government’s request and will realise the necessary operations in order to guarantee the stability of the regulated tariffs of natural gas until the end of June,” Engie said in an emailed statement.
Uzbekistan borrows $2.3 billion for gas-to-liquids plant project
Uzbekistan has agreed loans worth $2.3 billion for its gas-to-liquids (GTL) plant project with 11 banks from Japan, China, South Korea, Russia and the West. The $3.7 billion GTL plant, set to be launched in 2020, will allow the Central Asian nation to use its large natural gas reserve to produce more fuels such as diesel which it currently imports due to declining crude oil output and insufficient refinery capacity. The plant will refine 3.6 billion cubic metres of gas a year and produce 1.5 million tonnes of fuel, its management said at a signing ceremony in Tashkent. Lenders include China Development Bank, Credit Suisse, Japan’s MUFG, Mizuho, and SMBC, Korea’s Eximbank, KSure, and Woori Bank, Russia’s Exiar, Gazprombank, and Roseximbank.
Niti Aayog pushes for methanol as cooking fuel
Premier think tank Niti Aayog has proposed a move to transform the way food is prepared in India, reducing the massive import bill and worsening pollution. The Aayog has prepared a comprehensive plan advocating adoption of methanol as the preferred cooking fuel in households as well as commercially. It’s a cleaner fuel and will reduce dependence on imported gas too, said people aware of the matter. A plant each would be set up in Bengaluru and Assam for manufacturing methanol cooking stoves based on a technology sourced from Sweden. Larger stoves for commercial use will be imported till technology is developed locally. Methanol is being produced by the Gujarat Narmada Valley Fertilizers & Chemicals, Rashtriya Chemicals & Fertilizers and Assam Petrochemicals. Methanol cooking fuel is being made available in canisters of 1.2 kg, to be priced at .`32. Around 18 canisters would be equivalent to a conventional domestic LPG cylinder. A senior government official told ET work is on full swing to introduce methanol-run cooking stoves. “After Assam, we are eyeing Uttar Pradesh and then Maharashtra to provide such stoves in households. Simultaneously, we have tied up with some hotels in Bengaluru to use methanol stoves,” said the official, requesting not to be identified. “Next in line would be big temples, gurdwaras and ashrams where cooking is done on a massive scale daily.” There was a pilot launch of methanol stoves in Assam in October. According to the official, the Bengaluru plant will be set up by a private player while the one in Assam may be government-owned. The Aayog has been aggressively pushing for adoption of methanol as cooking as well as transportation fuel. It estimates that even partial use of methanol could help reduce India’s import bill $100 billion and pollution 40%. In terms of heat value, a 14-kg LPG cylinder is equivalent to about 20 kg of methanol. But estimates show methanol is 30% cheaper and saving on an equivalent quantity of LPG is expected to be Rs 350. In contrast to the present cooking fuel, which is used in liquefied gas form, the methanol fuel will come in vapour form. Unlike LPG, which can explode if it combusts, the methanol canister will burn without explosion and will be safer. India’s LPG consumption stands at nearly 2 million tonnes per month and has been growing consistently in the past 56 months on the back of the government’s push for increasing access to LPG through the Pradhan Mantri Ujjwala Yojana. More than 70% of India’s demand is met through imports.