RIL, other CBM producers get pricing, marketing freedom
Reliance Industries and other producers of coal bed methane have been granted pricing and marketing independence as well as permission to sell fuel to affiliates after the formal policy notification. Through the April 13 notification, the oil ministry said a coal bed methane (CBM) producer has to call for open bids for sale of coal gas and seek price quotes to discover the market price. The producer will have to issue advertisement in national dailies and run a competitive bidding to arrive at the arms-length sale price, it said. The process prescribed is the same as the one Reliance Industries had run in 2012 to discover a price for CBM gas it is to produce in Madhya Pradesh. It had sought bids for 3.5 million standard cubic metres per day of coal gas from its Sohagpur CBM block in Madhya Pradesh at a benchmarked rate at 12.67 per cent of JCC, or Japan Customs-Cleared Crude, plus USD 0.26 per million British thermal unit. The formula was the same at which Petronet LNG, a joint venture of public sector oil companies, whose chairman is the oil secretary, used to buy long-term liquefied natural gas (LNG) from Qatar. At USD 100 per barrel oil price prevalent that year, CBM from RILs Madhya Pradesh block was to cost USD 12.93 per mmBtu. At USD 55 a barrel rate currently, it would cost USD 7.2. That formula was, however, rejected by the ministry even though 59 valid bids seeking about 70 mmscmd of gas were received in the open tender. “In the event of market-discovered price being less than the price notified by the Petroleum Planning Analysis Cell (PPAC) under the New Domestic Natural Gas Pricing Guidelines, 2014, the royalty and production level payment (PLP) shall be paid on the basis of the latter,” the CBM pricing policy notified last week said. The PPAC notified price of gas for April 1 to September 30 at USD 2.48 per mmBtu and the same for difficult areas is USD 5.56 per mmBtu, lower than the rate in RIL formula. “Sale of CBM to any affiliate of the contractor is permitted, in the event the contractor cannot identify any buyer following the procedure (of open bidding),” the policy said, adding that the reasons for sale to affiliates will have to be notified to the Directorate General of Hydrocarbons (DGH). The policy is expected to incentivise the CBM operation in the country to boost gas production. Of the 33 CBM-bearing blocks awarded so far in four auction rounds and on a nomination basis, gas is being produced from only four. The four CBM blocks in production have a combined output of 1.17 million standard cubic metres per day. As many as 18 blocks have either been relinquished or are in the process as operators found that it did not make economic sense to produce gas at the prevailing rates. According to the DGH, India has the fifth largest proven coal reserves in the world and holds significant prospects for exploration and exploitation of CBM. The estimated CBM resources in the country are about 92 trillion cubic feet. The 33 CBM blocks awarded so far hold a total of 62.4 tcf of the estimated resources, of which so far, 9.9 tcf has been established as Gas in Place (GIP). The pricing freedom will help quickly ramp up CBM gas production to targeted 5.77 mmscmd within a year, officials said. Wayne Gallman Jersey
Reliance Industries to start coal-bed gas sales in May as prices freed
Billionaire Mukesh Ambani-owned Reliance Industries Ltd will start selling coal-bed methane from its central India block next month after the government allowed producers freedom to set prices, people with knowledge of the matter said. The company will begin with daily sales volumes of 400,000 cubic meters of gas from coal seams in Sohagpur block in Madhya Pradesh state and gradually increase the volumes, said the people, who asked not to be identified citing company rules. Reliance has sought bids from potential buyers to be submitted by April 24, they said. With this, Reliance becomes the third supplier of gas produced from coal seams after Great Eastern Energy Corp. and Essar Oil Ltd India’s federal government last month gave marketing and pricing freedom to producers of coal-bed methane to sell the fuel within the country as it seeks to attract investments to boost production. The country seeks to increase the share of natural gas in its energy mix to 15 percent by 2020 from 6.5 percent now. Joe Montana Authentic Jersey
Cabinet approves Policy to provide Purchase Preference (linked with Local Content (PP-LC) in all Public Sector Undertakings under Ministry of Petroleum & Natural Gas
The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has given its approval for Policy to provide Purchase Preference (linked with Local Content (PP-LC) in all Public Sector Undertakings under Ministry of Petroleum & Natural Gas. The Policy will be applicable for five years. A steering committee will be constituted to oversee implementation of the Policy and carry out annual review and recommend continuation of the policy from year to year basis. Under the Policy, the targets of Local Content (LC) will be stipulated for certain oil and gas business activities. The manufacturers/ service providers who meet the local content targets and whose quoted price is within 10% of the lowest valid price bid would be eligible for purchase preference for a stipulated portion of the purchase order on matching such price. The Policy is expected to encourage suppliers and service providers to progressively adopt ‘Make in India’ practices and add value to their goods and services within the country. The Policy will apply to all the Public Sector Enterprises and their wholly owned subsidiaries, Joint Ventures that have 51% or more equity by one or more Public Sector Enterprises, attached and subordinate offices of Ministry of Petroleum and Natural Gas. Background The ‘Make in India’ initiative was launched by Prime Minister in September, 2014 as part of a wider set of nation-building initiatives devised to transform India into a global design and manufacturing hub. In tune with this campaign, the Government has decided to incentivize the growth in local content in goods and services while implementing oil and gas projects in India through a policy for providing Purchase Preference to the manufacturers/ service providers who meet the local content targets in oil and gas business Anze Kopitar Authentic Jersey
Mega merger: A state oil conglomerate in the works to compete with global biggies
The government plans to merge state oil companies to create an integrated oil major that could top $100 billion in market value and compete with global oil biggies. The Budget 2017 proposed such a merger though the government had been planning it for long. After the Cabinet Secretariat suggested the idea to the oil ministry last year, it begun the process of evaluating the prospects of creating the conglomerate. State-owned Oil and Natural Gas Corporation (ONGC), the top oil producer and one of the largest companies in the country, leads the pack of 13 state oil companies that are being considered for the merger. Other companies include Indian Oil Corporation, the nation’s largest refiner and fuel retailer, Bharat Petroleum CorporationBSE 0.41 %, Hindustan Petroleum, GAIL, Mangalore Refinery and Petrochemicals (MRPL), Chennai Petroleum and Numaligarh Refinery and Oil India. The scale The top eight listed state oil firms have a market value of $108 billion, which dwarfs the $71 billion of Reliance Industries, $70 billion of Russia’s Rosneft and is closer to BP’s $115 billion. The merger would give these companies capacity to bear higher risks, benefit economies of scale and take higher investment decisions, giving much stronger bargaining power with suppliers, and greater financial clout to secure oil resources. It would also create more value for their shareholders and bring much-needed transparency. These conglomerates, post-merger, would be able to compete with domestic private sector oil and gas companies as well as with international players. Leaner and meaner The merged entity would have opportunities to save on costs and improve operational efficiency. For example, there would be less need for multiple retail outlets in a single area. Transport costs could be reduced by retailers sourcing from the nearest refinery, rather than the ones they own, as is the common practice now. It would also be able to share expertise for exploration and acquisition. The challenges Since the state-run oil companies are large, diverse, vertically integrated into operations and have overseas presence as well, the merger may face significant execution challenges. The timeline The Oil Ministry asked state-run oil companies to produce a road map for merger. As part of the plan, ONGC might purchase the government’s stake in either Hindustan Petroleum Corp., worth $4 billion, or Bharat Petroleum Corp., worth $7.7 billion. The planning and setting up of a merged entity will take two-three years and the results will begin to appear a few years later. Tyler Glasnow Authentic Jersey
Oil PSUs to give preference to domestic cos in procurement
In a big boost to ‘Make-in-India’, the Union Cabinet today approved a policy to provide purchase preference to domestic manufacturers in procurements done by state-owned oil and gas companies. Under the policy, the targets of Local Content (LC) will be stipulated for certain oil and gas business activities. “The manufacturers/ service providers who meet the local content targets and whose quoted price is within 10 per cent of the lowest valid price bid would be eligible for purchase preference for a stipulated portion of the purchase order on matching such price,” an official statement said here. The policy, approved by the Cabinet headed by Prime Minister Narendra Modi, will be applicable for five years. A steering committee will be constituted to oversee implementation of the policy and carry out annual review and recommend continuation of the policy from year to year basis. The new policy is expected to encourage suppliers and service providers to progressively adopt ‘Make in India’ practices and add value to their goods and services within the country. “The policy will apply to all the public sector enterprises and their wholly owned subsidiaries, joint ventures that have 51 per cent or more equity by one or more public sector enterprises, attached and subordinate offices of Ministry of Petroleum and Natural Gas,” the statement said. Modi had in September 2014 launched the ‘Make in India’ initiative to make the country a global design and manufacturing hub. In tune with this campaign, the government has decided to incentivise the growth in local content in goods and services while implementing oil and gas projects in India through a policy for providing purchase preference to the manufacturers/ service providers who meet the local content targets in oil and gas business activities. Jadeveon Clowney Authentic Jersey
IOC to invest 2.7kcr in Gujarat refinery
The Gujarat Refinery (GR) will set up four more plants in Koyali to meet the BS VI fuel supply standards in the coming years. GR executive director Sudhir Kumar, who recently assumed the post, said that GR will meet the deadline of supplying BS VI fuel much in advance. “The government has set a deadline of April 2020 for BS VI fuel but GR will start supplying it by December 2019. We have already begun process for it,” Kumar said. “We will be investing Rs 2,771 crore for this project. Meeting BS VI standards will be tougher as we will have to be very accurate about the quality of the fuel,” Kumar added. The refinery has already begun supply of BS IV fuel from January this year and the process to increase the production capacity is on. GR invested Rs 1,315 crore for BS IV project in two phases. “The government will be going directly from BS IV to BS VI norms and the challenge is to improve the fuel quality,” he said. The BS IV norms require to keep the Sulphur content below 50 ppm and in BS VI norms, the Sulphur content has to be below 10 ppm, thereby lowering the air pollution significantly, GR officials said. The refinery has also begun process to acquire another 65 acres of land near its current complex in Koyali as a part of its expansion plans. The refinery is eyeing to increase its capacity from the current 13.99 million metric tonnes per annum (MMTA) to 18 MMTA by 2021. GR officials also said that the goods and services tax (GST) will hit the refinery as five of its products are outside the ambit of that tax. “The government is trying to formula to ensure that the impact of GST on our products is less,” a GR official added. Sam Vigneault Authentic Jersey
Petrol, diesel prices to change daily from May 1
Come May 1, petrol and diesel prices will change every day in sync with international rates, much like what happens in most advanced markets. State-owned fuel retailers Indian Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL), which own over 95 per cent of nearly 58,000 petrol pumps in the country, will launch a pilot for daily price revision in five select cities from May 1 and gradually extend it to all over the country. “Ultimately, we will be driving towards market linked rates on a daily basis at all pumps across the country,” IOC Chairman B Ashok told PTI. A pilot for daily revision of petrol and diesel price will be first implemented in Puducherry, Vizag in Andhra Pradesh, Udaipur in Rajasthan, Jamshedpur in Jharkhand and Chandigarh, he said. State fuel retailers currently revise rates on 1st and 16th of every month based on average international price of the fuel in the preceding fortnight and currency exchange rate. Instead of using fortnightly average, pump rates will reflect daily movement in international oil prices and rupee— US dollar fluctuations. “It is technically possible to change rates daily but we have to first do a pilot. Once pilot is done and its implications studied, we will extend it to other parts of the country,” he said. While Ashok said the pilot is to be “launched within one month” and did not give a specific date, industry sources said the pilot is planned to be launched on May 1. Daily price change will remove the big leaps in rates that need to be effected at the end of the fortnight and consumer will be more aligned to market dynamics. While petrol price was freed from government control in June 2010, diesel rates were deregulated in October 2014. Technically, oil companies have freedom to revise rates but often they have been guided by political considerations. Rates differ by only a few paise between pumps of the three state fuel retailers. Unbranded petrol at IOC pumps in Delhi costs Rs. 66.29 per litre, while the same at BPCL pumps in the city is priced at Rs. 66.37 a litre. HPCL pumps sell for Rs. 66.48 per litre. Unbranded diesel at IOC pumps in Delhi costs Rs. 55.61, Rs. 55.66 at BPCL outlets and Rs. 55.69 a litre at HPCL pumps. With daily changes, which are unlikely to be more than few paise per litre, the political pressures for not revising rates particularly when they are to be hiked will go, sources said. Petrol price was last revised downward by Rs. 3.77 a litre on April and diesel rates were cut by Rs. 2.91. This was the first revision in two—and—half—months as oil firms did not change prices during assembly elections in five states, including Uttar Pradesh and Punjab. Ashok said prices of petrol and diesel in a particular market (city or town) will be the same. “By and large, in a particular market it should be same. Though, there might be marginal difference from pump to pump,” he said. Jeff Heuerman Womens Jersey
IndianOil Chairman bags SCOPE Special Commendation Award
Mr. B Ashok, Chairman, IndianOil, has been conferred the SCOPE Special Commendation Award for Excellence and Outstanding Contribution to Public Sector Management – Individual Leadership Category 1 (Maharatna & Navratna PSEs) 2014-15. The award was presented by Hon’ble President of India, Shri Pranab Mukherjee, at the Public Sector Day event hosted by SCOPE at Vigyan Bhavan in New Delhi today. Others present on the occasion were Mr. Anant Geete, Union Minister of Heavy Industries and Public Enterprises; Mr. Babul Supriyo, Union Minister of State for Heavy Industries and Public Enterprises; Mr. UD Choubey, Director General of Standing Conference of Public Enterprises (SCOPE); and other dignitaries. The SCOPE awards have been instituted to recognise the contribution of Public Enterprises and outstanding PSU professionals for their seminal work and leadership qualities. With over three-and-a-half decades of experience in the oil & gas industry, Mr. Ashok, has been heading Indian Oil Corporation since July 2014. Under his leadership, IndianOil has shaped up as a more responsive, nimble and forward-looking business enterprise – by leveraging technology across business units, countrywide infrastructure and retailing network which caters to millions of customers each day. Mr. Ashok is concurrently the Chairman of refining subsidiary Chennai Petroleum Corporation Ltd. and IOT Infrastructure & Energy Services Ltd., IndianOil’s joint venture with Oiltanking GmbH of Germany. He is also the Vice-President of the Paris-based World LPG Association, the authoritative voice of the global LPG industry representing the full LPG value chain. Brice Butler Authentic Jersey
Motor-fuels outlets divided over starting agitation to secure higher sales margin from oil companies
Motor-fuels outlets in India are divided over starting an agitation to secure higher sales margins from oil companies, with one retailing group deciding not to back next month’s protests its national rival had planned to mount pressure on the government. The All India Petroleum Dealers Association (AIPDA) said Tuesday that it would not support the agitation proposed by the Consortium of Indian Petroleum Dealers (CIPD), which had threatened Monday to stop petrol and diesel purchases on May 10, and shut outlets every Sunday if sales margins were not raised. The weekly Sunday off would start May 14, and from May 15, dealers would operate from 9 am to 6 pm to cut costs, the consortium had said. Ravi Shinde of CIPD said the agitation would continue as planned even if the rival association did not support its move. AIPDA would wait until May 15 for a decision from the state oil companies before deciding on the next course of action, Ajay Bansal, the chief of AIPDA, said on Tuesday. He said that AIPDA was in touch with Oil Minister Dharmendra Pradhan on the dealers’ demand. There wouldn’t be much impact on the availability of fuel as the rival association didn’t have many members, Bansal claimed. AIPDA claims to have 43,000 members, while CIPD claims to have 28,000 outlets attached to it. Both claims can’t be correct as India has only about 53,000 dealers for motor fuels. AIPDA and CIPD are the two national bodies that have expanded in the past 3-4 years. Both national bodies, in turn, have affiliated state associations. In many states, more than one association is active, and these in turn are affiliated at times to competing national bodies. Mark Ingram Authentic Jersey
We are planning investments worth over $1 billion going forward: Sudhir Mathur, Acting CEO, Cairn India
Oil and gas producer Cairn India has been in news for having received the government’s approval for an extension of its Production Sharing Contract for its flagship Barmer block in Rajasthan. In an exclusive interview with Bilal Abdi, Acting Chief Executive Officer (CEO) Sudhir Mathur shares a perspective on what the decision means Edited excerpts.. With the government extending the Production Sharing Contract, what kind of investment fillip is expected in the Rajasthan and Cambay blocks? We are yet to give our guidance as we have to get the investment plan cleared from the board. At a very macro level, we want to double production in the next two to three years, which requires very serious investment upwards of $1 billion initially. We would be very happy to disclose the exact plans once we get the approval from the board of directors. The idea is to maximise effort on the exploration front. We have just started exploration in Palar-Pennar basin and we will do some more exploration in Rajasthan too. In terms of projects, we will focus more on the gas project in Rajasthan, Enhanced Oil Recovery in Aishwariya and Bhagyam fields as well as extraction of tight oil from Aishwariya Barmer Hill. Cairn India managed to cut down expenses by 18 per cent in the nine months ended December, according to its financial statements. What explains the dip? Trying times create opportunity to reset the cost base. The management team worked very hard. We used a three-pronged strategy on the cost side — optimise the use of assets, deploying cutting edge technology as well as re-negotiation with the suppliers. We have been working closely with vendors and good technology suppliers which makes a lot of difference in real time operations. We now have access to resources and data which we did not have before. All of this increases efficiency. Because of these factors, higher is the production, lesser is the cost per barrel. You have just begun exploration in the Palar-Pennar block. What is the estimate of reserves it holds? The initial 3D data seems very promising. There is no estimate of reserves as yet. It is a frontier basin. So, the risk is more but we have always believed in India’s geology and after the 3D data was analyzed we decided to put the drilling machine at work. The oil ministry is planning to incentivize EOR and announce a new policy around Performance Enhancement Contracts for extraction of oil from mature and difficult fields. How do you view these developments? We have always been delighted to have discussions with the oil ministry. Its policies for both the downstream and upstream segments have been very progressive including LPG reforms and market pricing. All of these policies reflect a deep understanding of the industry — that technology costs money and there is a need to incentivize tertiary recovery projects. If there is oil in the ground then there is no need to put exploration money at risk and if there is capital available then why not take it to the last mile? It is the government’s way of saying we are keeping pace with technology advancements and willing to look at existing contracts, which is the right thing. Oil and gas contracts are written for 20-30 years and technology changes are very difficult to embed in policies and contracts. I think it is one of the most progressive and transformational things the government can do — embedding technology changes into an existing contract to bring about efficiency across the sector. There were reports about gas sale disruption in Raageshwari Deep Gas Field due to disagreement between the transporter and buyer? Has the issue been resolved? There are always issues which spring up during the course of work. The issue has been resolved and we have started supplying to all our customers. Cairn India was looking at collaborating with global companies for service contracts for its different assets. Which assets have been identified for this? What kind of collaboration are you looking at? We are taking to various service providers. The idea is to expedite production. If we were to execute these five projects simultaneously ourselves, it would be quite challenging for the company. Accelerating production is line with the government’s vision to increase production as much and as fast as you can. Victor Antipin Jersey