Cabinet approves policy for extension of oilfields contracts to attract $5.4 billion investments
The Union cabinet chaired by Prime Minister Narendra Modi today approved a new policy that allows extension of Production Sharing Contracts (PSCs) governing exploration blocks awarded in the pre-New Exploration Licensing Policy (NELP) regime before 1999. “During the extension period, the contractors are expected to make an additional investment of more than $5.4 billion,” said an official statement, adding the recoverable reserves from these blocks are estimated to be more than 426 million barrel of oil equivalent. The decision comes as a major positive for Vedanta-owned Cairn India Ltd that operates India’s largest onland block at Barmer in Rajasthan. The 25-year lease period for the block — RJ-ON-90/1—expires in May 2020. The contract provides for a mutually-agreed 10-year extension if gas is being produced commercially. Commercial production of gas from the field commenced in 2013. Cairn India holds a 70 per cent stake in the Rajasthan block while ONGC owns 30 per cent. The PSC extension of the block has the potential to add another 250 million barrels of oil equivalent into its reserves. The company had earlier approached the Delhi High Court seeking its intervention for an early decision on the extension of the PSC. The court has asked the government to come up with a decision soon. Based on the new policy, the government’s share of Profit Petroleum – proceeds from the sale of hydrocarbon that the company shares with government — during the extended period of contract would be 10 per cent higher for these fields, thus bringing additional revenues to government. In addition, the policy brings out detailed guidelines regarding grant of extension, criteria for evaluation of request, time-frame for consideration of request and the duration of extension. “This policy will enable the contractors to extract not only the remaining reserves but also plan to extract additional reserves by implementing new technologies. In certain fields, additional recovery of hydrocarbons can be obtained through Enhanced Oil Recovery or Improved Oil Recovery (EOR/IOR) Projects and as such the production would extend beyond the current duration of PSC,” the official statement read. Oil and gas blocks allotted in the pre-NELP regime produced around 55 million barrel of oil and 965 million standard cubic meter (mmscm) of natural gas in the current financial year between April 2016 and February 2017. Mark Messier Jersey
Petroleum Ministry seeks integration road map from state-run oil companies
The oil ministry has directed state oil firms to prepare a roadmap for creating integrated firms. Oil secretary Kapil Dev Tripathi held a short meeting with the chairmen of state oil firms last week and asked them to submit their respective plans for integration within weeks, according to the people present in the meeting. Top executives of Oil and Natural Gas Corporation (ONGC), Oil India, Indian Oil Corporation (IOC), Bharat Petroleum (BPCL), Hindustan Petroleum (HPCL) and GAIL attended. In their plan, companies have to indicate who they will prefer to combine with and what kind of synergy that will bring, a person privy to the meeting said. The ministry has undertaken this exercise as a follow up to finance minister Arun Jaitley’s budget speech where he announced the government’s intent of restructuring state oil firms to create an integrated oil major. Last month, media reports, citing unnamed top officials, said the government planned to sell its entire equity stake in HPCL to ONGC, helping build a company that will have a presence across the industry value chain. The reports also said all other state oil firms will remain untouched. The idea of merging state oil firms is more than a decade old and was resurrected in the middle of last year when the Cabinet Secretariat referred the matter to the oil ministry. But it made little progress until the budget announcement, which has prompted consultation with oil companies. The idea of creating an integrated oil major germinated outside the oil ministry, and so it is entirely possible that the key decisions regarding this will be made outside, officials familiar with the matter said. Therefore, its not necessary that the plans state oil companies present will actually get adhered to, and the government may just direct them according to what it thinks is the best way to create an integrated player, the officials said. Jalin Marshall Jersey
State-owned oil firms surpass combined annual capex targets
State-owned firms have beat their capex targets which had been set for the running financial year. These 11 state-owned firms expended over the target of Rs 876.03 billion. As shown in the data furnished by the Petroleum Planning and Analysis Cell, during the period of April-February, these firms disbursed Rs 917.81 billion as their capital expenditures, which is excessive on account of 2014-2015. The companies like ONGC, Oil India Ltd., Bharat Petroleum Corporation Ltd., Indian Oil, Videsh Ltd., Numaligarh Refinery Ltd., Balmer Lawrie Co. Ltd., and Oil India, have surpassed their capex targets. The GoI has taken a bold step in supporting PSU oil firms to upgrade the investments, while it is being noticed that there is a slowdown in private sector investment, and thus the powerful demand and certain policy plans have helped to raise the investment opportunities in the Oil and Gas sector. Michael Roberts Authentic Jersey
Oil companies to face higher tax burden under GST: Parliamentary panel
Upstream oil and gas producers like Oil and Natural Gas Corp. and Oil India Ltd will face “substantial additional tax” liability under the proposed goods and service tax (GST) regime due to the clipping of existing tax breaks, a higher tax rate on services and the temporary exclusion of five hydrocarbons from the new indirect tax system, a parliamentary panel has reported. The new tax regime, expected to kick in from 1 July, seeks to streamline the tax system by pruning exemptions and establishing a seamless market across the country. However, crude oil, petrol, diesel, jet fuel and natural gas have been temporarily excluded from it as part of an understanding between the Union and state governments meant to prevent any disruption in states’ revenue from the oil sector in the initial years of the tax reform. The GST Council is expected to take a call after a couple of years on the inclusion of petroleum products under GST. The parliamentary standing committee on petroleum and natural gas chaired by Bharatiya Janata Party MP from Karnataka, Pralhad Joshi, which tabled its report in both the Houses on Friday, said if the import and excise duty exemptions on select goods for oil and gas production are not continued under the GST regime, it will lead to “substantial additional tax implication on upstream companies”. Besides, the five hydrocarbons excluded from GST will continue to be subjected to existing value added taxes (VAT) and cesses. This would prevent oil companies from taking credit for the GST paid on the equipment and services purchased for meeting the tax liability on their output. Use of credit between the two systems of tax is not allowed. The panel pointed out that offshore works contracts, which oil and gas producers get into and which at present do not attract state VAT, will come under GST. Also, service tax levied by the Centre, which currently covers only 40% of the value of such contracts, will be replaced by GST that will apply to its entire value. Also, the service tax rate, which at present is 15%, will make way for an expected 18% GST, imposing additional tax burden on upstream companies, the panel noted. Services are expected to be taxed at three slabs—5%, 12% and 18%—with most of the services taxed at 18%. However, the GST council is yet to arrive at a final decision on the tax rates to be applicable on various services. Tax experts said the exclusion of five hydrocarbons from GST will have an impact on the economy. “It would be very essential that necessary changes are incorporated in the GST legislation because the hydrocarbon segments missed out of GST are critical components in various downstream industries and are likely to face cost escalation leading to an inflationary effect on the economy,” said Prashant Deshpande, partner, Deloitte Haskins & Sells LLP. In the case of goods purchased from one state to be sold in another, the panel noted that a 2% central sales tax levied now, the proceeds of which go to the origin state, will be replaced by a much higher integrated GST (IGST), causing additional stranding of taxes. Refiners using crude oil on which they pay excise duty, VAT and cesses, will have to keep separate books of accounts for petrol, diesel and jet fuel that will continue to attract these taxes and for LPG, kerosene and other petrochemicals that will attract GST. This will “increase compliance cost”, the report said. The panel said the GST will lead to increase in operational cost of the petroleum products and can have a cascading effect across the supply chain. Therefore, some way of giving credit to the taxes paid should be found. It recommended the oil ministry to take up the matter of providing full tax credit with the ministry of finance for a mutually acceptable solution. Jaccob Slavin Womens Jersey
Government to sign oil & gas field contracts on Monday
The government will on Monday sign contracts for the 31 small discovered oil and gas fields it had auctioned in the first bid round in more than six years. State-owned oil firms IOC, BPCL and HPCL had cornered a third of the fields whose award was confirmed by the Cabinet last month. “Contracts with successful bidders will be signed on March 27,” a senior official said. Touted as an auction round that would replicate the shale gas revolution of the US, half of the fields went to new and lesser known entrants like engineering company Megha Engineering & Infrastructure, KEI-RSOS Petroleum, Enquest Drilling and Nippon Power. The Cabinet Committee on Economic Affairs had approved award of 31 fields out of 34 that received bids in the auction that closed on November 21. These fields, which hold in place reserves of 62 million tonnes of oil and oil equivalent gas, can cumulatively produce a peak of around 15,000 barrels of oil per day and 2 million standard cubic meters per day of gas, the Directorate General of Hydrocarbons (DGH) said in a statement last month. The peak oil and gas output envisaged is about 2 per cent of India’s current oil and gas production. “It has been estimated that the indicative gross revenue over economic life would be approximately Rs 46,400 crore of which royalty collection and government’s revenue share is expected to be around Rs 5,000 crore and Rs 9,300 crore, respectively,” it had said. Development of these small oil and gas fields is crucial in achieving Prime Minister Narendra Modi’s target of reducing oil imports by 10 per cent by 2022. Akhil Teja Natural Resources Ltd, which was incorporated just three days prior to close of the bidding, had bid for the most number of 17 fields. But it drew a blank with the CCEA not even accepting its solo bid for three on land blocks, according to analysis of list of awardees approved by CCEA. Bharat PetroResources Ltd, a unit of Bharat Petroleum Corp Ltd (BPCL), won the most number of 5 fields. It had put in a bid for eight. Indian Oil Corp (IOC) bagged three fields, the same number as new entrant PFH Oil and Gas Pvt Ltd got. Hindustan Petroleum Corp Ltd’s upstream arm, Prize Petroleum won two fields on its own and one in consortium with Hindustan Oil Exploration Co (HOEC) and Oil India Ltd. HOEC, which had in all bid for eight fields, won another field in consortium with new comer Adbhoot Estates Pvt Ltd. Nippon Power Ltd two out of the eight fields it had bid for. OilMax Energy Pvt Ltd too won two fields. Sun Petrochemicals Pvt Ltd, a privately owned company formed by the directors of drugmaker Sun Pharmaceuticals Industries Ltd, won one block. In all 46 fields, which were taken away from state-owned Oil and Natural Gas Corp (ONGC) and Oil India Ltd (OIL), were put on bidding. 34 of them received bids. Of these, 14 were single bids. All the 26 onland areas had received bids, although 9 had only single bidders, including three from Bengaluru-based Akhil Teja Natural Resources Ltd. Of the 20 offshore blocks on offer, only 8 received bids, 5 of which were single company offers. Ryan Schraeder Womens Jersey
ONGC’s bonanza to KVIC: Rs.140 million sales in 2 months
A deal between Khadi and Village Industries Commission (KVIC) and ONGC has brought cheers to Khadi institutions in Gujarat which have seen never-before sales of over Rs.140 million in just two months. ONGC usually distributes bonus and gifts to its employees in the form of cash, recognising their services and rewarding their work. In January 2017, however, ONGC had reached an agreement with KVIC and rewarded its staff in kind. V K Saxena, Chairman, KVIC, said here on Monday that following the deal, ONGC rewarded its employees in kind, at a value higher than the cash value of bonus or gift. Accordingly, ONGC provided Khadi vouchers worth Rs. 10,000 each to its regular employees and Rs. 5,000 each to its non-regular employees. KVIC allowed an additional 35 per cent incentive on these vouchers, thus enhancing the value of ONGC bonus to 135 per cent of its cash value for its staff. These Khadi vouchers can be used by ONGC staff over a period of 2 months. KVIC will get Rs 350 million from ONGC due to this initiative. The total sale of KVIC products will be more than Rs. 500 million, including Rs. 100 million as wages. Saxena said the artisans attached to this special sales drive will be given an additional 5 per cent reward directly in their accounts through DBT. KVIC provided quality Khadi products through 16 special exhibitions within the ONGC premises in Gujarat, so that its employees get the products at their doorsteps. KVIC, though this partnership, is likely to generate 0.650 million extra man days for its Khadi artisans, increasing employment opportunities. Albert Wilson Jersey
Indian gasoil supply weighs
High sulphur gasoil supply appeared from India, helping to offset spot demand from Indonesia for the fuel and keeping differentials for the fuel steady, traders said on Monday. Indonesia’s Wilmar Trading required a spot cargo for April but Indian Oil Corp offered term cargoes of the fuel, they added. Pakistan State Oil bought just one of four gasoil cargoes it was seeking for delivery in April, industry sources said. It bought 55,000 tonnes of 500ppm sulphur gasoil for delivery in April from Swiss Singapore at a premium of $1.88 cents a barrel to the Middle East quotes, they said. Inventory of the fuel is adequate and the company did not need as much volumes as it initially thought, one of the industry sources said. PSO is yet to award a 10,000-tonne jet fuel cargo it was seeking for delivery in April but will likely buy the cargo from Renish Petroleum, the source added. Sri Lanka’s Ceylon Petroleum Corp has cancelled a tender seeking 160,000 barrels of jet fuel and 150,000 barrels of gasoil for delivery over April 11 to 12. The reason was not immediately clear. Egyptian Petroleum Minister Tarek El Molla said on Sunday his country had received two cargoes of diesel fuel from Saudi Arabian state-owned oil company Aramco on Friday and Saturday. Saudi Arabia agreed in April last year to provide Egypt with 700,000 tonnes of refined oil products a month for five years, but the cargoes stopped arriving in early October. Dalvin Tomlinson Jersey
Oil tanker workers begin indefinite strike for minimum wages in Assam
Oil tanker workers affiliated to Assam Petroleum Mazdoor Union (APMU) today began an indefinite strike demanding minimum wages and other benefits like provident fund. Oil marketing companies, including IOC, BPCL and HPCL, have termed their demands as “illogical and baseless” as they are employed by transporters and not the PSU firms. “We have started the indefinite strike against IOC, BPCL and HPCL. We are demanding minimum wages, PF, insurance and ESI benefits,” APMU general secretary Ramen Das told here. He said APMU held talks with the three companies in November last year, but did not yield any result. When pointed out that APMU workers are employed by the transporters and not the retailers, Das said: “We went to the transporters and they refused to pay us. IOC and others have not been able to implement the tender conditions with the transporters. The companies must force the transporters.” Reacting to the demands, IOC Executive Director (IndianOil-AOD) Dipankar Ray said the company is always proactive to resolve the issues and has been asking the workers for specific complaints to take action against the erring transporters, but nobody has come to them. “Their demands to us are illogical and baseless as they are not our employees. How can we pay to them? They are hired by the transporters, whom we engage trough a tender process. “The company’s contracts with the transporters take into account the government notified minimum wages to workers. Now if some transporters are not paying the minimum wages to its employees, we can force them to pay provided the workers give us specific complaints,” he added. He informed that IOC follows the government norm of minimum wages of Rs 450.62 per day for drivers and Rs 309 for the helper in each truck. Ray said the striking workers have physically prevented some willing truck drivers, who wanted to come and take supplies from the depots. Talking about the scenario, he said: “Though locations outside Assam are by and large unaffected by this strike, but it will choke other places in North East soon as all the four refineries of the region are in Assam. So we have sought intervention from the government. Around 4,500 tankers for both LPG and petroleum products are registered with IOC in entire North East. BPCL Territory Manager (Retail) Suresh Chandra Jha said loading and offloading at their sites have also been affected today. Greg Van Roten Jersey
RIL’s KG-D6 gas output drops to 9% of target: Pradhan
Reliance Industries’ flagging KG basin D6 block has seen natural gas output slip further, leading the government to disallow USD 2.756 billion in cost, Oil Minister Dharmendra Pradhan said. RIL and its partners BP plc of UK and Canada’s Niko Resources produced less than 16 per cent of the 31,793.28 million standard cubic meters (mmscm) target from KG-DWN-98/3 or KG-D6 block in 2013-14. Output fell to 4,461.91 mmscm or 13.75 per cent of the targeted 32,458.72 mmscm in 2014-15 and to 3,939.97 mmscm or 12.24 per cent of the target in the following year, he said in a written reply to a question in the Lok Sabha. In the current fiscal 2016-17, RIL and its partner have produced 2,641.67 mmscm of gas till February as against target of 29,316.69 mmscm, he said. Pradhan also said the Gujarat government firm GSPC too has produced much less than target in the three years but no penalty has been levied on it. Gujarat State Petroleum Corp (GPSC) produced 23.44 per cent of the targeted 470 mmscm of gas from its KG-OWN-2001/3 block in 2014-15 which when down to 11.09 per cent of the targeted 1210 mmscmd in the following year. In the current fiscal, just 6.29 per cent of the targeted 1,850 mmscm gas has been produced. “The gas production from D1 and D3 fields in this (KG-D6) block (of RIL) is much less than the production rates approved in addendum to Initial Development Plan (AIDP),” he said. He added that RIL set up facilities to produce gas of 80 million standard cubic meters per day but “failed to adhere to approved field development plan in terms of drilling and putting on stream the required number of wells and consequent achievements of projected gas production profile in AIDP”. This, he said, has led to under-utilisation of facilities and surplus inventories. “Government of India issued notice for proportionate disallowance of cost of production facilities based on cumulative shortfall in gas production vis-a-vis AIDP targets,” Pradhan said. Consequently, he said, the government has disallowed USD 2.756 billion from the cumulative development cost incurred by RIL and its partner as on March 31, 2015. “This disallowance was computed based on the cumulative shortfall in production of gas vis-a-vis production estimates under the approved AIDP till March 31, 2015. “The additional profit petroleum payable to the government by the contractor (RIL) for the period up to FY 2014-15 is approximately USD 246.9 million,” he said. RIL and its partners have disputed the cost disallowance and have initiated arbitration. Adam Butler Authentic Jersey
ONGC may shift proposed basin from Tripura to Assam
State-owned ONGC may shift its proposed new basin to Cachar in Assam from Agartala, where initial work had already begun last year. The ONGC board is likely to take a decision on the upcoming second basin of North East in the next six months. “Cachar has lot of accrues, but the area is less explored. So we are looking at the possibility of setting up the basin in Cachar and may shift it from Agartala,” ONGC Director (Onshore) Ved Prakash Mahawar told PTI here. He, however, clarified that no final decision has been taken yet on shifting the proposed basin to Assam. Asked by when a decision is expected, Mahawar said: “The Board may decide on this in the next six months.” In December last year, the Director had said that ONGC was working on to launch a new basin in Agartala by the end of this year to focus more on exploration of oil and gas in North East. He had informed that construction work was going on as there was no proper building to start functioning of a ‘basin’ in Agartala. “We are discussing about setting up a basin in Agartala. Director of Exploration and I visited Agartala around five months ago. We checked the facilities. Currently work for creation of workstation is going on,” Mahawar had said then. ONGC’s North East operations is divided into two areas — Assam Shelf from Jorhat to Duliajan and Assam Fold Belt from Silchar to Agartala. Silchar is the headquarters of Cachar district of Barak valley in Assam. Assam Fold Belt has mainly gas, while there are both oil and gas in Assam Shelf. While exploration is being done only by Assam-Arakan basin based at Jorhat, the production is divided by three Assets — Assam Asset at Nazira, Jorhat Asset at Jorhat and Tripura Asset at Agartala. Basin’s job is to discover or explore oil and gas, but it does not produce anything. On the other hand, an Asset exploits or produces and sends the products to refineries. Last fiscal, ONGC’s production in Assam was 0.9 million tonnes and this year it is targetted to reach the figure of 1 million tonnes. Devin McCourty Authentic Jersey