BP sees new output from KG-D6 block after 2020
UK-based oil and gas major BP Plc today said new natural gas production from the flagging eastern offshore KG-D6 block will start after 2020, at least three years later than previously planned schedule. BP in its fourth quarter earning presentation said Satellite, R-Series and D-55 discoveries will start production “beyond 2020.” The company holds 30 per cent interest in Reliance Industries-operated KG-DWN-98/3 or KG-D6 block in the Bay of Bengal. The discoveries, it said, are currently in “design” stage, implying project engineering work was in progress and construction is yet to begin. Reliance Industries holds 60 per cent interest in the block while the remaining 10 per cent is with Niko Resources of Canada. RIL-BP currently produce gas from Dhirubhai-1 and 3 field and oil and gas from MA field, three of the over one-and-half dozen discoveries made in KG-D6 block. The fields, which began gas production in April 2009, hit a peak output of 69.43 million standard cubic meters per day in March 2010 before water and sand ingress shut down well after well. The block currently produces around 8.7 mmscmd. “By 2020, we anticipate that our current suite of major projects will add 800 million barrels of oil equivalent per day (mboed) of new production net to BP, which includes 500 mboed of new capacity planned to be on-line by end of 2017,” BP said without giving break-up of output from a portfolio that spans across the globe. Work for developing R-Series and satellite discoveries has begun. A field development plan (FDP) approved in August 2013 envisages USD 3.18 billion investment in R-Series or D-34 gas field to produce 13-15 mmscmd of gas for 13 years. RIL-BP recently submitted FDP for two other discoveries D-29 and 30, which formed part of R-Culster. Besides, another FDP of USD 1.529 billion for four satellite gas discoveries D-2, 6, 19 and 22, was approved in 2012. The four fields can produce 10.36 mmscmd. Both of these productions were to start by 2017. The two partners have also submitted a FDP of D-55 or MJ find. Sources said it will take 36-42 months to build and install new facilities on these fields and to drill new wells and hook them up. BP said it had a net impairment reversal in the fourth quarter of USD 442 million, comprising impairment charges of USD 339 million offset by impairment reversals of USD 781 million. “The impairment reversals include USD 234 million relating to assets in India, with the recoverable amount calculated on a fair value basis. In addition USD 319 million of exploration costs were written back relating to India,” it said. BP said the USD 319-million reversal relates to Block KG D6. “In addition, an impairment reversal of USD 234 million was also recorded in relation to this block,” it added. Raymond Felton Womens Jersey
Petroleum: Why two governments ruled against mega merger
In the Budget for 2017-18, Finance Minister Arun Jaitley said the government proposes to create an integrated public sector oil major which would be able to match the performance of international and domestic private sector oil and gas companies. That’s something two previous governments have taken a look at twice in the last 25 years. At the start of the UPA’s term in 2004-05, Mani Shankar Aiyar, the then petroleum minister, approved the setting up of a committee headed by former steel secretary and BHEL chairman, V Krishnamurthy, to take a broad look at the energy sector and to recommend an appropriate structure for India’s state-owned companies engaged in both refining and exploration. The committee had as its members two former petroleum secretaries, G V Ramakrishna and Vijay Kelkar, the former ONGC chairman, B C Bora, the former chief of Bharat Petroleum, U Sundararajan, and the former finance secretary G K Arora. It came to the conclusion that rather than creating a mega entity in the sector, it would be better to strengthen the structure of the state-owned oil companies, as it was then in 2005, through policy measures and improvement in managements. That would work rather than a merger, they said, when given the mandate to examine the core competence of these companies in the petroleum sector and to assess their competitiveness on the global scenario given the kind of changes which were underway. And the recommendation that it wouldn’t make sense to opt for a mega merger was based on cases of restructuring or mergers and acquisitions in the global oil industry. The rationale then for such mergers was to achieve operational synergies and to pare costs in a competitive industry — which would mean cutting on jobs and boosting profitability. But the committee then felt that going by the case studies and data, only 29 per cent of all mergers and acquisition transactions led to higher returns for shareholders in those firms. An interesting finding was that one of the major causes of the failure of mergers was the handling of people working in many of these firms. Then there was the danger of monopolies and cartels being created in the industry. India’s PSU oil companies, the committee said, operated in distinct areas across the hydrocarbon value chain — be it refining or exploration — and in areas of competence, building a case for not rocking the boat. There were other worries to be taken into account. A merger — or the emergence of a monolith would have meant reduction of staff in these firms — which would not have been politically feasible as all the committee members recognised, having worked with the government for decades. It would also have inhibited competition for sure. The presence of any mega entity dominating the energy market has ambiguous implications and it is the considered opinion of the committee that merger of oil PSU’s may not be an advisable opinion at present. The Krishnamurthy committee’s recommendations in many ways mirrored the views of another group constituted by the petroleum ministry towards the fag end of the Narasimha Rao government. In 1994-95, the balance of payments crisis had been overcome with a fair measure of macro economic balance and unveiling of reform measures in many areas including the financial sector. By 1995, the government had started looking at the prospect of carrying out reforms in the oil industry. The ministry, then headed by Captain Satish Sharma, formed a R group (signifying reforms) driven by the then petroleum secretary, Vijay Kelkar, and the chairman of Bharat Petroleum, Sundararajan. Over a few weekends, they and many of the industry stakeholders and experts often met in Mumbai and the capital to discuss various proposals, with a report being prepared in over six weeks involving several youngsters from the industry. Then too, the view was that a giant entity in the sector wasn’t something desirable given the Indian context. It could mean destabilisation of some of the companies and the industry besides creating problems for consumers. In short, the costs far outweighed the benefits which could arise from a possible merger, many of them felt. There could also be a collateral damage to ONGC too, policymakers felt. Yet, when Kelkar moved from the petroleum ministry to North Block as finance secretary during the NDA government headed by Vajpayee, the proposal which went through was that of the big oil companies buying into each other. So under a cross-holding plan worked out by the government, oil exploration firm ONGC bought 9.1 per cent in IOC with the refining company in turn picking up 9.6 per cent in ONGC and 4.83 per cent in GAIL, the gas transportation company. The move came in for much criticism then, but over five years later, IOC sold part of its holding for over Rs 3,600 crore — a substantial return on its original investment. Again in 2014, another committee headed by Kelkar, tasked with working out a road map for reducing India’s import dependency in the hydrocarbon sector by 2020, although it did not directly address the issue of a merger given its mandate, made out a case for empowering and strengthening national oil companies and to strengthen the board processes with greater accountability and autonomy. Given this backdrop, it will now be interesting to see the approach which this government adopts for a potential merger. Josh Malone Authentic Jersey
Petrol prices lower now than in 2013-14, says Government
The prices of petrol are lower than the 2013 level and the money collected through taxes on petro products was being used to develop infrastructure and creating educational facilities, government said on Wednesday. Union Minister Rajyavardhan Singh Rathore, who was replying to questions in Rajya Sabha on behalf of his colleague Petroleum Minister Dharmendra Pradhan, said the price of petrol had come down from what they were in 2013. In July-August 2014, the price was 73.60 paise whereas in January 2017 it is 71, he said during the Question Hour. Read Also: Indian govt plans to merge state oil firms to take on global giants Increase in excise duty and depreciation of the Rupee are among reasons due to which the slide of petroleum products in international market are not reflected in the retail selling price, he said. The revenue collected is spent on infrastucture, public schemes and education, which is increasing, Rathore said, adding “we are using that money to provide for the country”. In the written reply, the government said the price of petroleum in international market started sliding in July 2014 but the retail selling price has not witnessed a similar decline due to some factors. Read Also: Spike in oil prices may impact growth: Economic Survey 2017 One of the factors was that the element of excise duty has been gradually increased by Rs 12 per litre on petrol since November 2014, it said, adding that depreciation of the rupee vis-a-vis the dollar was another reason. Another factor for the domestice prices not showing as much slide as global petrol prices was the increase in VAT and other local levies by the state governments from time to time. It also said that elements like dealers’ commission and marketing cost do not vary with the increase or decrease in global price. Robyn Regehr Womens Jersey
Diesel Price Cut: After Airtel & Idea, Reliance to target IOCL, HPCL, BPCL?
Reliance Industries, which started giving a discount of Re 1 on every liter of diesel sold through its pumps in January, has now started advertising the offer in Kerala. The discount was first noticed in January in North and West Indian towns. The move was, at the time, not taken very seriously by players such as Indian Oil Corporation and Hindustan Petroleum Corporation, who felt that it was a response to the discounts offered by state-owned companies to promote electronic payment. In the aftermath of demonetization, state-owned players including Bharat Petroleum Corporation, had started giving a 0.75% discount when customers paid electronically. That translates to a saving of about 45 paise per liter, and that too in the form of a cash back at a later date. However, Reliance Industries is offering an instant discount of Re 1 at the pump with no terms and conditions or limits. But the expansion of the offer could pose concerns for the incumbents. TIME TO WORRY? The move could set the cat among the pigeons of Indian petroleum retailing business and Reliance could disrupt the fuel retailing market like it disrupted the telecom market. The state-owned companies, BPCL, IOCL and HPCL, control over 90% of the petrol and diesel retail sales in India. To prevent competition amongst themselves, they also have identical prices. This ensures that their profit margins are not hit by competitive pressures, and consumers often choose their pumps purely by looking at the quality of fuel they get. This is very similar to the Indian telecom market before the entry of Reliance Jio into it. There were three players — Bharti Airtel, Idea Cellular and Vodafone — and their tariffs, especially for data — was very similar. As a result, consumers chose their provider on non-tariff factors such network coverage and advertising and there was no price-based competition. MALPRACTICES Due to the monopolistic nature of the existing petroleum retailing market in India and the high costs of setting up petrol pumps, the sector has seen the rise of malpractices such as adulteration of fuel and rigging of pump equipment. Moreover, the public sector companies charge a profit margin of around Rs 2 per liter, irrespective of market conditions. Reliance Industries, which has its own sources of petrol and diesel and is not dependent on state-owned oil companies, is trying to bring forces of competition by cutting the price of fuel. Even though the price cut is not as high as in telecom — where Reliance Jio’s prices were about 80% cheaper that those of rivals — in petrol and diesel retailing, even a 1.7% cut in price can result in a huge saving. Many lorry and bus operators, for example, spend millions of rupees on fuel per day and a 1-rupee discount can save them thousands of rupees each day. It remains to be seen how Indian Oil, Bharat Petroleum and Hindustan Petroleum react to the move by Reliance. Reliance owns only around 1,100 pumps, and many of its pumps are non-operational, but each pump can serve a huge customer base, especially those situated on highways and in busy junctions. Bryan Witzmann Jersey
Essar Projects wins 100-km Jalandhar to Amritsar pipeline contract
Essar Projects has won a 100-km pipeline contract from GSPL India Gasnet (GIGL) for laying of natural gas pipelines between Jalandhar and Amritsar. The project for laying of pipelines with diameters “ranging from 12 inches to 18 inches” is “a critical segment of the 2,100-km Mehsana–Bhatinda–Jammu–Srinagar Pipeline (MBJSPL) project that passes through 29 districts in five states,” Essar Projects said in a statement today. The MBJSPL project has been initiated to cater to the growing demand for natural gas in India. The Jalandhar-Amritsar section is among the three sections for which GIGL recently completed the tender evaluation process, the company said. Essar Projects said it has a proven track record of executing cross-country pipelines that carry oil and gas, water, as well as iron ore slurry through challenging geographies and tough terrains. It said it has successfully executed over 5,500 km of cross-country pipelines in India and overseas, servicing clients like GAIL, GSPC, Indian Oil, Hindustan Petroleum, Bharat-Oman Refinery, Takreer, Gasco and Ambatovy Minerals. Shiba Panda, Managing Director, Essar Projects, said: “We are proud to be associated with a project that is integral to building a countrywide gas pipeline grid for India. This win reinforces our expertise as a world-class EPC contractor in the Pipeline segment.” Essar Projects is a engineering procurement and construction company that offers a collaborative end-to-end project delivery model, which is backward integrated into the supply chain and forward integrated into customer needs. Its key projects include Gas Gathering System including trunklines and pipelines of up to 300 km and 35 compressor stations for CBM Field Development at Raniganj, West Bengal, India and crude pipeline for Salaya-Mathura. Dont’a Hightower Jersey
Get 5kg LPG cylinders at Kirana stores soon? OMCs turn to Petroleum ministry for nod
The National Democratic Alliance government is leaning towards the use of the cleaner fuel for cooking instead of traditional sources such as firewood, which have high carbon emission and health hazards. Oil minister Dharmendra Pradhan on Monday said the LPG coverage in the country has gone up to 72%, thanks to the Pradhan Mantri Ujjawala Yojana, which aims to provide free LPG connections to women belonging to the below poverty household category. The budgetary support for the scheme has been increased to Rs. 25 billion for financial year 2017-18 compared with Rs. 20 billion a year ago. The government had in July 2013 approved the FTL scheme for selling 5kg LPG cylinders through company-owned retail outlets of OMCs. Under the Gas Cylinder Rules, 2004, up to 100 kg, or 20 cylinders of 5 kg each, could be stored at the licensed outlets at any point in time. However, over time, such cylinders were also sold through kirana stores by OMCs. In the Gas Cylinder Rule, 2016, PESO however said that 100 kg of LPG can be stored for one’s own consumption only and not for sale. An industry source, requesting not to be identified, said this change under Clause 44 of the rules has created hurdles for the OMCs to sell FTL cylinders to the segment that requires them. A government release dated July 24, 2013, says, “This decision has been taken in view of the fact that over the years, a new category of consumers have emerged especially in big cities who are mobile and thus do not want a permanent LPG connection but still require LPG for their needs. Such customers need flexibility for getting the LPG cylinders as per their convenience and their needs can also be fulfilled by smaller quantities of LPG.” LPG sold through FTL cylinders are available at non-subsidised rate. “OMCs have written to PESO as well to reconsider the decision. The government is in favour of promoting FTL so that access is not denied to anyone, especially the migratory population. The issue is being taken up with PESO,” said a government official requesting anonymity. FE sought responses from the OMCs on the issue but no response came in till filing of the report. NT Shahu, joint chief controller of explosives and head of the department, PESO, however, said that it is in dialogue with the petroleum ministry and is working out the modalities to allow sale of FTL cylinders through kirana stores. India has committed to move towards cleaner sources of fuel to cut its carbon emission as part of the Paris climate change deal. It also plans to increase the share of gas in the energy mix to 15% in the next three years from the current 6.5%. Tyrell Williams Womens Jersey
Oil cos merger may not be good for consumers, pvt retailers’
The proposed merger of the state- controlled oil companies, both upstream and downstream, can reduce inefficiencies and improve competitiveness but will be an execution challenge apart from being not so good for consumers and competition, says a report. Though a merger can create an entity that is better placed to compete globally for resources and less vulnerable to shifts in oil prices, it will face significant execution challenges, particularly on the HR integration, addressing overcapacity and getting it backed by private shareholders, Muralidharan R, a director at Fitch said in a report today. “There will be considerable difficulties in merging a number of entities with differing structures, operational systems and cultures,” he said adding it may not be good for consumers as well. Though political sensitivities will limit job cuts, personnel-related issues are likely to arise from the need to manage hierarchies and potential overcapacity in the integrated entity, he added. Moreover, being listed companies with public shareholding of 51-70 per cent, can cause some problems in obtaining the mandatory 75 per cent approval for a merger, particularly if there are concerns over valuation,” he warned. There is also a question of how the state will handle the likely decline in competition post-merger as consumers have benefited from competition among these state-controlled retailers, and the resultant improvement in service standards. The plan comes at a time when private players like Essar, RIL and BP and Royal Dutch Shell are planning it big in the retail space, but if the proposal works out these players may not be able to compete with a single large state- controlled behemoth. He expects the new entity getting much stronger bargaining power with suppliers, and greater financial clout to secure oil resources. Most Asian countries have just one national oil company integrated across the value chain. As against this India has 18 state-owned oil companies, with at least six of them being key players – IOC, ONGC, BPCL, HPCL, Oil India, and Gail. Plans to consolidate the oil and gas sector have been floated before, but last week the idea was presented in the Budget speech for the first time. 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, he argued. It would also be able to share expertise for exploration and acquisition. Beau Allen Authentic Jersey
With oil ministry’s clean energy focus, PMUY may cross 20-mn mark by FY17 end
Clean energy seems to be the buzzword for the Dharmendra Pradhan-led ministry of petroleum now. Its flagship social sector programme, the Pradhan Mantri Ujjwala Yojana (PMUY), has not only surpassed the current financial year’s target of 15 million connections, it is likely to touch the 20-million mark by the end of March. In a sign of the success of the project, the spending on PMUY, under which LPG connections are given to poor households, in the current financial year has shot up by Rs 5 billion in the revised estimates, over the budgeted Rs 20 billion. The subsidy outgo on this account is expected to be Rs 25 billion in 2017-18. The scheme was launched on May 1, 2016, at Ballia in Uttar Pradesh with a target of providing connections to 50 million below-poverty-line families in three years, with a government support of Rs 1,600 per connection. For three years, the government has allocated Rs 80 billion for the scheme, in which connections are issued in the name of the women in those families. On February 6 this year, the scheme crossed the 16-million mark by touching 1,66,86,876 connections. The target set for PMUY this financial year was 15 million. The scheme is headed by a team of ministry officials led by Joint Secretary Ashutosh Jindal and Deputy Secretary K M Mahesh. PMUY is one of the major initiatives by the ministry for fuel conservation and shifting towards clean energy. Under the policy of shifting towards clean fuel, India will be introducing BS-IV fuels in the entire country by April this year and will be shifting to BS-VI quality norms by April 2020. Moreover, the ministry is giving special incentives to states which undertake cuts in kerosene allocation. According to sources, direct benefit transfer (DBT) has also helped in considerable reduction of kerosene consumption. Under DBT, states will be given a cash incentive of 75 per cent of subsidy savings during the first two years, 50 per cent in the third year and 25 per cent in the fourth year. States like Haryana and Karnataka are likely to be eligible for these incentives during the next financial year. During the financial year 2015-16, India consumed 86,85,384 kilo litres of kerosene distributed through the public distribution system. As far as ethanol blending is concerned, oil marketing companies (OMCs) have procured 1.11 billion litres of ethanol till November 2016. OMCs are planning to sell ethanol blended petrol with percentage of ethanol up to 10 per cent. In order to meet this target, oil PSUs are set to establish 12 second-generation ethanol plants in 11 states. Meanwhile, the first biofuel refinery is being set up by Hindustan Petroleum Corporation Ltd at Bathinda, in Punjab. Similarly, bio diesel blended diesel is being sold by OMCs in six states through 3,621 retail outlets. State-run Indian Oil Corporation Ltd has also set up a 5 tonne per day waste-to-energy plant in Varanasi. Out of India’s total petroleum consumption of 184.7 million metric tonnes (MT), 74.6 MT is diesel, followed by petrol at 21.8 MT and LPG at 19.6 MT. DeShone Kizer Jersey
India becomes second-largest LPG consumer
India has become the second-largest domestic LPG (liquefied petroleum gas) consumer in the world due to the Narendra Modi government’s rapid rollout of clean fuel plan for poor households and fuel subsidy reforms. LPG consumption by households has reached 19 million tonne, registering an annual growth rate of 10%. Consumption is expected to rise 20 million tonne, backed by expanding consumer base in urban areas and rapid rollout of the ‘Ujjwala’ scheme for providing LPG connections free of cost to five crore poor households by 2019. The Ujjwala scheme has turned India into an example for energy experts from other emerging economies still struggling to provide clean fuel to their rural folks. No wonder the World LPG Association (WLPGA) — so far focused on developed economies — has chosen to hold its Asia summit in Delhi, bringing together 600 experts from 35 countries who want to learn from Ujjwala. Barely nine months after being launched by the PM in May 2016, the scheme has covered 1.6 crore poor households, topping the target set for the entire 2016-17 financial year on the back of a massive rural outreach push. “It simply beats me how they achieved this,” WLPGA Yagiz Eyuboglu told a curtain-raiser session on Monday in a compliment to oil minister Dharmendra Pradhan. “When we assumed office, we had a system of misdirected subsidies, rich and upper-middle class were entitled to LPG subsidies. There were many duplicate connections and the subsidized LPG was diverted to commercial and industrial segments. As a result poorest of the poor never had access to LPG. In 2014, almost half of Indian households didn’t have LPG connections. We took it as a challenge and decide to change the LPG landscape in India,” Pradhan told the session, giving an insight into the government’s thinking behind the reforms. Pradhan said reforms in the subsidy mechanism — elimination of ghost consumers and direct subsidy transfer into bank accounts — saved an estimated Rs 21,000 crore, or $3.2 billion, in the two years of the Modi government. During this time, he said, Rs 40,000 crore, or $6.5 billion, in subsidy has been transferred directly to bank accounts of consumers. Ujjwala has raised the number of Scheduled Caste and Scheduled Tribe households with LPG connection to 35% of the total LPG coverage in the country. It has raised national the LPG coverage from 61% as of January this year to 70% as of December 1. India is home to more than 24 crore households, of which about 10 crore still do not have access to LPG as cooking fuel and have to rely on firewood, coal, dung cakes as primary fuel for cooking. Ujjwala also aims at improving health of women folk in rural households, who still depend on firewood, coal, dung cakes as cooking fuel. According to a World Health Organisation report, smoke from such fuels inhaled by women is equivalent to burning 400 cigarettes in an hour and causes several respitory and other diseases. In addition, women and children have to go through the drudgery of collecting firewood. The idea is that after getting a LPG connection, there would be no need for the women to collect firewood or dung and they can spend that time more productively. Nelson Agholor Authentic Jersey
India becomes second-largest LPG consumer
India has become the second-largest domestic LPG (liquefied petroleum gas) consumer in the world due to the Narendra Modi government’s rapid rollout of clean fuel plan for poor households and fuel subsidy reforms. LPG consumption by households has reached 19 million tonne, registering an annual growth rate of 10%. Consumption is expected to rise 20 million tonne, backed by expanding consumer base in urban areas and rapid rollout of the ‘Ujjwala’ scheme for providing LPG connections free of cost to five crore poor households by 2019. The Ujjwala scheme has turned India into an example for energy experts from other emerging economies still struggling to provide clean fuel to their rural folks. No wonder the World LPG Association (WLPGA) — so far focused on developed economies — has chosen to hold its Asia summit in Delhi, bringing together 600 experts from 35 countries who want to learn from Ujjwala. Barely nine months after being launched by the PM in May 2016, the scheme has covered 1.6 crore poor households, topping the target set for the entire 2016-17 financial year on the back of a massive rural outreach push. “It simply beats me how they achieved this,” WLPGA Yagiz Eyuboglu told a curtain-raiser session on Monday in a compliment to oil minister Dharmendra Pradhan. “When we assumed office, we had a system of misdirected subsidies, rich and upper-middle class were entitled to LPG subsidies. There were many duplicate connections and the subsidized LPG was diverted to commercial and industrial segments. As a result poorest of the poor never had access to LPG. In 2014, almost half of Indian households didn’t have LPG connections. We took it as a challenge and decide to change the LPG landscape in India,” Pradhan told the session, giving an insight into the government’s thinking behind the reforms. Pradhan said reforms in the subsidy mechanism — elimination of ghost consumers and direct subsidy transfer into bank accounts — saved an estimated Rs 21,000 crore, or $3.2 billion, in the two years of the Modi government. During this time, he said, Rs 40,000 crore, or $6.5 billion, in subsidy has been transferred directly to bank accounts of consumers. Ujjwala has raised the number of Scheduled Caste and Scheduled Tribe households with LPG connection to 35% of the total LPG coverage in the country. It has raised national the LPG coverage from 61% as of January this year to 70% as of December 1. India is home to more than 24 crore households, of which about 10 crore still do not have access to LPG as cooking fuel and have to rely on firewood, coal, dung cakes as primary fuel for cooking. Ujjwala also aims at improving health of women folk in rural households, who still depend on firewood, coal, dung cakes as cooking fuel. According to a World Health Organisation report, smoke from such fuels inhaled by women is equivalent to burning 400 cigarettes in an hour and causes several respitory and other diseases. In addition, women and children have to go through the drudgery of collecting firewood. The idea is that after getting a LPG connection, there would be no need for the women to collect firewood or dung and they can spend that time more productively. Danielle Hunter Jersey