Small oil and gas field auction date may be extended
Fearing poor response, the government is likely to extend by at least one month the last date of bidding for the auction of 46 small oil and gas fields that were “given up” by state-owned ONGC and Oil India. Bidding for the auction, the first in over four years, is to close on October 31. There are apprehensions about the response after prospective bidders complained about the quality and amount of data being made available on the fields that have been put on offer, sources privy to the development said. For bidders to make decisions, more data, particularly about the size of reserves, is required and making that available would require extending the deadline, they said. Also, some prospective bidders have raised concerns about the size of the blocks or fields on offer. They say 10 square kilometer offering, one-tenth of the smallest block ever offered in the previous bid rounds, was too small. Sources said the bidders feel the block area has to be larger to give them room for probing for oil and gas reserves. After holding roadshows in India and abroad, the Oil Ministry’s technical arm, the DGH will on October 19 hold an “outreach” even on the Discovered Small Fields Bid Round 2016 in the national capital. A ‘Bidder Facilitation Workshop’ is planned at the event to “resolve queries of the bidders”, they said adding the extension of the bid deadline may be announced there. The auction, which was announced on May 25, is to be conducted on simpler contractual terms together with pricing and marketing freedom. India liberalised its exploration and production regime almost two decades ago when in the early 1990s, it auctioned about 28 fields to private and public investors. In the late 1990s, it further liberalised its E&P sector with the introduction of New Exploration Licensing Regime (NELP) regime that allowed 100 per cent FDI and offered a level playing field to private and national oil companies. NELP was based on Production Sharing Contract (PSC) that meant sharing of revenues with government post recovery of cost by contractor. This regime was marred by disputes over cost recovery and regulatory inflexibility. Now the bid round is being held under a new regime that will offer discovered fields to those who offering the maximum share of oil and gas to the government. The fields on offer hold an estimated 625 million barrels of in-place oil and gas reserves. Sources said the 46 fields that are offered are actually 67 small and marginal discoveries that have been clubbed. Oil and Natural Gas Corp (ONGC) and Oil India Ltd (OIL) “surrendered” these as they could not develop them because of huge overhead cost and uneconomic size. Last exploration licensing round concluded in March 2012. That was the Ninth round of bidding under NELP. A total of 256 blocks were awarded in the nine rounds of NELP. In the new round, as many as 67 idle discoveries of state-owned ONGC and OIL have been clubbed into 46 fields for offer in the international bidding round. Of these, 28 discoveries are in Mumbai offshore and another 14 are in the prolific Krishna Godavari basin. As many as 10 discoveries are in the Assam shelf. The discoveries were given up as late as 2012-13. These in-place reserves are estimated to have about 88 million tonnes of oil and oil equivalent gas. The biggest discovery among the lot is the D-18 in Mumbai Offshore that alone holds 14.78 million tonnes of in-place oil reserves. Among the gas discoveries, the largest is ONGC’s B-9 find in the offshore Kutch basin that has an in-place reserve of 14.67 bcm. Sources said the auction will be done on a new revenue sharing model where bidders will be asked to quote the revenue they will share with the government at low and high end of price and production band. The new revenue sharing regime will replace the controversial PSC model where oil and gas blocks are awarded to those firms which show they will do maximum work on a block. The PSC regime allowed all their investments to be recovered from sale of oil and gas before profits are shared with the government. This model was criticised by CAG which said it encouraged companies to keep raising cost so as to postpone higher share of profits to the government. Also, single licence for exploration and exploitation of conventional and non-conventional hydrocarbons will be issued and operators will have freedom to sell oil and gas on arms on arms length market price, they said, adding that there would be no cess on crude oil. Matt Paradis Jersey
IOC launches start-up scheme with Rs 30 crore corpus
Indian Oil Corporation (IOC), the country’s largest fuel retailer, today announced it has launched a start-up scheme with a corpus of Rs 30 crore to promote promising start-ups and “nurture an eco-system conducive for innovations” in the domestic hydrocarbons sector. Driven by IOC’s Research & Development Centre at Faridabad, the scheme will support projects which involve innovative technology and business process re-engineering ideas with significant business potential, social relevance and focus on environment-protection. “The start-up scheme will be administered through a dedicated online portal and will facilitate the community of innovators, entrepreneurs and intrapreneurs. It will help them pursue their promising ideas right up to validated proof of concept (PoC) stage by funding the incubation ecosystem and through intellectual mentoring,” the company said in a statement. IndianOil will also help in commercialisation of select validated PoCs through equity participation. Citizens of Indian origin willing to work in India besides individuals affiliated to academic institutions having incubation centres approved by the central government, or intrapreneurs from IndianOil can apply under the scheme. To begin with, IndianOil will float the first round of open Innovation Challenge by way of an Expression of Interest (EoI) to select 9 proposals in the domain of Technology Process Re-engineering (TPRE) and 6 proposals in the domain of Business Process Re-engineering (BPRE). The proposals received will be subjected to screening and the short-listed one will be incubated with the required physical and intellectual support till they reach PoC stage. The project owners will be supported with grants of up to Rs 2 crore per project during this period. The areas identified by the start-up scheme under Technical Process Re-engineering (TPRE) include low-cost efficient vapour recovery system at fuel stations, low-cost production of Hydrogen, low-cost process for desalination of sea water, innovative schemes for ensuring zero effluents from oil refineries, molecular modelling and design of the inter-phase molecule for dispersion of nano-material in HC media. The scheme will also cover environment-friendly disposal of insulation material like ceramic blankets and glass wool, LPG cylinder safety aspects and waste-to-energy projects. The company said it is hopeful the start-up scheme will promote collaborative research, develop an innovative ecosystem, nurture entrepreneurship, boost start-ups with rural orientation and open up avenues for young employees of IOC to launch start-up projects. IOC will soon launch a dedicated online portal for the scheme. Matt Read Womens Jersey
Saudis cancel rare prompt oil offer to Asia after OPEC deal -sources
Top global crude oil exporter Saudi Aramco last week cancelled a rare offering of prompt cargoes to buyers in Asia, five sources with knowledge of the matter said on Friday, pulling back on a private tender after OPEC unexpectedly agreed to an output cut. The state oil giant has excess crude to sell as at least two domestic refineries are scheduled for maintenance in the fourth quarter, while Asian buyers may have opted to lift minimum term volumes next month after official monthly prices rose more than expected, the sources said. In what is sometimes called a private tender, selected buyers across Asia last week were given the option of purchasing Arab Light or Arab Heavy crude cargoes loading at Ras Tanura in October in the tender, the sources said, although few other details were available. But Saudi Aramco subsequently cancelled the tender after the Organisation of Petroleum Exporting Countries (OPEC) reached a deal to cut output on Sept. 28, the sources said. It was not immediately clear if Saudi Aramco sold any cargo before or after cancelling the tender. Saudi Aramco officials did not respond to an emailed request for comment. The company does not comment on its oil sales. The sources talking on the matter asked to remain anonymous due to its sensitivity. Asian buyers have remained cautious following the OPEC supply cut agreement, awaiting the next meeting in November for more details on how the agreed cut might be divvied up between the group’s members. SPOT CRUDE SALES? The crude sales tender may indicate an interest from Saudi Aramco to sell spot cargoes in future, trade sources said, which would be a major change in the producer’s marketing strategy. Saudi Arabia sells its crude oil mainly via annual contracts to customers at designated destinations, meaning that its oil is rarely traded on the open market. Still, the producer has in the past few years shown some flexibility in selling spot cargoes from its storage in Okinawa, Japan, to North Asian buyers. “Spot sales help in price discovery, providing an additional guide for the producer when it sets monthly prices,” an industry source said. Saudi Aramco typically sets its crude prices based on the changes in the Dubai market structure, recommendations from customers, and after calculating the change in the value of its oil over the past month, based on yields and product prices. The official Saudi prices help to set the trend for crude grades from Iran, Kuwait and Iraq, affecting more than 12 million barrels per day (bpd) of oil bound for Asia. Dave Winfield Jersey
GLOBAL LNG-Prices rise to highest in nine months on firm Asian demand
Asian liquefied natural gas (LNG) gas prices reached a nine-month high this week as demand from India, Japan and South Korea underpinned sentiment. LNG for November delivery were about $6.20 per million British thermal units (mmBtu), 10 cents higher than last week, as supply-demand balances for the rest of the year appear tighter, said three traders who participate in the market. That is the highest since the week ending Jan. 8. Higher crude prices are also lending support to LNG values. ICE Brent futures have gained 3.3 percent to above $52 a barrel this week following the Organizations of the Petroleum Exporting Countries announced plans to curb production. LNG demand from North Asia remains firm as nuclear power stations in Japan and South Korea that have been taken offline are expected to stimulate demand for the super-cooled fuel. Japan’s Kyushu Electric Power Co shut the 890-megawatt No. 1 reactor at its Sendai nuclear plant on Thursday for planned maintenance that is expected to last at least two months, although a restart could be hampered by anti-nuclear local authorities. South Korea has also shut multiple nuclear power plants for maintenance and as a precaution after the country suffered its biggest earthquake ever in September. “We expect demand to continue to be strong in Korea and Japan. China is also looking for more cargoes,” a Malaysia-based LNG trader said. The best bids from Asian buyers were pegged at the low-$6 per mmBtu range, while offers were in the mid- to high-$6 per mmBtu range, the traders said. “It is still a buyers’ market, but for November and December cargoes, sellers can decide who they want to sell to,” a Singapore-based trader said, adding that the market may rise due to demand from India and North Asia. Indian gas firm GAIL closed a tender seeking a November and a December cargo early this week. The results were not immediately known, but traders expect the firm to have appetite for more cargoes. Angola LNG, which closed its sell tender for its Oct. 4-6 loading cargo on Wednesday, is likely to have awarded the tender because of its prompt loading dates. The bids are valid until Friday. Despite firm Asian demand, gains in spot prices could be capped by new production from the Australia Pacific LNG (APLNG) project that is due to start-up this quarter, and returning U.S. supplies. Cheniere’s Sabine Pass is scheduled to come back from maintenance around Oct. 17, a source close to the matter said on Thursday. The Australian project is starting up its second production line, an APLNG spokesman said on Thursday, with traders expecting a first shipment to be loaded later this month. Jarvis Jenkins Womens Jersey
Pradhan pitches for subsidy withdrawal on petro products
Making a case for free market economy to boost investments, Oil Minister Dharmendra Pradhan has said the market price of petroleum products should be commensurate with production rate to augment output and subsidies on such items must be for poor households only. “The market price should be near to production price. We have to adopt a market mechanism. Government should not control prices (of petroleum products),” the minister said at the India Economic Summit here. The minister was also of the view that freeing price of petroleum products is necessary to boost the investors confidence and increase private players participation in energy sector. He suggested that the without removing subsidies India cannot augment production of petroleum products in the country. He also stressed that the subsidies should be targetted and should not be available to everybody for increasing investors confidence. Besides there should be a debate on this. At present, the government still provides subsidy on kerosene and cooking gas (LPG). Government has been trying to persuade consumers to give up their LPG subsidy so that it could be provided to deserving below poverty line or poor families. The minister was of the view that the gas and renewables like solar and wind energy has a future in India in the long term and their proportion will increase in the energy mix in coming days. The Minister also emphasised the need to monetise farm waste by converting it into various forms of energy and said “We are very much focused on the bio-energy. We have to tap the farm bio waste.” Ben Lovejoy Authentic Jersey
India to set up LNG terminal, City Gas network in Sri Lanka
India is working on a slew of proposals aimed at strengthening bilateral energy engagement with Sri Lanka including setting up an Liquefied Natural Gas (LNG) terminal and a dedicated City Gas Distribution (CGD) network in the neighbouring nation. Petroleum minister Dharmendra Pradhan today met his Sri Lankan counterpart Chandima Weerakkody here and discussed the Indian proposals, the oil ministry said in a statement. “During the meeting, both the ministers discussed various Indian proposals including joint development of Upper Tank Farm by Lanka IOC (LIOC) in Trincomalee; setting up of LNG terminal at Kerawalapitiya, near Colombo by Petronet LNG Ltd; setting up of CGD network by GAIL and use of CNG in the automotive sector of Sri Lanka,” the ministry said. The Sri Lankan government is trying to promote the use of clean fuel in that nation, including for power generation. Pradhan also said the Indian oil ministry has offered to work with the Lankan government for developing gas infrastructure there. He added Indian companies had engaged a reputed consultant for assessing LNG demand and are developing related infrastructure in Sri Lanka. The consultant’s report would be shared shortly. Weerakkody welcomed India’s cooperation and said though India’s gas-based business and infrastructure is only 20 years-old, it has the requisite experience and expertise in the sector which is ready to be shared with Sri Lanka. Pradhan also discussed LIOC activities in Sri Lanka including increasing the number of its retail outlets and bunkering operations and granting license to LIOC for marketing Aviation Turbine Fuel (ATF) and LPG. Both the sides also discussed refurbishment of Sapugaskanda refinery and possibility of setting up of a refinery in Sri Lanka as a joint venture to address the local needs. India also offered to assist Sri Lanka in building oil and gas pipeline networks. During the meeting, the two ministers also exchanged notes on the exploration and production activities in the Sri Lankan Mannar basin. Pradhan said ONGC Videsh Ltd (OVL) and its parent company ONGC had the expertise and knowledge of the geological conditions that exist in the Cauvery basin. “These conditions are similar to Mannar basin in Sri Lanka and, hence, OVL could be a natural partner in carrying out exploration and production activities in this area,” he said. Pradhan also expressed India’s commitment to work with Sri Lanka to develop Trincomalee as a regional energy hub. The petroleum ministers also discussed the possibility of creating South Asian Association of Regional Cooperation (SAARC) Energy Initiative to create sub-regional hydrocarbon infrastructure, particularly gas network, to fuel the two economies. The ministers also discussed cooperation in bio-fuel sector including training of Sri Lankan energy professionals in India. Anthony Davis Jersey
ONGC to pick stake in Gujarat State Petroleum Corp’s KG basin block
ONGC has signed a preliminary pact to acquire a stake and operate the KG Basin block of Gujarat State Petroleum Corp. (GSPC), which had announced a major natural gas discovery and spent $3 billion to develop it but hasn’t been able to start commercial production in the technically challenging field. “Yes, we have signed an MoU (memorandum of understanding) on October 4. This is a preliminary thing and we are looking into various possibilities. We have shared report (about gas reserves) of our consultant Gaffney Cline & associates with ONGC,” GSPC managing director JN Singh told ET. ONGC declined comment. GSPC had announced the gas discovery in the Deen Dayal block with much fanfare when Narendra Modi was Gujarat’s chief minister. Subsequently, the company faced unexpected hurdles such as extremely high temperature and pressure, which can damage equipment. This contributed to the rise in development expenditure, debt and delay in execution. Official sources said the pact provides for a panel of three experts to oversee the transaction. This includes Vijay Kelkar, former oil secretary, and P Shankar, former chief vigilance commissioner. The third slot is yet to be filled but sources said MA Pathan, a former chairman of Indian Oil Corp., may get the job. ONGC and GSPC currently have differences over the quantity of reserves in the KG block, the amount of capital and operating expenditure needed, the prices gas and condensate from the KG block can obtain, and the discount rate that should be used to calculate the net asset value, sources said. Singh said the commercial matters could easily be resolved between the two state-run firms. “As the minister had earlier pointed out, ONGC and GSPC are not India and Pakistan. We are both government bodies, and various possibilities are being looked into,” he told ET. The expert panel will take a final call on all the differences. In the MoU, the two companies have agreed to accept the expert panel’s recommendation on valuation and seek their respective boards’ approval, sources said. ONGC has appointed Ryder Scott, a consultancy, to independently assess the reserves in the GSPC’s block. The consultant’s assessment of the Deen Dayal West (DDW) field has to be presented to the expert panel by November 15and for other discoveries latest by December 31, sources said. The MoU is non-binding and valid for six months. It doesn’t mention the extent of stake ONGC may acquire but sources said it could be a majority holding. If a definitive agreement is signed, GSPC will offer ONGC suitable indemnity, sources said. GSPC’s stake in the KG block and future income from the block is hypothecated to lenders, sources said. The Comptroller and Auditor General (CAG) had criticized GSPC this year for the way it handled the block. The investments in the block drove up GSPC’s debt 180% in four years to Rs 19,700 crore by March 2015, the auditor said. The CAG had cited deficient implementation, cost overruns and inability to induct a strategic partner in time. GSPC owns an 80% participating interest in the KG block while Jubilant and Geo Global Resources have 10% each. One official said that in late August, the Prime Minister’s Office called a meeting with top executives of the two firms including ONGC chairman DK Sarraf to review progress in the matter and to make sure the MoU’s terms would be acceptable to both companies. GSPC joint managing director T Natrajan had earlier confirmed to ET about the meeting held on August 24 and the sharing of data with ONGC. “ONGC has the capability and resources to develop DDW field. They have also done their internal study,” he had said. “This is a high pressure and high temperature field. Further, DGH has made its assessment about it, which is in the public domain. Our technical consultant Xodus is also working on this.” A senior PMO official told ET that ONGC’s board would decide on buying a majority stake in GSPC. “Our role is only to facilitate talks and ONGC’s board is free and fully independent to decide on this deal,” said this official. Petroleum minister Dharmendra Pradhan had earlier told ET that the two companies were commercially discussing the matter for mutual benefit and that his advice to the firms was to use common facilities and make a joint strategy, just like global firms such as BP, BG, Chevron and Exxon do. Curtis McElhinney Authentic Jersey
GE Opens New Oil & Gas R&D Center in Oklahoma, Showcases Smart Sensing Drone, Advanced Labs and Emerging Digital Technology
Providing a present and future glimpse of promising new technologies in the pipeline for the Oil & Gas industry, GE (NYSE:GE) today held the grand opening of its new Oil & Gas Technology Center in Oklahoma City. The new Center will become a central hub for GE scientists and engineers to closely collaborate with the Oil & Gas industry on cutting-edge digital and hardware solutions to advance the industry. Lorenzo Simonelli, President and CEO, GE Oil & Gas said, “We believe a strong commitment to R&D will help our oil and gas customers find new efficiencies to work through tough market conditions and lead to transformational opportunities for the industry to thrive long-term. The new technology center in Oklahoma City will accelerate innovation; it’s where we can bring the full power of digital solutions and technology from across GE’s industrial businesses to advance the Oil & Gas industry.” At the Center opening, GE unveiled a prototype drone, nicknamed “Raven,” engineered to detect emissions precisely and cost-effectively, to help customers reduce environmental impact and improve operational efficiency in the Oil & Gas industry. Southwestern Energy Company successfully piloted the technology to detect emissions from oilfield equipment at well sites in Arkansas in July. Vic Abate, Senior Vice President and Chief Technology Officer, GE said, “At our new research center in Oklahoma City, customers benefit from the collective global brain of technologists from our 10 GE global research centers around the world, as well as our 50,000 global GE engineers who span multiple industry sectors. We call it the GE Store, and it allows us to bring innovation from other GE industries such as Aviation, Power, Healthcare and Transportation to transform and strengthen the Oil & Gas sector.” About GE’s Oil & Gas Technology Center GE’s new Oil & Gas Technology Center is five stories, with 125,000 sq. ft. of lab and office space that includes: • 400-foot and 60-foot deep test wells • Two 30-ton overhead cranes for moving large testing equipment • An entire floor dedicated to customer collaboration with embassy offices Michael Ming, General Manager of GE’s Global Research Oil and Gas Technology Center, said, “To the greatest extent possible, we are bringing the oilfield and our customers directly into our lab space. When you couple that with the world-leading scientists and engineers based here in Oklahoma City and at GE’s other global research centers around the world, you have a winning formula for driving transformational technologies the industry will need.” Ming noted the research focus at the new Center will span across all areas of oil & gas from production solutions and well construction systems to oilfield facilities and systems and reservoir performance. Although the new Center just recently opened, temporary offices were established more than two years ago in the City Place Tower in downtown Oklahoma City. With 120 employees today, the Center can accommodate as many as 230 people. GE’s new Oil & Gas Technology Center has established several programs and partnerships with industry and academia, including Oklahoma State University and the University of Oklahoma and has R&D agreements in place with many of the leading operators in North America. John Hannah Womens Jersey
ONGC, OIL in a spot over dipping gas prices
Per dollar decrease in gas price will have an impact of Rs 42 billion on its gross revenue, according to ONGC. With the domestic natural gas price dipping by 51 per cent in 24 months to $2.5 per million metric British thermal unit (mmBtu), downstream companies like Oil and Natural Gas Corporation (ONGC) and Oil India (OIL) are now batting for a floor pricing of at least $4.2 per unit, claiming that at current price there will be no margins for producers. According to ONGC, at current volume, per dollar decrease in gas price will have an impact of Rs 42 billion on its gross revenue. On the other hand for OIL India, the loss on revenue is to the tune of Rs 3.50 billion. ONGC has already requested the government to set a floor pricing or protection pricing insulating it from further drop in international prices. “We have requested the government to set a floor pricing, which is at least equal to the pricing in 2010, which is $4.2 per mmBtu. One dollar decrease in gas price will have an impact of Rs 42 billion on our gross revenue and Rs 24 billion post tax per annum,” said A K Srinivasan, director (finance) of ONGC. According to Srinivasan, the average cost of production for the company comes to about $3.5 per unit, which will zoom to $ 5 per unit, if returns are also taken into account. It was in June 2010 that the government increased the prices of natural gas to $4.2 per unit, which continued till November 2014 till a formulae suggested by a panel led by C Rangaranjan. Echoing his words, OIL chairman and managing director Utpal Bora said, “At current prices of $2.5 per unit, we are left with zero margins and you need profits to invest in our future projects.” However, government was not keen on responding to the demands by the companies. Addressing the media on Wednesday, petroleum minister Dharmendra Pradhan hinted that rather than thinking about protection pricing, companies should focus on more innovations. “When Rangarajan formulae was adopted by us in 2014, these market fluctuations were taken into account. The pricing will continue as per that formula only,” Pradhan added. Since November 2014, domestic natural gas price has dropped four times from $5.1 per unit to $2.5 per unit now. After the Rangarajan formulae was implemented, the prices were first fixed in at $5.1 per unit on gross calorific value basis on November 2016, this got revised again on April 2015 to $4.7 per unit. The prices again dropped in October 2015 to $3.8 per unit and further to $3.1 per unit on April 2016. This again dropped for the fourth time, in tandem with the international prices on October 2016 to $2.5 per unit. As per the current formulae, prices are revised after every six months and calculated on the basis of a weighted average of rates in countries like the US, Canada and Russia, based on the 12-month trailing average price with a lag of three months. However, the companies are upbeat about the future of gas price. “The prices are bound to come up. Once it increases, we will be reaping benefits as well,” Srinivasan added. According to Fitch Ratings, the cut in prices will not have a significant impact on OIL standalone credit profile of ‘BBB-‘, although the company’s upstream gas operations will incur losses. “We expect that the price of $2.50 per mmBtu to be just sufficient to cover the costs of bringing the gas to the surface and that OIL will incur cash losses due to taxes and levies. Fitch estimates are duction in gas price by $0.5 per mmBtu will result in about a INR2.5bn fall in EBITDA over the next six months for OIL,” Fitch Ratings added. Gas accounts for about 40 per cent of the company’s total oil and gas production in terms of barrels of oil equivalent. Jack Johnson Jersey
BP India gets license to sell jet fuel in India, says company
The Indian arm of British oil giant BP Plc has received a license from the government to sell jet fuel in India, its country head said on Thursday. “India is a huge market … Obviously we are a very large player globally in the aviation business, so it makes sense for us to be here,” said Sashi Mukundan, regional president and India country head for BP. Mukundan said BP will soon start local sales of aviation turbine fuel (ATF). He declined to elaborate on whether BP will sell fuel on its own or tie up with an Indian partner. Danny Etling Womens Jersey