Government engaged in phase two of strategic oil reserves
With global crude oil prices having dropped to under $50 barrel levels amid a supply glut, the Indian government has been giving attention to developing the country’s strategic petroleum reserves for enhanced energy security. Earlier this week, Petroleum Secretary K.D. Tripathi, along with senior officials of state-run Indian Strategic Petroleum Reserves Ltd (ISPRL) and Engineers India Ltd (EIL), visited the proposed petroleum storage site at Chandikhol in Odisha, a Petroleum Ministry statement here said. “The underground storage facilities at Chandikhol will be created within the available government-owned land parcel, and would involve a significant development in the region with the greater objective of Odisha becoming the energy gateway of the Eastern and Northeastern region of India,” the statement said. “The estimated capital cost of the Chandikhol project is approximately Rs 50 billion,” it added. The first phase of implementing India’s strategic oil reserves would be completed by end of this fiscal with over 5 million tons (MT) of crude reserves in place in three separate storage facilities. The facilities entail storage of crude oil in underground rock caverns. “Under Phase I storage program, three facilities have been created at Vishakhapatnam, Mangalore and Padur, with a total storage capacity of 5.33 MT,” the ministry said. Petroleum Minister Dharmendra Pradhan had told reporters earlier this year that preparations had started for the second phase of construction where it is planned to build reserves of 12.5 MT, so that by the end of the second phase India has strategic reserves of around 17.8 MT. “Government is considering the proposal for establishment of Phase II storage program for a total storage capacity of 10.0 MT, which includes 4.4 MT storage capacity at Chandikhol and 5.6 MT storage capacity at Bikaner (Rajasthan),” the ministry said in a statement on Saturday. India imports nearly 80 percent of its oil requirements, and the government had decided to set up strategic crude oil storages as a cushion against external supply disruptions. These storages would be in addition to the existing ones of the oil companies. The construction of the storage caverns is being managed by ISPRL, which is a special purpose vehicle created by the Oil Industry Development Board (OIDB). Justin Smoak Authentic Jersey
States await Rs 240 billion bounty from excise on oil products’
Indian states await a big boost to their finances this year as they are on course to get an additional Rs 240 billion bounty or more from the Centre by way of the excise duty share on oil products this fiscal year, which is set to jump by around Rs 600 billion. As per the 14th Finance Commission wards, the Centre has to part 42 per cent of the incremental excise mop up on oil products with the states from 2015 through 2020 fiscals. Since the government has been increasing the excise duty on oil products since mid 2014 after the crash in crude prices, it has been biggest contributor to tax kitty. While it contributed as much as 63 per cent of the total excise mop-up last year, up from 46 per cent in the previous year, it is going to jump by around Rs 600 billion this year to Rs 1786 billion. The government has jacked up the basic excise duty on diesel and petrol by Rs 6.5/litre and Rs 7.75/litre, respectively, in four tranches between November 2014 and January 2015. “Excise collections on oil products may expand by an incremental Rs 550-600 billion in the current fiscal year and 42 per cent of these incremental collections would devolve to the states. “This is equivalent to Rs 220-240 billion, which is sizeable in relation to the estimated devolution of excise on fuels of Rs 364 billion in 2015-16, and a positive factor for the states’ fiscal health this fiscal,” Icra’s chief economist Aditi Nayar said in a report. She adds this estimate is contingent on the facts that the basic excise duty on petrol and diesel continues unchanged in the remainder of this year and consumption of these items grows by an average of 5 per cent. The contribution of oil products to the overall excise duty levied by the Centre has increased significantly from 46 per cent in 2013-14 to around 63 per cent in 2015-16, following a high growth rate of excise on fuels in the recent years, the report notes. While the Centre mopped up Rs 794 billion from oil products in 2014-15, 23 per cent of it or Rs 179 billion were devolved to the states in that year. Cory Spangenberg Womens Jersey
Benefits under Pradhan Mantri Ujjwala Yojana extended to people of all Hilly States including North-East States by treating them as ‘Priority States’
Ministry of Petroleum and Natural Gas has decided to extend the benefits under Pradhan Mantri Ujjwala Yojana to the people of all Hilly States including North-East States by treating them as ‘Priority States’ and release LPG connections to the eligible beneficiaries. This step of the Ministry will effectively address the difficulty faced by poor people residing in the States of Jammu and Kashmir, Himachal Pradesh, Uttarakhand, Sikkim, Assam, Nagaland, Manipur, Mizoram, Arunachal Pradesh, Meghalaya and Tripura in accessing LPG for cooking purposes. Pradhan Mantri Ujjwala Yojana is being implemented with an objective to provide deposit free LPG connections to BPL households as a clean fuel solution. So far, more than 50 lakh connections have been released to the beneficiaries. Brice McCain Jersey
Oil glut to ease by 2017, clean energy investment to rise – IEA’s Birol
The International Energy Agency (IEA) expects oil markets to reach a balance between supply and demand in 2017 as the current oil glut slowly eases, IEA chief Fatih Birol said during meetings in South Korea. The head of the Paris-based agency also exchanged views with energy minister Joo Hyung-hwan on the direction of the world’s energy markets in the wake of the renewed commitment to tackle climate change after last year’s Paris climate talks, South Korea’s Energy Ministry said in a statement on Thursday. The IEA forecast in its August report that oil markets will slowly tighten in the second half of 2016 as global demand growth declines and non-OPEC supplies rebound. “Oversupply of oil markets will gradually be eased and (oil markets) will find a balance between supply and demand in 2017,” Birol said in the statement. In a separate interview with Reuters after the statement was released, Birol said he saw two drivers for the rebalancing of the oil market. The first is a drop in production from countries outside of the Organisation of the Petroleum Exporting Countries (OPEC) of about 900,000 barrels per day (bpd), especially in the United States in 2016. The second is “demand that is growing in a healthy way” and that the IEA expects to climb by 1.4 million bpd this year. “We may be on a higher side compared to others (forecasts), this is mainly because we’re more upbeat when it comes to Europe and emerging Asia demand in demand growth,” he said. In the statement, Birol also said there is concern that a decline in upstream oil and gas investments because of the prolonged low oil prices could increase oil price volatility. The statement added that Birol believes the start of the new climate regime after Paris would spur research and development investments on clean energy technology, with fast growth expected from the solar, wind power and electric car sectors. Birol noted in the interview that solar energy costs have dropped by 80 percent over the last five years and wind power costs have declined by 35 percent which means more countries can afford them. “Several years ago renewables were considered to be a romantic story but now it’s becoming a business,” he said. Birol also commented in the interview on how changes in the global liquefied natural gas (LNG) markets could affect South Korea, the world’s second-largest LNG buyer, and other countries, particularly regarding destination clauses that restrict LNG sales to the country of delivery. “A lot of gas is coming to markets … and this creates a historic opportunity to push for flexibility in gas contracts, especially destination clauses,” he said. Jimmy Howard Jersey
Petroleum sector could face over Rs 2.4 lakh crore impact of project delays
hat could be the total size of the price paid by the petroleum sector due to unwanted delays in implementation of oil and gas projects? The price could be a staggering over Rs 2.4 lakh crore through 2040, according to a study by Project Management Institute (PMI), a research and education institution. The Mumbai-based institute said in a report on project management practices in the oil and gas sector the country faces the humongous cost overruns and additional investment outlay over 2015-40 period if the existing project implementation scenario in the petroleum sector continues to prevail. The report was based on a survey of industry professionals. “With the new trend of fast growth, a lot of project managers are being assigned cases without on field experience. Becoming a project manager in the oil and gas sector requires in-depth knowledge about the Industry as opposed to other sectors that require only good people management skills,” said Partha Purkayastha, Managing Director, Amec Foster, speaking at a conference organized by PMI today in Delhi. The oil and gas sector has witnessed an average delay of 1.5 years in implementation of projects with average cost escalation of 6.2 per cent in the past, according to the PMI report. An average of 15-month delay has been noticed in projects worth Rs 100-999 crore each while the delay increases to 18 months in projects worth Rs 1,000 crore and more. Also, an average cost overrun of 6.9 per cent has been noted in projects worth Rs 1,000 or more across all PSU petroleum projects. Delays in petroleum projects occur at two stages — The Planning Stage and The Execution Stage. At the planning stage delays occur due to lack of detailed planning, poor risk management and lack of flexibility. Issues like change of scope of work, procurement delays and manpower allocation occur at the execution stage, the report stated. The report said only 25 per cent of the surveyed oil and gas companies had a dedicated independent risk management vertical and only 28 per cent of the respondents mentioned about organizational practice of drawing detailed response plan for each of the major identified risks. The report, released today, also talks about cost overruns occurring due to lack of planning, or continuous growth in a project’s scope and lack of management skill. “The Oil and Gas sector is expected to create a huge investment opportunity of $542 billion by 2040. We believe this can be achieved by improving the project management practices, identifying the gaps in organizational structure, practices, skill sets etc,” said Raj Kalady, Managing Director at PMI. He added there is a need to look at ways to bridge the gaps in project management through better organizational planning and manpower capability building. India is the 4th largest consumer of oil and petroleum products in the world with 216 million metric tonnes per annum (MMTPA) of refining capacity. Jerome Murphy Authentic Jersey
Japan may invest $10 bln in Russian oil firm Rosneft – Nikkei
Japan will propose a broad cooperation in the energy sector with Russia that could include a nearly $10 billion investment in Russian state-owned oil giant Rosneft, the Nikkei newspaper reported on Friday. The report comes as Prime Minister Shinzo Abe plans to meet Russian President Vladimir Putin on the sidelines of a two-day business conference beginning Friday in Vladivostok. The two are expected to discuss closer cooperation in such areas as energy and technology, with Japan hoping to strengthen economic ties and create a breakthrough in a decades-long territorial dispute. The Nikkei said the Ministry of Economy, Trade and Industry (METI) is considering investing as much as 1 trillion yen ($9.7 billion) to buy 10 percent of Rosneft through the government-backed Japan Oil, Gas and Metals National Corp, or Jogmec. In addition, Japan will consider joint surveys for oil and gas projects in Eastern Siberia and the Russian Far East. It will also seek technical cooperation in decommissioning the Fukushima Daiichi power plant, the site of the 2011 nuclear disaster, the paper said. METI was not immediately available for comment. Rashard Robinson Womens Jersey
Pradhan hopes to spread cheer with Centre’s LPG scheme
The Narendra Modi government’s thrust on subsidised LPG to women in rural households has helped the oil ministry shed its image of a profit-making wing into a social welfare one, Union petroleum minister Dharmendra Pradhan said here on Thursday. “LPG has been so far seen as a commercial product in India and never considered as a catalyst for social change earlier,” Pradhan said adding that his government hopes to change this, bringing clean fuel to millions of households in the country. The minister was speaking at the inaugural session of a two-day international conference on ‘LPG: a catalyst for social change’, which commenced here on Thursday. Experts from over 10 countries discussed the best practices on accelerating access to LPG and evolved strategies to create a thriving market for the clean fuel. Quoting a WHO report, Pradhan said 15 lakh people die every year in the world due to indoor air pollution, with five lakh of them in India alone. “Indoor air pollution is responsible for significant number of acute respiratory diseases in young children. Traditional sources of cooking are causing indoor household pollution leading to serious health implications particularly on women and children. During the course of collection of these fuels, they face inclement weather, snakebite, bad terrain and backache. LPG is going to change all that,” the minister said. Around 4 crore new households got LPG connections after the Modi government took over in 2014, raising the total number of families using LPG to 17.4 crore, a whopping 26 per cent, Pradhan said while talking about his ministry’s social welfare scheme Ujjwala, one of the Modi government’s biggest political initiatives. The oil ministry is also preparing itself to create a SAARC grid by providing LPG to neighbouring countries. “Now we are providing LPG to Nepal and Bhutan. We are engaged in talks with Sri Lanka and Bangladesh for supplying LPG. Slowly we are trying to connect the living standards of the neighbourhood with the LPG movement,” Pradhan added. Several African countries have already evinced interest in replicating India’s models of Pahal, Sahaj and Ujjwala, the minister claimed. Jharkhand governor Droupadi Murmu recounted her own troubled experience as a teenager as her village did not have access to LPG connection. Tom Compton Jersey
Biodiesel producers seek legislation to tap used cooking oil from restaurants
Biodiesel producers are seeking policy that will give them more access to used cooking oil from the food processing industry. Used cooking oil can be processed to make biodiesel, which is derived from renewable bio-mass resources. In India, cooking oil accounts for 20% of the total output of biodiesel. “A legislation to ensure supply of used cooking oil from food processing industry and restaurants would boost biodiesel output by 3-4 million litres,” said Sandeep Chaturvedi, president of Biodiesel Association of India. Such a move will also check used oil from coming back for human consumption, he said. “Biodiesel is less polluting than fossil fuel-based diesel and more conducive for automobiles due to higher lubrication and calorific strength,” Chaturvedi said. In 2015-16, domestic production of biodiesel increased to 110 million litres, mainly due to favourable government policy. It was 8-9 million litres in 2014-15. “Already the output is around 8-9 million litres this fiscal,” he said. Biodiesel manufacturers attribute the increase in production to the Centre’s decision to allow up to 5% biodiesel in diesel used by the railways. The decision to remove excise duty on inputs for making biodiesel is another factor. Biodiesel manufacturers say all states needs to come on board to promote biodiesel by allowing a favourable VAT policy. At present, VAT levy on biodiesel is at par with fossil fuel-based diesel and ranges between 24% and 26% in states, according to the association. “It is a major deterrent as it makes biodiesel blending a revenue-losing proposition for oil marketing companies,” said Chaturvedi. The association welcomed the Haryana government’s recent announcement to reduce VAT by 5 % on biodiesel. “Such decisions need to be implemented sincerely and other states needs to follow,” manufacturers said. Austin Hedges Authentic Jersey
Shah panel report on RIL-ONGC dispute puts government in a fix over compensation
The official panel’s report on the Reliance-ONGC gas dispute has left the government in a fix as the report has not quantified the compensation to be paid for the gas that flowed into RIL block. This can further delay the resolution of a key issue for which the committee was set up, sources familiar with the development said. Industry executives said the report has also created consternation in ONGC, which faced stern words from the committee although the company which had gone to court against Reliance and the oil ministry alleging that Reliance was illegally pumping out its gas. Company executives resent the panel’s view that ONGC deserves no compensation from RIL. “For the government, the main issue in the terms of reference of the committee was to quantify ‘unfair enrichment, if any’, but the committee has thrown the ball back to the ministry’s court,” an official source said. The panel, which had a purely advisory status, said lack of data and “inherent technical limitations” prevented it from quantifying ‘unfair enrichment’. When the panel was appointed, RIL and Niko said it had no power to adjudicate, its decisions were not binding, and that the government’s intervention in the matter meant that the dispute could be resolved only by arbitration. Reliance has not reacted to the panel’s report but its position has been that all its drilling and field development decisions were taken with the prescribed regulatory and official approvals, and that it had extracted natural gas from wells drilled strictly within the boundaries of its own block. It said ONGC had no basis to claim a compensation. ONGC was seeking compensation for the gas that flowed out of its block, while Reliance had contested that claim. The panel said only the government could claim compensation, and criticized ONGC for not developing its own block. It suggested proper scrutiny of the company’s role in India’s oil and gas sector. ONGC declined comment on the matter, but its former chairman, RS Sharma, who led the company for five years from the middle of 2006, slammed the committee. “It’s extremely disappointing,” said Sharma, whose stint partly coincided with the period during which Reliance allegedly made “unjust enrichment” from gas that flowed into its block. “The contention of the committee that compensation should go to the government, not ONGC, is absolutely wrong. The committee has made a gross error of judgement. If the government agrees to this part of the recommendation, it will send a negative signal to all investors. ONGC by virtue of having the mining lease owns the rights to all revenues from sub-surface production,” Sharma said. The Directorate General of Hydrocarbons had initially made a similar plea to the Shah panel, arguing that ONGC possessed a “right to the economic benefits” under the contract for the gas that migrated beyond its block. Subsequently, its advocate put forth a different argument that “ONGC had no right to any restitution,” since ONGC has not produced any gas. The government later told the panel to take an independent view on the issue. “What is the sanctity of the contract if all revenues were to go the government?” said Sharma, who also heads the hydrocarbon committee of FICCI, an industry lobby. Ashok Varma, who retired as director at ONGC last year, said the panel has established two key things that the gas has migrated and that it was pumped out. “This is a key step in the long battle forward,” he said. But the resolution won’t be easy, he said. “The ministry will take a long time in quantifying the gains made by Reliance. And Reliance is not going to accept the findings anyway,” he said. Sharma vehemently denied the panel’s observation that ONGC probably had prior information about gas migration but didn’t act promptly. “The ONGC management at any level had no prior knowledge about the connectivity of the reservoirs, or that the gas was migrating from one field to the other, or that it was being siphoned off. That was a shock to me when I heard about this in 2013,” he said. ONGC had first flagged the issue in 2013. The panel has also criticized ONGC for delaying projects and recommended a further enquiry into it. Responding to this, Sharma said the deep water discovery in the KG Basin was ‘not commercially viable’ at the then prevailing price and which is why its development was delayed. “ONGC needed $6-7 per unit of gas price to make it commercially viable. But the domestic gas price was $4.2/unit. This government has now given a higher pricing for deep water gas which will now help develop this block,” he said. Case Keenum Womens Jersey
Indian Oil Corp to continue importing two LNG cargoes a month
Indian Oil Corp (IOC) will continue importing at least two liquefied natural gas (LNG) cargoes a month after the expansion of the Dahej import terminal on India’s west coast, a top company executive said. Terminal operator Petronet, which is also India’s biggest single LNG importer, expanded the Dahej plant’s import capacity by 50 percent to 15 million tons a year. IOC will use its import capacity in the expanded terminal to continue importing LNG, said D. Sen, the company’s business development director. IOC purchased two LNG cargoes last week in a tender process, traders said. Tom Johnson Authentic Jersey