Private LPG bottlers may shine as govt plans to add 10 crore consumers
The government’s ambitious plan to enroll 10 crore new cooking gas consumers in three years is set to throw open big opportunities for private liquefied petroleum gas (LPG) bottlers. The oil ministry recently asked state oil firms to prepare a model for participation of private players in setting up cooking gas bottling plants as the public sector’s planned bottling expansion may not be enough to meet the entire projected demand in the coming years, an official said. If the idea takes off, private bottlers, which have just a minor presence now, could help meet a large part of the new refill demand from state LPG distributors such as Indian Oil Corporation, Bharat Petroleum and Hindustan Petroleum . Fixing logistics is the biggest challenge in the government’s plan to enhance LPG consumer base by 60% in three years. This means appointment of thousands of LPG distributors across the country, especially in the interiors where the new consumers are likely to mostly come from, and setting up scores of bottling plants to churn out refills in time for new consumers. The state oil firms currently have 188 LPG bottling plants with a bottling capacity of around 15.2 million metric tonne per annum. State firms sold nearly 17.2 million tonne in 2015-16, mainly helped by more than 100% capacity utilization at several plants and some help from private players. But with the projected demand of 20.7 million tonne in 2016-17 and 24 million tonne in 2018-19, as per industry executives, the state firms would need rapid expansion of their bottling facility. The state firms plan to erect 14 new bottling plants by March 2019, adding 1 million tonne annual capacity, state oil companies’ executives said, adding that another nearly 3 million tonne capacity will be enhanced by adding carousals and shifts at existing plants. This would still leave a projected demand-supply gap, which is what the government wants the private players to fill. In some locations today, state firms source LPG refills from a handful of private bottling plants currently operating. Some of the private players run bottling plants and distribute non-subsidized LPG cylinders under what is called parallel marketing. Reliance Industries has recently sought the government permission to distribute subsidized cylinders to households as subsidy is now transferred directly to cooking gas consumers’ respective bank accounts. Once a model for private participation is prepared, it would pave way for private bottlers who would have a reliable clientele in state oil firms. Mason Foster Authentic Jersey
Greka Drilling bolstered by contract in India
Greka Drilling Ltd (LON:GDL) expects to drill as many wells in India as China this year as activity slowed in the first half. The unconventional oil and gas drilling specialist saw the number of metres drilled reduce by 52% as oil prices struggled, with 12,458m drilled compared to 26,367m a year ago. India provided the bulk of this with seven wells drilled as part of a contract with Indian giant Essar. Greka hopes to complete 30 wells over the remainder of 2016 by two rigs as part of the Essar contract. Talks are also at an advanced stage with other oil and gas companies for work in the central part of India said chairman and chief executive Randeep Grewal. Previously, most of Greka’s contracts had been in China for former parent Green Dragon Gas, but only two wells were drilled in the first half though Green Dragon has indicated an eight well programme will start in the autumn. Other drilling expected to start this year in China for other customers includes six wells in November 2016 and six directional wells for tight gas. Grewal added: “We had previously advised the market that we expected this year to be challenging while the oil & gas operators realign their portfolios to the new oil price environment. “During this period we continued to take steps to reduce costs, improve our drilling efficiency and diversify our services and customer base. “In India we won a new contract from Essar Oil to provide drilling for vertical and directional wells on a day-rate basis. “In China it is anticipated that a number of larger E&P companies, including Green Dragon Gas, will start their programmes for 2016 in H2.” Buster Posey Womens Jersey
GAIL seeks to defer Gazprom LNG contract
GAIL India Ltd is seeking to defer a 20-year contract to buy liquefied natural gas (LNG) from Gazprom PJSC until the Russian company’s Shtokman project begins production, officials at the South Asian country’s biggest gas transporter said. New Delhi-based GAIL signed a contract in 2012 to buy 2.5 million tons a year of LNG from Gazprom starting in 2018 and 2019. The Russian exporter was to supply LNG from the Shtokman project under the contract, according to GAIL’s website. Now that the Arctic project is on hold, Gazprom has offered to supply LNG from other sources, said the GAIL officials, who asked not to be identified citing company policy. The Indian company is insisting on supplies from Shtokman and has said it will consider lifting LNG from other sources at a renegotiated price that is closer to spot-market rates, the officials said. Gazprom didn’t immediately comment. GAIL is struggling to find buyers for its gas amid an abundance of cheap alternative power generation supplies, including coal. The price of spot LNG to Asia during the past year has fallen 28% amid a global glut. Reuters earlier reported GAIL was seeking to delay the gas purchase deal with Gazprom. Rocky Bleier Jersey
India, US discover large deposits of natural gas in Bay of Bengal
Natural gas hydrate deposits were found in the Krishna-Godavari Basin in the Bay of Bengal by a joint expedition team, including the United States Geological Survey (USGS), the Indian government and Japanese scientists, said the USGS on Tuesday. The discovery has the potential to help India, which currently imports a major chunk of its fuel, in fulfilling its energy needs. This was the second such expedition undertaken by the USGS and the government of India. The gas hydrates found by the Indian National Gas Hydrate Program Expedition 02 are producible unlike the discovery during the first expedition. For natural gas to be “producible with existing technologies,” it has to occur in sand reservoirs, the US government agency said. “Advances like the Bay of Bengal discovery will help unlock the global energy resource potential of gas hydrates as well help define the technology needed to safely produce them,” said Walter Guidroz, USGS Energy Resources Program coordinator. The gas hydrate deposits, located in the Krishna-Godavari Basin, were found within coarse-grained sand-rich depositional systems. The discovery can help India diminish its dependence on coal and petroleum, eventually affecting the India’s carbon footprint. The team was led by Oil and Natural Gas Corporation on behalf of the Ministry of Petroleum and Natural Gas, in cooperation with the USGS, the Japanese Drilling Company and the Japan Agency for Marine-Earth Science and Technology. The team will now test if the production of the naturally occurring fuel is “practical and economic.” “The results from this expedition mark a critical step forward to understanding the energy resource potential of gas hydrates,” said USGS Senior Scientist Tim Collett, who participated in the expedition. “The discovery of what we believe to be several of the largest and most concentrated gas hydrate accumulations yet found in the world will yield the geologic and engineering data needed to better understand the geologic controls on the occurrence of gas hydrate in nature and to assess the technologies needed to safely produce gas hydrates.” Jack Lambert Womens Jersey
India discovers producible natural gas hydrates: US agency
India has discovered a large, highly enriched accumulations of natural gas hydrates in the Bay of Bengal that has the potential to be tapped, a top US agency which helped in this major discovery has said. “Advances like the Bay of Bengal discovery will help unlock the global energy resource potential of gas hydrates as well help define the technology needed to safely produce them,” said Walter Guidroz, coordinator of the US Geological Survey (USGS) Energy Resources Program coordinator. USGS said this discovery was the result of the most comprehensive gas hydrate field venture in the world to date, made up of scientists from India, Japan and the US. The scientists conducted ocean drilling, conventional sediment coring, pressure coring, downhole logging and analytical activities to assess the geologic occurrence, regional context and characteristics of gas hydrate deposits in the offshore of India, it said yesterday. This research expedition was called the Indian National Gas Hydrate Program Expedition 02. It is second joint exploration for gas hydrate potential in the Indian Ocean. The first expedition, also a partnership between scientists from India and the US, discovered gas hydrate accumulations, but in formations that are currently unlikely to be producible, a statement said. Natural gas hydrates are a naturally occurring, ice-like combination of natural gas and water found in the world”s oceans and polar regions. Although it is possible to produce natural gas from gas hydrates, there are significant technical challenges, depending on the location and type of formation. USGS said the second expedition focused the exploration and discovery of highly concentrated gas hydrate occurrences in sand reservoirs. The gas hydrate discovered during the second expedition are located in coarse-grained sand-rich depositional systems in the Krishna-Godavari Basin and is made up of a sand-rich, gas-hydrate-bearing fan and channel-levee gas hydrate prospects. The next steps for research will involve production testing in these sand reservoirs to determine if natural gas production is practical and economic, it said. “The results from this expedition mark a critical step forward to understanding the energy resource potential of gas hydrates,” said USGS Senior Scientist Tim Collett, who participated in the expedition. A.Q. Shipley Authentic Jersey
ONGC, Cairn India demand halving of cess on crude oil
State-owned ONGC and private sector Cairn India have demanded halving of cess on domestic crude oil production saying their burden has actually gone up after Finance Minister Arun Jaitley’s Budget exercise aimed at reducing the levy. Oil and Natural Gas Corp (ONGC) paid Rs 4,500 per tonne cess on crude oil it produced from almost all its fields including prime Mumbai High, till February 2016. In Budget for 2016-17, Jaitley changed the cess from specific levy to an ad valorem rate of 20 per cent of crude oil price. However, at the current oil prices, ONGC and other oil firms like Cairn are paying more than Rs 4,500 per tonne cess. Sources privy to the development said the two firms have made representation to the government saying the Rs 4,500 per tonne equals to 20 per cent ad valorem duty when oil price crosses USD 44 per barrel. And with oil prices ruling higher, the net impact of an exercise which was aimed at giving relief to domestic oil producers, is that they have to pay more now, they said. Historically, the Oil Industry Development (OID) cess was first levied in 1970s at the rate of Rs 60 per tonne. Over the next decades it was hiked few times. It was Rs 900 per tonne, when India opened up its economy in 1991 and was doubled to Rs 1,800 in 2002. In 2006, it was hiked to Rs 2,500 per ton when international oil price was USD 60 per barrel. It was further hiked to Rs 4,500 per ton in 2012 when oil pries were over USD 100 per barrel. Sources said the levy translated into no more than 10 per cent of the oil prices even when oil prices were at their peak. But when international oil prices slumped to decade low, putting question mark over fresh investments in exploration, Jaitley proposed to move to ad valorem rate of 20 per cent. The move was to give relief to upstream firms but has turned out to be reverse, they said. ONGC and other upstream players have sought reduction in cess to 8 to 10 per cent as the purpose of Budget exercise to rationalise the cess has been defeated even at current moderate crude prices. In a low crude oil price regime, cess imposes a significant economic burden on producers, they said. In addition to cess, other statutory levies like royalty (10-20 per cent), VAT (5 per cent) and Octroi (4.5 per cent) are also payable on production/sale of crude oil. At prevailing crude oil prices, with the revised rate of 20 per cent fro cess, ONGC would end up paying almost half of crude prices towards statutory levies, source said. Moreover, since both royalty and OID cess are production levies and not pass through to buyers, it adds up in cost of production of crude oil. William Jackson Jersey
Cairn-Vedanta merger to happen by 2016-end, says Anil Agarwal
Mining mogul Anil Agarwal today said the merger of his group’s cash-rich oil firm Cairn India with its parent, Vedanta Ltd is likely to be completed by year end to create India’s largest diversified natural resources company. Debt-laden Vedanta Ltd, previously known as Sesa Sterlite Ltd, had on Friday upped its offer to buy out the minority shareholders in its cash-rich subsidiary, Cairn India. Instead of its June 2015 offer of one Vedanta share for each Cairn India share, plus a preference share worth Rs 10 that can be redeemed after 30 days or 18 months, the mining group has offered three more preference shares. “I want to create a true natural resource company out of India that can rival the likes of Bralia’s Vale SA, Rio Tinto of the US or BHP Billiton of Australia,” Agarwal, Chairman of Vedanta Group told PTI in an interview. The merger of India’s biggest private oil producer with the country’s top producer of aluminum and copper will give India “a natural resources company of its own,” he said. The deal, he said, is likely to concluded by end-2016. “Oil prices have fallen 27-30 per cent and mineral prices have fallen 7-8 per cent. The merger will help balance the risks,” he said. Agarwal, 63, who rose from running a scrap-metal business to become one of the India’s wealthiest tycoons with his business empire spanning across mining and petroleum, said the group will keep investing across its businesses. “It is very important for India to create a very value creating company, risk diverse company and that is what is happening in the world and we wanted to have oil and gas, copper, zinc, iron ore, aluminium to be one company and that is what the merger proposed,” he said. In the sweetened offer announced Friday, Vedanta offered minority shareholders of Cairn India one equity share and four redeemable-preference shares with a face value of Rs 10 each. The preference shares will carry a coupon of 7.5 per cent and tenure of 18 months. While the company said the revised deal implies a 20 per cent premium to the one-month volume weighted-average price of Cairn shares, it translates into 9.1 per cent premium over share’s Friday closing. The bettering of the deferred cash payout translates into giving away about Rs 3,400 crore of Cairn India’s cash to its shareholders. The payout is 15 per cent of Cairn’s cash pile. Vedanta is said to be wanting to use Rs 23,290 crore cash lying with Cairn to pay off part of its Rs 77,952 crore debt. It had in May rolled over a controversial USD 1.25-billion loan taken from the cash-rich oil explorer Cairn India in July 2014. Vedanta Ltd is India’s most-indebted base metals company. For the merger to go through, half of the minority shareholders, who together make up for 40 per cent of the Cairn equity, have to approve the deal. Miro Heiskanen Womens Jersey
NoC must if fuel pumps want to switch business
Petrol pumps and LPG retail outlets in Bengaluru and other urban areas may have to seek a no objection certificate (NoC) from the oil marketing companies if they wish to close down the business and switch to another activity. In other words, oil companies too will have to approve any change in land use by the landlord. The urban development department’s circular to this effect to BDA and other authorities in the state follows a letter from the ministry of petroleum and natural gas, which wants retailing of petrol, diesel and LPG to be treated as essential activity. RULE FOR PUBLIC SECTOR COS The new rule applies to outlets affiliated to public sector oil marketing companies. The circular does not say anything about the retail outlets of private brands. The ministry’s letter mentions about steep real estate prices coming in the way of availability of plots for retailing activities. The ministry wants the state to treat these outlets as essential public service, and earmark space for setting up outlets in the local planning area. DEALERS’ BODY NOT GAME FOR IT Bangalore Petroleum Dealers Association, however, has expressed anguish at the new NoC rule. The pumps are closing down, according to association president BR Ravindranath, because the landlords don’t want to renew the lease in view of the poor rentals the PSU oil firms pay. “They want to pay peanuts for the land they get. Instead of making rentals attractive, they come up with irrational rules such as this infringing upon the fundamental rights of citizens,” he said. The fuel station next to Forum mall in Koramangala, he added, gets a monthly rental of ` . 6,120 for a plot measuring 20,000 sqft while the market rate could be a few lakhs. “The oil marketing companies are making no efforts to retain the landlords, and as a result, more than a dozen pumps have closed down in the past two years,” the president said. CENTRE’S ORDERS The Centre has also asked the state to notify the facility as allowable use in all non-residential zones and agriculture zones in the master plan. GREEN BELT The urban development department has also asked the planning authorities to earmark a green belt of 300 m around the petroleum and chemical installations in all new master plans, and implement this if the existing plans already don’t have such a provision. Going by the circular, the BDA and other urban bodies will now have to earmark exclusive plots to enable public sector oil marketing companies set up petroleum and LPG retail outlets. The Union government wants the state to revisit the previously-approved master plans and reserve land for fuel outlets by reallocating land reserved for other purposes that are less essential. Josh Ferguson Womens Jersey
GAIL India in talks with Gazprom to renegotiate gas deals
GAIL India Ltd is in talks with Russia’s Gazprom to delay and renegotiate a 20-year gas purchase deal undercut by low spot prices, sources familiar with the matter say, as weak demand at home forces it to stall some contracted supply. Shipments under the deal, initially expected to start in 2018/2019, are linked to crude oil prices which are rising while gas prices are expected to stay subdued for longer as major new production plants in Australia and the United States start up. The price mismatch is injecting tensions into long-term LNG agreements, driving a wedge between buyers and sellers such as GAILBSE -1.04 % and Gazprom’s Marketing & Trading, industry sources say. GAIL is also trying to juggle a rapidly expanded LNG book after embarking on a buying spree between 2011 and 2013 when the fuel was scarce and prices kept hitting new peaks. GAIL is seeking a meeting with Gazprom officials to discuss in greater detail delaying the deal and revising its oil-linked price, a source with knowledge of the matter said. By exploiting what GAIL sees as an inconsistency in its contract with Gazprom, GAIL hopes to revise key terms under the 2.5 million tonne/year deal, according to industry sources. Under the 20-year accord, signed in 2012, Gazprom said it would source its supply from the now-cancelled Shtokman LNG export plant in the Barents Sea, the sources said. The Gazprom subsidiary now aims to source supply from its global portfolio, including a share in the forthcoming Yamal LNG project in the Arctic peninsula, which GAIL claims constitutes breach of contract, industry sources said. A Gazprom source adds that GAIL is not proposing scrapping the entire deal. “The Indians are looking to postpone most deliveries and this is what talks are focusing on,” the Gazprom source said adding that Gazprom gas is not the most expensive in GAIL’s supply mix. “They have over committed,” the Gazprom source said. At current oil prices, Gazprom’s LNG will cost more than $7 per mmBtu while spot cargoes fetch around $5 per mmBtu, a big difference in a price-sensitive market like India, sources said. Apart from a deal with Gazprom, GAIL is also saddled with about 5.8 million tonnes of LNG a year from the U.S. which is expected to begin ramping up within the next two years. The cost of liquefying gas and exporting it as LNG from the United States to India currently turns out at $4.62 per mmBtu this winter, a still attractive level for Indian buyers, but analysts say the trade could be loss-making later this decade. The Indian firm has thus far managed to sell 2 million tonnes annually from its U.S. portfolio, part of which went to Royal Dutch Shell, Gail Chairman B.C. Tripathi has said, as Indian customers struggle to absorb or afford LNG from the United States. GAIL did not respond to a Reuters email seeking comment. Gazprom declined immediate comment. Cheap spot cargoes are streaming into India at an unprecedented rate – overall LNG imports are up 40 percent on last year, helping displace demand for inflexible long-term deals. India wants to migrate gradually to a gas-based economy and lift share of the cleaner-burning fuel in its energy mix closer to the world average of 23.8 percent from a current 6.5 percent. Last year India renegotiated a long-term LNG supply deal with Qatar’s Rasgas, nearly halving the price and avoiding a $1.5 billion penalty fee for lifting less gas than agreed as customers preferred cheaper spot supplies. It showed how tumbling oil prices and a global gas glut are compelling exporters to offer better deals to retain their share in global energy trade. India’s biggest LNG importer Petronet is also seeking to renegotiate its costliest import deal with ExxonMobil for 1.4 million tonnes annually from the Gorgon project in Australia, industry sources say. That deal, which is due to start in the first quarter of 2017, is also oil-linked at an indexation level of 14.5 percent to a barrel of crude, or over $7 per mmBtu – a hefty premium to current spot prices. Jaime Garcia Womens Jersey
Government exploring ways to bring petro products under DBT: Dharmendra Pradhan
Government is exploring ways to bring the petroleum products under the ambit of the proposed GST with the consent of states, Petroleum Minister Dharmendra Pradhan said today, announcing plans to implement DBT scheme in kerosene. Pradhan said in Lok Sabha that so far the petroleum products have been kept out of the purview of the proposed Goods and Services Tax but an in-principle decision has been taken to bring petroleum products under it. “The petroleum products will be brought under the GST but I don’t know when. Since we have a federal structure, we have to get the consent of the states. We are exploring various ways,” he said during Question Hour. The Minister said many states are against bringing the petroleum products under the ambit of GST as it was a huge revenue generating source for them. Pradhan said except Tamil Nadu, Mizoram and a few Union Territories, most of the states have increased taxes on petroleum products and it was difficult to bring a uniform tax rate across the country. The Minister said government was planning to implement the Direct Benefit Transfer scheme in kerosene after its successful implementation in LPG. “75 per cent profits to be incurred through the DBT in kerosene would be distributed among the states,” he said. Pradhan said plans are afoot to make Haryana a kerosene- free state after making Delhi and a few other UTs kerosene-free. Replying to a supplementary, the Minister refuted allegations that despite a fall in the international crude prices, retail prices in the country have not reduced saying petrol prices were slashed 27 times and diesel prices 21 times in last two years. Pradhan said despite international crude prices going down, cost of refining, transportation and other costs have not gone down. He said India being a welfare state, the benefits are being passed on to the people by way of better roads, good hospitals and other facilities. Chuck Foreman Authentic Jersey