PDS kerosene price hike will reduce under recoveries by ₹7.60 billion in FY17: ICRA
Rating agency ICRA on Wednesday said the government decision to hike retail prices of subsidised kerosene by 25 paise every month will help cut down the gross under recoveries on the fuel by ?7.60 billion in 2016-17. The impact of the move on the exchequer would be even more in 2017-18, when it would help lower the gross under recoveries on kerosene by ?20.40 billion. “The upstream companies would be major beneficiaries of the reform especially at current or higher level of crude oil prices,” it said. As per existing under-recovery sharing formula, the government bears kerosene subsidy up to ?12 per litre, while the balance is borne by the PSU upstream companies – ONGC and Oil India Ltd. In the first such move in five years, retail prices of subsidised kerosene were hiked by 25 basis points on July 1. It followed a government decision to allow state-owned oil companies to raise the price of kerosene by 25 paise a litre each month for 10 months to cut the subsidy burden. Kerosene subsidy is estimated at about ?120 billion in the current fiscal, if global crude oil prices remain within the $40 to $50 per barrel. In 2015-16, kerosene accounted for 41.7 per cent of the total petroleum subsidy of ?275.71 billion. According to the Ministry of Petroleum and Natural Gas, the under recoveries on subsidised kerosene is estimated at ?13.12 per litre in July as against ?11.73 last month. Ryan Spooner Authentic Jersey
Essar all set to become India’s first shale fracking company, awaits government guidelines
Essar Oil can’t wait to become the first company in the country to produce shale gas, and its coal bed methane block at Ranigunj in Bengal is all set for the task. The company has done all the preparations and is waiting for the government guidelines. Ranigunj is spread over 500 square kilometre area, where Essar Oil began explorations in April 2009. “We have been preparing ourselves in anticipation that regulations would allow us so that there is minimum gestation period,” Essar exploration and production CEO Manish Maheswari said. The government notified the Hydrocarbons Exploration Licencing Policy in March 2016. Before that, shale gas was in the exclusive domain of public sector oil companies. But under the new regulation, a block operator can explore and extract both conventional as well as non-conventional resource from the same acreage. “While policy has been notified, Directorate General of Hydrocarbons is formulating the guidelines. We need to see whether we would be allowed to extract shale from our block but we believe the government recognises the complementarity of producing CBM as well as shale gas,” Maheswari said. To illustrate, CBM extraction gives out water while shale fracking needs water. Again, CBM production can only be ramped up gradually after de-watering while in case of shale, production is high in the initial years. “So, we can front-end shale production and back-end CBM production, thereby achieving an optimum utilisation of infrastructure. Also, while we need to drill separate wells, there would be better utilisation of land footprint,” he said. Essar’s Raniganj (East) Block in Bengal recently became India’s first CBM asset to cross 1 million standard cubic metres per day (scmd) production milestone. Besides Ranigunj, Essar has CBM blocks at Rajmahal in Bengal, Sohagpur in Madhya Pradesh, and Talcher & IB in Orissa. While the CBM gas in place is estimated at 4.14 trillion cubic feet, the shale gas-initial-in-place is almost double at 8 tcf. In Essar’s CB-ON/03 block at Mehsana, there is 0.7 tcf of CBM and 2.6 tcf of shale reserve. In Ranigunj, 300 wells have been drilled of which 192 are gas producing. It has laid 60 kilometres of gas evacuation pipeline with 30 kilometers dedicated to Matrix Fertilizer. Essar has targeted to produce CBM at the rate of 2 million scm per day by FY16-17 and 3 million scm per day by mid FY2017-18 from Raniganj. Cumulative investments of Rs 33 billion have been made in the block till date and another Rs 10 billion investment is expected. John Miller Womens Jersey
Mumbai High production: Senior babus in dock as CAG report says Rs 260 billion loss
The Comptroller and Auditor General (CAG) report that India lost oil & gas production worth over Rs 260 billion due to delay in awarding the Ratna and R-Series hydrocarbon blocks, 130 km off the Mumbai coast, has brought the Negotiating Team of Secretaries (NTS) under the scanner of the Public Accounts Committee (PAC). At a meeting on Tuesday, the PAC, headed by Congress leader K V Thomas, was of the view that the country should have a mechanism to review the efficiency of high-level government officials associated with inter-ministerial groups or high-level groups independently of the help of regular bureaucracy, sources said. As the issue was taken up, Thomas is understood to have said that he was unable to understand the NTS, which comprised senior civil servants, keeping such a “calculated silence and inaction, if not indifference”. The panel is seeking the Annual Confidential Report (ACR)/Annual Performance Assessment Report (APAR)s of all the officers in the NTS and those assisting them, the sources said, adding it was of the view that being graded outstanding while the result was “apathy, inefficiency and negligence” could not co-exist. The NTS included secretaries in ministries of petroleum and natural gas and finance and chairman and managing director of ONGC. The CCEA had in 1999 approved negotiations to be held by the NTS for finalising and concluding Production Sharing Contract (PSC) within six months. The NTS set a deadline of February 2000. The PAC pointed out that the process of reaching up to a decision to finalise the PSC was not completed even after 23 years of the policy decision– 19 years of award and 16 years of approval of Cabinet Committee on Economic Affairs. The PAC said it was the “rarest of rare cases of extraordinary negligence and inefficiency”. Bids for private participation were invited as early as 1993 and the CCEA approved the award of contract to the Consortium of Successful Bidders (COSB) in 1996. Not a single barrel of oil was extracted since 1994 when the ONGC stopped production. The government had issued notice inviting development of R and RS fields in 1993 and a year later ONGC had stopped production of petroleum from these fields. The parliamentary panel noted that the government had cancelled the award in 2016, after a period of 20 years, which saw six governments at the Centre. In 2015, the CAG report had said the delay in taking a final decision on various matters was an indication of lack of seriousness in the approach of the ministry of petroleum and natural gas towards reaching at a final decision on this issue, particularly when an already developed and producing field was lying closed for more than 20 years, in contrast to the objectives of the policy to attract private investment for upstream oil sector. John Matuszak Authentic Jersey
Gas migration row between ONGC- Reliance: Government says Shah Panel can decide on compensation
The petroleum ministry has told the Justice AP Shah committee on the migration of gas from ONGC-held gas blocks to adjacent fields of Reliance Industries that its remit includes deciding on possible compensation, if any, to the government as well over any “unfair enrichment”. That effectively rules out any other remedy under the production-sharing contract (PSC) or the possibility of fresh arbitration between Reliance Industries and the government, clearing the way for the single-member committee to issue its report on the matter by the end of July. The petroleum ministry’s June 7 communication to the panel, which is not in the public domain, came after Directorate General of Hydrocarbons (DGH) contended the government was the sole custodian of natural resources and compensation if any should go to the Centre rather than ONGC. Shah then issued an order regarding the matter. “The issue before it is the dispute between ONGC and RIL which includes the question of whether there exists a claim for unjust enrichment by ONGC against RIL,” Shah said in a May 9 ruling. “The committee clarified its mandate does not extend to considering claim, if any, between the government and RIL. If the government has any claim against RIL it can always resort to appropriate remedy under the production-sharing contract.” DGH’s submission had prompted the Shah panel to ask the government for its view. According to RIL, the intervention by DGH meant the matter needed to be enquired into afresh. RIL believes that any claim made by government against it would need to be resolved in another forum and therefore disassociated from the committee in light of new claims by DGH,” Shah recorded in the May 9 order. Responding to the May 9 order, the petroleum ministry assured the committee on June 7 that the government is in fact included under the terms of reference (ToR). These allow the panel to quantify enrichment, if any, to RIL held blocks and to “make good the loss to ONGC/government on account of such unfair enrichment to the contractor”. RIL also wrote to the petroleum ministry seeking fresh discussions on the subject. ONGC has sought compensation from RIL for what it says is the loss of more than 18 billion cubic metres (bcm) of gas that migrated from its Krishna-Godavari Basin fields as well as the gas left stranded due to allegedly poor reservoir management by RIL. It’s seeking the cost of the gas with 18% interest. RIL declined to comment on the matter. “It would be inappropriate to comment on the submission itself in deference to Justice Shah’s instructions to the parties to maintain strict confidentiality,” the company said in an email to ET. “We have already made our detailed submission to the Hon’ble Shah Committee regarding the filing made by (Canadian partner) Niko. Steve McNair Womens Jersey
Hydrocarbon exploration: PAC pulls up officials for excessive delay
Public Accounts Committee of Parliament has slammed Secretaries of Government of India for inordinate delay in deciding the issue of exploration of Ratna and R series hydro carbon fields by private sector and demanded to see the annual confidential reports and annual performance reports of of all officers in the Negotiating Team of secretaries and those assisting it. Calling it the “rarest of rare cases of extraordinary negligence and efficiency,” the PAC headed by K V Thomas on Tuesday told the representatives of Ministry of Petroleum and Natural Gas and Oil and Natural Gas Corporation that appeared before it that the process of reaching up to a decision to finalilse the Production Sharing Contract was not completed even after 23 years of policy decision, 19 years of award and 16 years of approval of Cabinet Committee on Economic Affairs. Jordan Akins Authentic Jersey
Aim of bidding for small fields is to boost production: Dharmendra Pradhan
Union Minister Dharmendra Pradhan said that the aim of the bid round for the upcoming auction of 46 discovered small gas and oil fields is to boost production and reduce the dependence on imports by 10 per cent by 2022. The minister of state for petroleum and natural gas, who is visiting Houston to hold roadshows to promote bidding of oil fields, met top executives, lobbyist and Indian-Americans associated with oil and gas industry yesterday at a dinner here hosted by Council General of India, Houston, Anupam Ray. Starting the first of the two planned roadshows here to auction 46 discovered small gas and oil fields, Pradhan said he is confident of receiving good response for blocks. He said the aim of the bid round is to enhance the production of oil and gas, in compliance with the government’s mission of reducing dependence on imports by 2022 by 10 per cent from the current 78 per cent, officials said. India will seek participation of global oil and gas firms in its upcoming auctions for discovered small fields, as Pradhan will meet American oil and gas industry leaders during his week-long visit aimed at attracting FDI and new technologies in the Indian exploration and production sector. Pradhan will seek cooperation from US’ oil and gas industry for infusion of new and innovative technologies and best practices for unlocking its indigenous hydrocarbon potential. Pradhan had a brief one-on-one meetings with technology company heads, energy company executives, various Indian-American organisations of interest, Indo-American Chamber of Commerce of Greater Houston, University of Houston, Reliance Holding USA, US-India Chamber of Commerce DFW, Infosys, Vinmar International, Mahindra USA. Earlier in the day, Pradhan inaugurated the ‘Data Centre’ which can be accessed by all interested investors to view the technical data related to the small fields being offered under the upcoming bid round. Chief executive officers (CEOs) of all big firms and personnel from embassies are likely to attend the launch of Discovered Small Fields (DSF), according to the DGH. Buster Skrine Jersey
Gas migration row between ONGC- Reliance: Government says Shah Panel can decide on compensation
The petroleum ministry has told the Justice AP Shah committee on the migration of gas from ONGC-held gas blocks to adjacent fields of Reliance Industries that its remit includes deciding on possible compensation, if any, to the government as well over any “unfair enrichment”. That effectively rules out any other remedy under the production-sharing contract (PSC) or the possibility of fresh arbitration between Reliance Industries and the government, clearing the way for the single-member committee to issue its report on the matter by the end of July. The petroleum ministry’s June 7 communication to the panel, which is not in the public domain, came after Directorate General of Hydrocarbons (DGH) contended the government was the sole custodian of natural resources and compensation if any should go to the Centre rather than ONGC. Shah then issued an order regarding the matter. “The issue before it is the dispute between ONGC and RIL which includes the question of whether there exists a claim for unjust enrichment by ONGC against RIL,” Shah said in a May 9 ruling. “The committee clarified its mandate does not extend to considering claim, if any, between the government and RIL. If the government has any claim against RIL it can always resort to appropriate remedy under the production-sharing contract.” DGH’s submission had prompted the Shah panel to ask the government for its view. According to RIL, the intervention by DGH meant the matter needed to be enquired into afresh. “RIL believes that any claim made by government against it would need to be resolved in another forum and therefore disassociated from the committee in light of new claims by DGH,” Shah recorded in the May 9 order. Responding to the May 9 order, the petroleum ministry assured the committee on June 7 that the government is in fact included under the terms of reference (ToR). hese allow the panel to quantify enrichment, if any, to RILheld blocks and to “make good the loss to ONGC/government on account of such unfair enrichment to the contractor”. RIL also wrote to the petroleum ministry seeking fresh discussions on the subject. ONGC has sought compensation from RIL for what it says is the loss of more than 18 billion cubic metres (bcm) of gas that migrated from its Krishna-Godavari Basin fields as well as the gas left stranded due to allegedly poor reservoir management by RIL. It’s seeking the cost of the gas with 18% interest. RIL declined to comment on the matter. “It would be inappropriate to comment on the submission itself in deference to Justice Shah’s instructions to the parties to maintain strict confidentiality,” the company said in an email to ET. “We have already made our detailed submission to the Hon’ble Shah Committee regarding the filing made by (Canadian partner) Niko.” ONGC’S COMPENSATION CLAIM ONGC has submitted a breakup of its compensation claim to the panel, ET has learnt: “RIL should be asked to compensate the state explorer for 9.476 bcm of gas that RIL has already produced, 1.435 bcm of estimated gas production from 2016 to 2019, and 7.3359 bcm of gas on account of poor reservoir management.” The state-owned company stayed away from the ToR debate and on July 8, in a fresh communication to the Shah panel, reiterated its claims. RIL had initially boycotted the Shah panel proceedings before reversing its stand in February. The panel was established last year. “It is RIL’s position the committee has no power to adjudicate any matters or issues concerning the claims of ONGC and any such recommendation of the committee, if made, would in no manner be binding on RIL,” the company had said in February. “Nothing in the D&M report points towards any wrongdoing by RIL.” The reference is to the November 2015 report by US-based consultant DeGolyer and MacNaughton (D&M) that said about 12 bcm of ONGC’s gas had migrated to RIL’s fields. The Shah committee is examining the findings of this report. The questions before the panel to be decided upon are acts of “omissions and commission on the part of all stakeholders, undue enrichment to block KGDWN-98/3 (held by RIL), and compensation, if any, to be paid to ONGC/government”. In its submission to the panel, ONGC said RIL and the regulator had known about the fields being connected more than a decade ago. “RIL and DGH had full prior knowledge of continuity and connectivity of Pliocene channels of all the blocks in question, and that there were acts of omission on the part of RIL right from 2002,” ONGC told the panel, ET has learnt. “DGH as regulatory authority should have initiated timely discussions/actions under PSC (production-sharing contract), P&NG (petroleum and natural gas) rules.” ONGC subsequently submitted another appraisal report prepared by D&M in 2003 that was included in Niko’s annual disclosure to the Canadian Stock Exchange, which said, “A portion of the field accumulation straddles the western boundary of the block (ONGC)”. Further, the state explorer told the panel that RIL and Niko Resources had prior knowledge that their development plan for exploration in KG Basin will deplete gas reserves in ONGC’s block. However, RIL is believed to have rejected this and told the Shah committee that the report reflected a “simplistic consideration of seismic data and very limited well data confined to discover wells in Block KG-DWN-98/3 (Block KG-D6), with no modelling but rather with a reliance on D&M’s general experience in geology”. ONGC would have had access to this information and could have raised the matter with RIL or DGH at the time rather than 10 years later, RIL said in its communication. “Up until this point in time, ONGC had yet to drill wells and discover any hydrocarbon in this area,” RIL told the committee. “As RIL has explained to the committee, seismic data may suggest continuity of channels across block boundaries, but is entirely insufficient in conclusively establishing presence of reservoir and reservoir connectivity.” Cincinnati Bengals Womens Jersey
GSPC asks ministry, Bharat Petroleum to make Sabarmati Gas ‘more active’
Gujarat State Petroleum Corporation (GSPC) has written to the Union ministry of petroleum and to Bharat Petroleum (BPC), its joint venture partner in Sabarmati Gas (SGL) to make the latter’s management more active. “The idea is to see that SGL operates at par with Gujarat Gas, the other CGD (city gas distribution) entity of the state government. We want that the operations of SGL be as aggressive as Gujarat Gas. The Centre and BPC have agreed and further deliberations are on,” said Saurabh Patel, minister of energy and finance, Government of Gujarat. J N Singh, additional chief secretary, finance, and managing director of GSPC, said the letter had been written with an intention to expedite expansion activity in the CGD business in the state. While GSPC with its subsidiary, GSPL, holds 25.01 per cent stake in SGL, Bharat Petroleum holds another 25 per cent, with the rest held by institutional investors. SGL operates in the domestic, industrial and commercial gas segments through a piped natural gas network and compressed natural gas (CNG) outlets. The service area is the north Gujarat districts of Gandhinagar, Mehsana and Sabarkantha. The state has plans to double the domestic gas consumer base from the current one million-plus consumers. The year will also see 45-50 CNG stations being added. In the past five years, domestic gas consumers of SGL rose by 87 per cent, up from 46,128 in 2011 to 86,427; CNG stations increased from 16 to 38. For 2014-15, net sales were Rs 910 crore. Apart from domestic gas consumers, SGL services 244 industrial and 471 commercial gas consumers in Gujarat. Jack Johnson Authentic Jersey
Kerosene prices hiked by 25p, to pad-up OMC net; oil subsidy to fall
The government’s decision to effect monthly hikes in PDS kerosene prices by 25 paise a litre between July 2016 and April 2017 would reduce the PSU oil marketing companies’ under-recoveries on the fuel by R2,100 crore, Nomura said, adding that this would mean R1,190 crore savings on the government’s oil subsidy, given the current formula for sharing of the burden between the government and upstream oil companies, reports fe Bureau in New Delhi. Icra estimated the reduction in under-recoveries for FY17 as a result of the move at R760 crore and R2,040 crore for next fiscal. As per Icra’s earlier estimates, subsidy on kerosene was expected to be in the range of R9,000-12,500 crore in FY17 assuming crude price in the $40-50 per barrel band. In recent years, the oil marketing companies’ under-recoveries on the sale of petroleum products have reduced steeply, thanks to decontrol of diesel and the DBT scheme on LPG, besides benign crude prices. Under-recoveries on PDS kerosene, however, remained relatively sticky as its prices continued to be controlled, resulting in a doubling of their share in total under-recoveries between FY14 and FY16. While upstream firms was to escape the burden of under-recoveries for crude price up to $45 per barrel, post the monthly price hike policy, they may not have to bear any burden for crude price up to $50-52 a barrel, Icra predicted. “With monthly price revisions, the burden on PSU upstream companies is expected to be lower by Rs 700-760 crore in FY17 which may be 2.5% of the combined profits of ONGC and OIL reported in FY16,” it said. Nazair Jones Authentic Jersey
Singapore GRMs decline sequentially, Indian refiners expected to follow suit
Singapore gross refining margins (GRM), a benchmark of profitability for Indian refining companies, declined for the June quarter, sequentially as well as year-on-year (y-o-y). The measure came in at $5 per barrel compared to $7.7 a barrel in the March quarter and $8 a barrel in the June 2015 quarter. Margins declined primarily on account of decline in gasoline product cracks. Diesel cracks, on the other hand, showed some sequential strength. Cracks refer to the difference between crude oil price and refined product price. Gasoline cracks fell quarter-on-quarter (q-o-q) to $14.6 per barrel from $18-20 a barrel levels in the last four quarters, calculated Bank of America Merrill Lynch (BoAML). “Diesel cracks recovered to $10.3 per barrel from a six-year low of $9.1 per barrel in March quarter,” pointed out BoAML analysts in their June quarter preview, adding that all other cracks were sequentially lower. This trend would reflect in the Indian oil refining companies’ performance. They are broadly expected to report lower GRMs q-o-q. Reliance Industries Ltd (RIL) had reported a GRM of $10.8 a barrel for the March quarter. For the June quarter, brokerages expect the company to report sequentially lower GRM. Citi Research expects RIL’s GRM at $9.5 per barrel, while Edelweiss Securities Ltd pegs it at $10 a barrel. This would be RIL’s first sequential drop in profit after tax after five quarters of consistently improving operating performance, attributable almost entirely to refining, pointed out analysts from Citi Research. However, RIL’s petrochemicals business is expected to compensate for the lacklustre performance of the refining segment. Investors will be watching out for commentary on telecom business too. Inventory gains could help the performance of state-run refining and oil marketing companies—Bharat Petroleum Corp. Ltd (BPCL), Hindustan Petroleum Corp. Ltd (HPCL) and Indian Oil Corp. Ltd (IOCL). Analysts from Jefferies India Pvt. Ltd expect a weaker quarter for BPCL and HPCL (q-o-q and y-o-y) due to lower refining and marketing margins, though inventory gains should moderate the impact to some extent. However, IOCL’s GRM and earnings are expected to improve sequentially due to reversal of its high inventory losses in the March quarter. Meanwhile, oil producing companies—Oil and Natural Gas Corp. Ltd, Oil India Ltd and Cairn India Ltd—could well see sequential improvement in price realization, given the improvement in broader crude prices. Trey Burton Jersey