Hindustan Petroleum Corporation Limited (HPCL), a major stakeholder in the proposed refinery cum petrochemical complex at Pachpadra, may give in to the Rajasthan government’s demand to increase the state’s share from 26% in HPCL-Rajasthan Refinery Limited (HRRL).
Chief minister Vasundhara Raje vowed to renegotiate the terms under which the previous Congress government persuaded HPCL to set up the refinery. In her budget speech, Raje had targeted the conditions in the agreement and termed it as unique and against the interest of the state. She pointed out that despite giving land, interest free loan of Rs 3,736 crore each year (for 15 years) and oil wells, the state controls only 26% while HPCL has stake of 76%.
According to HPCL officials, the state government’s share can be increased from 26% but the funding pattern must remain the same. “Alteration in shareholding pattern can be done but should not impact the viability gap funding (VGF),” said a senior official of HPCL.
However, any rollback on VGF will lead to an uncertainty over the project.
As a part of the package, the state government agreed on an assistance of Rs 3,736 crore annually to HPCL for 15 years. The financial package is provided as VGF which made the project possible.
Raje has vociferously attacked the Congress government for dolling out such incentives. She maintained financial assistance is a burden which the Congress government had put on the exchequer. “An appraisal report reveals that within 15 years of its commercial produc tion, profit of more than Rs 68,000 crore will be earned.
That too when profits earned from the investment of this money is not taken into account. Yet, the previous government committed to give over Rs 56,000 crore as interest free loan to the HPCL,” Raje said.
The HPCL officials refute the allegeations and stress that refinery remains unviable without financial assistance. In a letter to the ministry of petroleum before signing the MoU, the company termed the project unvia ble unless the government of India assures full supply of crude oil produced from the Rajasthan block. In absence of oil supply, the company asked for VGF so that it can import it from other countries.
“Project was thoroughly examined by the previous government. They agreed only after getting convinced that project can be conceived under certain conditions. We are ready to explain these terms to the present government more broadly so that better understanding can be developed,” added the official.
Meanwhile, the state government is still in process of reviewing the project and has not communicated with the HPCL expressing their reservations.
“We have not sent any proposal to them so far,” said Ashok Singh, principal secretary, mines and petroleum department. “We are internally firming up the proposals,” he added.
(Source: Times of India July 26, 2014)
INDIA TO JOIN SELECT BAND OF NATIONS TO STORE CRUDE OIL
CHENNAI: Deep inside the earth under the hills of Visakhapatnam, tunnels 7-km long, as all as a 10-storey building and as wide as twelve Mercedes cars, are all set to fill themselves with a smelly, sticky guest – crude oil. It is in this huge dug-out, large and safe from the wickedest missiles, India will hold 1.3 million tonnes of crude oil as a ‘strategic reserve’. Some on-ground finishing works and testing remain, and then the caverns will get their first crude – likely by the end of the year.
To create the caverns, 7.8 million cubic metres of rock, weighing 21.5 million tonnes had to be scooped out of the earth, says Rajan Pillai, CEO and Managing Director of Indian Strategic Petroleum Reserves Ltd, a wholly-owned subsidiary of Oil Industry Development Board. The debris lies as mountains, merging with the local landscape. The mouths of the tunnels have just been sealed – with concrete plugs three metres thick. Water, carefully let into the rocks around the tunnel at high pressure, will prevent the crude from seeping out – a method called ‘hydraulic confinement’.
Visakhapatnam is one of the three strategic reserve caverns being created by Indian Strategic Petroleum Reserves Ltd. The other two – at Mangalore (1.5 million tonnes) and Padur (2.5 m t), both on the western coast of Karnataka – are also nearing completion, waiting only for the pipeline connection from the nearest ports. In all, the three projects cost about Rs. 4,000 crore.
While India is not the first country to build underground caverns to store crude oil, it is in the company of a select few – the US, Japan, China, Korea and the Scandinavian countries. It is fascinating to imagine huge caverns deep below as a defence against attacks, but the truth is that they are also the cheapest way of storing petroleum products. “You don’t require large swathes of land, giant metal tanks and a lot of security, there is much less evaporation and, since the caverns are built much below the sea level, it is easy to discharge crude into them from ships,” says AK Naithani of the National Institute of Rock Mechanics, Kolar, Karnataka.
In Visakhapatnam, the top of the tunnels are 30 metres below the mean sea level, which could be a hundred metres below the ground.
The three storage facilities can hold 13 days’ stock of the country’s needs. The International Energy Agency recommends 90 days. Even counting the petroleum stock of the refineries and in transit, inventory would be far short of IEA’s recommendations, says Pillai.
There is need to build more. There is a Phase-II in the works, which seeks to create 12.5 million tonnes of storage capacity, at Padur, Chandikhol (Odisha), Bikaner (Rajasthan) and Rajkot (Gujarat). Chandikhol is likely to be underground concrete tanks. Bikaner is likely to be the cheapest to build. The region has mountains of salt underground. Pump in water, dissolve the salt, drain the water out and what have you? A cavern.
(Source: Business Line July 26, 2014)
GUJARAT GAVE ESSAR POWER, RELIANCE PETROLEUM UNDUE BENEFITS: CAG
GANDHINAGAR: The Comptroller and Auditor General (CAG) has found the Gujarat government extended undue benefits to Essar Power and Reliance Petroleum of Rs 587.50 crore and Rs 362.01 crore, respectively.
The report for the financial year ended March 31, 2013 was tabled in the Assembly on Friday. It pulled up the state government for commitments made in Gujarat’s port policy of 1995 not being implemented 15 years later.
The CAG said the Mundra port in Kutch, envisaged as a joint sector development, had turned private. It added the state government did not follow competitive bidding while divesting its stake in Gujarat Adani Port, promoted by Adani Port and Gujarat Ports Infrastructure Development Company.
State-run Gujarat Vurja Vikas Nigam (GVVN) had changed the delivery point of Essar Power from the Vadinar substation of the Gujarat Energy Transmission Corporation to the Hadala switchyard of Essar Power in November 2009, the auditor said.
“The change of the delivery point after the finalisation of the (2007) power purchase pact led to undue benefit to Essar Power of Rs 587.50 crore,” the CAG said. After the change, Essar Power saved Rs 52 crore by not having to put up transmission lines from the switchyard to the Vadinar substation, it added. More, the company saved Rs 21.42 crore a year in line losses.
After a performance audit of the Gujarat Maritime Board over 2008-13, the CAG said, “Undue benefit was extended to Reliance Petroleum by non-recovery of the full wharfage rate after the cost of a captive jetty (Rs 362.01 crore) constructed by it was set off. More, an erroneous calculation of the set-off value and application of an incorrect wharfage rate resulted in short recovery of Rs 649.29 crore from Reliance Petroleum.” Reliance Petroleum has a captive jetty with two single buoy moorings at Sikka port in Jamnagar.
The auditor said there was no system developed by the Gujarat Maritime Board for the timely verification of construction costs of assets or monitoring the activities of private port developers. “The penal provisions for violation by developers were ineffective.”
The CAG pulled up GVVN for paying incentives to three power producers on their deemed generation from naphtha-based plants, disregarding a central government notification coupled with belated legal action for recovering the erroneous payments. This led to a loss of Rs 396.39 crore, it added.
(Source: Business Standard, July 26, 2014)
CRUDE OIL OUTPUT INCHES UP IN JUNE
NEW DELHI: Domestic crude oil production for June grew at a snail’s pace of 0.1 per cent to 3.125 million tonne as against 3.123 million tonne in the same month last year.
Natural gas production fell 1.7 per cent in June as compared to last year.
The country produced 2.895 billion cubic meters of natural gas as against 2.945 billion cubic meters in the same month last year.
India’s refinery throughput also grew at a slow pace of 1.2 per cent in June 2014.
During the month, the refinery throughput was 18.353 million tonnes as compared to 18.135 million tonnes in June 2013.
(Source: Business Line, July 26, 2014)
PRADHAN INVITES BRITISH FIRM TO INVEST IN NELP-X
NEW DELHI: The tenth round of the New Exploration and Licensing Policy (NELP) will be launched after carrying out necessary modifications to attract foreign investors, Dharmendra Pradhan, the Minister of State (Independent Charge) Petroleum and Natural Gas told a delegation from the United Kingdom on Friday.
Pradhan invited investments from British companies to bring in technology in sectors such as deep sea exploration, monetisation of marginal and mature oilfields, laying of pipeline grid and setting up of LNG terminal in the east coast of the country.
The British delegation was led by Edward Jonathon Davey, Secretary of State for Energy and Climate Change, United Kingdom. The meeting was a courtesy call, an official statement of the Oil Ministry said.
“Both sides discussed enhancing cooperation between the two countries in the energy sector and agreed to enhance bilateral investments in the oil and gas sectors,” an official statement said.
(Source: Business Line, July 26, 2014)
GAIL INKS PACT WITH JAPAN’S SUMITOMO CORP
New Delhi: State gas utility GAIL India Ltd on Friday said it has signed an agreement with Sumitomo Corp, Japan’s third-largest trading house, for cooperation in gas procurement and petrochemicals.
‘Under the memorandum of understanding (MoU), GAIL and Sumitomo will pursue business opportunities in natural gas and LNG value chain business globally, specifically covering cooperation in petrochemicals, natural gas procurement, pipelines and LNG,’ the company said in a statement here. GAIL and Sumitomo have each booked a capacity of 2.3 million tonnes at Dominion Resources Inc’s Cove Point liquefied natural gas (LNG) export terminal at Lusby, Maryland, USA.
The two ‘have also agreed to coordinate for ensuring smooth operation of the terminal,’ the statement said, adding both the firms view US market as a growth area for their line of businesses and would cooperate on businesses ranging from upstream to downstream.
GAIL Chairman and Managing Director B C Tripathi said, ‘There are significant opportunities in the North American gas markets and we are pleased to be partnering with Sumitomo in jointly developing this business.’
GAIL is India’s largest gas transmission and marketing firm. In USA, its wholly owned subsidiary, GAIL Global (USA) Inc has acquired a stake in Eagle Ford shale acreage.
It also has signed a contract to buy 3.5 million tonnes per annum of LNG from Sabine Pass for 20 years. Another 2.3 million tonnes has been contracted from Cove Point terminal.
Gas from Sumitomo’s fields in the northeast of US will be liquefied at the Cove Point terminal for shipping to countries like India and Japan. Sumitomo was among the first Japanese traders to invest in US shale with the 2009 purchase of a 12.5 per cent stake in the Barnett Shale Gas project in Texas from Carrizo Oil & Gas Inc. Together with its stake in Rex Energy Corp’s Marcellus shale area, it has a 140 million cubic feet per day supply of gas.
Its subsidiary, Pacific Summit Energy LLC, is a significant player in natural gas trading and marketing (physical and financial) in USA.
(Source: Millennium Post July 26, 2014)
OIL COMPANIES CANCEL BULK LPG ROAD TRANSPORTATION TENDERS
Nearly a month after inviting bids for awarding bulk LPG road transportation contracts across the country, oil marketing companies have cancelled the e-tenders.
The move came in the backdrop of tanker owners expressing reservations over certain aspects of the tenders, particularly the price band, which they complained was lower than the existing charges.
The decision of the companies — IOCL, BPCL and HPCL — presumably to have a relook, is likely to add a few weeks as the process has to be initiated all over again. But, cooking gas consumers need not worry about supplies when the existing contract ends in October. Owners of the vehicles, which are referred to as bullet tankers, have promised they will work on an ad hoc basis until the new contracts are finalised. The vehicles are crucial in terms of maintaining supplies to bottling plants.
Admitting that the discussions which followed representations by the vehicle owners led to cancellation of the tenders, oil industry officials said a new tender would be floated in about 20 days.
The tender that was cancelled, an official said, was different in more than one ways. It was the first time e-bids were invited, a price band was introduced, and the contract was for a longer period. Unlike the existing ones, which are for two years with a provision to be extended by a year, the new contract was to be for three years and extendable by up to two years.
In its appeal to oil companies as well as to the Prime Minister and the Petroleum Minister, All India Bulk LPG Transporters Federation had pointed that the price offered was less than the charges paid now. Its secretary Khushwant Singh had also emphasised on transparency in the pricing process.
Price band
An office-bearer of the Southern Region Bulk LPG Transport Owners Association said the existing rate in the zone was Rs. 2.78 per tonne per km whereas the price band specified in the tender was Rs. 2.73 to Rs. 3.02 per tonne per km. On the price at the higher end of the band being more, he said when the existing rate was finalised the transporters had sought Rs. 4. The increase in operational costs such as spares, driver salary, insurance and taxes also need to be factored in while arriving at the rates, he said.
The rising operation costs apart, it is the annual cap on the number of subsidised cooking gas cylinders a household is entitled and the likelihood of a reduction that remains a concern for the transporters. Any move to limit supplies to households translates into the bottling plant requiring less and fewer trips for the vehicles.
(Source: Hindu July 26, 2014)
DABHOL LENDERS PROPOSE PARTIAL CONVERSION OF DEBT INTO EQUITY
MUMBAI: Lenders to the now-closed 1,967-MW Dabhol project in Maharashtra have proposed partial conversion of its debt into equity, to avoid the project being declared a non performing asset (NPA).
The lenders made the suggestion at a recent board meeting after the project’s operator, Ratnagiri Gas & Power Pvt Ltd (RGPPL), defaulted in its debt servicing in June.
The lenders want to convert debt into equity equivalent for interest dues worth Rs 405 crore. As of now, the RGPPL’s equity is worth Rs 2,965 crore. The equity holders include NTPC (32.86 per cent), GAIL India (32.86 per cent), IDBI Bank, ICICI Bank, SBI and Canara Bank together (16.87 per cent) and MSEB Holding Company (17.4 per cent). With the conversion of debt into equity equivalent to interest dues of Rs 405 crore, the equity would increase to Rs 3,370 crore.
“The board has already discussed the matter. MSEB Holding Company is opposed to the conversion of debt into equity, while other stake holders have given their consent. RGPPL desperately needs cash for debt servicing and also for expenses required for wages and maintenance of the Dabhol plant,” an RGPPL official, who did not want to be named, told Business Standard.
The official said if RGPPL was unable to mobilise cash at the earliest, it might have to cancel plant servicing and maintenance contracts. He added the project, which has been closed since December 28, urgently needs restoration of gas supply.
A Maharashtra government official confirmed that it was opposed to the lenders’ proposal of converting debt into equity at par. “The MSEB Holding Company may be short changed since the value of its holding is diluted and lenders would get the benefit when RGPPL’s financial health improves.” When the restructuring of the Dabhol project took place in 2006, MSEB Holding Company had received equity at premium to the face value.
Further, RGPPL has begun repatriating its staff to their parent companies. NTPC has repatriated 13 of its total 72 employees at the project site and deployed them in its various plants. Another 15 NTPC employees will be sent back to various plants.
As reported by Business Standard, the project would have turned NPA in March, but that was averted after RGPPL repaid Rs 150 crore received from MahaVitaran. RGPPL, which is facing a severe financial crunch, paid Rs 90 crore each to lenders in April and May, but defaulted in June. The company has also defaulted on debt repayment to Power Finance Corporation.
The RGPPL official informed that of the total debt of Rs 8,500 crore, it had so far repaid Rs 4,000 crore to Dabhol project lenders since the project was revived in April 2006.
(Source: Business Standard, July 26, 2014)
CAIRN INDIA MAY GET 10-YEAR EXTENSION OF PSC FOR BARMER ON NEW RESERVES
NEW DELHI: Vedanta Group company Cairn India’s case for 10-year extension of the production sharing contract for the Barmer block in Rajasthan may get strengthened with the company reportedly finding substantial new reserves in the block.
However, the company refused to give an outlook its gas production. Neither has it filed any field development plan for new gas discoveries with the designated panel comprising oil ministry officials, the Directorate General of Hydrocarbon.
The Barmer block is primarily producing crude oil and country’s largest onshore producing asset. In FY14, the block produced 66.3 million barrels of oil equivalent (mboe). It also achieved a milestone production of 200,000 boepd.
Cairn is believed to have found gas reserves ranging from 3 trillion cubic feet (tcf) to 9 tcf. If it is true, 9 tcf of gas could lead to peak production of about 50-60 mmscmd. Currently, country’s largest explorer ONGC is producing the same quantity of gas.
“We have heard that the OC (operating committee) has given the go-ahead. But nothing firm has reached DGH yet,” said an official at the regulator. The field development plan outlines the exact production profile of a block. Earlier, the DGH has turned down its request for a 10-year extension of the production-sharing contract (PSC) for its prolific Barmer block. The PSC is set to expire on May 14, 2020, and the DGH said not more than a five-year extension from that date could be given. The regulator is of the view that Barmer is primarily oil-producing and hence the contract can be extended only for five years. In case it was a gas field, the PSC could have been extended by another 10 years.
A top official at the petroleum ministry hinted that since Cairn is eyeing for a 10-year extension of PSC, it may be trying to monetise the gas potential.
Barmer is a tight reservoir and non-continuous reservoir. Nearly, 30 wells have been drilled and gas potential has been assessed, said the DGH official.
Cairn India has found a prolific gas field – Raageshwari – in the south of the Barmer block in Rajasthan. Gas from the field is currently processed at Raageshwari gas terminal (RGT), which is situated at about 80 km from crude oil processing terminal known as Mangala processing terminal (MPT). The current estimates show that the Raageshwari filed could produce up to 8-15 million standard cubic metres a day (mscmd) of natural gas
Essar Projects, Corrtech Energy, Punj Lloyd, JSIW Infrastructure, Jaihind Projects and KazStroyService are learnt to have shown interest for setting up a 200-km pipeline from Cairn India’s Raageshwari gas processing terminal in Rajasthan to Gujarat State Petronet’s storage facility at Palanpur.
The pipeline, integral to this plan, is expected to cost around `800-1,000 crore, say industry experts.
The private explorer that reported an operational expenditure of $3.90/barrel in FY14 for the Barmer asset targets to spend $2.4 billion over the next three years and believes that the entire oil cannot be taken out before 2030. Cairn has projected Barmer production to grow at 7-10% (CAGR) for the three years starting FY16.
Navin Agarwal, Chairman of Cairn India in the recently held AGM said that leveraging the gas potential of the Rajasthan block is a priority for Cairn India. “While we had commenced commercial sale of gas from the block last year, there is potential for significant expansion…We have now identified that the Raageshwari Deep Gas field has significantly higher gas resources. We believe that through additional infrastructure, we can quickly ramp-up production,” he told his shareholders.
(Source: The Financial Express, July 26, 2014)
RELIANCE MOVES SC TO APPOINT THIRD ARBITRATOR
NEW DELHI: Reliance Industries Ltd (RIL) moved the Supreme Court on Friday, requesting it to appoint a third arbitrator, replacing the earlier court-appointed one, Michael Hudson McHugh. The latter quit after the government challenged his decision to initially withdraw and then accept the offer to arbitrate the cost recovery row between RIL and the government.
The RIL plea was mentioned by senior advocate Abhishek Manu Singhvi before a three-judge bench, comprising chief justice of India RM Lodha, Kurian Joseph and RF Nariman. Lodha assured him of action on the matter.
In its application, filed through law firm Parekh & Co., RIL accused the government of “provoking the chairman not to accept the appointment” and submitted that the conduct of the government was in “brazen violation of the spirit of an arbitration… The fact that the Union of India is acting in this fashion can only be considered to be unfortunate… Be that as it may, the situation that now transpires is that the respondents have provoked the chairman not to accept the appointment.”
Another bench, comprising Justice SS Nijjar, had earlier appointed McHugh as the third arbitrator.
But McHugh initially cited his reluctance to take up the task citing prior commitments until September, then changed his mind. The government, through the oil ministry, objected to what it regarded as his vacillation.
RIL expanded on the sequence of events in its application. It said McHugh had initially written to all parties in the case on May 29 expressing his reluctance to take up the task on the ground that the top court had asked him to complete it as soon as possible and since he was occupied with something else, it would not be appropriate for him to do so.
But advocates for RIL, King and Spalding, pressed him to accept, following which he gave his consent and agreed to procedural hearings after September.
RIL claimed this mail was copied to the Director General of Hydrocarbons and the ministry of petroleum and natural gas, but not the lawyers for the government as it wasn’t known who would act for it in the arbitration proceedings.
After it came to be known that the same counsel would be advising the government as before, the company said that a copy of all the correspondence on this was provided to the lawyers. But following this, the lawyers for the government sent McHugh a letter on July 7 stating that his mandate stood terminated by operation of law on May 29, when he declined to accept his appointment as an arbitrator by the top court.
He had then withdrawn his offer and left it to the parties to move the Supreme Court to revoke its decision to appoint him as third arbitrator.
RIL then urged the court to appoint a person who wasn’t of Indian, British or Canadian nationality.
The government of India has appointed justice VN Khare as its arbitrator in the case and while RIL has chosen SP Bharucha.
(Source: The Economic Times, July 26, 2014)
BAD NEWS RAIN ON RELIANCE INDUSTRIES
MUMBAI: In February this year, Aam Admi Party leader Arvind Kejriwal targeted Narendra Modi, accusing him of links with Reliance Industries (RIL) Chairman Mukesh Ambani. Hours later, Bharatiya Janata Party leader Chandan Mitra told a television channel that the party opposed the Rangarajan formula on gas price hikes that Kejriwal alleged was in favour of Ambani.
No one gave much importance to Mitra’s statement because of the perception that relations between RIL and the Central government would improve dramatically once the United Progressive Alliance, with which India’s largest private company had a lot of run-ins, was voted out of power. However, four months later, Mitra has proved to be spot on. There is no evidence to suggest any warmth in the relationship between the new government led by Modi and RIL.
The first of the bad news was the government’s decision to defer the decision on higher gas prices. This is a huge setback for RIL as in April this year, the company had asked the oil ministry to announce the new price immediately after polling ended on May 12, saying this was necessary to avoid “irreparable” loss to all parties, including the government. The new pricing formula arrived at by the UPA government almost doubled the price of natural gas to about $8.34 per million British thermal unit and was to be implemented from April 1. But it was put in abeyance following a directive of the Election Commission.
To make matters worse, the new government has also maintained the previous regime’s policy of imposing penalties on RIL for failing to meet a predetermined level of production. The latest penalty takes the total to more than $2.3 billion.
The bad news is not coming from the government alone. The Comptroller & Auditor General (CAG) has drafted a report to the telecom department, suggesting cancellation of the nationwide broadband spectrum allotted to Reliance Jio in 2010 on the grounds that the company violated rules. In its draft report, CAG said that DoT failed to recognise the rigging of the auction right from the beginning in which a small ISP, Infotel Broadband Services (later acquired by RIL) emerged winner of pan-Indian broadband spectrum by paying 5,000 times of its net worth.
When contacted, RIL, however, said any reference to a “CAG report” or even a “draft CAG report” in the ongoing audit would be incorrect. “For that, fundamental conditionalities like rights available to auditees to place their rejoinder before the CAG process, and then for the CAG to finalise his organisation’s collation, read with explanations of the auditees, put together under one final report to Parliament have not been completed,” says the RIL statement.
And then there came reports of the anti-corruption bureau of the Delhi government investigating the complaint by former Delhi Chief Minister Arvind Kejriwal on gas pricing.
Meanwhile, the market regulator is starting its investigations into the alleged fraudulent trades by the company in the shares of subsidiary Reliance Petroleum just before its merger with RIL.
And if this was not all, just a few days before the Lok Sabha election results, government-owned ONGC sued RIL in the Delhi High court, alleging that RIL drew gas from its fields in the Bay of Bengal (see box).
It’s not that Reliance is not fighting back. The company has hired some of country’s best legal brains to present its side of the story to the courts and restructured its communications team.
Though operationally, the company is doing well and is investing a massive Rs 1,80,000 crore in the next three years to increase its petrochemicals and oil and gas business, the negative news – like a bad penny – keeps coming back.
Unlike the Tatas and Birlas, both of which earn sizeable revenues from abroad, RIL’s success story is mainly India-centric. But it is taking steps and is investing more abroad.
A detailed RIL statement on the issues said the company always had a robust and composite relationship of transparency with several hundred governmental agencies ranging from those residing at the ground level to public sector units to various state governments to, of course, individual ministries in the central government and sectoral regulators.
“As for matters pertaining to MoPNG, the matter is under arbitration, a process duly provided for in our rights as contractors. To represent it in any other manner would be wrong and prejudicial to our rights and contentions, as also our reputation in the eyes of known and unknown persons in geographies you are distributed,” the RIL statement added.
RIL, which has presented its case on its website, said the first gas price was approved in 2007 when the crude oil price was hovering at $30 a barrel. Crude oil prices have moved up to over $100 a barrel and imported LNG from around $4 to over $14 a unit. It also says the charge of hoarding gas by the company is technically impossible. The decline in production in D1-D3 fields in the KG-D6 block is due to reservoir complexity and geological surprises and not due to hoarding.
Peers agree. A former CEO of a multinational oil company said RIL was not at fault as far as the fall in production of gas from KG-D6 fields was concerned. All over the world as the production of oil and gas is highly uncertain and a highly complex process, production can meet any unexpected hurdle and it is very difficult for a lay person to understand the complexities of a field. “I don’t think RIL can be blamed for a fall in gas production. The government is the owner of the gas assets and it can take any step as it deems fit in the national interest,” he says, asking not to be identified. “But to single out RIL for the fall (in gas production) is not correct,” he adds.
Meanwhile, riding on a 16 per cent rise in RIL shares since January this year (the BSE Sensex is up 24 per cent in the same time), large investors and analysts say the worst is now behind the company. In a report, multinational bank UBS says it expects a gas price hike at $7.5 a unit from October this year and a gradual recovery in KG-D6 output to 15 mmscmd.
Analysts are also expecting a ramp-up of gas production post arbitration, which is expected to be resolved by 2015. “We expect RIL premium gross refining margins (GRMs) to go up by $1 a barrel from pet-coke gasifier in 2016, and growing US shale profits to contribute over the next two years,” says UBS analyst Ashish Jagnani in a report dated July 21.
That’s good news for the company which has been plagued by bad news for quite some time.
(Source: Business Standard, July 26, 2014)
UK KEEN TO INVEST IN INDIA, WANTS FORUM TO RESOLVE TRADE DISPUTES
NEW DELHI: UK’s Secretary of State for Energy Edward Davey told Oil Minister Dharmendra Pradhan on Friday that British investors are keen to invest in India provided the country has “stable, predictable and transparent policies” and suggested setting up a forum to resolve disputes impeding investment, officials sources said.
Davey also discussed policy hurdles faced by British firm BP Plc in exploration and pricing issues related to the KG-D6 block, said the sources cited earlier. BP had acquired 30% interest in Reliance Industries-operated blocks including the KG-D6 gas fields for over $7 billion in 2011.
RIL, BP and its Canadian partner Niko Resources have since initiated arbitration proceedings against the government’s decision disallowing recovery of part of the investment in developing the gas fields. While the production sharing contract allows the investor to recover its costs, the government has disallowed a part of the cost recovery as a penalty for missing production target. The consortium says such penalties are not envisaged by the production sharing contract (PSC). There is also a separate arbitration case for delaying announcement of a new price of gas.
“We raised all (the) issues you might expect,” Davey told reporters when asked whether he raised issues related to the KG-D6 block.
“We had a constructive meeting,” he added.
Pradhan assured Davey that India would auction oil and gas blocks under a simplified and investor-friendly regime, the sources said.
An oil ministry statement said the Davey-led UK government delegation paid a “courtesy” visit and discussed enhancing the cooperation between the two countries in the energy sector.
Pradhan told the visiting delegation that the Indian government it is taking steps to enhance exploration and production of oil and gas in the country, the statement said.
“Indian companies are interest ed in acquiring equity in the oil and gas producing field(s) of UK along with companies which are active in hydrocarbon sector of UK as well as in sourcing LNG (liquefied natural gas (LNG),“ the statement said. The oil minister invited British companies to bring in investment and technology in various segments of the oil and gas industry, such as deep sea exploration, monetisation of marginal and mature oilfields, laying of a pipeline grid, and setting up of LNG terminal in the east coast of the country, it said. “Both sides agreed to enhance bilateral investments in the oil and gas sectors,” the statement said.
(Source: The Economic Times, July 26, 2014)
UK LOOKS TO DEEPEN PARTNERSHIP IN ENERGY SECTOR WITH INDIA
NEW DELHI: United Kingdom is looking to strengthen and deepen its partnership with India in the energy sector, a top UK official said today.
UK’s Secretary of State for Energy and Climate Change Edward Davey also said that India can play a crucial part in addressing global climate change issues.
Speaking at an event organised by Indian Council for Research on International Economic Relations (ICRIER) here, he said UK is looking to “strengthen and deepen” its partnership with India in the energy sector to ensure security and prosperity.
According to him, India can also play a crucial role in solving global climate change issues.
There is a need for early action to tackle climate change issues, he added.
United Kingdom is already engaged with India on various initiatives pertaining to climate and energy matters.
Among others, both sides have collaboration with more than 150 million pounds of jointly-funded, high-quality research.
In this regard, there are more than 30 joint research projects on sustainable energy and climate change such as those related to changing water cycles and energy storage.
(Source: The Economic Times, July 26, 2014)
INDONESIA SEEKS INDIAN INVESTMENT TO MINE GOLD, REFINE CRUDE OIL
Ahmedabad: With a new government under Joko Widodo set to assume power in Jakarta, Indonesia is looking for big ticket Indian investors to mine gold and refine crude oil in the fourth most populous country in the world.
Indonesia is also targeting to increase bilateral trade with India from $16.99 billion in 2013 to $45 billion in 2015.
“This is a tremendous achievement if we compare the figure of 2004 when it was only worth $4.5 billion,” Hariyanta Soetarto, Acting Consul-General of Indonesia, Mumbai, told Business Line here.
He said Jakarta is looking for investors to set up crude refineries in Java and Sumatra islands. “We are open to both 100 per cent investments and joint ventures,” he said.
Besides, Indonesia is inviting investments in mining of nickel, gold and copper.
It is the ninth largest gold producer, accounting for four per cent of global production.
The world’s largest gold reserves (67.4 million ounces) are believed to be at the country’s Grasberg mine. Due to a variety of reasons, production fell from 141 tonnes in 2003 to 97 tonnes in 2011. To augment this, the Government is looking for fresh investments and technology.
Indonesia has 3.6 billion barrels of proven crude oil reserves as of January 2014, down from 4 billion barrels a year ago.
It was the world’s 24th largest crude oil producer, accounting for just 1 per cent of world production.
The country’s total crude oil refining capacity in 2013 was 1.1 million barrels per day against a consumption of 1.5 million bpd.
Soetarto said the key challenge for the Government, especially in the oil and gas sector, is to balance exports with domestic needs.
“Indonesia needs to build at least two new oil refineries. The cost to produce oil in 2009 was only $11.95 per barrel, better than industry average of $34.34.”
As the single largest holder of proven natural gas reserve in the Asia Pacific region, Indonesia is emerging as an important energy supplier to East Asian countries such as Japan, Korea and China.
With reserves of 112 trillion cubic feet, Indonesia has expanded gas pipe network to neighbouring countries Singapore and Malaysia.
So far, Indonesian investments in India were about $612 million, as against Indian investment in Indonesia at only $64.9 million.
China, Singapore, Japan and Korea have emerged as the biggest investors in Indonesia.
Similarly, in the bilateral trade in 2013, while Indonesian exports to India were worth $13.03 billion, imports were only worth $3.96 billion.
“We want to improve bilateral trade with a balanced approach. Besides, we want direct trade between the two countries, and not via Singapore or Malaysia.”
As part of attempts to woo investment, Indonesian Ambassador to India Wilmar Rizali Indrakesuma met Gujarat Chief Minister Anandiben Patel and business and industry leaders last week.
Besides, officials from the two countries have also identified 17 clusters, proposed to be signed up in a sister city arrangements.
(Source: Business Line July 26, 2014)
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