NEW DELHI: In a move aimed at ensuring India’s energy security, the Narendra Modi-led government plans to import huge volumes of natural gas from Russia. The Centre is working out the contours of a $40-billion (Rs 2.4 lakh-crore) mega onland pipeline project carrying gas from Russia to India, in one of India’s biggest energy projects till date.
Top government officials told HT that the move follows Prime Minister Narendra Modi’s recent meeting with Russian President Vladimir Putin in Brazil on the sidelines of the Brics summit.
The Prime Minister’s Office (PMO) along with the ministry of petroleum and natural gas are preparing a blueprint to examine the feasibility of this new project, they added.
An announcement on this initiative is expected to be made in December when the two leaders meet at the India-Russia annual summit to be held in New Delhi.
China has already finalised a similar gas pipeline deal with Moscow for importing gas. New Delhi, sources said, also plans to import crude oil from Moscow and the logistics for the same are being worked out.
“Russia so far has directed majority of its oil and gas supplies to the West… however, the scenario may be quiet different in the coming years especially in the wake of its gas pipeline to China and the one now proposed till India,” a senior oil ministry official said.
Two routes are being considered for the gas pipeline project. One is from Russia’s southern border to India via the Himalayas and the second from Russia – Astrakhan – Khazakstan — Uzbekistan and then along the Turkmenistan-Afghanistan-Pakistan route to India (TAPI gas pipeline).
The proposed project from Russia to India is almost four times the cost of the $10-billion (or Rs. 60,000-crore) Iran-Pakistan-India (IPI) gas pipeline project, also called the peace pipeline, which has failed to take off due to security concerns over the pipeline traversing through Pakistan and has been on the drawing board for the past many years.
“This government (under Modi) is taking all steps that will lead to a reduction in India’s oil import bill… apart from this proposed pipeline, reviving and pushing the other two projects — IPI and TAPI are also being looked into at the highest level,” he added.
The cost of the other onland gas pipeline project from Turkmenistan to India via Afghanistan and Pakistan (or the TAPI) project is also close to $8-10 billion.
GAIL India Ltd will be associated with this project along with a consortium of other state-owned oil and gas companies including Oil and Natural Gas Corp (ONGC), Oil India Ltd and Indian Oil, the official said.
(Source: Hindustan Times, August 5, 2014)
INDIA TO BUILD PIPELINE TO NEPAL FOR OIL PRODUCTS
KATHMANDU: In a move to deepen economic ties with Nepal, India on Monday agreed to build a pipeline from Bihar to Kathmandu for supply of petrol, diesel and ATF.
Prime Minister Narendra Modi on Sunday signalled India’s willingness to build the Rs 200-crore pipeline to supply fuel during his visit to Himalayan nation, the first by an Indian Prime Minister in 17 years.
“The Nepalese side requested and the Indian side agreed to take up the project for the construction of Raxaul (in Bihar) to Amlekhgunj (in Nepal) petroleum pipeline in the first phase and extend it to Kathmandu in the next phase to facilitate the transport of petroleum products,” a joint press statement issued after the two-day visit said.
Nepal is dependent on India for meeting all of its fuel requirement. Petrol, diesel, domestic LPG and jet fuel (ATF) are currently trucked from Indian Oil Corp’s (IOC) depot at Raxaul in Bihar to Nepal.
In 2006, a 41-km pipeline from Raxaul to Amlekhgunj in Nepal was proposed for transportation of the fuel. The pipeline was to be funded 50:50 by IOC and Nepal Oil Corp (NOC). The project, however, never took off as Nepal refused to fund its share of cost.
IOC in the meanwhile has decided to shift its oil storage depot from Raxaul to Motihari and the pipeline origin point too may have to be shifted to Motihari. Motihari- Amlekhgunj pipeline will be about 81-kms long and cost Rs 200 crore.
“It is not a very big pipeline but we have to secure statutory clearances from authorities in India as well as Nepal before work on the pipeline can begin,” said a senior IOC official.
The Raxaul-Amlekhgunj project was to cost about Rs 100 crore excluding the cost of land acquisition and the new line would cost almost double of that, he said.
Nepalese Commerce Minister Sunil Bahadur Thapa had raised the issue when he met Oil Minister Dharmendra Pradhan on July 30.
“IOC is our main supplier of petroleum products. I have reopened the subject (of laying the pipeline) with the Minister (Pradhan). We want IOC to lay the pipeline,” he had told PTI after the meeting.
Nepal was keen on the pipeline from Motihari to Amlekhganj in view of the traffic congestion and frequent complaints of pilferage and adulteration during trucking.
The IOC official said the pipeline will now be built by the company.
(Source: The Times of India, August 5, 2014)
OILMIN MAY CHANGE POLICY TO AVOID STANDOFFS OVER DRILL STEM TESTS
NEW DELHI: With the Directorate General of Hydrocarbons (DGH) contending that ONGC and RIL have not undertaken the drill stem tests (DST) at their respective hydrocarbon finds in the KG basin, the oil ministry is contemplating a policy change to ensure that such stand-offs are not common in the future.
“The ministry would soon convene a meeting of DGH and the explorers to review the ‘contractual’ and ‘technical’ necessity of carrying out the DST test. After deliberations, the ministry would seek Cabinet approval to put in place a long-term solution,” a senior petroleum ministry told FE. The DGH is also looking at global practices in deep water acreages such as the Gulf of Mexico to examine whether DST is a must for approving a discovery.
In RIL’s case, citing the production sharing contract, the previous director general RN Choubey had said that the flow of hydrocarbon to surface was mandatory to recognise a discovery. In which case, the DST is must. While this has caused problems for the explorers, the government reckons that it cannot reverse that decision without a Cabinet approval.
Recently, the DGH turned down three out of 14 discoveries submitted by ONGC in its KG basin blocks – KG-DWN-98/2 and G4 because the PSU explorer did not conduct the DST.
According to ONGC, the guidelines issued by DGH in 2007 does not make it mandatory to conduct DST for smaller discoveries. Out of the three discoveries not recognised by the regulator, one is at a depth of 3,000 metres, while other two are smaller finds.
“In order to conduct DST, a deep water rig needs to be hired for atleast 20-25 days. Each day, the rent for a deep water rig is almost $1 million. Moreover, we have already done the mini drill test. We have made our representations to DGH,” said a senior ONGC official familiar with the issue.
ONGC has submitted declaration of commerciality for nearly 2-3 TCF of gas and 100 mmt of crude oil. Non-recognisition of three discoveries may mean ONGC not able to monetise about 1.5 TCF of gas.
Earlier, Mukesh Ambani promoted RIL too faced the same problem when three gas discoveries (D29, D30 and D31) in its KG-D6 block were not given go-ahead by DGH for not doing DST.
Later, the petroleum ministry has said it is agreeable to giving the firm a one-year extension to redo the necessary tests at three gas discoveries (D29, D30 and D31) in its KG-D6 block. But, RIL will be allowed to recover only 50% of the cost it incurs to conduct the DST. The matter was pending sans Cabinet approval.
Now, since ONGC also faced the same issue, petroleum ministry wants to have a policy reform to settle the contentions.
(Source: The Financial Express, August 5, 2014)
GAIL DIRECTOR APPOINTMENT ‘BIASED’, PESB TOLD TO REVIEW DECISION
NEW DELHI: The National Commission for Scheduled Tribes (NCST) has advised the Public Enterprises Selection Board (PESB) to review the appointment of a director in Gail India and said the selection process was biased and opaque to the detriment of a tribal candidate for the post.
In a letter to PESB and the company, the commission recommended that the government’s headhunter may initiate a transparent selection process afresh by giving an equal opportunity to a reserved category candidate and furnish compliance report to it by August 14.
Gail executive director Gajendra Singh, who appeared before the board as one of the prospective candidates for the position of director, business development, in the company, had appealed to the commission to hold the appointment process alleging discrimination against him because of his tribal status. The board in March this year interviewed 11 candidates for the post and recommended Sanjib Datta.
ET first reported it on April 29. Government officials said Datta’s selection is based on merit after due process where Singh was also given chance and the commission’s recommendations are not binding on them. Singh had alleged that that PESB is full of Brahmins and had discriminated against him because of his Scheduled Tribe (ST) status.
“PESB members who all are Brahmins, raised the question on my qualification to isolate me during the selection process which not only harassed and discriminates me in my peer group but also have some mala fide intension,” he had said in his complaint.
Based on the letter, NCST had issued notices to PESB, Gail and the oil ministry. The comission heard all parties on June and found merit in Singh’s complaint. “Based on the deliberations, documents provided by petitioners, PESB, Gail, the issue of grievance of petitioner due to discrimination, lack of transparency has been clearly identified in the case,” said minutes of the proceeding, reviewed by ET.
(Source: The Economic Times, August 5, 2014)
GOVERNMENT TO ROLL OUT JAGDISHPUR-HALDIA PIPELINE PROJECT SOON
New Delhi: The NDA Government, in one of its major big ticket decisions, has given an in-principle approval to the country’s first petrochemical hub consisting of Jagdishpur-Haldia gas pipeline, which will pass through Prime Minister Narendra Modi’s constituency of Varanasi and will ensure cooking gas supply in Tier-II cities of Uttar Pradesh, Bihar, Jharkhand and West Bengal. Top sources privy to the development said that a date for the commencement of the project will be announced soon formally.
Four urea plants in Gorakhpur, Barauni, Durgapur and Haldia as well as one steel plant in Sindri are also part of the ambitious project, which has been expedited at the instance of the Prime Minister’s Office.
Highly placed sources told The Pioneer that Fertiliser Minister Ananth Kumar, Petroleum Minister Dharmendra Pradhan and Steel Minister Narendra Singh Tomar – held hectic parleys in two successive meetings held over the weekend, which also included their top officials. The ministers on Monday, among themselves decided to resolve all the outstanding issues which had been holding back the project and sources informed that the official commencement of the project will be announced within the next few days.
Though the 2,050 km long Jagdishpur-Haldia pipeline project had been envisaged in 2007 by GAIL at a cost of Rs 7,600 crore, it got incessantly delayed owing to Maharatna company’s inability to find an anchor investor. Secondly all the significant fertiliser units belonging to State-owned Fertiliser Corporation of India Ltd (FCIL) as well as Hindustan Fertiliser Corporation Ltd (HFCL), which fall on the route of the proposed pipeline, had refused to book transportation capacity for it.
However, more significantly, FCIL’s Gorakhpur and Sindri fertiliser units and HFCL’s Haldia, Durgapur and Barauni units – which are all located at significant points of Jagdish-Haldia pipeline’s route – had gone defunct since both FCIL and HFCL had been referred to BIFR, and it is only in the recent years when their revival has been ordered.
Modi, within a couple of weeks after taking charge of the PMO, had summoned Petroleum Minister Dharmendra Pradhan to discuss the matter. Subsequently between June 11 (when the first meeting on the project was held between Petroleum, Fertiliser and Steel Ministries) and August 3, sources pointed out that under the supervision of the three ministers, top officials of the respective ministries agreed to work in cohesion for removing the prevailing bottlenecks and ensuring smooth take-off for the project.
Accordingly after a consensus emerged among the three ministries on outstanding issues, sources with direct knowledge of the development said that it was decided to formally announce the commencement of the project soon.
The fast tracking of the project has been mainly due to PMO’s direct intervention, as its implementation will not only enable gas supply in key States of UP and Bihar, but its easy availability in these densely populated States will also widen GAIL’s gas network there. Once this happens, sources pointed out, the project’s functioning will help in lessening the gas subsidy burden on the Government in the long run. Official sources pointed that despite being a crucial region – with both UP and Bihar falling within the Gangetic plan – there is huge paucity of gas there, and the Jagdishpur-Haldia project will be crucial for the overall development of the area.
(Source: Pioneer August 5, 2014)
INDIA TO BE DEVELOPED AS REFINERY HUB: GOVT
New Delhi: India refines more oil than the domestic requirement and the government seeks to develop the country as a refinery hub, Lok Sabha was informed on Monday.
Petroleum minister Dharmendra Pradhan said domestic requirement is 160 million metric tonnes (MMT), while India refines 215 MMT.
He said it helps the country earn foreign exchange.
Pradhan said the country also seeks to fulfil the need of South Asian Association for Regional Cooperation countries and other developing economies.
He said while some Gulf countries produce crude, they lack refining capacity. This, he said, has led to a situation where crude is cheaper while refined product is costly in those countries.
The minister was responding to a supplementary on country reaching a saturation point in refined oil production.
He said while several companies have applied for refinery in the private sector, Essar Energy Plc and Reliance Industries Ltd have been contributing to the country’s refinery production.
The refinery sector was delicenced in June, 1998 and a refinery can be set up anywhere in India by a private or public sector company depending on its techno-commercial viability.
“The present capacity is more than the demand of petroleum products in the country. Hence, the country is now a net exporter of petroleum products. India has been exporting surplus petroleum products since 2001-02,” he said.
India has exported petroleum products to the tune of `3,68,279 crore during 2013-14.
(Source: Mint August 5, 2014)
ONGC’S SHARE OF OIL SUBSIDIES TO BE CUT PRIOR TO STAKE SALE
NEW DELHI: Ahead of the proposed 5% disinvestment in ONGC, the government may partially relieve the state-run oil explorer from its mounting subsidy burden by allowing it a net price realisation of $65 per barrel from the sale of crude oil.
In FY14, ONGC realised a net price of around $41 per barrel from sales of oil even as its average pre-discount price was $106.7 a barrel. That translated into a debilitating subsidy burden of $65.8 per barrel or an all-time annual high of R56,384 crore.
The government is also weighing the option of using the Kirit Parikh formula that would result in the total subsidy share of ONGC and the two other upstream oil PSUs (Oil India and GAIL) becoming smaller although it would see a graded increase with global crude price.
Sources said the oil ministry is discussing the proposals with the finance ministry, which is relying heavily on divestment proceeds to meet the budget numbers and will look to mop up about R17,500 crore from the ONGC stake sale.
“After coming to a conclusion, the matter would be taken to the (CCEA) Cabinet Committee on Economic Affairs for its nod,” a senior petroleum ministry official said.
The proposed formula of assured minimum realisation from oil sales would work out to an annual subsidy share of R31,400 crore for ONGC (assuming a rupee-dollar exchange rate of 60 and a crude oil price of $100 per barrel).
The use of the Parikh formula would lead to a similar figure if the price of crude oil and the rupee are assumed at the same levels. The Indian crude basket is hovering between $104 and $105 per barrel right now.
The petroleum ministry’s move is prompted by the need to enable ONGC to invest meaningfully for exploration and production (the oil major has paid a whopping Rs 2.72 lakh crore as fuel subsidy over the past 11 years and its share of subsidy has skyrocketed in recent years).
Of course, the periodical increases in diesel prices and the planned roll-out of the direct benefit transfer scheme to disburse cooking gas subsidy are expected to pare the under-recoveries of oil marketing companies this fiscal without straining its own finances.
ONGC’s ever-increasing subsidy burden is a major concern among investors (from Rs 2,690 crore in FY04, it surged to Rs 56,384 crore or 40% of the total OMC under-recoveries in FY14).
In October 2013, a panel headed by former Planning Commission member Kirit Parikh recommended a slab-wise methodology for subsidy sharing by upstream companies.
The Parikh panel also said that after adjusting the upstream contribution, the remaining under-recovery on diesel, PDS kerosene and subsidised domestic LPG should be fully compensated to
oil marketing companies (Indian Oil, Bharat Petroleum and Hindustan Petroleum) by providing cash subsidy from the government budget until the prices are fully deregulated and subsidy on these products is eliminated.
ONGC, as FE reported recently, is also facing the prospect of having to pay higher amounts as royalties to states given that Gujarat has secured a favourable court verdict on its demand that the firm must pay royalty to it at pre-discount price on crude produced from onshore fields in the state.
Petroleum minister Dharmendra Pradhan recently indicated that his government is working to boost investors’ confidence in the country’s largest oil and gas explorer. “The Narendra Modi government is not incompetent that ONGC will not get its rates when the divestment process begins. The finance minister has indicated that the process has already begun,” Pradhan had told FE.
(Source: The Financial Express, August 5, 2014)
SIX COMPANIES SHOW INTEREST TO INVEST IN TRIPURA POWER PROJECT
NEW DELHI: At least six firms have shown interest in becoming a strategic investor in the recently commissioned Palatana power project in Tripura, with ICICI Securities being the advisers for this exercise.
The stakeholders of the Rs.3,804 crore ONGC-Tripura Power Co. Ltd (OTPC) include state-owned Oil and Natural Gas Corp. Ltd (ONGC), Infrastructure Leasing and Financial Services Ltd (IL&FS) and the Tripura government.
State-owned Bharat Heavy Electricals Ltd (Bhel) built the project.
“ICICI has been mandated with the task of finding the strategic investor. They are advising about the short-listed firms,” said an ONGC executive requesting anonymity. He refused to name the firms.
The 726.6 MW project, inaugurated by President Pranab Mukherjee in June last year, is an integral part of the government’s efforts to develop infrastructure in the north-eastern region—considered to have been neglected by New Delhi for decades.
The project has been touted as the single largest investment in north-east India.
Queries emailed to the spokespersons of ONGC, ICICI Securities and IL&FS on Sunday remained unanswered.
This comes in the backdrop of the government’s plan to disinvest a 5% stake in ONGC to raise around Rs.18,000 crore. ONGC has also been scouting for a strategic investor for ONGC Mangalore Petrochemicals Ltd (OMPL) and ONGC Petro additions Ltd (OPaL).
According to information available on the OTPC website, the project comprises two units of 363.3MW each. While ONGC has a 50% stake in OTPC, IL&FS and Tripura government have stakes of 26% and 0.5% respectively with the residual equity of 23.5% remaining. “IL&FS has undertaken to arrange for the placement of Residual Equity of 23.5% through an Initial Public Offer (IPO) or with Strategic Investors, Banks, Financial Institutions, Private Equity Funds etc. prior to the Commercial Operations Date,” the website added. ONGC had plans to dip into its reserves to help it meet its capital expenditure requirements, indicating the challenges facing the state-owned oil explorer whose fields are ageing, yields diminishing, and which ends up funding some part of the subsidy the government extends to oil marketing companies.
“ONGC’s net realization (after removing discount offered to OMCs) declined by 5%. In rupee terms, ONGC’s gross realisations increased at 21% CAGR as against a 1% decline in net realizations. Even in 2013-14 when gross realization declined by ~$5 per barrel, discounts actually increased by $3 per barrel. Consequently, profit after tax (PAT) margins of upstream companies remained more or less stable around 28% as their contribution towards under-recoveries almost doubled to Rs.670 billion in 2013-14 from Rs.341 billion in 2008-09,” credit rating firm Crisil Ltd wrote in a 9 June report.
The largest project in the world registered under the clean development mechanism (CDM) of the United Nations Framework Convention on Climate Change (UNFCCC) had run into serious problems, which was reported by Mint on 16 September 2013.
Of the three gas compressors at the 726.6 MW project, two were damaged due to debris in the gas supplied to the project. Gas has to be compressed before it is fed to the turbines. The gas to the Tripura project is supplied by ONGC’s 55 km-pipeline. As per the electricity allocation from the project, Assam will get 240 MW, Meghalaya 79 MW, Manipur 42 MW, Nagaland 27 MW, Arunachal Pradesh 22 MW, Mizoram 22 MW and Tripura 196 MW.
“There have been some difficulties in the off-take of power from the project,” said the first ONGC executive quoted above.
The development of infrastructure in the North-East is also key to the nation’s so-called Look East policy—a focus on South East Asia that includes connecting the region with India. The Tripura power project was planned as it was economically unviable to transport gas from the North-East to other parts of the country. ONGC has been battling concerns over its production capabilities and diminishing yields at its oil fields.
ONGC’s crude oil and natural gas production declined to 25.99 million tonnes (mt) and 3.02 billion cubic metre per day (bcm) in the last fiscal year. Net profit of
ONGC, India’s largest oil and gas explorer, rose 44.3% in the fourth quarter ended 31 March.
Net profit increased to Rs.4,889 crore although revenue dipped by 2.3% to Rs.21,403 crore.
ONGC registered a 5.6% increase in net profit to Rs.22,095 crore in 2013-14 on a 1.1% increase in annual revenue to Rs.84,201 crore.
(Source: Mint, August 5, 2014)
IGL TO INVEST Rs. 190 CR IN MAHARASHTRA NATURAL GAS
New Delhi: Indraprastha Gas Ltd (IGL) has agreed to invest Rs. 190 crore in Maharashtra Natural Gas Ltd (MNGL) by acquiring five crore shares from institutional investors. The acquisition will be in a manner wherein post the transaction, IGL’s shareholding does not exceed 50 per cent in MNGL. The shares will be acquired at Rs. 38 a share.
MNGL is in the business of city gas distribution in Pune. The company is a joint venture of GAIL (India) and BPCL with both owning 22.5 per cent each in the company. The other shareholders are the Government of Maharashtra which owns 5 per cent; IDFC which owns 20 per cent; IL&FS which owns 20 per cent and Axis Bank which owns the remaining 10 per cent.
“The purchase of shares is subject to finalisation and execution of definitive agreements (share purchase agreements) in this regard,” IGL said in a statement to the BSE.
Meanwhile, IGL reported a 30 per cent increase in its net profit to Rs. 114.03 crore for the first quarter of fiscal 2014-15 against Rs. 87.58 crore on the back of a lower depreciation expense. However, the company’s net sales fell 3.5 per cent to Rs. 868.73 crore from Rs. 900.66 crore in the same quarter last year.
(Source: Business Line August 5, 2014)
IGL UPS PROFIT AT CONSUMERS’ COST
New Delhi: Indraprastha Gas Ltd, the sole seller of CNG to automobiles and piped cooking gas in Delhi, on Monday reported a 30 per cent jump in its first quarter net profit on back of revision in depreciation rates.
Net profit in April-June at Rs 114.03 crore was 30 per cent higher than Rs 87.57 crore net in the same period a year ago.
Profit rise has been ‘driven by revision on depreciation rate on certain fixed assets as per useful life specified in the Companies Act 2013 or re-assessment on the basis of technical evaluation,’ it said.
IGL said sales volumes grew 1 per cent. ‘Product wise, CNG recorded sales volume growth of 2 per cent, while PNG sales volume declined by 4 per cent in the quarter as compared to last year.’
(Source: Millennium Post August 5, 2014)
PETRONET LNG Q1 PROFIT DROPS 30% ON LOWER MARGINS
New Delhi: Petronet LNG Ltd on Monday reported a 30% drop in its June quarter net profit on lower margins and said it has received interest from 17-18 global LNG (liquefied natural gas) players for hiring its almost-idle Kochi terminal.
Petronet, India’s biggest importer of LNG, reported a net profit of `156.60 crore in April-June, down from `225.32 crore in the same period a year ago.
“The decrease in net profit is primarily due to higher depreciation and interest charges pertaining to Kochi LNG terminal capitalized in the books of accounts in September 2013, and also lower margins at Dahej (terminal),” Petronet chief executive officer (CEO) Ashok K. Balyan said.
Petronet operated its 10-million-tonne-a-year Dahej import facility in Gujarat at 109% of the capacity but its margins on import of LNG from the spot market shrunk.
Also, the 5-million-tonne-a-year Kochi terminal is operating at just 1% of capacity as state gas utility GAIL India Ltd has not yet built pipelines to connect the facility to key customers in Bangalore and Mangalore.
“The Board has today approved leasing out of storage facility at Kochi. We had recently sought expression of interest from LNG traders and marketers who want to use Kochi as an intermediate for storing of LNG,” Balyan said, adding that response to the tender has been tremendous.
About 17-18 international LNG marketers such as Excelerate have evinced interest in hiring two LNG storage tanks of nearly 182,000 cubic metres gross capacity each.
“We hope to finalize agreements and begin leasing out the facility by end of September,” he said.
The storage can be used by traders who want to import gas and resell it to customers or entities seeking to contract LNG for their own use.
The facility is also useful for LNG suppliers, like those in the Middle East, who want to use Kochi as an intermittent storage point for supplying customers in the east. Kochi can be used to store LNG during times of glut or low prices.
LNG is natural gas that is chilled to minus 160 degrees Celsius to liquid state for ease of transportation by ship. LNG is converted back into gaseous state at the import facility (regasification) before being sold to users such as power and fertilizer plants.
“What we are proposing is that LNG will be imported at Kochi and stored in its liquid form at the tanks, for which we will charge a fee. The trader can at his convenience take out or reload the LNG in cryogenic ships for sale to customers,” Balyan said.
Petronet director (finance) R.K. Garg said spot prices in April-June have fallen to $10.5 per million British thermal unit, compared to $17-18 at the beginning of the year, putting pressure on margins.
(Source: Mint August 5, 2014)
PETRONET TO LEASE OUT KOCHI TERMINAL TO INTERNATIONAL LNG PLAYERS
New Delhi: Petronet LNG Ltd has obtained its board’s approval for leasing out its 5-million-tonne-a-year Kochi terminal as a storage facility for international LNG players.
Due to lack of pipeline connectivity, the terminal’s capacity utilisation is merely 1.4 per cent. Only 0.66 trillion British thermal units of natural gas was regasified and sold from the terminal during the first quarter of fiscal 2014-15. The gas was sold to the Kochi Refinery.
“We have approved a proposal for leasing out the Kochi terminal as a storage facility for international LNG players. More than a dozen companies have shown interest to use the facility. We hope to start leasing out the terminal by the third quarter of the current fiscal,” AK Balyan, MD and CEO, Petronet LNG, said on Monday. “Currently, the international gas market is not attractive with lower spot prices. Therefore, the Kochi terminal is an ideal opportunity for international players looking at arbitrage opportunities wherein they store the gas for now and sell later when the market improves,” said RK Garg, Director-Finance, Petronet LNG.
Meanwhile, Petronet has reported a 30 per cent drop in net profit for the first quarter of fiscal 2014-15 on the back of lower margins from LNG imported at the Dahej terminal, Gujarat, and higher depreciation and interest charges for the Kochi terminal.
During the June quarter, the company’s net profit stood at Rs. 156 crore against Rs. 225 crore a year ago.
During the quarter, the company’s net revenue stood at Rs. 10,161 crore against Rs. 8,444 crore in the corresponding quarter last year.
On Monday, Petronet’s shares closed 3.25 per cent lower on the BSE at Rs. 179.95.
(Source: Business Line August 5, 2014)
PETRONET LNG OPERATES DAHEJ TERMINAL AT 109% OF CAPACITY
New Delhi: Petronet, India’s biggest importer of liquefied natural gas (LNG), reported a net profit of Rs 156.60 crore in April-June, down from Rs 225.32 crore in the same period a year ago.
‘The decrease in net profit is primarily due to higher depreciation and interest charges pertaining to Kochi LNG terminal capitalised in the books of accounts in September 2013, and also lower margins at Dahej (terminal),’ its chief executive Ashok K Balyan said here.
Petronet operated its 10 million tonnes a year Dahej import facility in Gujarat at 109 per cent of the capacity but its margins on import of LNG from spot market shrunk.
Also, the 5 million tonnes a year Kochi terminal is operating at just 1 per cent of the capacity as state gas utility GAIL India Ltd has not yet built pipelines to connect the facility to key customers in Bangalore and Mangalore.
‘The board has on Monday approved leasing out of storage facility at Kochi. We had recently sought expression of interest from LNG traders and marketers who want to use Kochi as an intermediate for storing of LNG,’ he said adding the response to the tender has been tremendous.
About 17-18 international LNG marketers like Excelerate have envinced interest for hiring two LNG storage tanks of nearly 182,000 cubic meters gross capacity each.
‘We hope to finalise agreements and begin leasing out the facility by end of September,’ he said.
The storage can be used by traders who want to import gas and resell it to customers or entities seeking to contract LNG for their own use. The facility is also useful for LNG suppliers, like those in the Middle East, who want to use Kochi as an intermittent storage point for supplying customers in the east. Kochi can be used to store LNG during times of glut or low prices.
LNG is natural gas that is chilled to minus 160 degrees Celsius to liquid state for ease of transportation by ship. LNG is converted back into gaseous state at the import facility (regasification) before being sold to users such as power and fertiliser plants.
‘What we are proposing is that LNG will be imported at Kochi and stored in its liquid form at the tanks, for which we will charge a fee. The trader can at his convience take out or reload the LNG in cryogenic ships for sale to customers,’ he said.
Petronet Director (Finance) R K Garg said spot prices in April-June have fallen to $10.5 per million British thermal unit compared to $17-18 at the beginning of the year, putting pressure on margins.
(Source: Millennium Post August 5, 2014)