NEW DELHI: In what could prove to be a major corridor for energy sourcing in the future, the Union Cabinet, on Thursday, approved the signing of the agreement for buying gas fromTurkmenistanthrough the $7.6 billion Turkmenistan-Aghanistan-Pakistan-India (TAPI) pipeline.
The approval has given a concrete shape to the pipeline which could prove to be a big boost to the relations betweenIndiaandPakistanand bring good news to the region.
The contentious issue of transit fee was also resolved withIndiaagreeing to pay bothAfghanistanandPakistana transit fee of $0.50 per million metric British thermal unit (mmBtu) for allowing passage of gas through their respective territories. This was one of the major points that had been a bone of contention between the three neighbouring countries.
The Cabinet approved signing of the Gas Sale and Purchase Agreement (GSPA), officials in the Petroleum and Natural Gas Ministry said.
The Petroleum and Natural Gas Minister, Jaipal Reddy, is likely to visitTurkmenistanon May 23-24 for the signing of GSPA.Indiawill pay a price linked to fuel oil for the natural gas, which, at current oil prices, translates into a rate of $8-10 per mmBtu.Indiawould also pay a transportation charge for wheeling of natural gas from 1,735-km long pipeline, which is likely to be operational by 2016.
The delivered price of gas on the Indian border works out to $10-12 per mmBtu as compared to $4.20 per mmBtu price of domestic gas and $16 per mmBtu rate of gas imported in ships in its liquid form (LNG). The pipeline would carry 90 million metric standard cubic metres per day (mmscmd) of gas. Of which, 14 mmscmd would be bought byAfghanistanand 38 mmscmd each would be forIndiaandPakistan.
The pipeline will run fromTurkmenistan’s Yoloten-Osman gas field toHeratandKandaharprovinceofAfghanistan, before enteringPakistan. InPakistan, it will reachMultanviaQuettabefore ending at Fazilka Punjab inIndia.
All the three nations had met inIslamabadin April to work out the issue of transit fee but no breakthrough could be achieved asIndiashowed its reluctance to accept and pay the transit fee being asked byAfghanistan. During the trilateral talks,Indiahad declined to pay the 50 cents per mmBtu as transit fee for the gas.
The contract price of TAPI gas is linked to a formula which contains indices based on fuel basket and other indices which are not as volatile as crude oil. TheU.S.is backing the pipeline as an alternative to the India-Pakistan-Iran (IPI) pipeline that has been stalled for quite some time now due toU.S.pressure onIndiaandPakistannot to go ahead with the project.
CHEAPER PRICE INDEX FOR TURKMAN GAS
NEW DELHI:Indiawill buy gas fromTurkmenistanat a price indexed to fuel oil, a cheap byproduct of oil refining, instead of crude that makes imports costlier than domestic supplies. The Cabinet on Thursday approved the model agreement for buying the Turkman gas that would be wheeled acrossAfghanistanandPakistanthrough a $7.6-billion pipeline.
Oil minister S Jaipal Reddy would join his counterparts from the participating countries to witness the signing of the gas sale purchase agreement in Turkman capital Ashgabat on May 23 and 24.
At present fuel oil prices, Turkman gas would cost $10-$12 per unit inIndia, including transit fee and transportation charge, against an average of $16 for liquid gas imported in ships and $4.2 for supplies from domestic sources.
The transit fee has been set at 50 cents per unit and would be same forAfghanistanandPakistan. The transportation charge would be decided after a consortium is in place and operational details of the pipeline are worked out.Indiaformally joined the project in December, 2010. Gas is scheduled to flow from 2016.
Originally,Turkmenistanproposed to supply gas from its Dauletabad field. Now, it would come fromSouth Yolotanfields. Global energy consultant Gaffney Kline has estimated the reserves at between 13 and 21 trillion cubic metres. The 1,735-km pipeline would run from southeasternTurkmenistanintoAfghanistanthen parallel to the highway fromHerattoKandaharand finally viaQuettaandMultaninPakistanto Fazilka inIndia.
The indexing of the gas price to fuel oil is significant. It is a reflection of an increasing global chorus for moving away from crude as an index for gas prices that has been sparked by advent of shale gas and oil.
State-run gas utility GAIL, which is leading the Indian consortium for Turkman pipeline project, has been the first to catch the trend by tying up future shipments of shale gas in liquid form indexed to price at Henry Hub – theUSgas exchange benchmark. This has made it difficult forPetronet,India’s biggest LNG player, to tie up additional supplies fromQatarwhich has indexed its price to crude.
Increasing supplies of shale gas and oil from huge deposits have depressed Henry Hub and reducedUSdemand for LNG, or liquid gas transported in ships, mostly from West Asia andNigeria. Huge shale gas deposits reported fromArgentina,Poland, parts of Africa andChina, have sparked a worldwide clamour for benchmarking LNG to Henry Hub rather than more expensive crude.
Even Russian president Vladimir Putin recently acknowledged the threat shale gas and oil posed to Russian state-run oil and gas giants, the biggest suppliers outside Opec, and asked them to prepare for a possible new world energy order.
OIL MINISTRY SEEKS RS.49,872 CRORE CASH SUBSIDY
NEW DELHI: The Petroleum Ministry has sought cash subsidy of Rs.49,872 crore from the Finance Ministry to compensate state-owned oil companies for selling fuel at government-controlled rates in the January-March quarter.
Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation together lost Rs.1.48 lakh crore on selling diesel, domestic LPG and kerosene at rates lower than cost in 2011-12, an Oil Ministry official said here.
Out of this, the government had provided Rs.45,000 crore in cash subsidy during April-December. Upstream oil firms such as Oil and Natural Gas Corp (ONGC) would provide Rs.53,359 crore for the fiscal, leaving an unmet gap of Rs.49,872 crore.
“We hope to hear from the Finance Ministry sometime next week,” he said.
State-owned oil firms lost Rs.81,192 crore on sale of diesel during 2011-12, Rs.27,352 crore on kerosene and Rs.29,997 crore on domestic LPG.
Besides, they lost Rs.4,890 crore on sale of petrol, a commodity which was decontrolled in June, 2010, but rates had not moved in tandem with cost due to political considerations.
The official said the oil marketing companies incurred an interest payout of Rs.4,800 crore due to delay in payment of cash subsidy by the government.
Of the Rs.1.48 lakh crore revenue loss, IOC’s share was Rs.80,305 crore, HPCL Rs.32,771 crore and BPCL Rs.35,155 crore.
ONGC TO GET INTO LNG MARKETING
NEW DELHI: Seeking to diversify its business portfolio and venture into new and challenging areas, Oil and Natural Gas Corporation (ONGC) has drawn up plans to enter the marketing and re-gasficiation of LNG and into the City Gas Distribution (CGD) business.
The company feels that the share of natural gas in Indian primary energy basket is expected to increase from 11 per cent to 20 per cent by 2025. Although domestic gas production is expected to grow to nearly 200 million metric standard cubic metres per day (mmscmd) by 2015-16, dependence on imported LNG is set to increase substantially, according to an internal appraisal report prepared by ONGC.
The recent drastic reduction in gas production from the KG-D6 block, owned byReliance Industries Limited (RIL), has created acute shortage of gas and resulted in sudden incremental demand for LNG.
Further, it states that LNG imports are likely to increase considering that not only do existing common carrier gas pipelines have unutilised carrying capacity but also new gas pipelines are being commissioned which will also lead to capacity surplus, thereby facilitating more LNG imports. “Considering the growing dependence on LNG imports in the country, there are opportunities for ONGC to enter the LNG space either through re-gasification terminals/FSRU or a stake in LNG marketing,” it states. Similarly, it states that ONGC is firming up plans for developing various offshore and onshore blocks that are expected to produce significant volume of gas over next 3-6 years. With a view to fetching better margins on future gas productions and to ensure a sustainable gas business model, ONGC is exploring options for entering the city gas distribution (CGD) business either on its own or through the setting up of a joint venture. A study by AT Kearney on CGD business environment inIndiaand evaluation of prospects of ONGC’s entry into the business has been submitted and an in principle approval to the proposal has been granted. A detailed business plan has been developed by the consultant and road map for entering CGD business it will be put up before the ONGC board for approval shortly.
GAIL CAN ENTER TAPI GAS PURCHASE PACT
NEW DELHI: The Union Cabinet on Thursday approved the petroleum ministry’s proposal to allow GAIL (India) to sign the gas sale & purchase agreement (GSPA) with TurrnenGas for the Turkmenistan-Afghanistan-Pakistan-India (Tapi) gas pipeline project, said a government release.
While the statement did not mention the price at which gas would be imported, people close to the development said the landed price of the gas would be cheaper than the import price of Qatari gas in 2018.Qatar’s RasGas charges 12.67 per cent of the price of Japanese crude cocktail and Petronet pays another $0.26 per million British thermal units (mBtu) for shipping the gas in its liquid form fromQatar. This currently stands at $8-10 per mBtu.
The $7.6-billion Tapi project envisages building 1,680 km of pipelines, with a total gas capacity of 90 million standard cubic metres per day.
The Cabinet on Thursday cleared new amendments in the Marriage Laws (Amendment) Bill introduced in the Rajya Sabha earlier this month to give the wife a clearly defined share in a husband’s immovable residential properties. It also retained the mandatory six-month cooling-off period for divorces with mutual consent.
The Cabinet also cleared the Agriculture Bio-Security Bill that would introduce stricter norms for the import of agri-food products.
CAIRN DEAL BOOSTS VEDANTA’S CORE PROFIT
LONDON: Vedanta, the London-listed miner, posted a 13 per cent rise in full-year core profit, as its zinc operations and recently acquired oil producer CairnIndiahelped offset the impact of a regional mining ban on its key iron ore operations.
Vedanta is in the throes of a simplification of its byzantine structure, which will see it place all but one of its subsidiaries under the umbrella of a single operating unit. The company said it was on track to complete the overhaul by the end of the calendar year.
Earnings before interest, tax, depreciation and amortisation (Ebitda) rose to just above $4 billion, in line with analyst expectations, though its core profit margin, excluding custom smelting, dipped to 40.6 per cent from 44.6 per cent.
The company took a majority stake in CairnIndialast year in an $8.7-billion deal, buying most of the stake from Cairn Energy. Core profit from Cairn accounted for the bulk of the group-level increase.
“The outlook for natural resources remains robust,” Chairman Anil Agarwal said on Thursday, adding Vedanta with a low-cost structure and an Indian asset base was well-positioned to serve the country.
INDIA’S CUT ON IRAN OIL IMPORT NOT DUE TO US PRESSURE: BLAKE
WASHINGTON: US, which has been askingIndiato cut oil imports fromIran, has said that the reduction has happened not because of its pressure but due to “financial and commercial considerations”.
“Progress is being made,” onIndiareducing its dependence on Iranian oil, assistant secretary of state for South andCentral Asia, Robert Blake told lawmakers during a Congressional hearing on Wednesday.
Responding to the questions from Congressmen, Blake saidIndiais making progress in this regard not because of any pressure from theUS, but because of “financial and commercial considerations.”
Blake’s remarks comes against the backdrop of Indian government saying it has cut crude import target from Iran by 11% to 15.5 million tonne for this financial year.
Indiadepends onIranfor 12% of its 80% of imports of crude. As a result of theUSsanctions onIran, it is becoming tough for countries to do business withIran. Many Indian companies have pulled out ofIranbecause of market considerations, Blake said.
So percentage of Indian import of oil fromIranis going down, he said, adding that theUSwelcomes this.
Referring to the recent visit of Secretary of State Hillary Clinton toIndia, Blake said that she herself had welcomed the progress thatIndiahas made in reducing its dependence on Iranian oil.
During herIndiatrip,Clintonnoted that both theUnited StatesandIndiashare the same goal to preventIranfrom acquiring nuclear weapons.
“We continue to urgeIndiato make progress and continue to reduce its import of oil fromIran,” Blake said, responding to questions at a hearing on South Asia convened by the House Committee on Foreign Affairs Sub Committee on the Middle East andSouth Asia.
Responding to a question, Blake conceded that theUnited Statesis assistingIndiain identifying alternative source of energy other than that ofIran.
In Indian case, Blake said, they have to have a long term policy of sourcing oil fromSaudi Arabia. Among the recent important sources of oil isIraq, he said.
TheUShad sent its top energy official Carlos Pascual toNew Delhifor talks with Indian officials on the issue.
The Obama administration has been exerting pressure on different countries, includingIndia, to bring down theirIranoil imports.
Clinton, who was inIndialast week, stated thatIndianeeded to further reduce imports fromIranto win waiver from US sanctions.
It has granted waivers to the sanctions forJapanand 10 European countries but has left outChinaandIndia,Iran’s biggest clients.
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