NEW DELHI: The Union Cabinet will soon consider a policy to develop marginal oil and gas fields. If approved, it will pave way for the auction of 69 smaller fields on a revenue-sharing basis, a first for the country’s hydrocarbons sector.
The proposed policy has been readied by the oil ministry to attract private investors to smaller fields lying unexploited for years for want of enough attention, capital and technology. Sixty-three such blocks earlier allocated to Oil and Natural Gas Corporation and six to Oil India Ltd, both state-run firms, will get auctioned under the proposed policy.
Because of its lower reserves, these fields have stayed off the radar of explorers like ONGC, which have had their attention and resources focused on bigger and more lucrative fields. “A better fiscal regime and availability of superior technologies can now make these fields attractive to private explorers,” a government official told ET.
The new policy would offer a revenue-sharing model, whereby bidders can offer a certain share of revenue from the fields to the government. The ones with the offer of the highest revenue share to the government will get the block to develop, the official said. “These are discovered fields.
Therefore, revenue-sharing is a good model,” the official said. A discovered field has lower uncertainty and risk related to production and revenue than the one which is yet to be discovered. The Indian oil and gas sector has long debated the benefits of revenue-sharing versus profit-sharing. Different government panels have sided with one or the other model citing their own arguments. The oil ministry is yet to make up its mind on following the revenue-sharing or profit-sharing model for its still-in-the-works new policy for larger oil and gas fields.
At present, all oil and gas blocks have been auctioned on a profit-sharing model, which many have blamed for allowing operators to jack up cost leaving lower than expected amount of profit for sharing with government. This, some argue, can be curbed by a revenue-sharing model, which too is seen by some as vulnerable as it may discourage private players from aggressively investing in exploration and development.
In the past, a profit-sharing model has led to disagreements between operator and government on project cost and resulted in legal battles. A revenue-sharing model can probably help check that.
(Source: The Economic Times, March 10, 2015)
GOVERNMENT RE-NEGOTIATING WITH HPCL ON OIL REFINERY: VASUNDHARA RAJE
JAIPUR: Rajasthan Chief Minister Vasundhara Raje today said her government is re-negotiating and reviewing Barmer Oil Refinery, the previous Congress government’s high profile project in the state.
“Land in Barmer is ours, money and natural resources are ours but not the ownership of the project as Rajasthan is given only 26 per cent of share under the MoU singed between previous Congress government and HPCL,” she said in a press conference after presenting the budget 2015-16.
“A loan of Rs 56,000 crore is provided to this project, but only 26 per cent share is given to the state. This is a peculiar package in which Rs 3,736 crore interest free loan is to be provided to HPCL for 15 years,” she said.
“There is a confusion that the project would provide thousands of new jobs. This is not job-related refinery as it would be fully automated,” she further said criticising the previous Congress government which claimed the project would provide thousands of jobs in Barmer area.
Principal Secretary, Finance Department, Prem Mehra said two meetings were held with the officers of Centre and HPCL, and a mining consultant was also deputed to review the project. The state’s interest and common consensus between two parties were to be achieved for finalising the project, he added.
On her budget proposals, Raje said people would feel satisfied as the government had put up a roadmap for all-round development of the state and it would be pursued in next three years.
The Government was doing the ground level works, filling and maintaining the financial gap in every department, followed by implementation of schemes being projected in the budget in her tenure so far, she said.
To a question on BJP’s promise to create 15 lakh new jobs, she said due to a number of elections ( Lok Sabha, civic bodies, and panchayats), the process of recruitment was delayed but schemes for job creation were being rolled out. It will done in her tenure, she added.
On her mention in her budget that “Budget is not politics, but inspired by rajdharam”, Raje said it only meant service to people.
On the state’s share in central taxes, Raje said as per the Centre’s budget the state would get less share from the central taxes, and eight schemes were not given funds.
Let the Centre’s budget get cleared in Parliament and respective Centre’s department send the new circular, till then let’s keep our finger crossed, she said.
To overcome the accumulated debt burden to the tune of Rs 77,000 crore in state’s power companies, the Chief Minister said distribution companies would try to reduce transmission and distribution losses, and they should go to bring short- term loan.
On possible inflation in the state due to an increase in services charge to 14 per cent in the recent central budget, she said better financial management, proposals of tax relief, and a formula of “ease of doing business” will give respite to people.
(Source: The Economic Times, March 10, 2015)
OIL MINISTRY TO PROTECT ONGC ON SUBSIDY PAYOUT: DHARMENDRA PRADHAN
NEW DELHI: Oil Ministry is keen to protect state-owned ONGC from subsidy burden in the March quarter as volatility in crude oil prices have taken a hit on its finances, Petroleum Minister Dharmendra Pradhan said today.
Oil and Natural Gas Corp (ONGC) met over 54 per cent of the Rs 67,091 crore loss that fuel retailers incurred on selling diesel, kerosene and LPG at government-controlled rates during the first nine months of the current fiscal.
The government chipped in only one-third by way of cash subsidy despite slump in international oil prices leading to halving of the net price realised by ONGC.
Pradhan said his ministry was “in touch” with the Finance Ministry for compensation of losses to be incurred by state oil companies during January-March quarter.
“We are in touch with Finance Ministry for working out the subsidies sharing mechanism for fourth quarter,” he said. “We have to protect the interest of ONGC and the subsidies will be calculated keeping in mind the volatility in crude prices.”
Out of the Rs 67,091 crore loss incurred on selling diesel at subsidised rates between April and October 17 and domestic LPG and kerosene through public distribution system (PDS) in the first nine months, the government provided Rs 22,085 crore as cash subsidy.
ONGC provided Rs 36,300 crore while Oil India Ltd (OIL) Rs 5,523 crore. Another Rs 1,000 crore was provided by gas utility GAIL India Ltd.
For January-March, the under-recovery or revenue loss is being pegged at around Rs 7,000-8,000 crore.
Pradhan said considering the volatility in crude oil prices, the interest of ONGC needs to be protected.
The fall in international oil prices has meant that ONGC’s realisation has dipped and after paying for fuel subsidy, which is in form of discount on crude oil it sells to refiners, it is left with only few dollars per barrel that are hardly sufficient to meets its expenditure.
Oil Ministry had last month proposed to exempt upstream producers from payment of any further subsidy, but the proposal is yet to be accepted by the Finance Ministry.
Under-recoveries or revenue retailers lose on selling fuel below cost, is projected at Rs 74,773 crore in full 2014-15 fiscal. Out of this, Rs 67,091 crore was in the first nine months (April-December).
(Source: Business Standard, March 10, 2015)
OILMIN DRAWS UP RS 6,800-CRORE PLAN TO BOOST OIL & GAS FINDS
NEW DELHI: The ministry of petroleum and natural gas has taken up an aggressive programme to survey 1.5 million sq km of virgin areas spread across 26 sedimentary basins to ensure presence of hydrocarbon in them. The exercise is pegged to cost about Rs 6,800 crore.
This initiative is in addition to reappraisal of existing data of the sedimentary basins already taken up by multi-agency team headed by Keshav Dev Majviy Institute of Petroleum Exploration (KDMIPE), an institute of PSU explorer ONGC. The idea is mooted to generate high quality geoscientific data in a speedy manner with government ownership of data.
And second, a multi-agency team would reassess the exploration data collected in India in the past 20 years.
It would be spearheaded by KDMIPE and would cost Rs 124 crore, the source explained.
“Two exercises are being taken up, the first to collect fresh geological data for 1.5 million square kilometres in 26 sedimentary basins. This would help to access whether these virgin areas, where no survey has been done in the past, have commercially recoverable hydrocarbon. The project would be completed in five years (2015-20) costing Rs 6,800 crore,” said a source privy to the development.
The availability of substantive and quality geological data is vital for success of exploration activity in the country. Industry watchers have blamed non-availability of data as one of the reasons for global explorers shying away from participating in the auction of oil and gas blocks under the New Exploration Licensing Policy (NELP) regime.
“Exploration and production activities relating to oil and gas are largely dependent on the prospectivity of the sedimentary basins within the country… All efforts are being made to optimise exploration and production activities in India,” said Dharmendra Pradhan, minister of state (independent charge) for petroleum and natural gas.
The appraisal of 1.5 million sq km of new areas would be taken up by PSU explorers ONGC and Oil India. “Oil India would carry out the survey in northeast areas, while ONGC would do it in the rest of the country. The explorers would conduct 2D seismic surveys apart from drilling parametric wells,” said the source quoted above.
The ministry of petroleum and natural gas is of the view that acquiring geological data would enable understanding the geology, hydrocarbon prospectivity and carving out new exploration blocks. This has become critically important for energy-deficit India when the nation’s crude import bill has sky-rocketed from $112.1 billion in FY11 to $155.7 billion in FY14. On the other hand, production of oil and gas from domestic fields is rather stagnant.
On the other hand, the reappraisal of existing data of sedimentary basins would lead to a clearer picture for investors about prospectivity of basins. It would re-examine exploration data collected in the past 20 years and is targeted to be completed by March 2016. KDMIPE would re-estimate the hydrocarbon resources including yet-to-find hydrocarbon potential of the country.
(Source: The Financial Express, March 10, 2015)
FINMIN MULLING IPOS IN 3 STATE-OWNED FIRMS IN FY16
NEW DELHI: The finance ministry, which has set a Budget target of raising Rs 69,500 crore through disinvestment in 2015-16, is trying to revive plans for initial public offerings (IPOs) in three central public sector enterprises (CPSEs) — Hindustan Aeronautics (HAL), Rashtriya Ispat Nigam (RINL) and THDC India.
The proposal to sell a 10 per cent stake in HAL has been discussed for two years, while public debuts of RINL and THDC (each by sale of 10 per cent shares) were considered for 2014-15 as well. None of these plans materialised, for a number of reasons.
Now, officials in the finance ministry’s department of disinvestment (DoD) are again setting the ball rolling for these three proposals, Business Standard has learnt.
The total proceeds from the three offerings are expected to be around Rs 6,000 crore. Half of that is expected to come from the sale of stake in HAL, while RINL and THDC are expected to bring in the rest.
“Even before the year starts, DoD has prepared a pipeline of minority stake sales worth Rs 30,000 crore (in listed PSUs). These are in various stages of approval. That allows time to put IPOs back on the table,” said a senior government official, adding there, though, were some stumbling blocks.
Sources say the IPO of HAL, a defence behemoth and India’s only manufacturer of military aircraft, has been put on the back burner as the defence ministry is not keen on selling stake in one of its marquee organisations.
Officials from DoD would likely meet their counterparts from South Block soon to hear their concerns, and push for the need to take the company public, the official said, adding the date for such a meeting had not yet been decided. Similarly, sources said there was unwillingness on the part of the Uttar Pradesh government to take THDC public.
The hydroelectric power company, formerly known as Tehri Hydro Development Corporation, is jointly promoted by the Centre and the UP government. They added the department of disinvestment was planning to meet officials from the Uttar Pradesh finance department and discuss the issue. Further details were not revealed.
As for RINL, the Vizag-based steelmaker suffered damages as Cyclone Hudhud hit the country’s east coast in October last year. Parliament was informed the company had suffered damages worth about Rs 350 crore. Government officials later said the company’s proposed IPO would be deferred till the company could recover.
Officials will soon start discussions, with representatives from RINL, to come up with a feasibility plan and road map for a market debut.
(Source: Business Standard, March 10, 2015)
GOVT TO BACK COS THAT FACE US SANCTIONS FOR INVESTING IN IRAN
NEW DELHI: India will protect economic interest of its oil companies from being impacted in the eventuality of US sanctions against them for investing in Iran, Petroleum Minister Dharmendra Pradhan said on Monday.
Pradhan made the comments after Government Accountability Office (GAO) of US named Oil and Natural Gas Corp (ONGC), Indian Oil Corp (IOC) and Oil India Ltd (OIL) along with two Chinese firms for having energy ties with Iran, an act for which it can impose sanctions against them.
“India will take its own stand, independent diplomatic stand on the issue,” he said. “Certainly economic interest of our companies and country will be priority.” He, however, refused to elaborate saying such issues cannot be discussed through media. The US Iran Sanctions Act provides for steps against persons, including foreign firms, investing more than $20 million in Iran’s energy sector in any 12-month period.
According to GAO, the US has not imposed sanctions on any firm for their Iran energy ties since 1998. The US and its allies have pursued the sanctions route to isolate Iran over its alleged nuclear programme.
The three firms have been named for their stake in the Farsi offshore block in Iran. “Looking at the diplomatic complexity of the whole issue, we will look at ways how our companies wont be affected by any adverse situation,” Pradhan said. ONGC, IOC and OIL have been named for having 40 per cent, 40 per cent and 20 per cent interest respectively in the Farsi block.
All the three firms gave similar response to US GAO saying the “exploration contract (for Farsi block) expired in 2009” and that they had “not carried out any activity after 2007 in the Farsi Block”.
OVL, IOC and OIL explored for oil and gas in Iran’s Farsi block and proposed investing $5.5 billion to produce gas from the 21.68 trillion cubic foot discovery they made in the offshore area located near the Saudi Arabian border.
They, however, haven’t invested in the development due to differences over the contract with the Iranian government.
(Source: Millennium Post, March 10, 2015)
‘TRANS-AFGHAN GAS PIPELINE MAY SOON TURN INTO REALITY’
NEW DELHI: Trans-Afghanistan gas pipeline connecting Turkmenistan, Afghanistan, Pakistan and India may become a reality soon as negotiation for the ambitious project is at the final stage, Oil Minister Dharmendra Pradhan said in Lok Sabha on Monday.
Pradhan said discussions over installing a pipeline to bring gas from Turkmenistan to India through Afghanistan and Pakistan were at the final stage and when the project becomes a reality, the country would be free from being dependant on Gulf countries on natural gas.
Replying to a question, the Minister said government will also take a decision on a project to bring natural gas from Iran through a pipeline passing through Afghanistan and Pakistan. He said India has been procuring crude oil from 25 countries and it was not correct to say that the country was over-dependent on the Middle-East for crude supplies. Pradhan said India has imported Rs 5,81,111 crore worth of crude oil, Rs 59,085 crore worth of petroleum products and Rs 46,712 crore liquefied natural gas during 2014-15 (till December 2014).
In 2013-14, India had imported Rs 8,64,875 crore worth crude oil, Rs 74,605 crore petroleum products and Rs 51,699 crore liquefied natural gas.
The Minister said in order to reduce dependence on imports of oil and gas to meet the energy needs of the growing Indian economy, a number of steps have been taken by the government for enhancing domestic production including improved oil recovery, enhanced oil recovery implemented by exploration and production companies for increasing oil recovery from fields.
(Source: Millennium Post, March 10, 2015)
INDIAN OIL TIES UP WITH SAHAJ E-VILLAGE TO SELL 5-KG LPG REFILLS
Kolkata: Sahaj e-Village Limited has entered into an agreement with Indian Oil for selling 5-kg FTL (Free Trade LPG) Indane cylinders through its Common Service Centres (CSCs).
In a statement, Sahaj said this is for the first time that Indian Oil is venturing into a pan India tie-up with a private company for selling 5-kg Indane cylinders.
Oil companies are offering FTL cylinders to consumers at non-domestic rate.
“Sahaj has been the chosen one owing to their extensive rural network where LPG cylinders have the highest demand in place across the states of Assam, Bihar, Odisha, Tamil Nadu, Uttar Pradesh and West Bengal,” the statement said.
“We have one of the largest digitally-enabled networks in rural India. It commands 27,000 Common Service Centres (CSCs) making Sahaj the largest CSC player with 32 per cent share,” Sahaj CEO Sanjay Panigrahi said.
(Source: Millennium Post March 10, 2015)
PRIVATE OIL COMPANIES CUT CAPITAL EXPENDITURE AND COST ON WEAK CRUDE DEMAND OUTLOOK FOR 2015-16
MUMBAI: Indian energy majors are slashing their capital expenditure and have initiated cost cutting measures, responding to the weak crude prices and dismal price recovery outlook for 2015-16.
Crude oil prices have plummeted almost 45% since June due to oversupply in the market. Benchmark Brent crude touched lows of $45 per barrel in January as against a high of $115 last summer.
Oil has seen gains recently and reached $60 a barrel again for the first time this year but the outlook remains muted as demand is unlikely to see a pick-up.
Global energy majors have cut capex, trimmed human resource and are taking severe cost saving measures, something that Indian companies have now started doing. Cairn India has reduced its capex by less than half to $500 million from $ 1.2 billion for 2015-16 and has also laid off 250 of its 1,800 staff. Reliance Industries continues with its capex plans across its businesses, but is implementing “austerity measures” in its exploration and production business, given the challenging times. Essar Energy is holding back capex plans and is also believed to be exploring cost saving steps. While state-run ONGC bucks the trend by increasing capex, it is trying to negotiate lower rates for new tenders to keep costs low. “Energy E&P business has been hit globally due to the fall in crude prices and Indian companies would be affected too. While ONGC would continue investment backed by government’s push, companies like Cairn have no option but to cut capex.
RIL and Essar are diversified and may be able to manage with severe cost cuts,” said Dhaval Joshi, research analyst, Emkay Global Financial Services. Cairn India has said it will undertake only economically viable projects, and has the board’s approval for Raag Deep Gas Project, but will defer rest of the plans. It is also working on reengineering projects and re-negotiating contracts to reduce costs.
While a detailed query sent to RIL remained unanswered, ET is in possession of an email from PMS Prasad, executive director of the company, dated February 17, in which he urges his colleagues in the E&P business to cut down on costs, given the “turbulent time” for the industry. “Considering the current business scenario, as an austerity measure, we at E&P are required to curtail business costs, wherever possible, without compromising on the smooth continuity of the business,” Prasad said.
“As a first step towards achieving this, we are seeking your cooperation to cut down on our business travel cost wherever possible.” Essar Oil told ET that as a refiner, the company was “agnostic” to crude oil prices, adding “we have no major capex plans lined up and hence the fall in crude oil prices has not impacted our plans”. The company said it was working on an energy efficiency programme, which includes conversion of vacuum gas oil into more valuable middle distillates in an attempt to improve its gross refining margins by $1 a barrel. The Union Budget 2015-16 stated that state-run oil firms would invest over Rs 76,565 crore on capex in 2015-16, up 5% on year. Of this, ONGC alone would invest Rs 36,250 crore, as against target of Rs 34,813 crore in the current fiscal. “All development projects in ONGC are evaluated, considering post discount prices available to ONGC and there is no issue of viability at existing prices. We are also going for exploration as per our approved work programmes. We envisage this as an opportunity of getting more competitive rates for oilfield services.
This is also an opportunity of new acquisitions at competitive prices for which ONGC Videsh is working out options to meet longterm energy needs of the country,” ONGC said in a response to ET’s query. Global oil and gas companies have already announced cut in capex to the extent of over $85 billion from their 2015 budgets to protect themselves from low oil prices, according to industry estimates. RBC Capital Markets said in a note that the 122 global companies in its coverage could see a 20% decline in capital expenditure in 2015 to $349.2 billion.
(Source: Economic Times March 10, 2015)
FRANCHISE FOR NON-SUBSIDISED LPG
Thiruvananthapuram: Worthwhile Gases, a player in the non-subsidised LPG solutions, has signed up AJ Gases as a master franchisee for Kerala. Worthwhile will give AJ exclusive rights to distribute their products in the State. It has already entered into tie-ups for bottling, logistics and supply and has a technical and strategic alliance with Torus Energy Company of the US. ‘My Gas,’ the non-subsidised LPG product, comes in volumes of 6 kg; 15 kg and 17 kg. Akshay Jain, Managing Director, Worthwhile, said that for domestic users migrating across Atates, it is difficult to procure subsidised LPG service due to stringent documentation requirements. Worthwhile offers them alternative fuel options.
(Source: Business Line March 10, 2015)
OIL DROPS TOWARDS $59 ON STOCK BUILD-UP
London: Brent crude oil fell towards $59 a barrel on Monday as the dollar strengthened and a supply glut pushed global oil inventories to record highs.
The dollar hit an 11-year high against a basket of currencies after the US unemployment rate in February fell to its lowest level since May 2008, making commodities priced in the greenback more expensive for holders of other currencies.
Oil inventories are rising across the world as production outstrips demand, offsetting tensions in the Middle East and the risk of output cuts in Libya and Iraq.
Brent was down 35 cents at $59.38 a barrel by 1130 GMT. The North Sea crude oil futures contract fell 4.6 per cent last week in its biggest decline since the week ended January 9.
US crude was up five cents a barrel at $49.67. It closed down $1.15 on Friday, ending a third week of declines.
“More and more investors are coming to the conclusion that the market is awash with oil,” said Carsten Fritsch, senior oil and commodities analyst at Commerzbank in Frankfurt.
“Unprecedented stocks levels cannot be ignored forever.” Goldman Sachs analysts argued in a note to clients that oil prices would reverse recent gains due to rising global inventories. They forecast US crude would drop to around $40 a barrel.
(Source: Business Standard March 10, 2015)