NEW DELHI: India and the U.S., on Tuesday, held talks on weaning New Delhi away from dependence on Iranian oil and while both sides stated their known positions on the issue, one positive outcome of the talks, which were wide ranging in nature and not focussed just on Iran, was the possibility of India importing shale gas in liquefied form from the U.S.
Indian officials, during their meeting with U.S. Special Envoy on Energy Carlos Pascual, explained the long-term projections ofIndia’s energy needs, including key suppliers of oil and natural gas and possible external energy sources in Africa, North America andSoutheast Asia.
Indiais, at present, importing crude oil from 30 countries spread across different continents, theU.S.team was told. From the trend of discussions, officials said the possibility of theU.S.exporting shale gas toIndiashould be seen positively.
Desperate to cornerIranin concert with other countries, theU.S.has been seeking sharp reduction in Indian oil purchases fromIran.
The issue was highlighted by U.S. Secretary of State Hillary Clinton right from the moment she landed in Kolkata last week on her way toDelhiwhere she dwelt on it during her interactions with Prime Minister Manmohan Singh and External Affairs Minister S. M. Krishna.
Indiahas cut back on oil purchases fromIranbut does not admit it was underU.S.pressure. Instead, it argues that displacement ofIranfrom its position asIndia’s number two supplier of oil was due to a commercial decision by its refineries.
In response toU.S.cajoling,Indiafeels some customers who had moved to alternate sources of oil have not found the experience very encouraging. But because ofU.S.insistence during Foreign Secretary Ranjan Mathai’s visit toWashingtonin February this year, it was agreed to have the envoy come over to discuss this issue as well as some others that are of acute long-term interest forIndia.
In his interaction with the multi-Ministry delegation drawn from the Ministry of External Affairs, Petroleum and Natural Gas and Non-Conventional Energy Sources, Mr. Pascaul made “detailed and expansive presentations” on the two main agenda items — oil and gas markets, including impact of LNG and of shale gas on the integration of gas markets. His team also made presentations on the demand, supply and consumption pattern projections, including discoveries off the coast of EastAfrica.
Mr. Pascaul will visit Mumbai on Wednesday for talks with ONGC and financial institutions on theIranissue as well as shale gas projections.
Besides shale gas, which some experts say could send the price of natural gas plummeting,Indiawas also keen on the discoveries made or being made on the east coast of Africa — offshore gas deposits inMozambique, indication of huge deposits offshore inTanzaniaand on land inKenya.
This could indicate a vast area in the Indian Ocean could contain hydrocarbons andIndiawould like this knowledge to cover the northern portion of theIndian Oceanas well.
INDIA CUTS CRUDE OIL IMPORTS FROM IRAN
NEW DELHI: In the aftermath of the recent visit of U.S. Secretary of State Hillary Clinton and an indication of rising U.S. pressure not to deal with Iran working, the Central Government, on Tuesday, admitted that it had cut the crude oil supplies from Iran by 11 per cent to 15.5 million tonnes this fiscal.
“Total crude oil imported fromIranby Indian companies during 2010-11 and 2011-12 is 18.50 million tonnes and 17.44 million tonnes, respectively. The target fixed for import of crude oil from Iran for 2012-13 is about 15.5 million tonnes,” Minister of State for Petroleum and Natural Gas R. P. N. Singh said in a written reply in the Rajya Sabha on Tuesday.
Indiahas been under tremendousU.S.pressure to curtail sourcing of crude oil fromIranfollowing sanctions imposed by it and the European Union. However,Indiahad stated that it was not bound by bloc sanctions and it would only go by UN backed sanctions. Mr. Singh said the quantum of crude oil imported by Indian refineries from various sources is decided by them on the basis of technical, commercial and other considerations. “To reduce its dependence on any particular region of the world, India has been consciously trying to diversify its sources of crude oil imports to strengthen the country’s energy security,” he said.
In fact, a recent strategy paper by the Petroleum and Natural Gas Ministry had called for diversifying the sourcing of crude oil from the traditional countries to new sources, which was an indication of the changing equations and attempts byIndianot to annoy theU.S.on the issue. During her visit toIndialast week, Ms. Clinton had stressed on the need forIndiato further reduce crude oil imports fromIranto win waiver fromU.S.sanctions.
External Affairs Minister S. M. Krishna, in reply, had saidIranwas a key country forIndia’s energy needs.Indiahad not publicly said it was aiming to cut back oil imports fromIranbut was understood to have unofficially conveyed to refiners and importers to prune shipments fromTehran.
PANEL FOR FLEXIBILITY IN LNG TRANSPORTATION
NEW DELHI: Keeping in mind the continued shortfall in domestic gas production and the mounting demand for gas, an inter-Ministerial Committee has pitched for flexibility in transportation of LNG and keeping in abeyance the guidelines of Director-General (Shipping) for grant of licence to LNG vessels.
This decision follows the report of the inter-ministerial committee on “Review of existing LNG shipping policy”, which felt that the DG Shipping guidelines for grant of licence to LNG vessels should not be implemented at this juncture as it could hamper the free import of the much-needed LNG. The guidelines stated that LNG vessel should be Indian flag vessel; Indian shipping entity to own 26 per cent; employ minimum two Indian officers and two trainee officers/cadets; LNG importer cannot fix spot vessels for more than 10 per cent of the total annual imports and transfer technology to Indian partner within five years.
However, the committee decided that to provide flexibility in the transportation of LNG, the DG Shipping guidelines for grant of licence to LNG vessels should be kept in abeyance.
“Flexibility in transportation of LNG has been beneficial to LNG consumers. We propose that this flexibility to import LNG on f.o.b. (free on board) basis or c.i.f. (cost, insurance and freight) basis should continue with the buyers and there should be no restriction in this trade,” the report said.
It was pointed out that the LNG market was driven by sellers.
Significant number of sellers own LNG carriers and, therefore, offer LNG for sale from far off places such as Trinidad and Tobago, Algeria, Egypt, Nigeria, Malaysia and Australia on c.f.r. (cost and freight) or c.i.f. basis. “Any attempt to introduce procurement of LNG only on f.o.b. basis, will restrict our ability to import LNG at competitive rates with very limited choice. Further, for spot cargos, location of loading is not certain, owning vessel will be very expensive since most of the time it will be unutilised or underutilised,” it added.
OIL PSUs CRY FOR HELP TO ABSORB RUPEE SHOCK
NEW DELHI: The continuous fall in the value of the rupee has worried the petroleum ministry that has sought immediate intervention from the Prime Minister’s Office (PMO).
In a recent letter to the PMO, the petroleum secretary has stated that higher cost of oil imports in the wake of sharp fall in the rupee against the dollar is making the state-owned oil marketing companies (OMCs) borrow more and more, resulting in a sharp deterioration of their debt-equity ratios.
In case of Hindustan Petroleum and Bharat Petroleum, these ratios have almost doubled due to the increased debt required to purchase oil for meeting the domestic demand.
The weakening of the rupee against the dollar has made oil imports costlier. Non-revision of domestic fuel prices despite high crude oil (the raw material) prices is putting further pressure on the financials of the oil marketing companies.
“During March, the price of the Indian basket of crude oil ranged between $121.50 and $125.44 per barrel, and the average price was $123.61 per barrel as compared to $117.67 per barrel in February, 2012,” the letter said.
The price of the Indian basket of crude was highest at $125.40 per barrel on March 13 during the financial year 2011-12, the letter said. The borrowings of oil companies have touched R126,714 crore by the end of January 31.
The petroleum ministry told the PMO that the combined interest burden of these borrowings on the three oil companies is likely to cross Rs. 9,800 crore during the year ending March 31, 2012.
The under-recoveries of OMCs on sale of diesel, PDS kerosene and domestic LPG below the cost price have already touched R97,313 crore and the estimated under-recoveries of OMCs for the 2011-12 is expected to be Rs. 139,659 crore.
This has adversely affected their credibility in the market.
GAIL, OIL AMONG 11 COMPANIES BIDDING FOR STAKE IN MUKESH AMBANI FIRM
NEW DELHI: Eleven firms including state-run GAIL (India) and Oil India (OIL) have bid to buy stake in billionaire Mukesh Ambani’s privately owned firm Reliance Gas Transportation Infrastructure (RGTIL).
“There are five Indian and six foreign companies which have submitted expression of interest (EoI) for buying stake in the gas transportation company (RGTIL),” a source privy to the development said.
Gas utility GAIL and oil explorer OIL have submitted separate EoIs for the stake buy, which is being managed by J P Morgan, Citi and SBI Caps.
Other firms which have put in EoI may include NYSE-listed energy major Enbridge.
A company spokesperson declined to comment. The source said the companies who have put EoI would visit data room of RGTIL and do a complete due diligence before making any financial bid.
RGTIL was originally a subsidiary of Reliance Industries Ltd (RIL) and was incorporated in March, 2003 to transport natural gas from eastern offshore gas fields to consumption centres. Two years later, it was transferred to Mukesh Ambani, Chairman of RIL.
It was said at that time that Ambani may sell stake in the company through an initial public offering (IPO) once RIL’s eastern offshore KG-D6 field hit peak volumes of 80 mmscmd.
But with KG-D6 output plummeting to less than 34 mmscmd, he wants to sell the gas pipeline business.
Industry sources said RGTIL earlier this month held a meeting of its shareholders inJamnagar, where its registered office is located, to seek approval for the stake sale. The stake sale was approved at the meeting.
RGTIL operates a 1,396-km East-West gas pipeline. The 48- inch pipeline fromKakinadain Andhra Pradesh to Bharuch inGujaratferries natural gas from KG-D6 fields. But the 80 million standard cubic meters per day capacity line is operating at less than half of its capacity as output from KG-D6 field has plummeted.
Relogistics Infrastructure Ltd (Relog), a subsidiary of RGTIL, has won government authorisation to lay Kakinada- Basudebpur-Howrah pipeline, Kakinada-Chennai line, Chennai- Bangalore-Mangalore pipeline and Chennai-Tuticorin line but work on these pipelines havent started because of uncertainty about availability of gas.
RIL is the operator of KG-D6 block with 60 per cent stake while UK-based BP Plc has 30 per cent interest.Canada’s Niko Resources owns the remaining 10 per cent.
While GAIL is nation’s largest pipeline utility by capacity, with a network of 8,500 km, OIL is keen on entering the gas business.
GAIL-TIDCO JV TO INVEST RS 10,000 CRORE IN POWER PLANT
CHENNAI: Gas Authority of India Limited (Gail) will be setting up a joint venture with the Tamil Nadu Industrial Development Corporation (Tidco). The new com-pany will make an investment to the tune of Rs 10,000 crore over the next five years across Tamil Nadu for setting up a power plant and pipeline infrastructure to carry LNG.
In a statement at the state Assembly, chief minister J Jayalalithaa said that the Tamil Nadu government had signed an MoU with Indian Oil Corporation to set up LNG terminals in north Chennai with a capacity of 5 million tonne a year.
The facility will distribute 18 million cubic metre of LNG every day for power generation, industries, vehicles and households, through the pipeline, which will be set up by GAIL.
The MoU was signed between B C Tripathi, chairman and managing director of Gail, andN Sundaradevan, chairman and managing director of Tidco, in the presence of J Jayalaithaa in Chennai on Thursday.
The chief minister added that Gail was setting an LNG terminal inKochiand was planning to create pipeline infrastructure betweenKochiandBangalorevia Tamil Nadu. About 310 kilometre will come under Tamil Nadu and the pipelines will be in the districts ofCoimbatore,Salem, Erode, Tirupur, Nammakkal, Dharmapuri and Krishnagiri.
“Gail has agreed to supply gas for industries, transportation and for household purposes (in main cities) on this 310-km route. It will invest around Rs 1,000 crore,” the chief minister said.
Besides, the company has said that it will invest another Rs 500 crore to carry six million cubic metre of LNG through a pipeline betweenSalemand Cuddalore on a daily basis and another Rs 2,500 crore to set up a floating storage degasification unit in south coastal zones.
“We have also planned to set up a 500-Mw, gas-based power plant with an investment of around Rs 2,000 crore. Overall, the new JV will invest around Rs 10,000 crore over the next five years,” the chief minister said.
YET ANOTHER BLOW?
D6 GAS PRICE REVISION MOVE FACES OPPOSITION FROM POWER PRODUCERS
The government is planning to revise natural gas price for RIL’s D6 block in the KG basin ahead of the official 2014 schedule decided by a ministerial panel in 2008. But the move has provoked strong opposition from the power sector, the biggest consumer of the fuel.
RIL started production from the field in April 2009. It was expected to achieve peak production of 80 mmscmd by the end of 2012. But performance of the field has so far been a far cry from the projection given by the field contractor to the government. The output from the block is projected to further drop to 20 mmscmd by 2015 from the current level of 34 mmscmd, adding to uncertainty about the viability of projects which were planned and developed on the hope of assured gas supply from D6.
Power projects worth over 8,000 MW capacity are facing the prospect of getting stranded due to non-availability of gas from the block. Meanwhile, the contractor has been lobbying with the government for a revision in the gas price from the block. Finally, the government seems to have decided to consider its request.
What seems to have provoked a sharp reaction from the power industry is that the government is considering a revision in D6 gas price ahead of 2014 when it would be officially due. What is even worse, this comes at a time when power producers are yet to recover from the shock of an unprecedented increase in the international coal price after key coal exporting countries like Indonesia changed their coal pricing methodology.
Power plants with a coal linkage from Coal India Ltd are facing a fuel security crisis owing to inadequate coal supplies from the public sector producer. CIL is unable to step up coal production to meet the demand of the power sector.
Meanwhile, payment risks are also looming for power generators, with the financial health of power distribution companies dipping to an all-time low from the ever-increasing gap between discoms’ revenue and expenditure. Discoms’ accumulated losses are estimated to have crossed R2 lakh crore in the financial year 2011-12
“The biggest challenge before power project developers today is to secure adequate and appropriately priced fuel to keep power costs affordable. Since the retail price of power is regulated, the issue of absorption of increases in power cost due to fuel cost escalation needs to be always kept in mind”, Ashok Khurana, director-general, Association of Power Producers (APP) has written to the petroleum minister S Jaipal Reddy in protest against the government’s planned move to review the price of the D6 gas. The APP is a body of private power project developers like Tata Power, Reliance Power, Lanco Power and Adani Power.
Significantly, the government set up the ministerial panel in 2007 to decide on the D6 gas price when a dispute arose between the Ambani brothers over the pricing of gas that was distributed to the younger brother as a part of the family division of assets. The younger brother insisted on paying the $2.34 per mmbtu, the same price that RIL had quoted for supplying gas to NTPC earlier.
“Gas supplies from Nelp and APM sources are $ denominated and looking at the rupee depreciation since 2007 (R40/$) to now (almost R54/$), this had a direct increase of 35% on the cost of gas-based power, thereby increasing tariff by 44 paise/kWh,” Khurana pointed out.