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Feb 2016

LNG Bharat Private Ltd plans to build the onland storage facilites in three phases.
 8Phase 1 shall consist of three horizontal vacuum insulated cryogenic storage tanks with total gross capacity of 1050 Nm3/day. The FSU will generate a BOG of 2, 00,000 Nm3/hr and a separate BOG compressor will be configured in the storage area to further compress this BOG and deliver it into the user gas pipeline at 10 bar (g) and 2,00,000 Nm3/day flow rate.
 8Phase 1A will consist of a full containment tank of 30,000 m3 store LNG. Submerged pumps inside the tank of suitable capacity will be provided to pump the liquid out at the required pressure 15 barg and flow rate 40,00,000 Nm3/day.will be deployed to at the required pressure 15 barg.
 8Phase 2 will consist of 3 full containment tanks of 30,000 m3 each
 8Suitable re-gas arrangement will also be provided consisting of ambient air vaporizers.
 8Regulation and metering will be part of the facilities.
 Click on Reports for more Details
The website carries here the full information on the LNG terminal, including complete details on the:
 8The Floating Storage Unit
 8Utility systems
 8Civil and Marine systems
 8Buildings
 8LNG storage tanks
 8Jetty and Marine works
 8Transportation facilities
 8Process Design
 8LNG composition data
 8Unloading facilities
 8Vapour Handling Facilities
 8BOG Recondenser
 8Low and High Pressure pumps
 8LNG Vaporizers
 8Metering station
 8LNG tuck loading station
 Click on Reports for more Details
LNG Bharat is planning to set up an LNG truck loading station to push LNG by road
 8The company's LNG truck loading station will have 8 truck loading bays
 8Each loading bay will be designed to export 50 m3/h LNG; and
 8The total BOG from the LNG truck loading station will be designed at 3,000 m3 (n)/h.
 8Clearly trucks cannot take care of the entire load of the terminal and the only viable way out is to have a pipeline evacuation network in place.
 8The promoters however will have to make quick progress in building both the pipeline and the terminal.
 8Meanwhile, the promoters claim that the LNG terminal will operate on the following modes:
 8Nominal/Peak/Minimum send-out without LNG ship unloading;
 8Nominal/Peak/Minimum send-out with LNG ship unloading; and
 8The Terminal will also operate on a LNG truck loading mode.
 Click on Reports for more Details
There are far too many LNG terminals coming up in the East Coast of India.
 8Indian Oil Corporation, GAIL, Petronet LNG and KEI-RSOS are in contention to set up four floating LNG terminals
 8The terminals, each with a five-million ton capacity, will cover users spread across 1,250 km from Gangavaram in Andhra Pradesh to Tuticorin District in Tamil Nadu.
 8GAIL’s terminal is meant to come up at Kakinada Port. Petronet’s terminal will be located at Gangavaram too and Indian Oil Corporation’s at Kamarajar Port.
 8GAIL and Petronet entered into separate pacts with the Andhra Pradesh government some time ago. While GAIL terminal is expected to go on stream by 2018, Petronet has not yet disclosed the details
 8GAIL is spending Rs.3,000 crore on the terminal and a 350-km-long pipeline starting from Kakinada to Srikakulam via Visakhapatnam.
 8Meanwhile, IOC has completed the feasibility study for its Rs.5,150 crore project. The LNG terminal is meant to be operational by 2018.
 8The problem however is that there are too many terminals chasing too few customers in the region.
  LNG Bharat’s project is meant to benefit consumers in Rayalaseema of Andhra Pradesh,Telangana and north Tamil Nadu. Besides, Chennai city is meant to get access to piped gas.
 8But other terminals owners are also chasing the same customers, such as Madras Fertilizers, CPCL, Tamil Nadu Petro Products, GMR Power, among others.
 8With the crash in crude prices, offtake of gas has been low as liquid fuels are now more lucrative to use than gas.
 8Then again, the evacuation network is not in place as the laying of pipelines is vigorously opposed by the local population.
 8A few of these terminals are unlikely to come up anytime soon.
 Click on Reports for more Details
The future continues to remain unpredictable for the oil industry.
 8Global oil supply growth is plunging as an extended period of low prices takes its toll and the IEA has estimated that the market will begin rebalancing only in 2017.
 8And even though prices will rise, more supply will be quickly tapped snuffing out any substantial rally.
 8But lack of investments will eventually show up in a sharp spike in prices not very long into the future.
 8Global oil exploration and production capital expenditures (capex) are expected to fall 17% in 2016, following a 24% cut in 2015
 8US production is seen reaching an all-time high of 14.2 mb/d by 2021, but only after falling in the short term.
 8Short term output declines by 0.6 mb/d this year in the US and by a further 0.2 mb/d in 2017 before a gradual recovery in oil prices, combined with further improvements in operational efficiencies and cost cutting, allows production to resume its upward climb.
 8The United States remains the largest contributor to supply growth during this study's forecast period of 2016-21, accounting for more than two-thirds of the net non-OPEC increase. Freed from sanctions, Iran leads OPEC gains and Iranian oil output rises 1 mb/d to 3.9 mb/d by 2021.
 Click on Reports for more Details
The PNGRB has issued a set of clarifications to their call for bids for the Jaigarh-Mangalore gas pipeline.
 8The EOI for the proposed 635 km pipeline was submitted by H-Energy Private Limited ( HEPL).
 8It envisages meeting the gas requirements of the south-west markets.
 8It has now been clarified that the pipeline can now be rerouted  by a further 10% of the authorised length with the Board’s approval.
 8This is an amendment from the earlier stipulated 5% deviation margin allowed to the bidders in the bid document for the pipeline.
 8It was further clarified that should any contentious provision arise in the bid document vis-à-vis the Regulations, the PNGRB shall have discretionary authority over it.
 8The Jaigarh-Mangalore pipeline aims at connecting other markets in Panjim, Karwar and Udupi which are located  along the proposed pipeline.
 Click on Reports for more Details
Finance minister Arun Jaitley faces touch challenges while presenting the  Budget for 2016-17 on February 29, 2016.
 Investments and growth momentum showing only a very modest and uneven recovery so far so the focus will have to be on reviving investments
 8But this has to be done without deviating from the medium-term fiscal consolidation agenda.
 Heavy outflow of funds
 8The heavy outflow of funds from the implementation of the Seventh Central Pay Commission’s (SCPC’s) recommendations as well as One Rank One Pension (OROP) scheme constrains the fiscal space further.
 Rural economy in distress
 8The rural economy is doing poorly and shoring it up adequately is a big challenge and this will mean significantly raising the funding of rural welfare schemes
 Corporate and bank balance sheets are stressed
 8The other bid problem is that the stress in a large section of both corporate and bank balance sheets. So raising money through innovative measures will assumes critical importance.
 8The scope of the Direct Benefit Transfer schemes would need to be expanded aggressively especially in the more contentious and difficult to implement areas like fertiliser and kerosene subsidy.
 Banks are in serious trouble
 8Indian banks are in serious trouble. Gross NPAs are at a massive Rs 400,000 crore. Tier 1capital requirement is between Rs 40,000 to 60,000 crore. This will limit the capacity of the banks to lend money. But somehow a solution has to be found or else funding for large infrastructure projects will suffer.
 8A clear roadmap for reduction in corporate tax rate from 30% to 25% as well as rationalisation of exemptions is awaited in the Budget.
 8Other changes in taxation rates are, however, expected to be limited, in pursuance of the goal of maintaining a relatively stable policy regime, and the anticipated shift to the goods and services tax (GST).
 Make or break budget for Modi
 8This is going to be a make or break budget for the Narender Modi government.
 8Modi has to get it right this time or it will too late.
 Click on Reports for more Details
The sharp drop in oil prices since late 2014 has permitted the government to step up excise duty on petrol and diesel
 8This brings around Rs 60,000 crore of extra revenue for the government in in 2015-16, while at the same time reducing the fuel subsidy allocation by Rs. 30,000 crore
 8It is a huge benefit and augments the government's fiscal spending space.
 8But this advantage will not be available in 2016-17.
 8The average crude oil price for the Indian basket to USD 40/barrel in 2016-17 from USD 46/barrel in 2015-16 along with modest INR depreciation, and an increase in the consumption of fuels.
 8A portion of the uptick in crude oil prices would be passed on to consumers, while the balance may be absorbed by reversing some of the recent excise hikes on petrol and diesel, to reduce the impact on inflation. Therefore, no further windfall benefit to the government is likely from incremental excise inflows on account of these fuels in the coming fiscal, unless crude oil prices are significantly lower which is unlikely.
 Click on Reports for more Details
Arun Jaitley is likely to focus on plugging leakages and better targeting of subsidies.
 8The idea is widen the Direct Transfer of Benefits (DBT) to the intended beneficiaries, a trend that has already gained momentum with the Government’s ambitious Jan Dhan Yojana.
 Detailed road map for roll out of DBT in fertilizes and Kerosene expected
 8A detailed roadmap for roll out of DBT in fertilisers and kerosene are also expected.
 8Notably, DBT for kerosene has been rolled out on a pilot basis in 26 districts from January 2016, aimed at reducing the widespread leakage of subsidised kerosene, which is used for adulteration of the higher priced auto-fuels (especially diesel). The working of the scheme is supposed to be reviewed after three months of implementation.
 8The roll out DBT for fertilizers is expected to be very challenging as land records are different from actual tillers of land Getting it wrong is not an option for the government
 Fuel subsidy to be between Rs 23,000 to Rs 25,000 crore
 8Incorporating the savings accruing from lower average crude oil prices, the DBT scheme for LPG, the pilot DBT for kerosene and cessation of LPG subsidy for high income households, the BE for 2016-17 for fuel subsidies to be restricted to Rs. 23,000 to 25,000 crore, providing a modest further cushion of Rs. 5000 to 7000 croren as compared to 2015-16.
 Rs 5000 crore subsidy saving because of revision of RasGas formula
 8We also expect a benefit of around Rs. 5000 crore for fertiliser subsidy per year following the revision in the formula for calculating the price of Rasgas LNG from January 1, 2016.
 Click on Reports for more Details
Indigenous crude oil production during January, 2016 was 4.7% less (150 TMT) than that of January, 2015. On cumulative basis, the production was 1.2% (383 TMT) less than the April 2014 - January 2015 period.
 Production of petroleum products during January, 2016 saw a growth of 7.1% (1,344 TMT) over the corresponding month of the previous year. On cumulative basis during the period April 2015 to January 2016, there was a growth of 3.4% (6182 TMT) in production as compared to the same period in the previous year.
 8Except for HMEL refinery’s DHDT unit planned shutdown from 22.1.2016, there was no reported planned and unplanned shutdown of refinery primary units during January, 2016. This resulted in 113.5% capacity utilization during the month. Total product availability during the month from refineries/fractionators was 20,350 TMT against POL production of 19,006 TMT as compared to January 2015. This is highest POL production in a month during the current financial year.
 8BPCL’s Mumbai refinery has commissioned CDU-4, replacing existing CDU 1 and 2 units of equivalent capacity (6.0 MMT).
 Export of POL products improved during January, 2016 by 8.1% (453 TMT) as compared to January, 2015. On cumulative basis, POL exports were lower by 9% (4,868 TMT) as compared to the April 2014 - January 2015 period.
 Consumption grows 12.7% in January
 8Petroleum product consumption registered a growth of 12.7% during January, 2016 as compared to 3.1% growth during January, 2015. Except for Kerosene and LDO, all other products registered positive growth during January 2016. During the period, April 2015 to January 2016 petroleum product consumption registered a growth of 9.9% (13.5 MMT) as compared to the same period last year.
 Click on Reports for more Details
Gross production of natural gas for the month of January, 2016 was 2,447 MMSCM which was lower by 15.3% compared with the corresponding month of the previous year (2,888MMSCM). The cumulative gross production for the current year till January, 2016 was 27,145 MMSCM which was lower by 4.0% compared with the corresponding period of the previous year (28,286 MMSCM)
 8LNG import during the month was 1,927 MMSCM which was 26.9% higher than the corresponding month of the previous year (1,519 MMSCM). The cumulative import 17,776 MMSCM for the current year till January, 2016 was higher by 9.7% compared with the corresponding period of the previous year (16,199 MMSCM).
 8The prices of Brent crude averaged $30.69/bbl during January, 2016 as against $38.21/bbl during December 2015. Similarly the Indian basket crude averaged $28.08/bbl during January, 2016 against $35.68/bbl during the previous month.
 45% reduction in import bill
 8With the continuing downward trend in crude prices, the import bill of crude oil is estimated to reduce by 45% from $113 billion in 2014-15 to $62 billion in 2015-16
 considering Indian basket crude oil price of $ 35/bbl and $/Rs=67 for the balance part of the financial year.
 Click on Reports for more Details
Petronet LNG Ltd (PLL) has fully tied up back-to-back offtake arrangements for 5 MMTPA of expanded capacity -- that will push its total capacity from the existing 10 to 15 MMTPA -- with gas suppliers in India.
 8The expanded capacity will come on stream in 2016-17.
 8New tolling agreements have in fact been tied up for 6 MMTPA of LNG under "use or pay" arrangements.
 8Deals have been signed with  IOC for 1.5 MMTPA of LNG, with BPCL for 1 MMTPA, GAIL for 2.5 MMTPA and GSPC for 1 MMTPA.
 8The project cost for the 5 MMTPA expansion is Rs. 2200 crore. The project is being funded by Rs 1200 crore interest free advances from the offtakers as equity contribution and the balance through internal accruals though earlier the company had planned to avail debt.
 8Pertinently, of the 10 MMTPA existing capacity, 8.5 MMTPA is under long term supply arrangement by PLL with RasGas. The back to back offtale arrangements have been tied up for all of 10 MMTPA of LNG, some of it involving tolling agreements.
 Click on Reports for more Details
PLL has also drawn up another Rs 1200 crore expansion that will take the capacity up from 15 to 17.5 MMTPA.
 8All of the capacity has not been booked yet but Torrent Power has agreed to pick up 1 MMTPA of LNG from this capacity.
 8The project will be funded with Rs 200 crore in advances from offtakers and the rest through internal accruals.
 8But the project is not expected to go on stream soon
 8Commissioning is expected only in 2019-20.
 8PLL is confident of tying up the tooling arrangements for the entire capacity by then.
 Click on Reports for more Details
PLL's big headache seems to be to get the 5 MMTPA Kochi terminal going.
 8But the building of the pipeline network out of Kochi again shows signs of getting delayed after the initial euphoria brought about by the Supreme Court decision to allow GAIL a free hand in laying the gas pipeline from Kochi to Mangalore across seven districts of the state.
 8The Tamil Nadu government has decided to file a Special Leave Petition before the Supreme Court against the apex court's order.
 8In a parallel move, the state government has constituted an export committee to look a the Supreme Court order and find ways of finding a solution to the impasse. This is however regarded by GAIL as a mere delaying tactic.
 8Meanwhile, the Tamil Nadu chief minister has written to Prime Minister Narender Modi seeking his help to halt work on the pipeline.
 8With the state elections looming ahead, and farmers continuing to be in protest mode against the pipeline, it does not seem likely that the row will be resolved any time soon.
 Click on Reports for more Details
The deal for shipment of 1.44 MMTPA of long term LNG contacted with Exxon Mobil for Petronet LNG's Kochi terminal and concomitant offtake agreements with domestic gas companies will have to be redrawn now that the gas evacuation network out of Kochi is not in place.
 8The terminal was built at a cost of Rs 4600 crore, funded through a debt of Rs 2200 crore and internal accruals of Rs 2400 crore.
 8This is turning out to be drag not just on PLL but also on GAIL who is building the Kochi-Bangalore pipeline
 8Although Phase I of the pipeline (from Kochi to Koottanad) has been almost completed, it is Phase II (from Koottanad to Mangalore and Kochi to Bangalore) that has run into trouble.
 8Given the uncertainty in Kochi, PLL is soft peddling the LNG terminal it wants to set up at Gangavaram Port in Andhra Pradesh. The slump in gas demand has is forcing a re-think about how many RLNG terminals will actually come up in India.
 8But this time around, PLL has promised that it will have to the entire commercial structure in place including customer tie ups and pipeline connectivity before moving ahead with the project construction.
 Click on Reports for more Details
What is the price of gas as per the new long term agreement signed by PLL with RasGas for 8.5 MMTPA of LNG?
 Here is a full background:
 8The decline of crude prices from July 2014 lead to the decline in the spot prices of LNG even as long term RLNG prices for PLL remained high due to floor price linked to past 60 month average of crude oil prices.
 8Due to the high differential between prices of RasGas LNG and spot prices, offtake of more expensive long term LNG had gone down by 30%.
 8This had resulted in the build up of large ‘Take or Pay’ liabilities (estimated at about Rs 12,000 crore) for PLL. Even though the liability was pushed on to the bulk offtakers of gas who in turn pushed it further down the line to the end consumers, it seems unlikely that any money will ever be recovered.
 8A new deal was subsequently negotiated with PLL wherein the price of gas was linked to the recent 3-month average price of Brent crude oil, without any floor and cap, as opposed to the earlier price, which was linked to a 12-month average price for JCC subject to floor and cap linked to 60-month average of JCC.
 8Though the slope remains unchanged, an additional constant of about US$ 0.6 /mmbtu was added in the revised formula.
 8Additionally LNG volumes not offtaken by PLL from RasGas during 2015 will be taken and paid for by PLL during the remaining term of the SPA (that is over the balance period of 13 years).
 8As a consequence of the deal, the FOB price of RasGas LNG fell down to US$ ~6.5-7 /mmbtu from January 1, 2016  against the earlier price of US$ ~12.5 /mmbtu earlier.
 8Even though the price of gas has fallen, the prices of liquid fuels have also gone down equally drastically, leading to a rise in their usage often at the cost of using gas.
 Click on Reports for more Details
Even though new benchmarks have been established for long term LNG prices, spot prices continue to decline.
 8Asian spot FOB LNG prices are now falling below the $5/mmbtu mark on weak demand and new capacities coming up.
 8Prices are trading at $4.90/mmbtu for future shipments
 8In this context, even RasGas' new long term price for PLL looks more expensive in comparison to ruling spot prices.
 8So will there again be a scenario where customers will prefer lower priced spot cargoes to long term LNG?
 8Observers do not believe that this is going to be the case. The differential is not likely to be wide enough this time around between the two set of prices for a switch to take place.
 8In any case the RasGas pricing is such that other long term LNG suppliers at least will find it difficult to match that price.
 8Given the massive quantum of long term supplies, tied up with RasGas, it will be near impossible to find substitute spot cargoes at low prices.
 Click on Reports for more Details
Oil multinationals are suggesting modifications in tax policies to address transfer pricing issues to encourage inflow of foreign investment into the country.
 8In the recent past, uncertainty on transfer pricing cases and issues related to arbitrary share valuation have significantly dented investor confidence, and actions to address these need to be taken immediately, an representation to the government has claimed.
 Specific suggestions that are reaching the government include:
 8Ensure that income tax is not levied on transactions related to fresh new shares for subscription and the receipts therein.
 8Retrospective Amendments brought in 2012 need to be done away with and clarifications given, since they create policy and regulatory uncertainty and hamper business confidence.
 8Existing cases of transfer pricing need to be resolved on a fast track basis.
 Click on Details for more Details
The push to allow open access for aviation turbine fuel segment in India is being pushed hard by some companies
 8The government has been petitioned to allow open access for ATF that encompasses airports, fuel storage and into plane activities, pipeline access and intermediate storage facilities.
 8This will reportedly create a level playing field and instill real competition.
 8Bangalore and Hyderabad became the first open access airports where all fuel suppliers were given access to bring fuel into a common facility including into-plane operations which is managed by independent service providers, unlike earlier where supply of ATF at airports was through individual fuel storage systems owned by each company supplying fuel.
 8The demand is now to allow intermediate dedicated storage tanks for bonded and non-bonded ATF sourced from refineries, for operational convenience at a storage location
 Click on Details for more. Details
Pre-budget suggestions have also been made for reforms in the natural gas sector: 
 8The long pending demand for eclared goods status for natural gas and R-LNG, in line with crude oil and coal has again been revived.
 8It has been suggested that natural gas, being a primary energy source like crude oil and coal, should be treated at par and the same tax status be granted.
 8Currently, there is varying VAT on natural gas, including LNG across the country, and it would be advisable for the government to treat natural gas and R-LNG as a "declared good" so that they have a common concessional rate of VAT.
 8There is a also a plea for Import duty exemption on LNG, in line with crude oil, and, extended to "end-use" of non-power sectors as well
 Click on Details for more Details
Companies have sought amendments in tax accounting principles that allows for 'contractual flow" and not "physical flow of molecules' as the basis for inter-state trade for "fungible goods" like natural gas
8Pending other legislation, what has also been sought is the full fungibility of tax  credits between state VAT and CST to ensure no loss of VAT credits due to CST sales.
8There is also a demand that safe harbor allowances for LNG import prices under transfer pricing should be based on the actual dispersion of custom import prices for the year and not on an adhoc basis
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Reliance Gas Pipeline Ltd had been given the go-ahead to construct the 1.25 MMTPA Dahej-Hazira-Nagathone ethane pipeline.
 8The dedicated pipeline will ferry ethane to RIL's Nagathone and Hazira manufacturing hubs.
 8The total cost of the project is Rs 1428 crore.
 8The pipeline length is 485 km and traverses through ecologically sensitive areas in the states of Maharashtra and Gujarat.
 8Details of metering and pump stations as well as pigging stations are carried here as also information on the cathodic protection system and SCADA system.
 Click on Reports for more Details
The Indian chemical and petrochemical industry is poised for dramatic growth.
 8The industry is estimated to be worth $250 billion by 2020.
 8From 3% of the global market, this segment is likely to be 5% of the market.
 8The basic building blocks for this push is going to be naphtha and natural gas for the manufacture of most of the sub-segments such as basic organic chemicals, petrochemicals and fertilizers.
 8Through its Make in India programme, the government is making a valiant push to attract investments in this sector.
 8The growth drivers are in place as segments automotive, construction, water chemicals and textile chemicals are poised for rapid growth.
 8The website carries here details of the investment opportunities available in this sector as well as a list of investments that has already been finalized.
 Click on Reports for more Details
The PNGRB has encahsed 25% of the bank guarantee (BG) submitted by the Gas Transmission India Pvt Ltd (GTIPL) which is authorized to lay the Ennore-Nellore natural gas pipeline for defaulting in providing the requite Gas Transportation Agreements ( GTAs) and the Financial Closure (FC) statement.
8The company was meant to submit the documentation in June, 2015 but eventually the PNGRB set November as the deadline.
8If that itself is not enough, GTIPL had also sought on several occasions extensions of time schedules for its initial pipeline laying activities, capacity bookings and natural gas tie-ups.
8The BG was encashed by the PNGRB after documents did not arrive even after the November deadline.
8The regulator is also concerned about the sudden downward revision in the cost of the pipeline.
8The PNGRB has claimed that the company has been able to furnish only the geotechnical report and the topographical report whereas the progress on the project should have been much faster.
8GTPIL has signed an MoU with the LNG Bharat Pvt Limited to ship for supply of 11.5 mmscmd of gas. This amounts to 50% of the volume of gas stipulated to be transported in the first five years by the pipeline.
Click on Reports for more Details
The PNGRB is also concerned other anomalies too in connection with the construction of the Ennore-Nellore natural gas pipeline project.
 8The regulatory board is skeptical about the mode of financing of the pipeline adopted by GTIPL
 8The sudden switch to100% internal funding of the project was found to be a little suspicious by the regulator.
 8The PNGRB had initially wanted clarification on how the Rs 729 crore project will be funded particularly when the networth of the promoters was only Rs 411 crore.
 8But GTIPL subsequently said that the networth of the promoters had gone up to Rs 756 crore whereas the cost of the project went down to Rs 625 crore.
 8Then a few days after the networth was revised upwards, it was revised once again, this time to Rs 1071 crore.
 8The PNGRB is skeptical about the sudden increase in networth of the company, particularly when 80% of the networth is accounted for by one individual.
 8Then again the antecedents of LNG Bharat Pvt Ltd were also found to be suspect as the terminal found no mention in the list of upcoming terminals published by the Petroleum Planning and Analysis Cell (PPAC).
 Click on Reprots for more Details
ONGC had in 2014 drawn up a plan to drill a total of 67 exploratory wells in 23 onland blocks in the Western Onshore Basin of Vadodara.
 8Encouraged by positive early results in exploratory drilling, ONGC is now looking to explore more wells in the area.  
 8Good results have come in from three out of the seven wells drilled in the Umra Extension-I & II where hydrocarbons have been found.
 8Then again in the Kural, Padra and Gandhar fields, six wells of the seven wells drilled in 2015-16 have been found to have hydrocarbons.
 8ONGC now has 11 wells lined up to be drilled in blocks spread over the Onshore Basin.
 8What is more, some wells are being relinquished in low prospect areas while plans for new wells in more prospective areas are being drawn up.
 8The strategy devised by ONGC is to swap the relinquished wells for newer wells in more prospective fields, keeping the numbers intact so as not to require fresh EC clearance.
 Click on Reports for more Details
What's the price that ONGC is working on for the CBM production from the Bakora block?
 8Is it working on an assurance given by the petroleum ministry that CBM will elicit a better price or is it based on the current and future projected price of gas as given under the formula currently in vogue?
 8Using benchmark prices for the period of January 1, 2015 to December 31, 2015, it has been estimated that the price for gas sales from the D6 Block in India for the April 2016 to September 2016 period could go down to approximately $3.15 / mmbtu GCV (approximately $3.50 / MMbtu NCV).
 8This price is projected to fall further in the second half of the new financial year..
 8The price announced by the GOI for October 2015 to March 2016 of $3.82 / MMbtu GCV (equates to approximately $4.24 / MMbtu NCV) represents a reduction of approximately 18 percent from the price for natural gas sales for the April 2015 to September 2015 period.
 8While freeing up the price of gas is what the petroleum ministry is pushing for,  the finance ministry may have a different agenda in mind, keeping in view the fact that any increase in price will have a direct impact on fertilizer subsidy as the gas price is a pass through under the retention pricing system. Then again, power, PNG as well as CNG prices will go up if gas prices are hiked.
8Essentially, raising gas prices will be as much as an economic as well as a political decision.
 8In this context, the question is whether ONGC's CBM foray is going to provide a positive IRR under the existing matrix rather than under an assumption that gas prices will be freed at some point in the future.
 Click on Details for more Details
ONGC is going ahead with putting up CBM production facilities in the Bokaro CBM block.
 8A total of 52 wells are to be drilled and attendant well head facilities will be set up.
 8Contractors have been invited to set up a GCS with a capacity of 10 LCMD that includes gas compressors and dryers.
 8The job will involve a water treatment plant of 1000 m3 and laying of main and feeder lines.
 8The project will be completed on a turnkey basis.
 Click on Reports for the entire list of equipment and services  Details
Business opportunities for equipment and service providers will be available for a Rs 150 crore investment to set up an LPG import, storage and handling faculties in Haldia.
 The following facilities are sought to be installed:
 8LPG/Propane/Butane Cryogenic Storage Tanks (2x12500 MT Double
 8Pressurized Tanks for Condensate Collection (2x50 MT)
 82x 12 inch LPG Pipelines & Marine Loading Arms for import and receipt of
 88 Bay LPG loading gantry
 8Associated facilities & utilities
 8Base line capacity: 0.6 MTPA
 8Achievable Capacity: 1.20MTPA
 8Parcel size: 20000MT - 25000MT
 88No of parcels per annum: 40-50
 8No of parcels per month: 3-5
 8The facilities will comprise of marine unloading arms, pipeline transfer facilities (12 km), storage tanks, Loading bays, compressors and a pump house along with utilities services.
 Click on Reports for more. Details
Chambal Fertilizers Ltd has finally placed the EPC contract on Toyo Engineering for an urea-ammonia plant
 8It will be the first private sector fertilizer company to go ahead with a new standard urea-ammonia plant under the new policy paradigm.
 8Toyo has been given an advance and work has now begun in Toyo, company sources have confirned.
 8Chambal's investment is going to come as a huge shot in the arm for the Modi's government's gas pooling policy for the fertilizer industry, under which the price of domestic gas is pooled with imported LNG price to arrive at a common price.
 8Traditionally, Toyo ties up with its KBR for its ammonia know-how.
 8This is good news for equipment and service providers, for the project cost is estimated at Rs 6,000 crore.
 8Gas suppliers too stand to gain, as the requirement for the new plant will be roughly 2.4 mmscmd of gas 
 8Another fertilizer plant, the Ramagundam plant, promoted by RCF and EIL, is already going ahead with the contracting process. 
 8So, total orders worth Rs 12,000-13,000 crore are on the anvil and this is good news indeed for the sector, which hasn't seen fresh investments in many decades.
 Click on Detaiks for more  Details
Even as Chambail Fertilizers is going ahead with its urea-ammonia plant, the rest of the private sector fertilizer industry seems to be still sitting on the fence.
 8The attitude seems to be to wait and watch Chambal's progress before they jump in themselves
 8Chambal's interest in going ahead with the project emanates from the fact that the Bhartia family (Shyam and Hari Bhartia) are stakeholders in the company, and they have a wide exposure to the oil and gas industry. They have a stake in the GSPC-led block in the deepwater KG Basin where gas is already being produced. Then again they have interests in several onland oil and gas blocks. Their understanding of the domestic gas industry is deeper than the rest of the fertilizer industry.
 8Also, Chambal's existing urea-ammonia complex in Gadepan  had survived mostly on imported LNG before pooling of prices allowed for a single price for all urea units.
 8Of the total requirement of 4 mmscmd of gas, as much as 2.28 msmcmd was based on long and medium term LNG. In fact their plant had to take a shutdown once as it did not make sense to produce urea because of the high LNG content under the pricing paradigm that was prevalent under the earlier policy. In that sense the company is not afraid to handle a situation, just in case the price pooling system is withdrawn, where the dependency on LNG is high, for they have survived under such circumstances.
 8It is therefore not surprising that Chambal has been more aggressive in pursuing fresh brownfield capacity than any other private player in the business. 
 8As far as this website is concerned, we will be able to provide our readers with advance information on future RFQ dates for equipment and services as well as key progress parameters over the next three years that these fertilizer projects will take to be completed. 
 8A software package will soon be available to those who want to track all fertilizer projects over hundreds of parameters in real time. This will come with live analyst support, so all you have to do is to call him should you need any clarification on a project.
 Click on Details for more Details
Why is there a reluctance on the part of the private sector investors to invest in fertilizer plants in India even when demand for urea far exceeds supply.
 8This is on account of the fact that India does not have a comparative advantage in the manufacture of urea.
 8Since domestic gas is not easily available, India has to depend on imported gas to meet incremental supplies. Even if a pooled pricing mechanism makes it cheaper than using pure LNG, this price is far higher than, say, a gas price of $2/mmbtu that prevails in the US or Canada.
 8So there is always a fear that if the imported urea price will br lower than that of domestically produced urea, the government may be tempted, because of the high subsidy burden, to temper down domestic production in preference for imports.
 8Even if there is a government assurance of a guaranteed return, manufacturers have seen in the past that the promise is often breached.
 8Subsidy allocations are always lower than what is needed and at the end of the financial year, it is always a crunch for urea units as subsidy payments come down to a trickle.
 8Companies have to survive on borrowings to fund their working capital needs until supplementary budgets, often insufficient to cover the gap, are approved.
 8But it is now hoped that Chambal's entry will be able to break the gridlock.
 Click on Details for more Details
When BP makes predictions -- like it did in the recently released Energy Outlook 2035 -- the oil and gas industry sits up and takes notice
 8BP has predicted a bright future for the oil and gas industry with crude prices, at times, spiking to  $100 a barrel again
 8Under the base case scenario, the British oil company believes fossil fuels will still be providing 80% of total energy supply in 2035.
 8But there is a doomsday scenario attached to the 'bright future": BP expects carbon emissions to grow by almost 1% a year for the two decades
 8The oil company was unwilling to speculate on where its base case scenario would leave the earth’s temperatures, but it said it would be way above the two degrees centigrade growth seen as safe by most scientists.
 8Is there a way out of this frightening future?
 8BP also outlined a mixture of alternative scenarios, some of which presume much more policy action to counter global warming, including one with a very high carbon price of $100 a tonne (compared with around $5 a tonne now).
 8For now, BP is not saying what should be done. It is for policy makers to decide
 Click on Details and Reports for more Details
Power minister Piyush Goyal is pushing for Gujarat to be the first state to provide 24x7 power supply.
 8The grand plan envisages using gas based power to meet peak demand requirements.
 8The government is now trying to push for full utilization of the state's gas based capacity of 5650 MW, of which 1648 MW is in the private sector.
 8Goyal has drawn up a road map where spot LNG will be used to make up for any intermittent need for power or to plug any power deficit while transiting into a 24x7 format.
 8This should be good news for LNG suppliers though it remains to be seen whether GSPC will give up its grip on the distribution of gas in the state.
 Click on Reports for a detailed report Details
Now that Qatar has established a new pricing paradigm with Pakistan, will Petronet LNG Ltd demand a better deal with Gorgon LNG?
 8India is an extremely price sensitive market, and all subtle price differences, even if it were to be a sale by Qatar to Pakistan, are scrutinized in great earnestness.
 8Petronet LNG was forced to put off taking cargoes from RasGas of Qatar after the long price was found to be higher than spot cargoes, forcing a renegotiation of the contract.
 8Will a similar renegotiation take place with Gorgon now that the Qatar has come in with new long term LNG pricing parameters?
 8Recently the power minister Piyush Goyal was in Australia seeking LNG supplies at a price point at which power can be produced at 5 cents/kwh.
 8This proposal did not find favour with Australian suppliers as it was far lower than their expectations. Goyal on the other hand said that the Australian prices were far too high.
 8Both sides have now appointed high ranking officers to work out a common price.
 Click on Details to find out more more on how Qatar's long term price is turning out to be more attractive than that of Gorgon'sin terms of three important freight, slope, and reference crude price. Details
Qatar, the world's largest producer of LNG, seems to be keeping competitors at bay not just in India but also in neighbouring Pakistan.
 8Worryingly for other suppliers, Qatar's 15-year deal with Pakistan is at significantly better terms than what India's Petronet LNG has elicited from Australia's Gorgon LNG plant.
 8The pricing has been done in a manner that Qatar will have a near-monopoly in the supply of long term LNG in the Indian subcontinent.
 8The LNG price is directly related to the price of crude but the choice of the crude index and the slope is more attractive than what Gorgon had offered to India.
 Click on Details for more on the pricing formula that Qatar had offered to Pakistan and what Gorgon had agreed with Petronet LNG Ltd.. Details
Asian spot LNG prices are now falling below the $5/mmbtu mark on weak demand and new capacities coming up.
 8Prices are trading at $4.90/mmbtu now that the Sabine Pass terminal in the US has gone on stream
 8GAIL has a take or pay deal with Sabine Pass for a fixed 3.5 MMTPA of LNG although deliveries do not start now.
 8Meanwhile GAIL is seeking two cargoes for March delivery and one for April but demand has been so fickle that GAIL has earned a reputation of canceling tenders at the last moment.
 8At the predatory pricing forced by Qatar and low spot LNG prices, GAIL's cargoes from the US will not be cost competitive for the Indian market.
 8What is more the price slope as indexed to crude oil is coming down rapidly and this may also force some renegotiation of long term deals in India, well placed sources said.
 Click on Details for more. Details
That revival of Haldia Petrochemicals Ltd (HPL) is going to make the Indian petrochemical market more competitive.
 8HPL, promoted by the Pumendu Chatterjee-led group manufactures commodities like high-density polyethylene (HDPE), linear low-density polyethylene (LLDPE), and polypropylene (PP), and chemicals such as benzene, butadiene etc with intermediates being sourced from a naphtha cracker (capacity: 670 KTA of ethylene) located at Haldia, West Bengal.
 8On a standalone basis, in 2014-15, the company reported a net profit of Rs. 365 crore on net sales of Rs. 3089 crore as against a net loss of Rs. 464 crore on net sales of Rs. 8096 crore in 2013-14.
 8The Chatterjee Group now has 56% of the equity after a long fight to control the company.
 8A deal with the finance ministry has allowed HPL to extend the export obligation period against their earlier demand for payment of Rs 3171 crore in dues.
 8What is more, the recompense amount has also been agreed between HPL and bankers, paving the way for for an exit of the company from the Corporate Debt Restructuring plan.
 8With this snag out of the way, the Chatterjee Group decided to buy out its shares from the West Bengal government, pushing its equity up to a controlling 56%.
 8Post the restart, after a shutdown of about 7 months, HPL’s plant has been running satisfactorily with the current capacity utilization of about 95-100% amid healthy tolling margins now prevailing.
 8With the sharp fall in naphtha prices following the plunge in crude oil prices and improving global demand-supply conditions for ethylene and propylene derivatives, the economics of naphtha crackers have improved materially of late, which is expected to be sustained in the near term enabling HPL to report healthy cash accruals.
 8Haldia's revival makes it more difficult for new public sector players to make a breakthrough in the already overcrowded Indian market.
 Click on Reports for more. Details
Perception is reality but one country that seems to have lost the war on perception seems to be Saudi Arabia.
 8Despite billions of dollars spent in building an entire city with gleaming new infrastructure to woo foreign investors, the country has been able to attract very few to its shores so far.
 Its vast foreign exchange reserves and a large well heeled population offer a huge opportunity to foreign companies. Ideally, there should have been a long queue of investors but that hasn’t been the case.  Foreign investments did flow in, but not to Saudi Arabia. They flooded in to tiny Dubai and to much smaller countries such as the UAE and Kuwait.
 8A research paper blames bad public relations and a flawed or non-existent marketing strategy as  reasons for this failure.  It goes on to claim that the kingdom’s media management has been poor.
 8Even though it was given high marks by the Global Competitive Report and Doing Business Report, consistent negative reportage by Forbes magazine and Saudi Arabia’s inability to quell the attack created a negative perception among investors.
 8CNN’s Fareed Zakaria’s remark on  Saudi Arabia left an indelible impression when he said, “It is the nation most responsible for the rise of Islamic radicalism and militancy around the world. Over the past four decades, the kingdom's immense oil wealth has been used to underwrite the export of an extreme, intolerant and violent version of Islam preached by its Wahhabi clerics.“
 8With the oil price crash and the rapid bleeding of its foreign exchange reserves, it is perhaps a little too late in the day for Saudi Arabia to contain the damage and bring about change in the perception.
 8Nevertheless, the research paper urges for a renewed public relations attempt, using all forms of media, to correct the imbalance in perception.
 8For, there is no other alternative for Saudi Arabia than to diversify its economy away from oil. The country faces the grim prospect of running out of foreign exchange reserves as oil prices are projected to remain persistently low until at least 2020.
 8Wooing FDI to create a broad based industrial base is more important now than ever before.
 Click on Reports for more Details
The Index of Industrial Production contracted by 1.3% for the second month in a row in December.
 8The contraction has been attributed to a lesser number of days in the month and floods in Tamil Nadu.
 8But will January be better?
 8Data shows that Coal India's production has improved to a robust 13.5% in January 2016 from 10.7% in December 2015, Moreover, growth of thermal electricity generation rose to ~8% in January from ~4% in December 2015. Notwithstanding the wider contraction in hydro electricity (~13% in January 2016; ~10% in December 2015), growth of overall electricity generation is likely to improve to ~6% in January 2016.
 8On the other hand, aggregate auto production contracted for the third month in a row by 1.3% in y-o-y terms in January 2016 but production of commercial vehicles recorded an expansion of 16.6%,
 8Will this improve the performance of the capital goods sector that plunged by 19.7% in December?
 8Analysts have claimed that January data too will remain unfavorable as compared to the growth of 2.8% in January 2015, as there is no appreciable improvement in the export segment and rural demand.
 Click on Reports for more Details
In today's depressed environment, it takes courage to post an "accumulate" recommendation on an E&P company.
 8But both Oil India Ltd and ONGC have been given a sign-up by brokerage houses.
 8This is despite a cut in earnings and projections of low crude prices in the coming two years.
 8One positive development is that government has withdrawn the discount on oil prices
 8But even this is not going to stop the erosion in margins over the next couple of years, according to projections.
 8So what really prompts a positive price outlook for the two companies?
 Click on Details for more Details
PNGRB has granted authorization operate its facilities to the Greater Calcutta Gas Supply Corporation Ltd (GCGSCL).
 8The exclusivity for laying, building and expansion of the network has been granted for 25 years
 8However the grant of exclusivity from the common carrier principle is only for five years, as is the norm.
 8The cumulative target for PNG connections over the five year period has been pegged at 14,17,959.
 8The cumulative steel pipeline laying target will be 7,296 inch-KM
 8The cumulative compression capacity has been kept at 7,90,200 kg/day.
 8Clearly there are good business opportunities here for equipment suppliers and service providers, for Kolkata is a big city.
 Click on Reports for more
Also click on Details for key contacts in the company for business development. Details
The Manali Refinery of CPCL is to introduce an FCC Gasoline Desulphurisation plant with an objective to reduce sulphur emission  to 8 ppm. The unit would comprise among others major equipment such as:
 8Reactors
 8Compressors
 8Heaters, air coolers
 8Exchangers
 8Pumps
 8Filters
 8In a detailed list of guidelines furnished by the IOC subsidiary, the equipment requirements are being grouped under typical and logical categories.
 Click on Reports for more Details
The Kamarajar Port Limited is seeking waiver of a public hearing for developing its Phase 3 port facilities, that entails infrastructure development in a CRZ area.
 8The company has petitioned the environment ministry to amend the directive to hold a public hearing that it had ordered on the basis of the minutes of the meeting of the Expert Appraisal Committee held in November, 2015.
 8In terms of routine procedures this is not unusual.
 8The ministry mandates, customarily, a public hearing to reflect local sentiments and issues on resources and utilisation.
 8However, the KPL authorities are seeking a waiver on the ground that in the development of their Phase 1 and Phase 2 facilities at the port earlier, they had sought clearance via a public hearing on the nature of the cargo handled, and infrastructure  to be built at the Kamarajar port.
 8The proposed third phase of the port is intended to handle the remainder of the volume  of the same cargo that reaches the port, and does not therefore impact the site differently. 
 8KPL’s plea is that while a waiver was agreed upon in their presentation to the EAC on the proposed Phase 3 expansion but the minutes hoiwever mention the requirement of a public hearing.
 8The ToR for the expansion project also indicates the need for  a public hearing , it claims.
 8The company is now seeking a waiver through an addendum to the minutes of the meeting so that an amended ToR can be issued before they proceed with expansion of the port facilities.
 Click on Reports for more Details
While capital expenditure was high, ONGC also has a huge non-plan expenditure side too.
 8This cost element is a lot more inflexible in comparison to plan expenditure and bringing it down is not going to be an easy job.
 8Non-plan expenditure for 2015-16 was a massive  Rs 60,000 crore for 2015-16.
 8Of this, there was an opex element of Rs 20,000 crore and an opex of another Rs 2000 crore on its various  JVs
 8Then again statutory levies were estimated at a high Rs 25,526 crore.
 8The total gas production targeted for the year was around 26 BCM while oil output was meant to be 27 MMT.
 8The total overall budget stood at Rs 100,000 crore
 8After taking account of the opex, statutory charges and recouped cost of around Rs 22,000 crore, the total cost of production was pegged at  $26.52/boe.
 Click on Reports for more Details
 What is the benchmark cut-off price that ONGC can safely take for its price sensitivity calculations?
8It should not exceed $15-$20 range, for oil prices can fall further.
 8It is estimated that the price of gas will be around $3.16/mmbtu for April-September, 2016. There can a further downside as the gas market is certainly very volatile.
 8Assuming a price of $2.50 to $2.75 will perhaps be more prudent, on the hypothesis that the government will stick with the present pricing regime. If gas prices are freed, the price bar will be higher but the upper ceiling will be the landed price of LNG, which too is likely to slide sharply in the medium term as LNG producers struggle for market share in the face of a huge supply glut..
 8The question then is: If these prices are factored in, what kind of development budgets will be feasible?
 8This is the calculation that ONGC will have to make.
 8On the non-plan side shaving off expenditure is not easy at all, as it will have a direct impact on output. Fixed costs such as salaries cannot be slashed. Opex can be cut only at the expense of hurting production.
 8Clearly, the expenditure on statutory levies is far too high and ONGC has correctly argued that the government will need cut down levies for the company to get some breathing space.
 8The need to cut levies has the petroleum ministry's sanction but will the finance ministry play ball?
 8That is the million dollar question.
 Click on Reports for more Details
ONGC is finally on a cost cutting binge.
 8McKinsey & Company has been appointed as a consultant to make suggestions on how to cut costs.
 8The E&P major is clearly working hard to contain costs.
 8All work centres have also been told to control costs and bring down capital expenditure without adversely impacting operations.
 8The company has issued an office order stating that projection of prolonged soft prices will have an adverse impact on its bottom-line and it was "imperative that due prudence is exercised while sanctioning all kinds of expenditure/ investments."
 8The first lot of cuts will be imposed on the usual suspects: travel, sponsorships, and hotel stays. But what eventually be needed will deep capex cuts to weed out projects that are not viable at prevailing oil and gas prices.
 Click on Details for more Details
ONGC has a big job in hand when it comes to cutting costs.
 8At the beginning of 2015-16, ONGC had agreed to conduct 250 GLK of shallow water and 270 GLK of onland seismic surveys while another 8,413 sq km of 3D studies were to be carried out. The cost was pegged at Rs 2000 crore. Some of these items may now have to be dropped
 8Then again, as far as the exploratory wells are concerned, ONGC's plans were to drill seven deepwater wells, 37 shallow water wells and 75 onland wells. The cost for 2015-16 was arrived at Rs 12,000 crore. The cost per deepwater well was placed at Rs 400 crore while for shallow water and onland wells, the figure was Rs 160 crore and Rs 30 crore. Costs for services and equipment have fallen but ONGC's gain will depend on whether it can get to renegotiate fixed price contracts. Some wells will also have be dropped to ensure capex stays in line with overall goals.
 8The finding cost for 3P reserves is at $4/barrel of oil equivalent (boe) and 2P reserves at $5/boe. These figures are not high but clearly judicious cuts will have to be applied wherever necessary.
 8ONGC planned a total of 60 shallow water development drilling wells and around 200 onshore wells.
 8The allocation for development drilling was for Rs 7000 crore. These wells have a positive contribution on putput and will have to be retained though the outlay will be lower on account of fall in equipment and service cost.
 8There was also another Rs 10,00O crore allocated for revamping of facilities and for various capital equipment purchases. These budgets will have to be redone.
 Click on Reports for more Details
McKinsey will have to figure out which elements will undergo cost cutting.
 8ONGC's internal estimates for oil and gas were $47/bbl and $4.20/mmbtu for 2015-16 while for JVs it took a price of $90.bbl of oil.
 8Clearly prices are down now at under $30/bbl whereas the cost of gas is also lower.
 8Cost of equipment and services are down by anywhere between 14 to 40% but will ONGC be able to take advantage of this?
 8The problem is that most of the contracts are on firm price, fixed period basis and renegotiating with them is not possible.
 8What it can do is cut expenditure where it can. The squeeze can be on the capital expenditure side.
 8High cost exploratory and even some development drilling work that won't make the cut off point can be curtailed, particularly those that do not yield a positive return at low oil and gas prices.
 Click on Reports for more Details
The PNGRB’S new regulations that recommended termination of the marketing exclusivity period  for 23 CGD networks has generated a range of reactions and responses.
 8These are being elicited from all kinds of stakeholders including those directly affected by the new directive. The notion that an exclusivity period will have to come to an end has clearly been contentious and exclusivity rationale has now become a subject to wide debate. (PNGRB Act, 2006).
 8The massive distribution monopolies and consequent monopoly pricing that such monopolies entail will come to an end with the new regulations, allowing competition and new players to emerge much to the benefit of the buyers of gas.
 8Quite understandably, existing CGD players are an unhappy lot.
 Click on Reports for more Details
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