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Mar 2016
There are reports all around the world of oil companies renegotiating their contracts with suppliers and equipment and services around the world.
8Saudi Aramco is reworking its long term engineering and fabrication contracts with a bunch of contractors that include McDermott of the US, Italy’s Saipem, the partnership of India’s Larsen & Toubro and Singapore-based Emas, and Dynamic Industries of the US.
8Aramco is doing the renegotiations for future contract rates but UAE's
8Abu Dhabi National Oil Company (Adnoc) on the other hand has written to contractors active on existing projects in the country seeking cost reductions of between 10% and 20% for work on contracts that they have already been awarded.
8Back in India, similar renegotiations have been attempted by Cairn India with some success.
8The point is whether ONGC and OIL can renegotiate such contracts too. Both companies have few long term contracts. Instead what they have are fixed duration EPC contracts.
8The capacity to renegotiate these contracts is limited.
8Whereas ONGC is currently pushing contractors to cut down quotes for the investment in the KG-DWN-98/2 block, there seems to be little room for maneovurability in fixed term contracts already entered into.
8This is the reason why ONGC's cost cutting exercise has been less successful than those of its global peers.
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8Saudi Aramco is reworking its long term engineering and fabrication contracts with a bunch of contractors that include McDermott of the US, Italy’s Saipem, the partnership of India’s Larsen & Toubro and Singapore-based Emas, and Dynamic Industries of the US.
8Aramco is doing the renegotiations for future contract rates but UAE's
8Abu Dhabi National Oil Company (Adnoc) on the other hand has written to contractors active on existing projects in the country seeking cost reductions of between 10% and 20% for work on contracts that they have already been awarded.
8Back in India, similar renegotiations have been attempted by Cairn India with some success.
8The point is whether ONGC and OIL can renegotiate such contracts too. Both companies have few long term contracts. Instead what they have are fixed duration EPC contracts.
8The capacity to renegotiate these contracts is limited.
8Whereas ONGC is currently pushing contractors to cut down quotes for the investment in the KG-DWN-98/2 block, there seems to be little room for maneovurability in fixed term contracts already entered into.
8This is the reason why ONGC's cost cutting exercise has been less successful than those of its global peers.
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The PNGRB has notified the Petroleum and Natural Gas Regulatory Board (Authorizing Entities to Lay, Build, Operate or Expand Natural Gas Pipelines) Amendment Regulations, 2016.
8The PNGRB has also published the views of the Sub-Committee on the amendments to the T4S CGD regulations.
8The Committee has looked at the amendments sought by different CGD entities to the regulations and provided its own independent views on them.
8Amendments were suggested by the likes of IGL, MGL and Glynwed Pipe Systems India.
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8The PNGRB has also published the views of the Sub-Committee on the amendments to the T4S CGD regulations.
8The Committee has looked at the amendments sought by different CGD entities to the regulations and provided its own independent views on them.
8Amendments were suggested by the likes of IGL, MGL and Glynwed Pipe Systems India.
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Like a bad loser, GAIL is not going give up on its fight with the PNGRB over tariff rates.
8It is going to rattle its saber and look at all possible options.
8One option would be to go back to the Appellate Tribunal and if justice is not dispensed there, the gas major will surely go to the Delhi High Court.
8GAIL had taken PNGRB's earlier provisional tariff order on the KG Basin network to the Appellate Tribunal which refused to intervene but asked the PNGRB to go ahead with the final tariff ruling.
8GAIL was directed to re-submit its proposal to the regulator.
8Clearly, the PNRGB did not alter its views and came back with much lower tariffs than what GAIL had demanded.
8If significantly lower tariffs from what GAIL seeks become the norm for all gas pipelines, it is going to hit the gas major's bottom-line badly.
8It looks like it has no option but to fight it out till the bitter end.
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8It is going to rattle its saber and look at all possible options.
8One option would be to go back to the Appellate Tribunal and if justice is not dispensed there, the gas major will surely go to the Delhi High Court.
8GAIL had taken PNGRB's earlier provisional tariff order on the KG Basin network to the Appellate Tribunal which refused to intervene but asked the PNGRB to go ahead with the final tariff ruling.
8GAIL was directed to re-submit its proposal to the regulator.
8Clearly, the PNRGB did not alter its views and came back with much lower tariffs than what GAIL had demanded.
8If significantly lower tariffs from what GAIL seeks become the norm for all gas pipelines, it is going to hit the gas major's bottom-line badly.
8It looks like it has no option but to fight it out till the bitter end.
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PNGRB's final ruling on the KG Basin will have far reaching repercussions for the Indian pipeline industry, for both buyers and sellers of gas.
8The benchmarks have finally been transparently set for determination of tariff.
8Users will no longer be forced to cough up an arbitrary tariff rate on gold plated costs.
Read the regulators observations on
8Project Execution Capex
8Capital Work in Progress
8Opex
8Common Corporate Expenses
8Volume Divisor
8Future Capex Projections
8Number of Working Days
8Line Pack
8Terminal Value
8Return on Capital Employed
8Zonal Apportionment
8Date of Applicable Tariff
Click here for more information. Details
8The benchmarks have finally been transparently set for determination of tariff.
8Users will no longer be forced to cough up an arbitrary tariff rate on gold plated costs.
Read the regulators observations on
8Project Execution Capex
8Capital Work in Progress
8Opex
8Common Corporate Expenses
8Volume Divisor
8Future Capex Projections
8Number of Working Days
8Line Pack
8Terminal Value
8Return on Capital Employed
8Zonal Apportionment
8Date of Applicable Tariff
Click here for more information. Details
One of the ways that GAIL had gold plated the cost of the pipeline was loading in load all kinds of expenses under the Common Corporate Expenses.
8Such expenses were a cost element and ultimately reflected in the tariff rate.
8PNGRB claims that it is not fair for GAIL to include marketing related expenses under this common head.
8GAIL was also not been able to provide clear cut answers to why allocation of expenses was made to all business segments on the basis of gross block and not on other considerations.
8Then again there were no answers to the rationale for birfurcation of these expenses (including all marketing and finance related expenses) into direct and indirect expenses
8There was no explanation either for the reconciliation of indirect expenses with unallocable expenses appearing in GAIL's annual report.
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8Such expenses were a cost element and ultimately reflected in the tariff rate.
8PNGRB claims that it is not fair for GAIL to include marketing related expenses under this common head.
8GAIL was also not been able to provide clear cut answers to why allocation of expenses was made to all business segments on the basis of gross block and not on other considerations.
8Then again there were no answers to the rationale for birfurcation of these expenses (including all marketing and finance related expenses) into direct and indirect expenses
8There was no explanation either for the reconciliation of indirect expenses with unallocable expenses appearing in GAIL's annual report.
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One reason why the tariff rate has come down is because of the PNGRB's unwillingness to take cognizance of "unaccounted gas" in the pipeline while it is being transported from one end to the other.
8GAIL had claimed that the reasons for such loss were on account of inbuilt metering inaccuracy, inaccuracies in heat value calculations, leakages from flanges and safety valves, unplanned purging and theft.
8The loss to the transporter was in terms of actual quantity lost to the shipper and concomitant loss in revenue
8GAIL claimed this needed to be compensated in order for the transporter to make a 12% post tax return.
PNGRB however gave the following reasons while rejecting GAIL's claims:
-- The pipeline is meant to be totally welded and leak proof so there is no scope for venting.
-- Metering accuracy based on modern technology is very accurate and it is incorrect to assume loss of gas on account of metering accuracy.
-- Loading unaccounted gas costs to transportation tariff means placing a burden on the consumer for inefficiency of the pipeline carrier
-- Accounting for such loss will boost "fugitive emissions", which is a green house gas many times more harmful than carbon dioxide.
-- GAIL is wrong in claiming that gas loss is allowed by regulators globally. This is not the case.
What PNGRB had allowed is only System Used Gas that is utilized to fire gas compressors to maintain pressure in the pipeline.
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8GAIL had claimed that the reasons for such loss were on account of inbuilt metering inaccuracy, inaccuracies in heat value calculations, leakages from flanges and safety valves, unplanned purging and theft.
8The loss to the transporter was in terms of actual quantity lost to the shipper and concomitant loss in revenue
8GAIL claimed this needed to be compensated in order for the transporter to make a 12% post tax return.
PNGRB however gave the following reasons while rejecting GAIL's claims:
-- The pipeline is meant to be totally welded and leak proof so there is no scope for venting.
-- Metering accuracy based on modern technology is very accurate and it is incorrect to assume loss of gas on account of metering accuracy.
-- Loading unaccounted gas costs to transportation tariff means placing a burden on the consumer for inefficiency of the pipeline carrier
-- Accounting for such loss will boost "fugitive emissions", which is a green house gas many times more harmful than carbon dioxide.
-- GAIL is wrong in claiming that gas loss is allowed by regulators globally. This is not the case.
What PNGRB had allowed is only System Used Gas that is utilized to fire gas compressors to maintain pressure in the pipeline.
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In what is going to come as a huge blow to GAIL, the PNGRB has decided to fix the final tariff rate for the KG Basin network at a fraction of GAIL's asking rate.
8GAIL had sought a tariff rate of Rs 180.77/mmbtu on GCV basis for the year 2015-16 but the regulator has ended up setting the rate at just Rs 5.56/mmbtu.
8Then again, the tariff for 2016-17 has been settled by the PNGRB at Rs 45.32/mmbtu. higher than the provisional tariff, whereas GAIL had asked for a rate of Rs 180.77.
8Clearly, there is a wide gulf between what GAIL has wanted and what was dished out to it.
8In an 81-page judgement, the PNGRB has set aside GAIL's argument for a higher tariff rate for the 877 km KG network.
8The capacity of the pipeline is 15.99 mmscmd, of which 4 msmcmd is allocated under a common carrier basis.
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8GAIL had sought a tariff rate of Rs 180.77/mmbtu on GCV basis for the year 2015-16 but the regulator has ended up setting the rate at just Rs 5.56/mmbtu.
8Then again, the tariff for 2016-17 has been settled by the PNGRB at Rs 45.32/mmbtu. higher than the provisional tariff, whereas GAIL had asked for a rate of Rs 180.77.
8Clearly, there is a wide gulf between what GAIL has wanted and what was dished out to it.
8In an 81-page judgement, the PNGRB has set aside GAIL's argument for a higher tariff rate for the 877 km KG network.
8The capacity of the pipeline is 15.99 mmscmd, of which 4 msmcmd is allocated under a common carrier basis.
Click here for more information. Details
Low crude oil prices are pushing shale oil producers to use technology to raise oil field efficiencies in a dramatic manner.
8High end software is being used to create "engineered completions", doubling and in some cases even trebling well productivity.
8Companies are now giving up on the standard practice of arbitrarily perforating a reservoir every 50 to 100 feet in geometric completions. Around 40 to 60% of these perforations produce little or no hydrocarbons, with just 30% of them resulting in 80% of a well's entire production. Ineffective fracture stages cause a loss of up to $40 billion to the US shale gas industry.
8All this is now changing with new software looking at detailed reservoir data that tales into account natural fractures, rock mechanics, brittleness, bedding planes, in-situ stresses and lithology to find sweet spots so that operators spend their money on initiating fractures only in the most likely-to-produce sections of a well.
8The technology is helping reduce the financial pain incurred through time-consuming, trial-and-error pilot programs used to determine a particular field’s best completion practices. Ultimately, the technological goal is to lower break-even costs and deliver sustainability to the flagging shale business by engineering wells that produce more oil and gas from fewer wells, with fewer fracturing stages.
8The interesting part here is that the players in the game are not just big service providers such as Schlumberger and Halliburton but a host of start ups, some of them working out of university campuses.
Click here for more information. Details
8High end software is being used to create "engineered completions", doubling and in some cases even trebling well productivity.
8Companies are now giving up on the standard practice of arbitrarily perforating a reservoir every 50 to 100 feet in geometric completions. Around 40 to 60% of these perforations produce little or no hydrocarbons, with just 30% of them resulting in 80% of a well's entire production. Ineffective fracture stages cause a loss of up to $40 billion to the US shale gas industry.
8All this is now changing with new software looking at detailed reservoir data that tales into account natural fractures, rock mechanics, brittleness, bedding planes, in-situ stresses and lithology to find sweet spots so that operators spend their money on initiating fractures only in the most likely-to-produce sections of a well.
8The technology is helping reduce the financial pain incurred through time-consuming, trial-and-error pilot programs used to determine a particular field’s best completion practices. Ultimately, the technological goal is to lower break-even costs and deliver sustainability to the flagging shale business by engineering wells that produce more oil and gas from fewer wells, with fewer fracturing stages.
8The interesting part here is that the players in the game are not just big service providers such as Schlumberger and Halliburton but a host of start ups, some of them working out of university campuses.
Click here for more information. Details
A 'goodwill' rail consignment of 2200 MT of HSD was flagged off from Siliguri to Parbatipur in Bangladesh by Dharmendra Pradhan as a gesture of Indo-Bangla Friendship.
8The two countries are now working on a 135 km ‘Indo-Bangla Friendship Pipeline’ with a capacity of 1 MMTPA ,
8A government press release claims that "once the Numaligarh refinery expansion from present 3 MMTPA to 9 MMTPA is complete, India will be in a position to export petroleum products on a regular and long term basis to Bangladesh".
8This website believes that the capacity expansion in Numaligarh Refinery Ltd (NRL) will entail a very high level of subsidy from the Indian government and unless Bangladesh is willing to bear the subsidy by way of a higher price for petroleum products, the expansion of the Numaligarh refinery is not justified.
8NRL's parent company BPCL has claimed that the expansion is viable only if a Rs.8,800 crore capital subsidy is available for the Rs.20,000 crore expansion plan.
8BPCL has also made a demand of between Rs 5000 to Rs 7000 crore, depending upon the price of petroleum products, in excise duty relief per year for the refinery.
8What is more, the pipeline to Bangladesh will have a capacity of 1 MMTPA and NRL will have to find a market for the rest of its "subsidized" refinery output within the country.
8Even if India were to palm off lower grade HSD and petrol to Bangladesh from the North Eastern refineries, the cost economics will not work out unless subsidies are woven into such exports.
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8The two countries are now working on a 135 km ‘Indo-Bangla Friendship Pipeline’ with a capacity of 1 MMTPA ,
8A government press release claims that "once the Numaligarh refinery expansion from present 3 MMTPA to 9 MMTPA is complete, India will be in a position to export petroleum products on a regular and long term basis to Bangladesh".
8This website believes that the capacity expansion in Numaligarh Refinery Ltd (NRL) will entail a very high level of subsidy from the Indian government and unless Bangladesh is willing to bear the subsidy by way of a higher price for petroleum products, the expansion of the Numaligarh refinery is not justified.
8NRL's parent company BPCL has claimed that the expansion is viable only if a Rs.8,800 crore capital subsidy is available for the Rs.20,000 crore expansion plan.
8BPCL has also made a demand of between Rs 5000 to Rs 7000 crore, depending upon the price of petroleum products, in excise duty relief per year for the refinery.
8What is more, the pipeline to Bangladesh will have a capacity of 1 MMTPA and NRL will have to find a market for the rest of its "subsidized" refinery output within the country.
8Even if India were to palm off lower grade HSD and petrol to Bangladesh from the North Eastern refineries, the cost economics will not work out unless subsidies are woven into such exports.
Click on Details for more Details
The crude bill for April-January 2015-16 has come down to $ 56 billion for the period April-January 2015-16.
8This is down significantly on a pro-rate basis from Rs 112 billion in 2014-15 and 142 billion in the previous year.
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8This is down significantly on a pro-rate basis from Rs 112 billion in 2014-15 and 142 billion in the previous year.
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RasGas has cut its gas price to $ 5/mmbtu from $ 12/mmbtu in 2015 under the new contract, according to the government.
8This is a sharp and dramatic cut and is aimed at retaining the company's monopoly in the Indian market.
8Another 1 MMTPA of LNG, over and above 7.5 MMTPA already signed, was singed with RasGas for deliveries from January this year for supply for a 12-year period.
8This puts GAIL in a corner, as its main aim in entering into contracts for supply of 6 MMTPA of LNG was to cater to the Indian market.
8RasGas has now taken the wind out of GAIL's plans, leaving the public sector gas major fumbling for another business plan.
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8This is a sharp and dramatic cut and is aimed at retaining the company's monopoly in the Indian market.
8Another 1 MMTPA of LNG, over and above 7.5 MMTPA already signed, was singed with RasGas for deliveries from January this year for supply for a 12-year period.
8This puts GAIL in a corner, as its main aim in entering into contracts for supply of 6 MMTPA of LNG was to cater to the Indian market.
8RasGas has now taken the wind out of GAIL's plans, leaving the public sector gas major fumbling for another business plan.
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Petronet LNG Ltd's plans to drop its terminal at Gangavaram was because there were too many such terminals coming up in the East Coast of India.
8Indian Oil Corporation, GAIL, and KEI-RSOS are in contention to set up three LNG terminals in the region.
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 and Indian Oil Corporation’s at Kamarajar Port.
8GAIL has entered into a pack with the Andhra Pradesh government some time ago and he gas major still claims that it will go on stream by 2018,ails
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.
8KEI-RSOS’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.
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8Indian Oil Corporation, GAIL, and KEI-RSOS are in contention to set up three LNG terminals in the region.
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 and Indian Oil Corporation’s at Kamarajar Port.
8GAIL has entered into a pack with the Andhra Pradesh government some time ago and he gas major still claims that it will go on stream by 2018,ails
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.
8KEI-RSOS’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.
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LNG equipment and service suppliers will now have to look elsewhere as Petronet LNG Ltd has decided to put on holds it plans to set up a 5 MMTPA onshore LNG plant at Gangavaram, Andhra Pradesh.
8The company had actually done a lot of footwork and till recently there was talk that the terminal will indeed come up but it has now been put in cold storage.
8The plans were dropped even after DFR, FEED and various other pre-project activities were completed
8Estimated project cost was $ 750 Million.
8The plans were dropped after Petronet after customer tie-up studies showed that there was enough demand to justify a terminal.
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8The company had actually done a lot of footwork and till recently there was talk that the terminal will indeed come up but it has now been put in cold storage.
8The plans were dropped even after DFR, FEED and various other pre-project activities were completed
8Estimated project cost was $ 750 Million.
8The plans were dropped after Petronet after customer tie-up studies showed that there was enough demand to justify a terminal.
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ONGC plans to spend Rs 2566 crore in capex in its CBM blocks.
The outlay will be split up along the following lines:
8Bokaro: Rs 823 crore
8North Karanpura: Rs 447 crore
8Jharia: Rs 696 crore
8Raniganj: Rs 600 crore
8The envisaged production is 1.98 mmscmd of gas
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The outlay will be split up along the following lines:
8Bokaro: Rs 823 crore
8North Karanpura: Rs 447 crore
8Jharia: Rs 696 crore
8Raniganj: Rs 600 crore
8The envisaged production is 1.98 mmscmd of gas
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Oil marketing companies continues to expand their retail outlet networks at a furious pace in order to retain market share despite adverse cost economics.
8The throughput levels in newer outlets are below cost and despite the government's protestation, the companies continue to add outlets at will.
8In the last two years, IOC had set up 3481 outlets while BPCL and HPCL had constructed 1500 each.
8Click on Details for a detailed breakup.
8The website also carries here the new dealer selection norms for new outlets.
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8The throughput levels in newer outlets are below cost and despite the government's protestation, the companies continue to add outlets at will.
8In the last two years, IOC had set up 3481 outlets while BPCL and HPCL had constructed 1500 each.
8Click on Details for a detailed breakup.
8The website also carries here the new dealer selection norms for new outlets.
Click here for more information. Details
The Oil Industry Safety Directorate claims that a series of measures have been taken to improve safety in installations.
Among them are:
8Installation of LPG mounded bullets by decommissioning the Horton spheres storage.
8Relocating the fire station control room to safe area.
8Connection of Safety valve discharge to flare.
8Provision of hydrocarbon detectors near LPG and Naphtha Pumps and double mechanical seals in LPG Pumps.
8Provision of close blow-down system
8Implementation of Supervisory Control & Data Acquisition (SCADA) system for leak detection and effective monitoring of Cross Country Pipelines.
8Implementation of GPS enabled Pipeline Patrolling System.
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Among them are:
8Installation of LPG mounded bullets by decommissioning the Horton spheres storage.
8Relocating the fire station control room to safe area.
8Connection of Safety valve discharge to flare.
8Provision of hydrocarbon detectors near LPG and Naphtha Pumps and double mechanical seals in LPG Pumps.
8Provision of close blow-down system
8Implementation of Supervisory Control & Data Acquisition (SCADA) system for leak detection and effective monitoring of Cross Country Pipelines.
8Implementation of GPS enabled Pipeline Patrolling System.
Click here for more information. Details
The website carries here a set of country-wise average costs of producing a barrel of crude around the world.
8Data is also carried here on cost of crude at which major producing countries achieve fiscal break-even.
8The two sets of figures are widely divergent
8The highest average cost of producing a barrel of crude is in the UK, followed by Canada and the US.
8The average US level is pegged at $36.2/bbl while the lowest producers are Saudi Arabia and Kuwait at $ 9.9 and $8.5/bbl respectively.
8The fiscal breakeven point for the economy as a whole tells an entirely different story however.
8With prices likely to hover between Prices to hover between $30-45/bbl until at least 2017, may of these countries, particularly Saudi Arabia, are staring at a really gloomy future.
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8Data is also carried here on cost of crude at which major producing countries achieve fiscal break-even.
8The two sets of figures are widely divergent
8The highest average cost of producing a barrel of crude is in the UK, followed by Canada and the US.
8The average US level is pegged at $36.2/bbl while the lowest producers are Saudi Arabia and Kuwait at $ 9.9 and $8.5/bbl respectively.
8The fiscal breakeven point for the economy as a whole tells an entirely different story however.
8With prices likely to hover between Prices to hover between $30-45/bbl until at least 2017, may of these countries, particularly Saudi Arabia, are staring at a really gloomy future.
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By how much is US oil and gas production going down as a result of low prices?
8Not by much and not enough until 2017 for oil and gas prices to move upwards beyond a point.
8U.S. liquid fuels production increased from 7.43 million barrels per day (b/d) in 2008 to 13.75 million b/d in 2015.
8Production will decline to 12.99 million barrels per day in 2017, mainly as a result of prolonged low oil prices.
8This is partially offset by a 450,000 b/d increase in the production of hydrocarbon gas liquids (HGL)—a group of products including ethane, propane, normal butane, isobutane, natural gasoline, and refinery olefins.
8Forecast growth in marketed natural gas production in the US slows from 5% in 2015 to 1% in 2016 and to 2% in 2017 but juxtaposed against it is the dramatic increase in inventories.
8The point to remember is that there is a concomitant compression in demand growth as well.
8India is one of those countries beating the trend, with rapid double digit growth in consumption of petroleum products but while India's growth is significant, we are not big enough to move global markets.
8Chinese growth is slowing down.
8So all in all, the crash in prices is not pinching enough to cause a sharp fall in production.
8In any case, for almost all of global production, the cost per barrel is lower than the prevailing price. So the higher price is nothing but "rent".
8For beyond a point, when there are adequate reserves of crude and gas which can be tapped at a given price point, rents cannot be multiple times the cost of production. Not beyond a point.
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8Not by much and not enough until 2017 for oil and gas prices to move upwards beyond a point.
8U.S. liquid fuels production increased from 7.43 million barrels per day (b/d) in 2008 to 13.75 million b/d in 2015.
8Production will decline to 12.99 million barrels per day in 2017, mainly as a result of prolonged low oil prices.
8This is partially offset by a 450,000 b/d increase in the production of hydrocarbon gas liquids (HGL)—a group of products including ethane, propane, normal butane, isobutane, natural gasoline, and refinery olefins.
8Forecast growth in marketed natural gas production in the US slows from 5% in 2015 to 1% in 2016 and to 2% in 2017 but juxtaposed against it is the dramatic increase in inventories.
8The point to remember is that there is a concomitant compression in demand growth as well.
8India is one of those countries beating the trend, with rapid double digit growth in consumption of petroleum products but while India's growth is significant, we are not big enough to move global markets.
8Chinese growth is slowing down.
8So all in all, the crash in prices is not pinching enough to cause a sharp fall in production.
8In any case, for almost all of global production, the cost per barrel is lower than the prevailing price. So the higher price is nothing but "rent".
8For beyond a point, when there are adequate reserves of crude and gas which can be tapped at a given price point, rents cannot be multiple times the cost of production. Not beyond a point.
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The focus of analysts will have to shift from production data of Saudi Arabia and Russia to well data out of shale gas producers in the US to figure out how crude prices are going to behave in the future.
8More importantly, the attention has to go to rising well productivity in the US shale gas industry.
8Data shows a dramatic increase in per well productivity for both for gas as well as for oil.
8This is happening in conjunction with an equally dramatic fall in rig counts as oil prices remain low.
8In many areas. per well productivity has more than doubled within very short spans of time.
8And the point to note is that such productivity gains are showing no signs of abatement.
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8More importantly, the attention has to go to rising well productivity in the US shale gas industry.
8Data shows a dramatic increase in per well productivity for both for gas as well as for oil.
8This is happening in conjunction with an equally dramatic fall in rig counts as oil prices remain low.
8In many areas. per well productivity has more than doubled within very short spans of time.
8And the point to note is that such productivity gains are showing no signs of abatement.
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The intelligent well completion business in the US provides a large business development opportunity here for Indian software companies.
8But is there someone here to identify the opportunity and take the risk of taking the plunge?
8The initial upfront investments may look risky but given excellent petroleum engineering resources in US universities, a tie with with some of them can bring positive results.
8A seamless integration of the US office with an agile Indian operation can allow Indian companies to plug the divide.
8A large number of geologists is available in India and they can be pulled in and integrated into the network.
8Since eventually it is just software, the risk elements are limited for an ambitious Indian software company with large cash balances.
8If start ups can emerge in this highly competitive business that was ordinarily controlled by the Schlumbergers of the world, there is no reason why Indian companies can't jump into the fray.
8Global scale and ambition are the only elements needed along with a leader willing to take some risks.
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8But is there someone here to identify the opportunity and take the risk of taking the plunge?
8The initial upfront investments may look risky but given excellent petroleum engineering resources in US universities, a tie with with some of them can bring positive results.
8A seamless integration of the US office with an agile Indian operation can allow Indian companies to plug the divide.
8A large number of geologists is available in India and they can be pulled in and integrated into the network.
8Since eventually it is just software, the risk elements are limited for an ambitious Indian software company with large cash balances.
8If start ups can emerge in this highly competitive business that was ordinarily controlled by the Schlumbergers of the world, there is no reason why Indian companies can't jump into the fray.
8Global scale and ambition are the only elements needed along with a leader willing to take some risks.
Click here for more information. Details
Raj Kapoor's Mera Naam Joker and its foot-tapping music is, at best, a frozen, forgotten moment of nostalgia for the average Ruski.
8Today, as the formidable Soviet Union, and its iron curtain, has made way for the modern-day Russia -- a dismembered, corruption-ridden country with an underperforming economy -- nostalgia itself is a nostalgic emotion.
8In the pragmatic dictates of contemporary power-play, old friendships have been discarded, and new camaraderie struck, based primarily on commercial self-interest.
8But, strangely, one association which has endured the ravages of contemporary Russian history is the Indian-Russian connection.
8And contributing, in some measure, to the cementing of this bond has been the historical cooperation between the two countries in the oil sector. It was, after all, Soviet seismic experts who were responsible for ONGC's biggest discovery to date -- the Mumbai High field.In fact, the Soviets were single-handedly responsible for all the major crude discoveries of ONGC-- beginning in 1960 with the Ankeleshwar field, followed by Mumbai High, Kalol, Galeki, Lakwa....the list reads on.
8No doubt Russia went through its own crises. High on perestroika, Russia embraced an ugly form of crony capitalism that gave short shrift to old ties. Kremlin often looked askance at Indian overtures while encouraging others through the front door. ONGC Videsh Ltd was left waiting while Chinese and international oil companies marched ahead. Some Indian investments such as in Imperial Energy turned sour as the Russians procrastinated on extending tax concessions until it was too late.
8Western approbation after the annexation of Crimea and the fall in oil prices have forced Moscow to look for new allies and it is now Russia's turn to woo India with oil and gas deals. And since old friendships never die, India seems to be willing to forgive and forget but will the bonhomie last when times change again?
8Nostalgia, without doubt, has its moments. Sar Pe Lal Topi Russi, Phir Bhi Dil Hai Hindustani.
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8Today, as the formidable Soviet Union, and its iron curtain, has made way for the modern-day Russia -- a dismembered, corruption-ridden country with an underperforming economy -- nostalgia itself is a nostalgic emotion.
8In the pragmatic dictates of contemporary power-play, old friendships have been discarded, and new camaraderie struck, based primarily on commercial self-interest.
8But, strangely, one association which has endured the ravages of contemporary Russian history is the Indian-Russian connection.
8And contributing, in some measure, to the cementing of this bond has been the historical cooperation between the two countries in the oil sector. It was, after all, Soviet seismic experts who were responsible for ONGC's biggest discovery to date -- the Mumbai High field.In fact, the Soviets were single-handedly responsible for all the major crude discoveries of ONGC-- beginning in 1960 with the Ankeleshwar field, followed by Mumbai High, Kalol, Galeki, Lakwa....the list reads on.
8No doubt Russia went through its own crises. High on perestroika, Russia embraced an ugly form of crony capitalism that gave short shrift to old ties. Kremlin often looked askance at Indian overtures while encouraging others through the front door. ONGC Videsh Ltd was left waiting while Chinese and international oil companies marched ahead. Some Indian investments such as in Imperial Energy turned sour as the Russians procrastinated on extending tax concessions until it was too late.
8Western approbation after the annexation of Crimea and the fall in oil prices have forced Moscow to look for new allies and it is now Russia's turn to woo India with oil and gas deals. And since old friendships never die, India seems to be willing to forgive and forget but will the bonhomie last when times change again?
8Nostalgia, without doubt, has its moments. Sar Pe Lal Topi Russi, Phir Bhi Dil Hai Hindustani.
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India has 28.68 MMT of crude oil and petroleum reserves equivalent to 62 days consumption cover, according to an estimate made by the petroleum ministry
8Find out more on how Indian "reserves" are fundamentally different from reserves in other countries such as China and the US.
8Also know more on the steps India is taken to "commercialize" strategic storage spaces that are coming up.
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8Find out more on how Indian "reserves" are fundamentally different from reserves in other countries such as China and the US.
8Also know more on the steps India is taken to "commercialize" strategic storage spaces that are coming up.
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Recent trends show that commodity prices have risen and so have crude prices
8Metal prices shot up
8Will the momentum weaken going ahead?
8While commodity prices recovered across a wide front, gas prices in the US saw a decline in February
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8Metal prices shot up
8Will the momentum weaken going ahead?
8While commodity prices recovered across a wide front, gas prices in the US saw a decline in February
Click on Reports to make sense of the movements in prices Details
The Ground Breaking ceremony to start the work on the Turkmen leg of the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline was held in December, 2015 but it won't be soon before the pipeline is completed.
8Don't expect gas in India before 2024
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8Don't expect gas in India before 2024
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Rates for the crude carriers surged last week on higher demand from the Middle East and this had a positive ripple effects everywhere.
8The fact that crude prices were up added to sentiments.
8The positives reflected in VL rates with West African Suezmax rates following course.
8But will this strong performance be able to sustain itself?
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8The fact that crude prices were up added to sentiments.
8The positives reflected in VL rates with West African Suezmax rates following course.
8But will this strong performance be able to sustain itself?
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New tanker constructions activity remained subdued as doubts persisted on the future of the business.
8When it came to tanker orders of above 25,000dwt, MR and Handy tankers have proven to be considerably more popular compared to the bigger sizes.
8MR orders have climbed, making up half of the ordering activity in the tanker sector for 2016 so far.
8But this is essentially because MR orders were low in 2014 and 2015 and the gap is sought to be bridged now.
8Among the highlights is an order placed by Latvian shipping for two firm MRs (50,000dwt) at Hyundai Vinashin, in Vietnam with delivery set in 2018.
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8When it came to tanker orders of above 25,000dwt, MR and Handy tankers have proven to be considerably more popular compared to the bigger sizes.
8MR orders have climbed, making up half of the ordering activity in the tanker sector for 2016 so far.
8But this is essentially because MR orders were low in 2014 and 2015 and the gap is sought to be bridged now.
8Among the highlights is an order placed by Latvian shipping for two firm MRs (50,000dwt) at Hyundai Vinashin, in Vietnam with delivery set in 2018.
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Exploration activity is picking up speed in India now that a spate of policy reforms has been initiated.
8Development orders are likely to come soon but seismic orders are lining up as well
ONGC is now looking EOI from seismic companies to do work on the following areas:
8B-157 Block
8South & South West of Mumbai High
8West of Bassein and West of Neelam area
8GK-28 of Western Offshore
8GS-29 of KG Basin
The E&P major is looking for:
83D Conventional seismic data acquisition
83D Conventional seismic data acquisition with Broadband processing
83D seismic Broadband data acquisition with Broadband processing (pre –STM, PSDM, AVO and Pre-stack inversion)
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8Development orders are likely to come soon but seismic orders are lining up as well
ONGC is now looking EOI from seismic companies to do work on the following areas:
8B-157 Block
8South & South West of Mumbai High
8West of Bassein and West of Neelam area
8GK-28 of Western Offshore
8GS-29 of KG Basin
The E&P major is looking for:
83D Conventional seismic data acquisition
83D Conventional seismic data acquisition with Broadband processing
83D seismic Broadband data acquisition with Broadband processing (pre –STM, PSDM, AVO and Pre-stack inversion)
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India's contribution to carbon dioxide emissions (CO2) – the largest source of man-made greenhouse gas emissions – flared dangerously with the spurt in consumption of petroleum products even as China and the US reported lower levels.
8The good news is that global emissions have stayed flat for the second year in a row in 2015.
8The two largest emitters, China and the United States, both registered a decline in energy-related CO2 in 2015. In China, emissions declined by 1.5% on lower usage of coal and a jump in low carbon hydro and wind generation.
8In the United States, emissions declined by 2%, as a large switch from coal to natural gas use in electricity generation took place.
8It is time now for India to stand firm and take action to bring down its carbon footprint.
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8The good news is that global emissions have stayed flat for the second year in a row in 2015.
8The two largest emitters, China and the United States, both registered a decline in energy-related CO2 in 2015. In China, emissions declined by 1.5% on lower usage of coal and a jump in low carbon hydro and wind generation.
8In the United States, emissions declined by 2%, as a large switch from coal to natural gas use in electricity generation took place.
8It is time now for India to stand firm and take action to bring down its carbon footprint.
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The data on carbon dioxide emissions is indeed very encouraging.
8Electricity generated by renewables played a critical role in 2015, having accounted for around 90% of new electricity generation
8Wind alone produced more than half of new electricity generation.
8In parallel, the global economy continued to grow by more than 3%, offering further evidence that the link between economic growth and emissions growth is weakening.
8The new figures confirm last year’s surprising but welcome news that the world today has seen two straight years of greenhouse gas emissions decoupling from economic growth.
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8Electricity generated by renewables played a critical role in 2015, having accounted for around 90% of new electricity generation
8Wind alone produced more than half of new electricity generation.
8In parallel, the global economy continued to grow by more than 3%, offering further evidence that the link between economic growth and emissions growth is weakening.
8The new figures confirm last year’s surprising but welcome news that the world today has seen two straight years of greenhouse gas emissions decoupling from economic growth.
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Reliance Industries Ltd is undoubtedly a massive corporate machine and no one else in the country can match that kind of project implementation capability.
8It will spend Rs 13,200 crore and get the project up in 27 months flat.
8No public sector company can achieve that kind of brute efficiency.
8It is easy to criticize the company for its many acts of commission and omission and for its secretive style.
8But when it comes to putting money where it matters, it is the only private company doing so at this point in time.
8In the E&P segment too, its investments will be only next to ONGC. It is not to be forgotten that the company had little or no experience in the E&P segment and yet it put together a $10 billion investment to extract gas from India's deepwater fields. It would have been beyond the capacity of an ordinary Indian company to do so.
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8It will spend Rs 13,200 crore and get the project up in 27 months flat.
8No public sector company can achieve that kind of brute efficiency.
8It is easy to criticize the company for its many acts of commission and omission and for its secretive style.
8But when it comes to putting money where it matters, it is the only private company doing so at this point in time.
8In the E&P segment too, its investments will be only next to ONGC. It is not to be forgotten that the company had little or no experience in the E&P segment and yet it put together a $10 billion investment to extract gas from India's deepwater fields. It would have been beyond the capacity of an ordinary Indian company to do so.
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Everyone knows that oil prices will nevr reach the $ 100/bbl mark anytime in the foreseeable future.
8The bet was that prices could climb to $ 60/bbl, could touch $ 70 or even $ 80/bbl.
8But now it seems like $ 40 may become the new ceiling price.
8For this is the price level at which American shale gas companies are willing to pump new oil and begin making money again. The shale companies have been able to push equipment and service providers to cut cost to the point where production can occur at the $40/bbl mark.
8Rig and drilling costs have fallen so fast that some wells could make money with oil prices at around $40-45 a barrel,
8Some big shale companies are sitting on hundreds of “drilled but uncompleted” (DUC) wells in which fracking that breaks open the shale rock and produces the oil was deferred.
8The companies now claim that at prices above $40 a barrel they can begin fracking their rising inventory of DUCs.
8The cost economics of the US shale industry could well be one of the reasons why oil prices began to to decline this week, for it was nearing the $40/bbl mark at which new shale wells would have come on stream.
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8The bet was that prices could climb to $ 60/bbl, could touch $ 70 or even $ 80/bbl.
8But now it seems like $ 40 may become the new ceiling price.
8For this is the price level at which American shale gas companies are willing to pump new oil and begin making money again. The shale companies have been able to push equipment and service providers to cut cost to the point where production can occur at the $40/bbl mark.
8Rig and drilling costs have fallen so fast that some wells could make money with oil prices at around $40-45 a barrel,
8Some big shale companies are sitting on hundreds of “drilled but uncompleted” (DUC) wells in which fracking that breaks open the shale rock and produces the oil was deferred.
8The companies now claim that at prices above $40 a barrel they can begin fracking their rising inventory of DUCs.
8The cost economics of the US shale industry could well be one of the reasons why oil prices began to to decline this week, for it was nearing the $40/bbl mark at which new shale wells would have come on stream.
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The month-long rally that sent crude prices spiraling up by 20% seems to be petering out finally.
8Light, sweet crude for April delivery recently fell $1.02, or 2.7%, to $36.16 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, fell 85 cents, or 2.2%, to $38.68 a barrel on ICE Futures in Europe.
8Analysts on Monday had attributed a lot of the downward movement simply to fast-moving fund managers taking extreme positions.
8By the end of the first week of March, hedge funds, pension funds and others had doubled their net-bullish position on U.S. oil in just two months, and set a record for the number of bullish bets on the Brent.
8But short-covering, in which bearish traders close their positions, but have to buy back contracts to do it, punting activity that sent prices higher seems to have run its course.
8The market continues to be over supplied even as demand continues to shrink. OPEC has recently released figures that lowered its demand forecast for its crude in 2017 by 90,000 barrels a day to 31.52 million barrels.
8Then again the much touted agreement between Russia and Saudi Arabia to buoy prices by cutting back OPEC production seems to have run aground after other members could not agree on the fine print.
8Under these circumstances, prices are likely to settle back to their lows in the days and weeks ahead.
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8Light, sweet crude for April delivery recently fell $1.02, or 2.7%, to $36.16 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, fell 85 cents, or 2.2%, to $38.68 a barrel on ICE Futures in Europe.
8Analysts on Monday had attributed a lot of the downward movement simply to fast-moving fund managers taking extreme positions.
8By the end of the first week of March, hedge funds, pension funds and others had doubled their net-bullish position on U.S. oil in just two months, and set a record for the number of bullish bets on the Brent.
8But short-covering, in which bearish traders close their positions, but have to buy back contracts to do it, punting activity that sent prices higher seems to have run its course.
8The market continues to be over supplied even as demand continues to shrink. OPEC has recently released figures that lowered its demand forecast for its crude in 2017 by 90,000 barrels a day to 31.52 million barrels.
8Then again the much touted agreement between Russia and Saudi Arabia to buoy prices by cutting back OPEC production seems to have run aground after other members could not agree on the fine print.
8Under these circumstances, prices are likely to settle back to their lows in the days and weeks ahead.
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Consumption of petroleum products continued to gallop in double digits in February.
8Total consumption grew at 11.66%.
8Petrol and diesel consumption went up by 12% and 10% respectively.
8ATF growth was a rapid 15%, spurred by low prices.
8Naphtha growth was also high at 10% while LSHS grew by 14%, perhaps pointing to their popularity over gas because of low prevailing prices.
8LPG consumption went up by 15%, spurred by a increase in offtake by the commercial segment.
8LPG is also substituting SKO which saw a decline in consumption of 4%
8The growth of 18% in bitumen demand points to a spurt in road building activity across the country.
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8Total consumption grew at 11.66%.
8Petrol and diesel consumption went up by 12% and 10% respectively.
8ATF growth was a rapid 15%, spurred by low prices.
8Naphtha growth was also high at 10% while LSHS grew by 14%, perhaps pointing to their popularity over gas because of low prevailing prices.
8LPG consumption went up by 15%, spurred by a increase in offtake by the commercial segment.
8LPG is also substituting SKO which saw a decline in consumption of 4%
8The growth of 18% in bitumen demand points to a spurt in road building activity across the country.
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Project execution will include engineering, procurement, construction, installation and start-up of facilities.
8The Basic engineering package shall be provided by Reliance Project Management Group (RPMG) in consultation with Reliance R&D Department.
8Detailed Engineering for this project shall be executed by the Mumbai Engineering Center (MEC).
8Procurement will be done with the help of RIL's internal Procurement and Contracts department.
8Engineering deliverables for procurement such as SOQ for construction contracts, MRs for all tagged equipment and PR for all bulk items shall be developed by MEC.
8Construction of above ground structures such as equipment foundations, control building for the proposed CPVC, VCM, PVC & ethane storage tank project shall be executed under the responsibility of the site construction department of RIL by appointing various contractors.
8The construction contractors will include all disciplines, such as civil, structural, mechanical, piping, electrical and instrumentation. Vendor services will be taken for specialized equipment during the construction and commissioning phase.
8Project Schedule: Overall completion schedule envisaged for this project is 27 months with a two month grace period.
Click here to go to our Reports section. Details
8The Basic engineering package shall be provided by Reliance Project Management Group (RPMG) in consultation with Reliance R&D Department.
8Detailed Engineering for this project shall be executed by the Mumbai Engineering Center (MEC).
8Procurement will be done with the help of RIL's internal Procurement and Contracts department.
8Engineering deliverables for procurement such as SOQ for construction contracts, MRs for all tagged equipment and PR for all bulk items shall be developed by MEC.
8Construction of above ground structures such as equipment foundations, control building for the proposed CPVC, VCM, PVC & ethane storage tank project shall be executed under the responsibility of the site construction department of RIL by appointing various contractors.
8The construction contractors will include all disciplines, such as civil, structural, mechanical, piping, electrical and instrumentation. Vendor services will be taken for specialized equipment during the construction and commissioning phase.
8Project Schedule: Overall completion schedule envisaged for this project is 27 months with a two month grace period.
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The RIL expansion will be also entail investments in utilities that will involve the the treatment and distribution of raw water. steam/condensate, cooling water, DM water, fire water, compressed air, nitrogen and oxygen, hydrogen, fuel gas and a power plant.
The following systems will have to be put into place:
8Air Separation Unit
8Compressed air system
8DM water plant
8Raw water
8Cooling towers
8Captive Power Plant
8Fire water system
8Tank farm
8Effluent Treatment Plant (ETP)
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The following systems will have to be put into place:
8Air Separation Unit
8Compressed air system
8DM water plant
8Raw water
8Cooling towers
8Captive Power Plant
8Fire water system
8Tank farm
8Effluent Treatment Plant (ETP)
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Who says big investments are not taking place in the oil & gas and related segments in India?
8Close on the heels of news that money is going to be pumped into the KG Basin to get deepwater gas discoveries off the ground, RIL has unfolded a massive Rs 13,250 crore plan to expand its gas craker at Bharuch in Gujarat, based on imported propane.
The expansion will raise the company's petrochemical capacity in the following manner:
8Ethylene capacity will go up by a hefty 200,000 tonnes
8Ethylene Dichloride by 89,000 tonnes
8Vinyl Chloride Monomer, Polyvinyl Chloride and Chlorine by 45,000 tonnes
8Caustic Soda by 52,000 tonnes
8Ethylene Oxide by 30,000 crore
8HDPE by Rs 2,000 tonnes
8Ethylene Vinyl Acetate by 2,000 tonnes
New units are to be added as well, and that includes:
8A Chlorinated Poly Vinyl Chloride (CPVC) unit with a capacity of 70,000 tonnes
8A Vinyl Chloride Monomer of 12,00,000 tonnes
8A Poly Vinyl Cholride of a capacity of 12,00,00 tonnes.
8There will also be a concomitant increase in relevant product and byproduct capacities as well.
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Details
8Close on the heels of news that money is going to be pumped into the KG Basin to get deepwater gas discoveries off the ground, RIL has unfolded a massive Rs 13,250 crore plan to expand its gas craker at Bharuch in Gujarat, based on imported propane.
The expansion will raise the company's petrochemical capacity in the following manner:
8Ethylene capacity will go up by a hefty 200,000 tonnes
8Ethylene Dichloride by 89,000 tonnes
8Vinyl Chloride Monomer, Polyvinyl Chloride and Chlorine by 45,000 tonnes
8Caustic Soda by 52,000 tonnes
8Ethylene Oxide by 30,000 crore
8HDPE by Rs 2,000 tonnes
8Ethylene Vinyl Acetate by 2,000 tonnes
New units are to be added as well, and that includes:
8A Chlorinated Poly Vinyl Chloride (CPVC) unit with a capacity of 70,000 tonnes
8A Vinyl Chloride Monomer of 12,00,000 tonnes
8A Poly Vinyl Cholride of a capacity of 12,00,00 tonnes.
8There will also be a concomitant increase in relevant product and byproduct capacities as well.
Click here to go to our Reports section.
Details
China seems to be doing what India will take a long time to achieve.
8The country had once declared that its emissions of carbon dioxide (CO²) will peak by 2030.
8But a new paper now says that it is quite possible that the highest peak of China’s CO² emissions may have been reached by 2014.
8The story is however not the same for India, where CO² emissions continue to climb.
8Indian cities are now very highly polluted whereas pollution levels in Chinese cities have peaked and are now on the decline.
8The rapid rise in petroleum consumption portends higher emissions levels in India well into the future.
8Authorities will have to take the bull by the horn and begin address India's atrocious air quality problems sooner than later.
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8The country had once declared that its emissions of carbon dioxide (CO²) will peak by 2030.
8But a new paper now says that it is quite possible that the highest peak of China’s CO² emissions may have been reached by 2014.
8The story is however not the same for India, where CO² emissions continue to climb.
8Indian cities are now very highly polluted whereas pollution levels in Chinese cities have peaked and are now on the decline.
8The rapid rise in petroleum consumption portends higher emissions levels in India well into the future.
8Authorities will have to take the bull by the horn and begin address India's atrocious air quality problems sooner than later.
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If $ 40/bbl is going to be the new normal for the oil industry, it is going to be bad news for a clutch of Indian companies.
8Both OIL and ONGC will have little spare cash to pump into fresh E&P projects.
8Cairn India's profit pile will also shrink dramatically.
8The only hope lies in some experts predicting that the talk about getting new shale output going at $ 40/bbl is just a lot of bravado and prices may have to push $50 or more, for US operators to make money.
8This view claims that at $40/bbl, debts will continue to pile up and it is only at around $50 that these companies break even.
While the outlook remains uncertain, the fact that prices will remain low is very bad news for countries such as Saudi Arabia, whose fiscal breaks even points are closer to $100/bbl.
8The prediction is that Saudi Arabia will burn cash at a rapid pace and run out of money in a few years time until it takes drastic steps to curb consumption.
8One spinoff of the oil crisis could be a slowing down of Saudi Arabia's Wahabi-inspired support for Sunni extremism.
8Wealthy individuals in Saudi Arabia have long been supporters of an extreme form of Islamization, with some of the support extending to outfits working against India in Kashmir and the North East.
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8Both OIL and ONGC will have little spare cash to pump into fresh E&P projects.
8Cairn India's profit pile will also shrink dramatically.
8The only hope lies in some experts predicting that the talk about getting new shale output going at $ 40/bbl is just a lot of bravado and prices may have to push $50 or more, for US operators to make money.
8This view claims that at $40/bbl, debts will continue to pile up and it is only at around $50 that these companies break even.
While the outlook remains uncertain, the fact that prices will remain low is very bad news for countries such as Saudi Arabia, whose fiscal breaks even points are closer to $100/bbl.
8The prediction is that Saudi Arabia will burn cash at a rapid pace and run out of money in a few years time until it takes drastic steps to curb consumption.
8One spinoff of the oil crisis could be a slowing down of Saudi Arabia's Wahabi-inspired support for Sunni extremism.
8Wealthy individuals in Saudi Arabia have long been supporters of an extreme form of Islamization, with some of the support extending to outfits working against India in Kashmir and the North East.
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Even as upstream companies struggle with low oil prices, the fortunes of the Indian downstream trio of IOC, BPCL and HPCL have improved dramatically over the last one years.
8Higher cracks and lower subsidies are reflecting on their balance sheets.
8Low oil prices and subsidies meant lower working capital loans. IOC's outstanding loans have come down to Rs 49,000 crore in December, 2015 from Rs 86,000 crore a year ago.
8Similarly, BPCL's loans are down to Rs 16,000 crore from Rs 20,000 crore and HPCL's to Rs 20,000 crore from Rs 32,000 crore.
8Under recoveries are down too: from over Rs 60,000 crore in 2014-15 to Rs 12,000 crore in the 9 months of 2015-16.
8While loans and under recoveries are down, profits are up. For the April-December, 2015 period, IOC posted a profit of Rs 9163 crore, up from Rs 5273 crore ayear ago. BPCL and HPCL too showed a rise in profit, though IOC's surge in profits was much higher than that of its counterparts.
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8Higher cracks and lower subsidies are reflecting on their balance sheets.
8Low oil prices and subsidies meant lower working capital loans. IOC's outstanding loans have come down to Rs 49,000 crore in December, 2015 from Rs 86,000 crore a year ago.
8Similarly, BPCL's loans are down to Rs 16,000 crore from Rs 20,000 crore and HPCL's to Rs 20,000 crore from Rs 32,000 crore.
8Under recoveries are down too: from over Rs 60,000 crore in 2014-15 to Rs 12,000 crore in the 9 months of 2015-16.
8While loans and under recoveries are down, profits are up. For the April-December, 2015 period, IOC posted a profit of Rs 9163 crore, up from Rs 5273 crore ayear ago. BPCL and HPCL too showed a rise in profit, though IOC's surge in profits was much higher than that of its counterparts.
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The RIL-BP duo are also informally in talks with drilling companies on the possibility of doing work in the KG Basin.
8There is no firm commitment however, because there are too many other variables -- in comparison to ONGC -- to take into account before they can start work on their discoveries.
8RIL in particular believes that prices will fall further before they start tightening up and orders should be placed sometime this year, once the go ahead comes from the top.
8The company may insist at the time of placing orders for flexibility in the deployment of rig.
8The idea seems to be to firm up the deal but utilize the drill ship according to to its own convenience.
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8There is no firm commitment however, because there are too many other variables -- in comparison to ONGC -- to take into account before they can start work on their discoveries.
8RIL in particular believes that prices will fall further before they start tightening up and orders should be placed sometime this year, once the go ahead comes from the top.
8The company may insist at the time of placing orders for flexibility in the deployment of rig.
8The idea seems to be to firm up the deal but utilize the drill ship according to to its own convenience.
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India seems to be one of the few deepwater markets in the world where positive activity is expected now that the gas pricing regime has been freed up.
8The point to note is that India today offers one of the best prices for gas available at landfall point anywhere in the world.
8One company that is going to be the first to jump off the bridge into the deep waters of the gas rich KG Basin is ONGC.
8Its capex plan for KG-DWN-98/2 block was pegged last year at Rs 53,000 crore but the figure has been trimmed considerably given the fall in the cost of equipment and services.
8Astute negotiations can bring down costs even more, particularly for the most expensive item in the menu, offshore drilling rigs.
8Both Transocean and Noble Corporation, among the largest owners of offshore rigs in the world, are in financial trouble as lack of demand has led to the idling of their rigs.
8Noble's latest fleet status report shows that five additional rigs have been stacked while two of them are, in the parlance of the rig industry, have been "cold stacked".
8Then again, Goldman Sachs has sent out an advisory against holding stock positions in Transocean, claiming that the company's fortunes are unlikely to see an upswing until well into 2018.
8The world today has a huge problem of rig oversupply.
8Already reeling under overcapacity, the market will also see dozens of newbuilds coming on stream in the years ahead.
8Orders were placed when times were better but the chickens are now coming home to roost. .
8According to on estimate, at least 50 of the approximately 250 floaters currently working or available worldwide will need to exit the market before the dynamics swing back in favour of drillers.
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8The point to note is that India today offers one of the best prices for gas available at landfall point anywhere in the world.
8One company that is going to be the first to jump off the bridge into the deep waters of the gas rich KG Basin is ONGC.
8Its capex plan for KG-DWN-98/2 block was pegged last year at Rs 53,000 crore but the figure has been trimmed considerably given the fall in the cost of equipment and services.
8Astute negotiations can bring down costs even more, particularly for the most expensive item in the menu, offshore drilling rigs.
8Both Transocean and Noble Corporation, among the largest owners of offshore rigs in the world, are in financial trouble as lack of demand has led to the idling of their rigs.
8Noble's latest fleet status report shows that five additional rigs have been stacked while two of them are, in the parlance of the rig industry, have been "cold stacked".
8Then again, Goldman Sachs has sent out an advisory against holding stock positions in Transocean, claiming that the company's fortunes are unlikely to see an upswing until well into 2018.
8The world today has a huge problem of rig oversupply.
8Already reeling under overcapacity, the market will also see dozens of newbuilds coming on stream in the years ahead.
8Orders were placed when times were better but the chickens are now coming home to roost. .
8According to on estimate, at least 50 of the approximately 250 floaters currently working or available worldwide will need to exit the market before the dynamics swing back in favour of drillers.
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The government seems to be tightlipped about the D&M Report over migration of gas to RIL's D-6 blok from the adjacent ONGC operated block KG-DWN-98/2.
8In a recent statement this is all that the ministry was willing to say on the controversy:
-- The Report has confirmed the continuity of reservoirs and has also quantified the amount of gas migrated from Godawari PML and D1 discovery area of ONGC’s KG-DWN-98/2 to RIL’s Block of KG-DWN-98/3 since 01.04.2009 to 31.03.2015
-- The Report has also quantified the amount of gas likely to further migrate from 01.04.2015 to 31.03.2019.
-- A single-member Committee under the chairmanship of Justice (Retd) A.P. Shah, former Chief Justice of the High Court of Delhi has been set up to look into the issue
and recommend further course of action.
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8In a recent statement this is all that the ministry was willing to say on the controversy:
-- The Report has confirmed the continuity of reservoirs and has also quantified the amount of gas migrated from Godawari PML and D1 discovery area of ONGC’s KG-DWN-98/2 to RIL’s Block of KG-DWN-98/3 since 01.04.2009 to 31.03.2015
-- The Report has also quantified the amount of gas likely to further migrate from 01.04.2015 to 31.03.2019.
-- A single-member Committee under the chairmanship of Justice (Retd) A.P. Shah, former Chief Justice of the High Court of Delhi has been set up to look into the issue
and recommend further course of action.
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South Africa will begin shale gas exploration work within this year.
8The country's semi-desert Karoo region is believed to hold at least 485 trillion cubic feet of shale gas.
8This is a massive quantity of gas by any yardstick.
8South Africa in fact had a moratorium on fracking, given its adverse environmental spinoffs, but that was lifted only a couple of years ago after which Anglo Dutch corporate Shell has shown keen interest in exploration of shale gas in the Karoo region.
8Shell says it is going to pump in $ 200 million for the first round of drilling of six wells there.
8If the investment is a success, South Africa may well joint the ranks of major producers of shale gas over time, thereby adding to the increasing supply of hydrocarbons globally, possibly influencing both supply and price of gas.
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8The country's semi-desert Karoo region is believed to hold at least 485 trillion cubic feet of shale gas.
8This is a massive quantity of gas by any yardstick.
8South Africa in fact had a moratorium on fracking, given its adverse environmental spinoffs, but that was lifted only a couple of years ago after which Anglo Dutch corporate Shell has shown keen interest in exploration of shale gas in the Karoo region.
8Shell says it is going to pump in $ 200 million for the first round of drilling of six wells there.
8If the investment is a success, South Africa may well joint the ranks of major producers of shale gas over time, thereby adding to the increasing supply of hydrocarbons globally, possibly influencing both supply and price of gas.
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Fugitive methane gas emissions from oil and gas facilities have emerge as a big contributor of global warming as methane is several times more harmful than ordinary carbon dioxide.
8New instruments have discovered large emissions levels near production installations which were not noticed earlier
8In this context, President Barak Obama along with visiting Canadian Prime Justin Trudeau promised in the White House to usher in a regime of strict regulations on the oil and gas industry to check emissions.
8The program to curb emission levels will be underway in a month’s time
8This will significantly impact the fracking industry and hinder its growth, sources said.
8Environmental groups like the Sierra Club in the US have in recent years appealed against this technology, claiming that the hazards posed by fracking to air and water in the US are immense.
8However, in a move contrary to growing apprehensions about the ill effects of fracking for gas, the US Environmental Protection Agency( EPA) had dismissed the fear of systemic groundwater contamination in a report (2015) whose research findings after a five year study, put to rest safety concerns related to fracking.
8Will the ministry of environment, taking the cue from the US, also lay down similarly stringent conditions on the domestic oil and gas industry in India?
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8New instruments have discovered large emissions levels near production installations which were not noticed earlier
8In this context, President Barak Obama along with visiting Canadian Prime Justin Trudeau promised in the White House to usher in a regime of strict regulations on the oil and gas industry to check emissions.
8The program to curb emission levels will be underway in a month’s time
8This will significantly impact the fracking industry and hinder its growth, sources said.
8Environmental groups like the Sierra Club in the US have in recent years appealed against this technology, claiming that the hazards posed by fracking to air and water in the US are immense.
8However, in a move contrary to growing apprehensions about the ill effects of fracking for gas, the US Environmental Protection Agency( EPA) had dismissed the fear of systemic groundwater contamination in a report (2015) whose research findings after a five year study, put to rest safety concerns related to fracking.
8Will the ministry of environment, taking the cue from the US, also lay down similarly stringent conditions on the domestic oil and gas industry in India?
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States in conflict in India have typically bargained for their package of compensations at the end of civil stife.
The Andhra Pradesh Reorganisation Act 2014, drawn up subsequent to the Telangana crisis was witness to a slew of agreements made by the Government of India to buy peace with the two warring sections of the state.
8In the case of Andhra Pradesh, a Greenfield oil and petrochemical complex under the aegis of IOCL or HPCL has been promised, among other industrial development projects.
8A feasibility cum configuration study by HPCL and GAIL had already been carried out for a 15 MMPTA refinery cum petrochemical complex
8A financial appraisal for the projects had been prepared too.
8The Nakkapalli cluster near Vishakapatnam, Kakinada SEZ in East Godavari district and Macchalipatnam were stipulated as possible sites for these complexes.
8The DFR and financial reports for the projects are currently under approval.
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The Andhra Pradesh Reorganisation Act 2014, drawn up subsequent to the Telangana crisis was witness to a slew of agreements made by the Government of India to buy peace with the two warring sections of the state.
8In the case of Andhra Pradesh, a Greenfield oil and petrochemical complex under the aegis of IOCL or HPCL has been promised, among other industrial development projects.
8A feasibility cum configuration study by HPCL and GAIL had already been carried out for a 15 MMPTA refinery cum petrochemical complex
8A financial appraisal for the projects had been prepared too.
8The Nakkapalli cluster near Vishakapatnam, Kakinada SEZ in East Godavari district and Macchalipatnam were stipulated as possible sites for these complexes.
8The DFR and financial reports for the projects are currently under approval.
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The website carries here the following LPG related data:
8State-wise LPG connections released up to March-January, 2016 in relation to the previous years.
8State-wise LPG coverage in terms of active consumers in relation to number of households in India
8State-wise established cases of irregularities in LPG distribution over the last three years.
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8State-wise LPG connections released up to March-January, 2016 in relation to the previous years.
8State-wise LPG coverage in terms of active consumers in relation to number of households in India
8State-wise established cases of irregularities in LPG distribution over the last three years.
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Is adulteration of petrol and diesel a big problem in India?
8For reference purposes, the website carries here the following related data:
8State-wise, company-wise cases of under measurement and adulteration uncovered at retail outlets between April-December, 2015
8Similar cases found at retail outlets over the last three years
8State-wise, company-wise cases of licences of retail outlets terminated for under measurement and adulteration between April-December, 2015.
8Similar cases reported in the last three years.
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8For reference purposes, the website carries here the following related data:
8State-wise, company-wise cases of under measurement and adulteration uncovered at retail outlets between April-December, 2015
8Similar cases found at retail outlets over the last three years
8State-wise, company-wise cases of licences of retail outlets terminated for under measurement and adulteration between April-December, 2015.
8Similar cases reported in the last three years.
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In these desperate times, is there any oil and gas industry equipment segment that is faring better than the rest?
8The answer seems to be a "yes" and it is the line pipe segment, if Welspun Corp. Ltd, one of the world's leading manufacturers, is to be believed.
82015 was the third year in a row that the company produced more than one million tonne of line pipes.
8The company claims its order book is at a record high.
8How has Welspun beaten the blues when others had to bite dust?
8The company claims it on account of its ability to deliver end-to-end solutions, diversified global presence, advanced technological prowess, expertise in complex projects and partnerships with global giants.
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8The answer seems to be a "yes" and it is the line pipe segment, if Welspun Corp. Ltd, one of the world's leading manufacturers, is to be believed.
82015 was the third year in a row that the company produced more than one million tonne of line pipes.
8The company claims its order book is at a record high.
8How has Welspun beaten the blues when others had to bite dust?
8The company claims it on account of its ability to deliver end-to-end solutions, diversified global presence, advanced technological prowess, expertise in complex projects and partnerships with global giants.
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Welspun claims that pipeline economics continue to be attractive despite a sharp all round fall in capex in the oil and gas business.
8Global line pipe demand is meant to go up to 10,744 KTM by 2020 from 9,194 KTM in 2015.
8The global markets for pipes continue to enjoy growth. The details are:
The US
8Oil production trends in the US and the development of gas projects in Canada are expected to result in good demand for pipeline in North America
MIddle East
8Focus on cross-Arabia gas transmission pipelines
8Iraq-Jordan Crude export pipeline (Total over 1,100 KM)
8Replacement of terminated oil pipelines in Kuwait
8Huge demand to distribute de-salined water from western coast to interiors in KSA
8Possible opening up of Iran
India
8India is also another area of hope with city gas distribution pipeline projects in multiple cities
8Around 1.5 million tonnes of water pipeline projects expected in near future
81,820 KM Turkmenistan – Afghanistan - Pakistan – India Pipeline will be another source of demand
8India has also announced 15,000 Km of cross-country gas pipelines.
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8Global line pipe demand is meant to go up to 10,744 KTM by 2020 from 9,194 KTM in 2015.
8The global markets for pipes continue to enjoy growth. The details are:
The US
8Oil production trends in the US and the development of gas projects in Canada are expected to result in good demand for pipeline in North America
MIddle East
8Focus on cross-Arabia gas transmission pipelines
8Iraq-Jordan Crude export pipeline (Total over 1,100 KM)
8Replacement of terminated oil pipelines in Kuwait
8Huge demand to distribute de-salined water from western coast to interiors in KSA
8Possible opening up of Iran
India
8India is also another area of hope with city gas distribution pipeline projects in multiple cities
8Around 1.5 million tonnes of water pipeline projects expected in near future
81,820 KM Turkmenistan – Afghanistan - Pakistan – India Pipeline will be another source of demand
8India has also announced 15,000 Km of cross-country gas pipelines.
Click on Reports for more Details
The reason why demand for line pipes has remained relatively robust is because of the fact that it is the cheapest mode of transportation of oil and petroleum products.
8The largest volumes of hydrocarbons are transported by pipeline
8The focus is on lowering transportation costs on account of a fall in crude prices. Here the pipeline industry has been able to be in step because of low steel prices.
8This makes pipelines relatively more viable than other modes of transport.
8There is a differential of 50% in the transportation cost of crude oil by rail and pipeline.
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8The largest volumes of hydrocarbons are transported by pipeline
8The focus is on lowering transportation costs on account of a fall in crude prices. Here the pipeline industry has been able to be in step because of low steel prices.
8This makes pipelines relatively more viable than other modes of transport.
8There is a differential of 50% in the transportation cost of crude oil by rail and pipeline.
Click on Reports for more Details
