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Mar 2016
The PNGRB has sought expressions of interest (EOIs) for CGD projects in 11 out of the 20 smart cities announced by the government.
8The other nine cities have already been authorized by the regulator.
The 11 cities are:
8Khordha
8Jaipur
8Jabalpur
8Vizag
8Solapur
8Davanagiri
8Coimbatore
8Udailpur
8Guwahati
8Chennai
8Bhopal
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8The other nine cities have already been authorized by the regulator.
The 11 cities are:
8Khordha
8Jaipur
8Jabalpur
8Vizag
8Solapur
8Davanagiri
8Coimbatore
8Udailpur
8Guwahati
8Chennai
8Bhopal
Click here for more information. Details
The ship building industry is going through a low phase as of now.
8Tanker ordering has been slow.
8Latest data shows that the Chinese order book position is down 75% from the previous year. Of the 300 yards, ship building work is going on in only 100 of them.
8More consolidation is therefore expected in the market
8In terms of recently reported deals, Ningbo Dayu Shipping placed an order for 6 firm small bulkers (9,800dwt) at CSC Jiangdong, in China with delivery set between 2017 and 2018.
8On the sales and marketing side, there was an en-bloc sale of the “Ganges Spirit” (159,453dwt-blt 02, S. Korea) and the “Yamuna Spirit” (159,435dwt-blt 02, S. Korea) which were sold, for a price in the region of $26.5m each.
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8Tanker ordering has been slow.
8Latest data shows that the Chinese order book position is down 75% from the previous year. Of the 300 yards, ship building work is going on in only 100 of them.
8More consolidation is therefore expected in the market
8In terms of recently reported deals, Ningbo Dayu Shipping placed an order for 6 firm small bulkers (9,800dwt) at CSC Jiangdong, in China with delivery set between 2017 and 2018.
8On the sales and marketing side, there was an en-bloc sale of the “Ganges Spirit” (159,453dwt-blt 02, S. Korea) and the “Yamuna Spirit” (159,435dwt-blt 02, S. Korea) which were sold, for a price in the region of $26.5m each.
Click here for more information. Details
Earnings for the crude carriers market moved down last week on the back of the Easter holiday recess that impacted activity all around.
8Some of the lost ground is likely to covered this week as business resumes its usual pace.
8As charterers move more aggressively into more forward April dates, sentiments are expected to improve.
8Underperforming the rest of the market, rates for VLs moved down last week on little West Asia activity.
8The W. Africa Suezmax also succumbed to the pressures of a dull market while cross-Med rates also struggled with very thin activity.
8Aframax rates held a bit compared to the rest of the market, with some pre-holiday fixing sustaining earnings in both the North Sea and Med regions, while, as expected, the Caribs Afra rates witnessed southward movements too.
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8Some of the lost ground is likely to covered this week as business resumes its usual pace.
8As charterers move more aggressively into more forward April dates, sentiments are expected to improve.
8Underperforming the rest of the market, rates for VLs moved down last week on little West Asia activity.
8The W. Africa Suezmax also succumbed to the pressures of a dull market while cross-Med rates also struggled with very thin activity.
8Aframax rates held a bit compared to the rest of the market, with some pre-holiday fixing sustaining earnings in both the North Sea and Med regions, while, as expected, the Caribs Afra rates witnessed southward movements too.
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The US shale oil and gas industry seems to have mastered the art of survival in difficult times.
8Despite a drastic fall in crude prices, the industry has honed its survival skills by raising its well productivity in tune with the market.
8A study shows that upstream costs in 2015 were 25% to 30% below their 2012 levels, when per-well costs were at their highest point over the past decade.
8Changes in technology have raised drilling efficiency and completion.
8The adoption of best practices and the improvement of well designs have reduced drilling and completion times, decrease total well costs, and increase well performance.
8Greater standardization of these drilling and completion practices and designs across the industry should continue to lower costs.
8The drilling cost per foot, based on total depth, and the completion cost per foot, based on lateral length, are both projected to maintain these lower cost trends through 2018.
8The American shale industry aren't hanging up their boots yet and it is seems willing to take on the competition head on.
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8Despite a drastic fall in crude prices, the industry has honed its survival skills by raising its well productivity in tune with the market.
8A study shows that upstream costs in 2015 were 25% to 30% below their 2012 levels, when per-well costs were at their highest point over the past decade.
8Changes in technology have raised drilling efficiency and completion.
8The adoption of best practices and the improvement of well designs have reduced drilling and completion times, decrease total well costs, and increase well performance.
8Greater standardization of these drilling and completion practices and designs across the industry should continue to lower costs.
8The drilling cost per foot, based on total depth, and the completion cost per foot, based on lateral length, are both projected to maintain these lower cost trends through 2018.
8The American shale industry aren't hanging up their boots yet and it is seems willing to take on the competition head on.
Click here for more information. Details
The area where the change in trade flows has been the most apparent has been in naphtha.
8Indian naphtha exports have fallen y/y by around 21 thousand b/d between January and November 2015, with the decline extending to 44 thousand b/d between September and November, as India consumes more of its own output due to the rapid growth in demand.
8India has long been a key short-haul naphtha supplier for the Asian market, so the decline in exports has been felt very rapidly.
8Moreover, these shipments are unlikely to return.
8India exported just over 0.1 mb/d of naphtha in October 2015; this is the smallest amount it has shipped overseas since February 2009,
8In November 2015, Indian naphtha exports remained lower y/y by 52 thousand b/d.
8With demand for petrol set to continue to grow at a phenomenal rate, Indian refiners are struggling to keep pace, and this will keep up the pressure on naphtha supplies.
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8Indian naphtha exports have fallen y/y by around 21 thousand b/d between January and November 2015, with the decline extending to 44 thousand b/d between September and November, as India consumes more of its own output due to the rapid growth in demand.
8India has long been a key short-haul naphtha supplier for the Asian market, so the decline in exports has been felt very rapidly.
8Moreover, these shipments are unlikely to return.
8India exported just over 0.1 mb/d of naphtha in October 2015; this is the smallest amount it has shipped overseas since February 2009,
8In November 2015, Indian naphtha exports remained lower y/y by 52 thousand b/d.
8With demand for petrol set to continue to grow at a phenomenal rate, Indian refiners are struggling to keep pace, and this will keep up the pressure on naphtha supplies.
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The "take off" has meant a significantly higher domestic offtake of petroleum products, and this has translated into a fall in oil product exports for eight of the first eleven months of 2015, with average product exports over the same period lower by over 0.1 mb/d compared to the same period in 2014.
8Meanwhile imports of petroleum products, which are still less than half the levels of total product exports, rose by over 0.1 mb/d in this period.
8Petrol imports have been on the rise. IOC and HPCL -- traditional exporters of gasoline -- turned into net importers of petrol in 2015.
8The start of IOCL’s 0.3 mb/d Paradip refinery will slow down imports but the refinery will initially run at 60 thousand b/d and only ramp up to full capacity at the end of Q1 2017. Only then will it help ease IOCL’s import burden.
8However, given the pace of domestic demand growth, it is estimated that Paradip will provide a respite for one to two years at best, before Indian state-owned refiners potentially turn into net importers of petrol.
8This is despite Paradip maximizing its gasoline output (at 81 thousand b/d) at the expense of naphtha (the refinery will not have any surplus naphtha).
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8Meanwhile imports of petroleum products, which are still less than half the levels of total product exports, rose by over 0.1 mb/d in this period.
8Petrol imports have been on the rise. IOC and HPCL -- traditional exporters of gasoline -- turned into net importers of petrol in 2015.
8The start of IOCL’s 0.3 mb/d Paradip refinery will slow down imports but the refinery will initially run at 60 thousand b/d and only ramp up to full capacity at the end of Q1 2017. Only then will it help ease IOCL’s import burden.
8However, given the pace of domestic demand growth, it is estimated that Paradip will provide a respite for one to two years at best, before Indian state-owned refiners potentially turn into net importers of petrol.
8This is despite Paradip maximizing its gasoline output (at 81 thousand b/d) at the expense of naphtha (the refinery will not have any surplus naphtha).
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The rapid expansion of the infrastructure sector has been another catalyst.
8The massive road building activity in the country holds significance when juxtaposed against the upsurge in car sales and increasing per capital oil consumption.
8A research paper has said that the 'Make in India' campaign can also aid the take off of demand for petroleum products.
8The policy aims to generate 100 million additional manufacturing jobs by 2022. In order to do so, it has been estimated that India’s manufacturing sector as a whole will need to grow at a rate that is 2 to 4 percentage points higher than the growth rate of its GDP. In contrast, India’s manufacturing sector has generally grown at a rate below that of its GDP. But if the sector does indeed grow as fast as is projected, it will work to significantly boost the consumption of petroleum products.
8Diesel will not be the sole beneficiary of the push toward manufacturing, as naphtha and bitumen consumption is also likely to increase. As manufacturing demand grows, so will the demand for plastics (petrochemical industry), and naphtha is best placed to benefit from this, particularly given the focus of the ‘Make in India’ campaign.
8A recent McKinsey report concludes that India will consume an additional 20–25 Mtpa of petrochemical intermediates by 2025 as industrial demand rises. The petroleum ministry which had earlier forecast that naphtha and fuel oil sales would contract year-on-year in 2016, now foresees substantial growth for both fuels, with naphtha demand set to rise in 2016 by 16.6 per cent. Thus, the petrochemical sector has contributed substantially to double-digit growth rates in sales of naphtha.
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8The massive road building activity in the country holds significance when juxtaposed against the upsurge in car sales and increasing per capital oil consumption.
8A research paper has said that the 'Make in India' campaign can also aid the take off of demand for petroleum products.
8The policy aims to generate 100 million additional manufacturing jobs by 2022. In order to do so, it has been estimated that India’s manufacturing sector as a whole will need to grow at a rate that is 2 to 4 percentage points higher than the growth rate of its GDP. In contrast, India’s manufacturing sector has generally grown at a rate below that of its GDP. But if the sector does indeed grow as fast as is projected, it will work to significantly boost the consumption of petroleum products.
8Diesel will not be the sole beneficiary of the push toward manufacturing, as naphtha and bitumen consumption is also likely to increase. As manufacturing demand grows, so will the demand for plastics (petrochemical industry), and naphtha is best placed to benefit from this, particularly given the focus of the ‘Make in India’ campaign.
8A recent McKinsey report concludes that India will consume an additional 20–25 Mtpa of petrochemical intermediates by 2025 as industrial demand rises. The petroleum ministry which had earlier forecast that naphtha and fuel oil sales would contract year-on-year in 2016, now foresees substantial growth for both fuels, with naphtha demand set to rise in 2016 by 16.6 per cent. Thus, the petrochemical sector has contributed substantially to double-digit growth rates in sales of naphtha.
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One "take off" argument that is given is that as economies and incomes grow, larger proportions of their populations become vehicle owners, contributing to the ‘motorization’ of the economy.
8India has seen a ‘jump’ in vehicle ownership that could prove the take off theory right
8Data shows that additions to India’s total vehicle fleet -- including cars, two-wheelers, and all other vehicles --had reached the take off stage sometime in 2014 and accelerated in 2015. The increase is mostly driven by additions of two-wheelers to the total vehicle fleet, further reinforcing the point that a combination of rising per capita income levels and the drop in the oil price have facilitated the affordability of oil to a wide range of lower and middle income consumers.
8Another measurement of take off is when the move up the energy ladder from traditional fuels (firewood, for instance) to more commercial and efficient, yet costlier, fuels (such as LPG and electricity) coincides with increased income and progress in economic development. This is precisely what is happening in India with rapid growth in LPG consumption.
8Then again, a spurt in per capita oil consumption is another indicator. The drop in oil prices (the price of the Indian crude oil basket has fallen from 109 US$/barrel in June 2014 to 25 US$/barrel in January 2016) has been sufficient to increase affordability for a whole new segment of the growing middle class population. The effect of prices is reflected in both higher consumption of fuels as well as a switch away from bio-energy and kerosene towards commercial fuels such as LPG.
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8India has seen a ‘jump’ in vehicle ownership that could prove the take off theory right
8Data shows that additions to India’s total vehicle fleet -- including cars, two-wheelers, and all other vehicles --had reached the take off stage sometime in 2014 and accelerated in 2015. The increase is mostly driven by additions of two-wheelers to the total vehicle fleet, further reinforcing the point that a combination of rising per capita income levels and the drop in the oil price have facilitated the affordability of oil to a wide range of lower and middle income consumers.
8Another measurement of take off is when the move up the energy ladder from traditional fuels (firewood, for instance) to more commercial and efficient, yet costlier, fuels (such as LPG and electricity) coincides with increased income and progress in economic development. This is precisely what is happening in India with rapid growth in LPG consumption.
8Then again, a spurt in per capita oil consumption is another indicator. The drop in oil prices (the price of the Indian crude oil basket has fallen from 109 US$/barrel in June 2014 to 25 US$/barrel in January 2016) has been sufficient to increase affordability for a whole new segment of the growing middle class population. The effect of prices is reflected in both higher consumption of fuels as well as a switch away from bio-energy and kerosene towards commercial fuels such as LPG.
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There is a dramatic shift in consumption of petroleum products in 2015. Year on year demand growth has jumped up to 0.30 million barrels per day in comparison to 0.1-0.15 mb/d over the previous decade.
8The jump is extraordinary in its persistence over a one-year period, promoting a comparison with the Chinese model. Chinese demand took off a decade and a half ago during the country's industrialization boom.
8Chinese consumption is now slowing down just as India's is taking off.
8Indian demand failed to take off earlier on account of political paralysis, high oil prices and burgeoning fiscal deficit but 2015 has seen a 'new India" emerging with a record jump in oil production.
8Part of the jump is on account of low oil prices but the government did not allow the full import of fall in price to work itself into the pricing matrix as it withdrew subsidies and mopped up a large part of it by way of taxes.
8So, what really had driven the sharp rise in consumption are more fundamental factors, all of which point to a "take off" in oil demand.
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8The jump is extraordinary in its persistence over a one-year period, promoting a comparison with the Chinese model. Chinese demand took off a decade and a half ago during the country's industrialization boom.
8Chinese consumption is now slowing down just as India's is taking off.
8Indian demand failed to take off earlier on account of political paralysis, high oil prices and burgeoning fiscal deficit but 2015 has seen a 'new India" emerging with a record jump in oil production.
8Part of the jump is on account of low oil prices but the government did not allow the full import of fall in price to work itself into the pricing matrix as it withdrew subsidies and mopped up a large part of it by way of taxes.
8So, what really had driven the sharp rise in consumption are more fundamental factors, all of which point to a "take off" in oil demand.
Click here for more information. Details
The maintenance of such a SPM sophisticated system is a full time job for IOC.
8A set of vessels is required to do the job, including one with a remote controlled Dynamic Positioning system so that it can remain steady in bad weather conditions in Pradip. It should come equipped with rescue boats, diving equipment, radars, gyros, eco-sounders, auto pilot and full communication gear.
8There is a need for another SPS 2008 compliant Maintenance vessel.
8Two support vessels are needed as well.
8The vessels will have to be manned with trained personnel -- including divers -- capable of providing a sophisticated range of services involved multiple equipment sets.
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8A set of vessels is required to do the job, including one with a remote controlled Dynamic Positioning system so that it can remain steady in bad weather conditions in Pradip. It should come equipped with rescue boats, diving equipment, radars, gyros, eco-sounders, auto pilot and full communication gear.
8There is a need for another SPS 2008 compliant Maintenance vessel.
8Two support vessels are needed as well.
8The vessels will have to be manned with trained personnel -- including divers -- capable of providing a sophisticated range of services involved multiple equipment sets.
Click here for more information. Details
IOC has installed a set of three Single Point Mooring (SPM) terminals 20 km off the Paradip coast to transport crude for its 15 MMTPA refinery as well as to other onland refineries of the company.
8The SPM systems are designed to cater to super sized oil tankers of sizes of up to 320,000 DWT.
8The three SPM systems have interconnected offshore pipelines that deliver crude to onshore pipelines.
8These heavy duty SPMs can unload up to 14,000 cubic metres of crude per hour through 48-inch submarine lines at pressures of up to 12 kg per sq cm.
8The system consists of chemical engineering and pigging systems and hundreds of different components with sounding systems, rotating assemblies, mooring structures, bogle wheel and rail assemblies, anti fouiling protection mechanisms, pumping sytems, navigation aids, radar reflectors, Navaida control modules, store stations, telemetry units, sub sea hoses, hydraulic equipment systems, instrumentations, fluid transfer systems, product distribution units, pipeline manifolds, PLEM pipimg systems, anchoring equipment.
8Click here for a comprehensive update along with complete technical data on the mooring systems which are capable of working in very rough weather conditions that are observed in the Bay of Bengal. Details
8The SPM systems are designed to cater to super sized oil tankers of sizes of up to 320,000 DWT.
8The three SPM systems have interconnected offshore pipelines that deliver crude to onshore pipelines.
8These heavy duty SPMs can unload up to 14,000 cubic metres of crude per hour through 48-inch submarine lines at pressures of up to 12 kg per sq cm.
8The system consists of chemical engineering and pigging systems and hundreds of different components with sounding systems, rotating assemblies, mooring structures, bogle wheel and rail assemblies, anti fouiling protection mechanisms, pumping sytems, navigation aids, radar reflectors, Navaida control modules, store stations, telemetry units, sub sea hoses, hydraulic equipment systems, instrumentations, fluid transfer systems, product distribution units, pipeline manifolds, PLEM pipimg systems, anchoring equipment.
8Click here for a comprehensive update along with complete technical data on the mooring systems which are capable of working in very rough weather conditions that are observed in the Bay of Bengal. Details
The point to note is that the huge improvements in vehicular technology since 2000 have had little impact in India due to Indian driving, road and ambient conditions.
8The technology that will be used in future BS-VI vehicles, though, will have considerable impact.
8However the move to BS-VI will entail more dramatic changes in engine technology in comparison to a transition to BS-V. And this includes fitting of a high-tech diesel particulate filter, which brings down particulate matter, that will have to be mounted vertically inside the engine compartment. This will have to spinoff from increasing the length of a small car by a significant margin, and putting it in another category altogether.
8Then again, the Selective Catalytic Reduction (SCR) module, which brings down NOX emissions, will need an ammonia chamber inside a car.
8There will also be the need to effect other major re-engineering and design changes to make a vehicle Euro-VI compatible.
8The time that will be taken to do these changes will be anywhere between 3-4 years.
8Finally validation tests will have to be done over 600,000-700,000 km and this process may need an extra few years.
Click here for more information. Details
8The technology that will be used in future BS-VI vehicles, though, will have considerable impact.
8However the move to BS-VI will entail more dramatic changes in engine technology in comparison to a transition to BS-V. And this includes fitting of a high-tech diesel particulate filter, which brings down particulate matter, that will have to be mounted vertically inside the engine compartment. This will have to spinoff from increasing the length of a small car by a significant margin, and putting it in another category altogether.
8Then again, the Selective Catalytic Reduction (SCR) module, which brings down NOX emissions, will need an ammonia chamber inside a car.
8There will also be the need to effect other major re-engineering and design changes to make a vehicle Euro-VI compatible.
8The time that will be taken to do these changes will be anywhere between 3-4 years.
8Finally validation tests will have to be done over 600,000-700,000 km and this process may need an extra few years.
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IOC is going ahead with a Ethylene Glycol complex in its Paradip refinery.
8The project will envisage a new Ethylene Recovery Unit (ERU) for recovery and production of FCCU off-site gases, which will then be converted into Mono Ethylene Glycol.
8The system will have to be integrated with the refinery by related modification in existing off-site facilities & utilities.
8The process involves storing liquid ethylene from the ERU in Horton spheres.
8This will then require vaporization in an ethylene vaporizer before being pushed to the Glycol Unit.
8The work will also involve tie-ins or tappings from the existing piping networks of utilities and process streams in the refinery.
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8The project will envisage a new Ethylene Recovery Unit (ERU) for recovery and production of FCCU off-site gases, which will then be converted into Mono Ethylene Glycol.
8The system will have to be integrated with the refinery by related modification in existing off-site facilities & utilities.
8The process involves storing liquid ethylene from the ERU in Horton spheres.
8This will then require vaporization in an ethylene vaporizer before being pushed to the Glycol Unit.
8The work will also involve tie-ins or tappings from the existing piping networks of utilities and process streams in the refinery.
Click here for more information. Details
A study has predicted that one-third of all global oil companies are at risk of bankruptcy this year, with the 175 most at-risk companies holding more than $150 billion in debt.
8A global survey of oil and gas executives found that nearly 75 percent were preparing their companies for a sustained period of low oil prices, with job cuts one of the top three methods they cited to control costs.
8Thirty-one percent of respondents expected further cuts to employment over the current year, an increase of 6 percent over last year.
8Far from signaling a return to health for the industry, a major factor behind the bottoming out of oil over the past few months has been the collapse in output among non-OPEC oil producers.
8The collapse in oil prices has caused a crunch in new investments, with an estimated $380 billion in planned oil projects being put on hold.
8There were an estimated 65,000 job losses in Britain last year, with possibly 45,000 more jobs on the block for 2016. In Norway, which also borders the North Sea, an estimated 200,000 jobs are threatened by the crisis of the oil industry in that country.
8In the US, since January 2015, 15,700 jobs in oil and gas and nearly 100,000 jobs in supporting industries have been lost in the US, according to the latest figures from the Bureau of Labor Statistics.
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8A global survey of oil and gas executives found that nearly 75 percent were preparing their companies for a sustained period of low oil prices, with job cuts one of the top three methods they cited to control costs.
8Thirty-one percent of respondents expected further cuts to employment over the current year, an increase of 6 percent over last year.
8Far from signaling a return to health for the industry, a major factor behind the bottoming out of oil over the past few months has been the collapse in output among non-OPEC oil producers.
8The collapse in oil prices has caused a crunch in new investments, with an estimated $380 billion in planned oil projects being put on hold.
8There were an estimated 65,000 job losses in Britain last year, with possibly 45,000 more jobs on the block for 2016. In Norway, which also borders the North Sea, an estimated 200,000 jobs are threatened by the crisis of the oil industry in that country.
8In the US, since January 2015, 15,700 jobs in oil and gas and nearly 100,000 jobs in supporting industries have been lost in the US, according to the latest figures from the Bureau of Labor Statistics.
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Did you know that India elicited an agreement with Turkmenistan to stop shipments of gas to Pakistan should that country impede gas deliveries to India via the TAPI pipeline?
8Whether Turkmenistan agrees to honour its end of the bargain if Pakistan were to do so remains a moot point.
8A ceremonial ground breaking ritual for the pipeline took place in December, 2015 but major hurdles still remain.
8Of all the potential obstacles impeding the project, including investment, competing pipeline projects from Iran and Qatar for the same market, difficult terrain and the high sulphur content of Turkmenistan’s gas, security issues remain the most primary concern.
8Security risks have grown with the emergence of ISIS and the increased possibility of wars between states in the region.
8Moreover, history has shown that when ‘invaders’ leave Afghanistan, old leaders do not always stay in power, and new leaders do not always stick to the deals negotiated with their predecessors.
8While the prospect of negotiating with the Taliban is unlikely to deter Turkmenistan, investors will be wary of laying a pipeline through Taliban territory or to pay off local officials.
8There is also no guarantee that individual warlords and even regular citizens would not attempt to sabotage the pipeline project at a future date.
8While the Afghan government has pledged to deploy 7,000 soldiers to safeguard the route, no guarantees were provided for security in Pakistan’s restive Balochistan province, which is also prone to volatility.
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8Whether Turkmenistan agrees to honour its end of the bargain if Pakistan were to do so remains a moot point.
8A ceremonial ground breaking ritual for the pipeline took place in December, 2015 but major hurdles still remain.
8Of all the potential obstacles impeding the project, including investment, competing pipeline projects from Iran and Qatar for the same market, difficult terrain and the high sulphur content of Turkmenistan’s gas, security issues remain the most primary concern.
8Security risks have grown with the emergence of ISIS and the increased possibility of wars between states in the region.
8Moreover, history has shown that when ‘invaders’ leave Afghanistan, old leaders do not always stay in power, and new leaders do not always stick to the deals negotiated with their predecessors.
8While the prospect of negotiating with the Taliban is unlikely to deter Turkmenistan, investors will be wary of laying a pipeline through Taliban territory or to pay off local officials.
8There is also no guarantee that individual warlords and even regular citizens would not attempt to sabotage the pipeline project at a future date.
8While the Afghan government has pledged to deploy 7,000 soldiers to safeguard the route, no guarantees were provided for security in Pakistan’s restive Balochistan province, which is also prone to volatility.
Click here for more information. Details
ONGC bosses and the mandarins in Shastri Bhavan who run India E&P giant can pick up a lesson on two from their Chinese counterparts who run companies much larger than the size of ONGC.
8Sinopec is the world's second largest oil and gas company and it has done a remarkable job of driving growth while cutting costs.
8Despite a dramatic crash in oil prices that lead to a 28% drop in sales, profits were down only 8.9% in 2015 from the previous year. Its payout ratios are low as the Chinese authorities are less usurious in their demand for chunk of profits from their companies than our North Block chieftains.
8The giant company used what it called flexible models to adjust to difficult times.
Its foray into shale gas is yielding results, and production is already at 5 mmscmd from the Fuling shale field. China has one of the largest reserves of shale gas in the world and a production ramp up is expected in the coming years.
8India is perhaps not a suitable country for a shale gas revolution but clearly little effort has been made to do some work in this direction. ONGC has been trying to drill a a handful of pilot wells for the past few years without much progress. India has little idea of how much shale gas reserves it has, and available estimates are at best a wild guess.
8Sinopec is an R&D giant too. Last year it launched a proprietary, high-efficiency, and environmentally friendly aromatics technology.
8The scale of its achievements is evidenced by the fact that it obtained a mind boggling 3,769 patents in 2015.
8How many patents have ONGC's venerated research institutions got? There is a feeling that some of them have deteriorated into cess pools of bureaucracy. ONGC just imports all the technology that it needs from western service providers while the Chinese are standing up with their own hardware and technology.
8What is more, China has not just one but a couple of other top notch oil and gas companies with massive size and stature. Sinopec's turnover was a massive $455 billion in 2015, next only to Saudi Aramco at $478 billion. Then there is CNPC at $428 billion and PetroChina at $367 billion.
8In comparison, the western world's largest company, Exxon Mobil, has a turnover of a mere $268 billion.
8The sheer muscle allows the Chinese to make more R&D investments and this in turn helps them march ahead.
8ONGC looks puny in comparison with these giants. While Sinopec has its equals in China to compete with, in India we have Oil India Ltd, whose size is just a 10th of that of ONGC.
8It will take a long time for ONGC to reach the scale, depth, muscle and firepower of a company such as Sinopec.
8We do a lot of chest thumping with ourselves but every now and them we need to look out and see where the rest of the world is going.
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8Sinopec is the world's second largest oil and gas company and it has done a remarkable job of driving growth while cutting costs.
8Despite a dramatic crash in oil prices that lead to a 28% drop in sales, profits were down only 8.9% in 2015 from the previous year. Its payout ratios are low as the Chinese authorities are less usurious in their demand for chunk of profits from their companies than our North Block chieftains.
8The giant company used what it called flexible models to adjust to difficult times.
Its foray into shale gas is yielding results, and production is already at 5 mmscmd from the Fuling shale field. China has one of the largest reserves of shale gas in the world and a production ramp up is expected in the coming years.
8India is perhaps not a suitable country for a shale gas revolution but clearly little effort has been made to do some work in this direction. ONGC has been trying to drill a a handful of pilot wells for the past few years without much progress. India has little idea of how much shale gas reserves it has, and available estimates are at best a wild guess.
8Sinopec is an R&D giant too. Last year it launched a proprietary, high-efficiency, and environmentally friendly aromatics technology.
8The scale of its achievements is evidenced by the fact that it obtained a mind boggling 3,769 patents in 2015.
8How many patents have ONGC's venerated research institutions got? There is a feeling that some of them have deteriorated into cess pools of bureaucracy. ONGC just imports all the technology that it needs from western service providers while the Chinese are standing up with their own hardware and technology.
8What is more, China has not just one but a couple of other top notch oil and gas companies with massive size and stature. Sinopec's turnover was a massive $455 billion in 2015, next only to Saudi Aramco at $478 billion. Then there is CNPC at $428 billion and PetroChina at $367 billion.
8In comparison, the western world's largest company, Exxon Mobil, has a turnover of a mere $268 billion.
8The sheer muscle allows the Chinese to make more R&D investments and this in turn helps them march ahead.
8ONGC looks puny in comparison with these giants. While Sinopec has its equals in China to compete with, in India we have Oil India Ltd, whose size is just a 10th of that of ONGC.
8It will take a long time for ONGC to reach the scale, depth, muscle and firepower of a company such as Sinopec.
8We do a lot of chest thumping with ourselves but every now and them we need to look out and see where the rest of the world is going.
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The transition cost to become a BS-VI compatible vehicle will also be high.
8Estimates of required investment to upgrade from BS-IV to BS-V are of the tune of Rs 50,000 crore
8So the guess is that moving straight to BS-VI would need Rs.70,000-80,000 crores of funding
8The impact of the cost on the transport industry and on the two and three wheeler industry is going to be high.
8Low interest loans may have to be given to fund a BS-VI compatible vehicles. Tax concessions will have to be doled out too.
Overall transportation cost will go up.
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8Estimates of required investment to upgrade from BS-IV to BS-V are of the tune of Rs 50,000 crore
8So the guess is that moving straight to BS-VI would need Rs.70,000-80,000 crores of funding
8The impact of the cost on the transport industry and on the two and three wheeler industry is going to be high.
8Low interest loans may have to be given to fund a BS-VI compatible vehicles. Tax concessions will have to be doled out too.
Overall transportation cost will go up.
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There are other problems too with fitting in the right BS-VI technology in vehicles.
8Because BS-V is being skipped, both the Diesel Particulate Filter and the SCR module would need to be fitted together for testing.
8Ideally, the technologies must be introduced in a series by moving gradually from BS-V to BS-VI and then synergized.
8The problem is that it will be difficult to detect which of the technologies is at fault in case of errors in the system.
8At every stage, the technology is getting more complex. To attain the specified super low emissions, all reactions have to be precise, and controlled by microprocessors
8Ideally, the technologies must be introduced in series and then synergized.
8So, even if oil companies manage to make the leap, auto firms claim they would need 6-7 years to switch to BS-VI.
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8Because BS-V is being skipped, both the Diesel Particulate Filter and the SCR module would need to be fitted together for testing.
8Ideally, the technologies must be introduced in a series by moving gradually from BS-V to BS-VI and then synergized.
8The problem is that it will be difficult to detect which of the technologies is at fault in case of errors in the system.
8At every stage, the technology is getting more complex. To attain the specified super low emissions, all reactions have to be precise, and controlled by microprocessors
8Ideally, the technologies must be introduced in series and then synergized.
8So, even if oil companies manage to make the leap, auto firms claim they would need 6-7 years to switch to BS-VI.
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The road to BS-VI fuel straight from BS-IV by 2020 is not going to be an easy one, experts claim.
8The government could face three key challenges in implementing the decision, and they are:
-- The ability of oil marketing companies to quickly upgrade fuel quality from BS-III and BS-IV standards to BS-VI.
-- The task of getting auto firms to make the leap is not going to be easy as they have clearly said that there may not be enough time to do the design and production work before going to BS-VI directly. There are two critical components -- diesel particulate filter and selective catalytic reduction module -- which would have to be adapted to India’s peculiar conditions, because running speeds here are much lower than in Europe or the US
8Then again, the transport community, especially 2/3 wheelers, will find the replacement cost too high
8Another big hurdle is whether oil companies will be able to redesign their refining processes on time for the upgrade.
8They will have to do it on a war footing to beat the deadline.
8The companies have already spent Rs 30,000 crore between 2005 and 2010 to upgrade to BS III and BS IV
8Now they will have to spend another amount of about Rs 40,000 crore to upgrade fuel quality to BS-VI.
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8The government could face three key challenges in implementing the decision, and they are:
-- The ability of oil marketing companies to quickly upgrade fuel quality from BS-III and BS-IV standards to BS-VI.
-- The task of getting auto firms to make the leap is not going to be easy as they have clearly said that there may not be enough time to do the design and production work before going to BS-VI directly. There are two critical components -- diesel particulate filter and selective catalytic reduction module -- which would have to be adapted to India’s peculiar conditions, because running speeds here are much lower than in Europe or the US
8Then again, the transport community, especially 2/3 wheelers, will find the replacement cost too high
8Another big hurdle is whether oil companies will be able to redesign their refining processes on time for the upgrade.
8They will have to do it on a war footing to beat the deadline.
8The companies have already spent Rs 30,000 crore between 2005 and 2010 to upgrade to BS III and BS IV
8Now they will have to spend another amount of about Rs 40,000 crore to upgrade fuel quality to BS-VI.
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There was always a mystery about how much gas Turkmenistan had until in 2011 Gaffney Cline Associates (GCA) publicly confirmed that there was a 95 per cent chance that the country's main Galkynysh field -- from where the TAPI pipeline will also emerge -- contained a massive 13.1 tcm of reserves.
8There was a 50 per cent probability that it held 16.4 tcm, and a 5 per cent probability that it contained 21.2 tcm, GCA had said
8Repeating these figures in 2013 following a fresh assessment, GCA stated that, if anything, they were an underestimate. For while it had delineated the boundaries of the field at its eastern and western ends, there were areas to both north and south where gas-bearing formations extended beyond the assessed areas.
8In any event, these figures make Galkynysh easily the second-largest gas field in the world after North Field/South Pars in the Persian Gulf, which is shared by Qatar and Iran.
8It is now established that Turkmenistan’s vast reserves can eventually support significant volumes going to multiple export destinations simultaneously, even in the best of circumstances such production can only come on stream stage by stage over the next decade or longer.
8Many of the fields currently under development or awaiting development present several challenges – with high pressure, high temperatures and a below-the-salt location at great depth – requiring not only investment, but also technical and managerial expertise. Not least, much of the gas in the Galkynysh complex is 'sour’ -- with high hydrogen sulphide content and other impurities -- requiring extensive processing.
8Despite these obstacles, Turkmengaz officially brought initial production at Galkynysh online in September 2013, only three months behind schedule. This was no mean feat as it required the company to integrate and commission three gas-processing plants – each built by separate contractors and using different technologies.
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8There was a 50 per cent probability that it held 16.4 tcm, and a 5 per cent probability that it contained 21.2 tcm, GCA had said
8Repeating these figures in 2013 following a fresh assessment, GCA stated that, if anything, they were an underestimate. For while it had delineated the boundaries of the field at its eastern and western ends, there were areas to both north and south where gas-bearing formations extended beyond the assessed areas.
8In any event, these figures make Galkynysh easily the second-largest gas field in the world after North Field/South Pars in the Persian Gulf, which is shared by Qatar and Iran.
8It is now established that Turkmenistan’s vast reserves can eventually support significant volumes going to multiple export destinations simultaneously, even in the best of circumstances such production can only come on stream stage by stage over the next decade or longer.
8Many of the fields currently under development or awaiting development present several challenges – with high pressure, high temperatures and a below-the-salt location at great depth – requiring not only investment, but also technical and managerial expertise. Not least, much of the gas in the Galkynysh complex is 'sour’ -- with high hydrogen sulphide content and other impurities -- requiring extensive processing.
8Despite these obstacles, Turkmengaz officially brought initial production at Galkynysh online in September 2013, only three months behind schedule. This was no mean feat as it required the company to integrate and commission three gas-processing plants – each built by separate contractors and using different technologies.
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For reference purposes, the website carries here a comprehensive document on Turkmenistan and how the country and its leadership operates.
8The company is trying to get away from the stranglehold of the Chinese who control the gas flow out of Turkmenistan after the Ashgabat entered into a spat with Russia over pending payments for gas supplies.
8Turkmenistan's attempts to build pipelines to Iran, India and Europe have been stymied by the big powers that operate around Turkmenistan.
8But more than the Afghans, the Pakistanis and even the Indians, Turkmenistan remains bullish about the Turkmenistan-Afganisthan-Pakistan-India pipeline.
8The confidence stems from the regime's faith in its power to get the Taliban to sign a deal to let the pipeline through.
8For years Turkmenistan has been offering to host peace talks among the warring parties of Afghanistan. It was among the first to open consulates in the Afghan cities of Herat and Mazar-i-Sharif. Turkmenistan also entered into several deals with Taliban and it seems confident of garnering their support to building the pipeline.
8Ashgabat has long regarded Afghanistan as a natural bridge to the vast markets of the Indian subcontinent.
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8The company is trying to get away from the stranglehold of the Chinese who control the gas flow out of Turkmenistan after the Ashgabat entered into a spat with Russia over pending payments for gas supplies.
8Turkmenistan's attempts to build pipelines to Iran, India and Europe have been stymied by the big powers that operate around Turkmenistan.
8But more than the Afghans, the Pakistanis and even the Indians, Turkmenistan remains bullish about the Turkmenistan-Afganisthan-Pakistan-India pipeline.
8The confidence stems from the regime's faith in its power to get the Taliban to sign a deal to let the pipeline through.
8For years Turkmenistan has been offering to host peace talks among the warring parties of Afghanistan. It was among the first to open consulates in the Afghan cities of Herat and Mazar-i-Sharif. Turkmenistan also entered into several deals with Taliban and it seems confident of garnering their support to building the pipeline.
8Ashgabat has long regarded Afghanistan as a natural bridge to the vast markets of the Indian subcontinent.
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Turkmenistan is worried that the Chinese will do what the Russians had done once with their monopoly buyer status.
8Russia bought Turkmenistan gas but haggled over price, delaying payments at whim
8Ashgabat feels that Beijing can do the same once demand tapers off after the shale gas revolution takes a firm footing in China. The country has one of the world's largest reserves of shale oil and gas and it has drawn up ambitious plans to unlock these reserves.
8The scare is that China may seek a lower price in return for firm offtake.
8The fact that the Russians have also built direct pipelines to satiate Chinese demand weighs on Turkmenistan's mind.
8It remains a moot point whether policy makers in India have the true pulse of the region's twisted but compulsive history and the factors that dictate Ashgabat's strategy.
8There are many players in the game around Turkmenistan, including Iran, Turkey, Europe, and a clutch of its immediate neighbors such as Kazakhstan,Uzbekistan and Kyrgyzstan.
8Is India aware of how the Chinese had coaxed and cajoled their way into getting itself a 32-year agreement to develop the Bagtyýarlyk onshore natural gas field. Can India play games too?
8After the Chinese capitulation, Turkmenistan has steadfastly refused to provide equity to any other country.
8Do we have enough knowledge about how China was able to bring together the contentious trio of Kazakhstan,Uzbekistan and Kyrgyzstan to build the pipeline to Turkmenistan.
8China’s state-driven policy – and the symbiotic relationship between its oil and gas companies and its policy-makers – has enabled Beijing to finance projects upfront and offer Ashgabat a ‘package deal’ in a way that Western companies can do.
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8Russia bought Turkmenistan gas but haggled over price, delaying payments at whim
8Ashgabat feels that Beijing can do the same once demand tapers off after the shale gas revolution takes a firm footing in China. The country has one of the world's largest reserves of shale oil and gas and it has drawn up ambitious plans to unlock these reserves.
8The scare is that China may seek a lower price in return for firm offtake.
8The fact that the Russians have also built direct pipelines to satiate Chinese demand weighs on Turkmenistan's mind.
8It remains a moot point whether policy makers in India have the true pulse of the region's twisted but compulsive history and the factors that dictate Ashgabat's strategy.
8There are many players in the game around Turkmenistan, including Iran, Turkey, Europe, and a clutch of its immediate neighbors such as Kazakhstan,Uzbekistan and Kyrgyzstan.
8Is India aware of how the Chinese had coaxed and cajoled their way into getting itself a 32-year agreement to develop the Bagtyýarlyk onshore natural gas field. Can India play games too?
8After the Chinese capitulation, Turkmenistan has steadfastly refused to provide equity to any other country.
8Do we have enough knowledge about how China was able to bring together the contentious trio of Kazakhstan,Uzbekistan and Kyrgyzstan to build the pipeline to Turkmenistan.
8China’s state-driven policy – and the symbiotic relationship between its oil and gas companies and its policy-makers – has enabled Beijing to finance projects upfront and offer Ashgabat a ‘package deal’ in a way that Western companies can do.
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Australian LNG projects are now going onstream one by one and the country is on its way to becoming the biggest supplier of LNG in the world.
8But whether all of them will be able to market their LNG at a profitable price remains a moot point, given the supply glut in the market.
8Three projects in eastern Australia -- Queensland Curtis, Gladstone, and Australia Pacific -- have been fully or partially commissioned since 2014.
8Queensland Curtis commissioned its two trains in 2014-15, Gladstone commissioned its first train in October 2015, and Australia Pacific sent its first cargo in January of this year. All three projects process coalbed methane into
8LNG and have a current combined capacity of 2.3 Bcf/d. Once fully completed, they will have a combined capacity of 3.4 Bcf/d.
8Gorgon LNG is the first of the four new projects off the northern coast of Western Australia to be partially commissioned.
8Three other projects in the northwest -- Prelude, Wheatstone and Ichthys -- are still under construction. These three projects have a combined capacity of 2.8 Bcf/d and are expected to come online in 2016-18.
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8But whether all of them will be able to market their LNG at a profitable price remains a moot point, given the supply glut in the market.
8Three projects in eastern Australia -- Queensland Curtis, Gladstone, and Australia Pacific -- have been fully or partially commissioned since 2014.
8Queensland Curtis commissioned its two trains in 2014-15, Gladstone commissioned its first train in October 2015, and Australia Pacific sent its first cargo in January of this year. All three projects process coalbed methane into
8LNG and have a current combined capacity of 2.3 Bcf/d. Once fully completed, they will have a combined capacity of 3.4 Bcf/d.
8Gorgon LNG is the first of the four new projects off the northern coast of Western Australia to be partially commissioned.
8Three other projects in the northwest -- Prelude, Wheatstone and Ichthys -- are still under construction. These three projects have a combined capacity of 2.8 Bcf/d and are expected to come online in 2016-18.
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Australia's Gorgon LNG project, one of the largest such projects in the world, shipped its first LNG cargo to Japan last week.
8It is not known yet when cargoes are meant to be shipped to Petronet LNG Ltd's Kochi terminal. PLL has a deal with Exxon Mobil for supply of 1.40 MMTPA of LNG annually.
8Given lack of evacuation facilities, PLL will have to divert the cargoes elsewhere.
8It is not known whether PLL has the flexibility that Chinese importers have built into their contracts with Gorgon where almost half of their deliveries have flexible destination clauses.
8On the other hand, only 7% of the cargoes to be shipped to Japan has this clause.
8The Gorgon project took more than six years to develop, with the original estimated capital costs of $37 billion in 2009 growing to $54 billion by 2013, making it the world's most expensive LNG project to date.
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8It is not known yet when cargoes are meant to be shipped to Petronet LNG Ltd's Kochi terminal. PLL has a deal with Exxon Mobil for supply of 1.40 MMTPA of LNG annually.
8Given lack of evacuation facilities, PLL will have to divert the cargoes elsewhere.
8It is not known whether PLL has the flexibility that Chinese importers have built into their contracts with Gorgon where almost half of their deliveries have flexible destination clauses.
8On the other hand, only 7% of the cargoes to be shipped to Japan has this clause.
8The Gorgon project took more than six years to develop, with the original estimated capital costs of $37 billion in 2009 growing to $54 billion by 2013, making it the world's most expensive LNG project to date.
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Anil Agarwal of Cairn India has made a proclamation that the company is capable of producing four times its current hydrocarbon production, almost entirely from its Barmer block in Rajasthan.
8But Agarwal added a significant caveat to the target, saying that it will only be possible with government support.
8The problem is that Agarwal will have to share a little more of his profits, both with his partner ONGC and with the government, from the block if he wants a 10-year extension of the PSC that expires in 2020.
8"Now that the government policy on extensions of PSCs has been announced and the parameters firmly set, it is unlikely that Agarwal will get an extension of his block without adhering to the same caveats that circumscribe such extensions," well placed sources said.
8Cairn has taken the government to court for pussyfooting on the extension issue but it is unlikely that the court will endorse a framework other than what has already been approved by the cabinet for small and mid sized fields because the general principle for extension of PSC is going to be the same.
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8But Agarwal added a significant caveat to the target, saying that it will only be possible with government support.
8The problem is that Agarwal will have to share a little more of his profits, both with his partner ONGC and with the government, from the block if he wants a 10-year extension of the PSC that expires in 2020.
8"Now that the government policy on extensions of PSCs has been announced and the parameters firmly set, it is unlikely that Agarwal will get an extension of his block without adhering to the same caveats that circumscribe such extensions," well placed sources said.
8Cairn has taken the government to court for pussyfooting on the extension issue but it is unlikely that the court will endorse a framework other than what has already been approved by the cabinet for small and mid sized fields because the general principle for extension of PSC is going to be the same.
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The Adani group is planning to lay a 90-km link that will tie up its 1.60 MMT LNG import terminal at Mundra with GAIL's Jamnagar-Loni LPG pipeline (JLPL) near Kandla.
8The pipeline inter-linkage has been envisaged keeping in mind the expansion of the capacity of the JLPL from 2.5 MMT to 4.5 MMT.
8The Mundra LPG terminal will be commissioned in June 2017 in time for synchronization with the expanded capacity of the JLPL.
8IOC, BPCL and HPCL too have been appraised of the progress made by the LPG terminal.
8Adani has now put in an EOI with the PNGRB as is statutorily required for the pipeline.
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8The pipeline inter-linkage has been envisaged keeping in mind the expansion of the capacity of the JLPL from 2.5 MMT to 4.5 MMT.
8The Mundra LPG terminal will be commissioned in June 2017 in time for synchronization with the expanded capacity of the JLPL.
8IOC, BPCL and HPCL too have been appraised of the progress made by the LPG terminal.
8Adani has now put in an EOI with the PNGRB as is statutorily required for the pipeline.
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Making money will continue to remain a challenging proposition for Indian deepwater gas producers on account of low LNG prices.
8Current spot prices are at $4.5/mmbtu, with landed prices at around $5.5 to $6/mmbtu whereas ONGC is pegging a price of $6.8/mmbtu to elicit a 15% return on its Rs 34,000 crore investment in the KG-DWN-98/2 block.
8Fresh projections show that LNG prices will remain depressed and likely to stay low by 2019-20, when first gas from ONGC's block hits Indian markets.
8This will create pressure on ONGC's margins as projected profits by ONGC will depend on its ability to keep the gas price in line with the spot LNG price.
8New studies show that the supply overhang may persist well into 2020s, with predatory pricing by Middle Eastern suppliers.
8If the $4-$5 LNG price persists, it will be the new normal against which Indian domestic gas producers will have to benchmark themselves.
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8Current spot prices are at $4.5/mmbtu, with landed prices at around $5.5 to $6/mmbtu whereas ONGC is pegging a price of $6.8/mmbtu to elicit a 15% return on its Rs 34,000 crore investment in the KG-DWN-98/2 block.
8Fresh projections show that LNG prices will remain depressed and likely to stay low by 2019-20, when first gas from ONGC's block hits Indian markets.
8This will create pressure on ONGC's margins as projected profits by ONGC will depend on its ability to keep the gas price in line with the spot LNG price.
8New studies show that the supply overhang may persist well into 2020s, with predatory pricing by Middle Eastern suppliers.
8If the $4-$5 LNG price persists, it will be the new normal against which Indian domestic gas producers will have to benchmark themselves.
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A survey conducted by a leading research agency in India shows that demand for gas can be created only through what is being called a 'carrier first, commodity later’ principle.
8This means that demand will only be created once the infrastructure is set up and not the other way around.
8The concept of creating the demand infrastructure first suffered a mortal blow after India built a large number of gas based power projects in anticipation of supply of gas from the KG Basin that did not materialize.
8Respondents are of the view that only when the gas network is set up, will a push be provided for setting up gas-based industries through development of industrial zones, corridors and clusters.
8On the other hand, investors are skeptical about developing infrastructure first as there is a risk of this infrastructure remaining unutilised or underutilised in the absence of firm tie-ups both on the gas sourcing and gas offtake front.
8In the last two years, with the tapering of domestic gas production, the existing gas infrastructure is grossly underutilised. The LNG regasification terminals
to be developed are the only hope for increasing the utilization of these pipelines.
8Given uncertain demand, majority of the respondent prefer PPP and VGF models for creating gas infrastructure in India.
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8This means that demand will only be created once the infrastructure is set up and not the other way around.
8The concept of creating the demand infrastructure first suffered a mortal blow after India built a large number of gas based power projects in anticipation of supply of gas from the KG Basin that did not materialize.
8Respondents are of the view that only when the gas network is set up, will a push be provided for setting up gas-based industries through development of industrial zones, corridors and clusters.
8On the other hand, investors are skeptical about developing infrastructure first as there is a risk of this infrastructure remaining unutilised or underutilised in the absence of firm tie-ups both on the gas sourcing and gas offtake front.
8In the last two years, with the tapering of domestic gas production, the existing gas infrastructure is grossly underutilised. The LNG regasification terminals
to be developed are the only hope for increasing the utilization of these pipelines.
8Given uncertain demand, majority of the respondent prefer PPP and VGF models for creating gas infrastructure in India.
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Australia is likely to soon emerge as the largest LNG supplier in the world, but a long term modeling exercise based on marginal cost of LNG supply shows that the continent's term contracts with India will not go beyond the 1.5 MMTA that Exxon Mobil intends to supply to Petronet LNG Ltd from the.Gorgon LNG project in offshore Western Australia,
8The US will garner about 20% of the market in the long run
8What is more, Indian gas imports will be skewed towards spot purchases. The very fact that the ceiling price for domestic producers of of gas has been pegged to Platt's spot market index is a sign to this effect.
8However, resolving the price sensitivity in the long run will require broader reform of energy policies and other subsidies.
8These are very difficult policy issues, and although there are policies being put in place to address them, progress is likely to be slow.
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8The US will garner about 20% of the market in the long run
8What is more, Indian gas imports will be skewed towards spot purchases. The very fact that the ceiling price for domestic producers of of gas has been pegged to Platt's spot market index is a sign to this effect.
8However, resolving the price sensitivity in the long run will require broader reform of energy policies and other subsidies.
8These are very difficult policy issues, and although there are policies being put in place to address them, progress is likely to be slow.
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The study shows that global LNG supply will continue to grow albeit at a slower pace from 2020 onwards.
8Fresh supply will come in from East Africa, mainly from Mozambique and Tanzania.
8Russia too will produce incremental supply.
8Then gain, a large number of projects can be triggered off in Australia and the US if there is a demand surge and prices go up.
8New studies forecast supply to stay ahead of demand going up to 2030.
8New modeling shows India trying hard to break the monopoly of Qatar in the years ahead but the Middle East -- which will also include Oman and the UAE -- will follow a predatory pricing policy to retain its monopoly over two thirds of supply to India by 2030.
8East Africa, the US and Australia will share the other third of supplies to India.
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8Fresh supply will come in from East Africa, mainly from Mozambique and Tanzania.
8Russia too will produce incremental supply.
8Then gain, a large number of projects can be triggered off in Australia and the US if there is a demand surge and prices go up.
8New studies forecast supply to stay ahead of demand going up to 2030.
8New modeling shows India trying hard to break the monopoly of Qatar in the years ahead but the Middle East -- which will also include Oman and the UAE -- will follow a predatory pricing policy to retain its monopoly over two thirds of supply to India by 2030.
8East Africa, the US and Australia will share the other third of supplies to India.
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Mar 30 : Gas markets will be in turmoil again-V: LNG prices to remain low until 2030, says new study
A recent study has established that LNG prices will not remain low only until 2020 but well beyond this date.
8The weakness in fact can spill over the next decade, or until 2030.
8This is based on the assumption that while demand will grow rapidly until 2020, the future remains uncertain after 2020.
8Major demand centres are going to slow down, with India and parts of Asian being an exception.
8Yet in the 2020s, new LNG capacities will continue to be built.
8There is no certainty that this excess capacity will evaporate after 2020
8The demand for gas after 2020 becomes uncertain and will depend on the highly competitive market that will prevail between gas and alternative energy sources such as nuclear, renewables and coal,
8Then again, countries with the greatest potential for long-term demand growth in the LNG market such as China and India, can also access pipeline supplies and indigenous production, which could depress LNG demand.
8In addition, the demand for natural gas will be sensitive to the price relativity of gas versus other fuels, and the recent fall in gas and alternative fuel prices may impact on end-use demand in unexpected ways.
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8The weakness in fact can spill over the next decade, or until 2030.
8This is based on the assumption that while demand will grow rapidly until 2020, the future remains uncertain after 2020.
8Major demand centres are going to slow down, with India and parts of Asian being an exception.
8Yet in the 2020s, new LNG capacities will continue to be built.
8There is no certainty that this excess capacity will evaporate after 2020
8The demand for gas after 2020 becomes uncertain and will depend on the highly competitive market that will prevail between gas and alternative energy sources such as nuclear, renewables and coal,
8Then again, countries with the greatest potential for long-term demand growth in the LNG market such as China and India, can also access pipeline supplies and indigenous production, which could depress LNG demand.
8In addition, the demand for natural gas will be sensitive to the price relativity of gas versus other fuels, and the recent fall in gas and alternative fuel prices may impact on end-use demand in unexpected ways.
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For reference purposes, the website carries here details of difference between tariff rates sought by GAIL and tariffs approved by the PNGRB for a total of 20 pipeline networks.
8The reductions vary anywhere between 28% to as much as 92%
8Tariffs have been slashed so dramatically that there is now a call to curb PNGRB's powers to do so.
8A rash of court cases are likely to challenge the regulator's powers. Example is given of the Supreme Court verdict in favour of IGL that has set the ball rolling for more investments in the CGD business across the country.
8Pushed to a corner, there is now wide spread anticipation that the regulator may allow some increase in tariffs, as it has already done with the KG Basin network recently.
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8The reductions vary anywhere between 28% to as much as 92%
8Tariffs have been slashed so dramatically that there is now a call to curb PNGRB's powers to do so.
8A rash of court cases are likely to challenge the regulator's powers. Example is given of the Supreme Court verdict in favour of IGL that has set the ball rolling for more investments in the CGD business across the country.
8Pushed to a corner, there is now wide spread anticipation that the regulator may allow some increase in tariffs, as it has already done with the KG Basin network recently.
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India's current gas pipeline network has the capacity to move a massive 340 mmscmd of LNG but gas consumption is way behind at 140 mmscmd.
8Given the spare capacity, it is not likely that any major investment in cross-country pipeline infrastructure is likely over the next few years until existing utilisation improves.
8The only way expansions are going to be sustainable is if viability gap funding or some other kind of government help is forthcoming to set up new pipelines.
8The website carries here details of possible rerouting of planned pipelines and shelving of some networks in order to ensure optimization of India's pipeline infrastructure.
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8Given the spare capacity, it is not likely that any major investment in cross-country pipeline infrastructure is likely over the next few years until existing utilisation improves.
8The only way expansions are going to be sustainable is if viability gap funding or some other kind of government help is forthcoming to set up new pipelines.
8The website carries here details of possible rerouting of planned pipelines and shelving of some networks in order to ensure optimization of India's pipeline infrastructure.
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In the survey, respondents have come out in support of gas swapping arrangements. The respondents were reserved in their opinion on whether the gas swap policy has done what the industry wanted: that irrespective of whose gas it is and from which source, the proximity of the source is leveraged and insistence on pipeline transportation is avoided. The tax and transportation tariff costs are consequently avoided, reducing the burden on consumers. The taxation issues involved and differences in the views of state governments and suppliers have hampered utilisation of this concept.
8Among the power sector reforms, most of the survey respondents are of the view that time of day (ToD) tariff is the need of the hour. This will enhance the affordability of gas as a fuel for the power.
8Suggestions were received on amending the prevailing Central Sales Tax (CST) Act, 1956, to avoid double taxation and allow commingling of gas in the pipeline for interstate sale and gas swapping.
8To make RLNG-based power generation viable, fiscal incentives like customs duty waiver, service tax waiver, state VAT/entry tax waiver should be made available. There is a suggestion from one of the survey respondents for Petroleum & Natural Gas Regulatory Board (PNGRB) to come out with model gas sales agreements (GSA) and gas transportation agreements (GTA).
8There is a strong requirement for the alignment/ synchronisation of regulations in the energy area, especially between the Central Electricity Regulatory Commission (CERC) and PNGRB, the survey felt.
8In the medium to long term, there should be an independent system operator (ISO) to administer pipeline networks and an open access mechanism. This will help in establishing gas market exchange (physical and financial), the survey concluded.
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8Among the power sector reforms, most of the survey respondents are of the view that time of day (ToD) tariff is the need of the hour. This will enhance the affordability of gas as a fuel for the power.
8Suggestions were received on amending the prevailing Central Sales Tax (CST) Act, 1956, to avoid double taxation and allow commingling of gas in the pipeline for interstate sale and gas swapping.
8To make RLNG-based power generation viable, fiscal incentives like customs duty waiver, service tax waiver, state VAT/entry tax waiver should be made available. There is a suggestion from one of the survey respondents for Petroleum & Natural Gas Regulatory Board (PNGRB) to come out with model gas sales agreements (GSA) and gas transportation agreements (GTA).
8There is a strong requirement for the alignment/ synchronisation of regulations in the energy area, especially between the Central Electricity Regulatory Commission (CERC) and PNGRB, the survey felt.
8In the medium to long term, there should be an independent system operator (ISO) to administer pipeline networks and an open access mechanism. This will help in establishing gas market exchange (physical and financial), the survey concluded.
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Respondents in the survey seems to have pitched strongly in favour of a gas purchase obligations (GPOs) scheme that encourage companies using higher than a designated amount of non-conventional fuels to have a part of their fuel requirement fulfilled by natural gas.
8In the past, the government had introduced renewable purchase obligations (RPOs) to boost the demand for renewable power in the country. It has also encouraged power buyers to create a mixed portfolio of power purchased by them. RPOs had a positive effect on the development of the renewable energy sector in the country.
8GPOs have the potential to address multiple issues for the government including reduce pollution, increasing the acceptance of natural gas as a fuel
8GPOs can make the country move towards market-determined pricing of natural gas in the country.
8A pilot project can be started off with state like Gujarat, where the gas pipeline network is already in place, and then extended to areas with gas network availability. Conventional fuels like coal, briquettes and other liquid fuels cause a lot of pollution. Introduction of GPOs can help keep a check on the pollution released by each major fuel-consuming unit. The overall objective of increasing the share of natural gas in the energy basket of the country can also be achieved.
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8In the past, the government had introduced renewable purchase obligations (RPOs) to boost the demand for renewable power in the country. It has also encouraged power buyers to create a mixed portfolio of power purchased by them. RPOs had a positive effect on the development of the renewable energy sector in the country.
8GPOs have the potential to address multiple issues for the government including reduce pollution, increasing the acceptance of natural gas as a fuel
8GPOs can make the country move towards market-determined pricing of natural gas in the country.
8A pilot project can be started off with state like Gujarat, where the gas pipeline network is already in place, and then extended to areas with gas network availability. Conventional fuels like coal, briquettes and other liquid fuels cause a lot of pollution. Introduction of GPOs can help keep a check on the pollution released by each major fuel-consuming unit. The overall objective of increasing the share of natural gas in the energy basket of the country can also be achieved.
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Mandatory third party access to LNG terminals is also supported by respondents in the survey.
The business models of terminals in India are changing.
8The Dahej terminal started with regasification primarily for its equity partners, with LNG sourced by Petronet LNG Ltd (PLL) through long-term contracts. However, it has since started offering capacities to other marketeers like Gujarat State Petroleum Corporation (GSPC) in addition to its equity holders.
8Although the Kochi terminal has not been fully operational, it is likely to follow the model of Dahej.
8The Hazira LNG terminal regasified gas sourced by itself, by GSPC and by Reliance.
8The Dabhol terminal has thus far regasified cargoes brought in and marketed by its owner.
8The Kochi terminal has not been fully operational but is likely to follow the model of Dahej.
8The Mundra terminal which is under construction will follow suit.
8Similarly, the Jafrabad and Chhara terminals are expected to offer long-term capacity to the desired parties right up front.
8The Jaigarh import terminal is likely to offer a majority of its capacity under the tolling model.
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The business models of terminals in India are changing.
8The Dahej terminal started with regasification primarily for its equity partners, with LNG sourced by Petronet LNG Ltd (PLL) through long-term contracts. However, it has since started offering capacities to other marketeers like Gujarat State Petroleum Corporation (GSPC) in addition to its equity holders.
8Although the Kochi terminal has not been fully operational, it is likely to follow the model of Dahej.
8The Hazira LNG terminal regasified gas sourced by itself, by GSPC and by Reliance.
8The Dabhol terminal has thus far regasified cargoes brought in and marketed by its owner.
8The Kochi terminal has not been fully operational but is likely to follow the model of Dahej.
8The Mundra terminal which is under construction will follow suit.
8Similarly, the Jafrabad and Chhara terminals are expected to offer long-term capacity to the desired parties right up front.
8The Jaigarh import terminal is likely to offer a majority of its capacity under the tolling model.
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The survey has identified the following key factors for development of CGD and PNG infrastrucutre in the country:
8Providing single-window clearances for the CGD networks at not just the state level but also at the district level.
8The criteria for tariff-based bidding for CGD need a relook. There have been instances of near-zero tariff bidding witnessed in bidding rounds. Also, respondents have suggested the reintroduction of cross-subsidies between the marketing margin and network tariff, which were recently scrapped.
In addition to these critical enablers for CGD development, the survey respondents have other enablers:
8There are variations in tax rates on different fuels across states. This leads to variation in fuel prices and thus differences in the affordability of gas vis-à-vis alternate fuels. In this regard, rationalisation of differential taxes across states is suggested.
8The industry is studying the 2016 budget provisions with respect to interstate gas sale.
8Additionally, abolition of municipal levies, continued allocation of domestic gas to CGD entities on priority, along with concerted focus by CGD companies on customer-centric initiatives, improved perception of safety, and operational aspects of gas distribution pipelines will further the development of CGD.
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8Providing single-window clearances for the CGD networks at not just the state level but also at the district level.
8The criteria for tariff-based bidding for CGD need a relook. There have been instances of near-zero tariff bidding witnessed in bidding rounds. Also, respondents have suggested the reintroduction of cross-subsidies between the marketing margin and network tariff, which were recently scrapped.
In addition to these critical enablers for CGD development, the survey respondents have other enablers:
8There are variations in tax rates on different fuels across states. This leads to variation in fuel prices and thus differences in the affordability of gas vis-à-vis alternate fuels. In this regard, rationalisation of differential taxes across states is suggested.
8The industry is studying the 2016 budget provisions with respect to interstate gas sale.
8Additionally, abolition of municipal levies, continued allocation of domestic gas to CGD entities on priority, along with concerted focus by CGD companies on customer-centric initiatives, improved perception of safety, and operational aspects of gas distribution pipelines will further the development of CGD.
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The survey has come out strongly for unbundling gas transmission and distribution segments in India by dismantling GAIL's monopoly over both these segments.
8Respondents were near unanimous in their view that the government must ensure non-discriminatory access to the network and deter vertically integrated companies from taking undue advantage of their monopolistic position, thus preventing conflicts of interest.
8The survey says the gas markets in India are far from perfect. The number of participants in the gas market, including gas consumers, gas producers and shippers, is not large enough for competitive forces to set in.
8Gas prices are not market-driven, thus creating distortions and asymmetries in information and leading to incorrect market signals.
8The sector is still not free of government intervention. The infrastructure is inadequate and inequitable. The policies and regulatory reforms are still at a nascent stage and yet to take shape.
8But there is also the other view that unless the markets attain maturity with regard to these basic building blocks, the primary objectives for which unbundling is required will not be met. Hence, the respondents seem to have accepted the governance and regulatory mechanism which provides for accounting unbundling to be effected, although they do not support legal unbundling.
8This will help competent and financially capable companies to participate in more than one segment while engaging in arm’s length transactions in the interest of consumers. It is also envisaged that the policy of freedom to market gas announced in March 2016 has the potential to bring more than one player into the value chain of marketing starting from the well head or import to end-consumer.
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8Respondents were near unanimous in their view that the government must ensure non-discriminatory access to the network and deter vertically integrated companies from taking undue advantage of their monopolistic position, thus preventing conflicts of interest.
8The survey says the gas markets in India are far from perfect. The number of participants in the gas market, including gas consumers, gas producers and shippers, is not large enough for competitive forces to set in.
8Gas prices are not market-driven, thus creating distortions and asymmetries in information and leading to incorrect market signals.
8The sector is still not free of government intervention. The infrastructure is inadequate and inequitable. The policies and regulatory reforms are still at a nascent stage and yet to take shape.
8But there is also the other view that unless the markets attain maturity with regard to these basic building blocks, the primary objectives for which unbundling is required will not be met. Hence, the respondents seem to have accepted the governance and regulatory mechanism which provides for accounting unbundling to be effected, although they do not support legal unbundling.
8This will help competent and financially capable companies to participate in more than one segment while engaging in arm’s length transactions in the interest of consumers. It is also envisaged that the policy of freedom to market gas announced in March 2016 has the potential to bring more than one player into the value chain of marketing starting from the well head or import to end-consumer.
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The survey shows that some LNG regasification project promoters faced with their inability to find markets for gas, are pushing for LNG delivery through road carriers.
8Here again, the problem is that buyers are unwilling to commit for long term supply, forcing the seller to go for the 'carrier first, commodity later’ principle.
8The idea is to store LNG in small scale storage facilities which is subsequently transferred by vehicles for offtake by small users with their own regas facilities.
8Infrastructure investments include building small-scale import terminals and low-capacity regasification facilities located near the end customers.
8The use of prefabricated equipment and pre-assembled modules reduces the commissioning time for infrastructure development considerably.
8The smaller scale is also attained by transporting liquid by road to small consumers, thereby obviating the need for pipeline connectivity.
8But all this is easier said than done, as trust has to be built between the buyer and seller of gas and large investments will be needed both ends.
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8Here again, the problem is that buyers are unwilling to commit for long term supply, forcing the seller to go for the 'carrier first, commodity later’ principle.
8The idea is to store LNG in small scale storage facilities which is subsequently transferred by vehicles for offtake by small users with their own regas facilities.
8Infrastructure investments include building small-scale import terminals and low-capacity regasification facilities located near the end customers.
8The use of prefabricated equipment and pre-assembled modules reduces the commissioning time for infrastructure development considerably.
8The smaller scale is also attained by transporting liquid by road to small consumers, thereby obviating the need for pipeline connectivity.
8But all this is easier said than done, as trust has to be built between the buyer and seller of gas and large investments will be needed both ends.
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For reference purposes, the website carries here the latest commissioning dates of the following LNG terminals:
8Mundra LNG terminal (GSPC-Adani JV, 5mmtpa)
8Pipavav LNG terminal
8Dabhol LNG terminal (at full capacity)
8GAIL-Shell-GDF Suez JV’s floating storage regasification unit (FSRU)
8Hazira LNG terminal
8IOC's Ennore LNG terminal
8Details are also given of the long term contracts, if any, attached to these terminals
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8Mundra LNG terminal (GSPC-Adani JV, 5mmtpa)
8Pipavav LNG terminal
8Dabhol LNG terminal (at full capacity)
8GAIL-Shell-GDF Suez JV’s floating storage regasification unit (FSRU)
8Hazira LNG terminal
8IOC's Ennore LNG terminal
8Details are also given of the long term contracts, if any, attached to these terminals
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The ex-ship spot LNG prices have declined to $4.5/mmbtu in the face of a global LNG supply glut and this has unleashed all kinds of possibilities for India.
8A study is now showing that low LNG prices may prevailing not just until 2020 but well beyond it.
8This possibility has now opened up the use of LNG in all kinds of price sensitive segments, from power generation to fertilizers to industrial applications using liquid fuels.
8The website carries here calculations of how the dynamics of power production, fertilizer use, CNG usage and industrial applications will change with the low ruling LNG prices.
The following calculations are carried here:
8Savings/km arising from using CNG in relation to petrol and diesel.
8New fertilizer capacity will raise gas consumption by 6-10 mmscmd between 2015-17 and 2017-19 and 10-15 mmscmd thereon.
8Estimate of the current demand-supply gap in the fertlizer sector on account of constraints in supply of gas either due to lack of pipeline network or regasification facilities.
8LNG volumes in the power sector to go up to 15 mmscmd next year and is likely to expand to around 50 mmscmd by 2019-20 if LNG spot rates continue rule low.
8Use of LNG for PNG and the cost economics of PNG in relation to subsidized and non-subsidized LPG cylinders for an average household in Delhi. The differential is exacerbated by hike in excise duties in petrol and diesel.
Click here for detailed calculations behind some of these projections. Details
8A study is now showing that low LNG prices may prevailing not just until 2020 but well beyond it.
8This possibility has now opened up the use of LNG in all kinds of price sensitive segments, from power generation to fertilizers to industrial applications using liquid fuels.
8The website carries here calculations of how the dynamics of power production, fertilizer use, CNG usage and industrial applications will change with the low ruling LNG prices.
The following calculations are carried here:
8Savings/km arising from using CNG in relation to petrol and diesel.
8New fertilizer capacity will raise gas consumption by 6-10 mmscmd between 2015-17 and 2017-19 and 10-15 mmscmd thereon.
8Estimate of the current demand-supply gap in the fertlizer sector on account of constraints in supply of gas either due to lack of pipeline network or regasification facilities.
8LNG volumes in the power sector to go up to 15 mmscmd next year and is likely to expand to around 50 mmscmd by 2019-20 if LNG spot rates continue rule low.
8Use of LNG for PNG and the cost economics of PNG in relation to subsidized and non-subsidized LPG cylinders for an average household in Delhi. The differential is exacerbated by hike in excise duties in petrol and diesel.
Click here for detailed calculations behind some of these projections. Details
One discovery that is unlikely to be exploited anytime soon is the UD-1 discovery in the Southern Discovery Area. The discovery has around 80 BCM of gas reserves.
8This is because the discovery is at a water depth of 2800 metres while the total depth of the reserve is a massive 6576 metres.
8An appraisal well to delineate the contours of the UD-1 discovery, dubbed UD-2, that went down to a total depth of 6216 metres, turned out to be dry and had to be abandoned.
8Then again, there was another appraisal well, UD-3, also going down at a depth of 6713 metres, that was found to be gas bearing.
8Two other appraisal wells, UD-4 and UD-5, drilled to total depths of 7032 and 5732 metres respectively were not found to be gas bearing. While the UD-4 well was permanently abandoned because of technical problems, the UD-5 was temporarily abandoned.
8It is unlikely however that these UD-1 discovery will even be tapped anytime soon because the technology is not there to drill such deep wells.
8And even if the technology is found, it is unlikely to be viable given the low price of gas and projections that gas prices may not go up enough for sometime in the future.
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8This is because the discovery is at a water depth of 2800 metres while the total depth of the reserve is a massive 6576 metres.
8An appraisal well to delineate the contours of the UD-1 discovery, dubbed UD-2, that went down to a total depth of 6216 metres, turned out to be dry and had to be abandoned.
8Then again, there was another appraisal well, UD-3, also going down at a depth of 6713 metres, that was found to be gas bearing.
8Two other appraisal wells, UD-4 and UD-5, drilled to total depths of 7032 and 5732 metres respectively were not found to be gas bearing. While the UD-4 well was permanently abandoned because of technical problems, the UD-5 was temporarily abandoned.
8It is unlikely however that these UD-1 discovery will even be tapped anytime soon because the technology is not there to drill such deep wells.
8And even if the technology is found, it is unlikely to be viable given the low price of gas and projections that gas prices may not go up enough for sometime in the future.
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Hard bargaining with equipment and service providers has brought down the cost of ONGC's investment in the KG-DWN-98/2 block by as much as 35%. The price tag of the investment now comes to Rs 35,000 crore from the earlier estimate of Rs 53,000 crore.
8The ONGC Board has given approval on Monday the new capex plan, thereby clearing the decks for the project to go ahead.
8Sources said that ONGC was able to established a 30-40% cut in the earlier full field development (capex) estimate of Rs 31,782 crore
8The earlier full field development (non-capex) of Rs 4,986 crore has been brought down by 30% while drilling cost estimates are down by 30-45% from the earlier capex of Rs 12,810 crore. Similar cuts have been achieved in non-capex drilling work as well, well placed ONGC sources said.
8The earlier drilling plan has been fine tuned and the current plan is to drill 35 wells, made up of 15 oil producers, 12 water injection and 8 free gas producers. The facilities include a Floating, Production, Storage and Offloading (FPSO) system and a fixed offshore platform.
8Besides the surface facilities, the E&P major also plans to set up subsea production systems (SPS) and subsea pipelines. About 430 Kms Sub-sea pipelines of various sizes from 6” to 22”, about 151 kms umbilical and 10 manifolds, riser base manifolds and onshore gas handling terminal will be erected.
8The drilling depth of the wells will be between 2,000 to 3,000 meters from the sea bed. The water depth in the area ranges from 320 to 3100 metres.
8Each well will take around 90-100 days to drill.
8As this proposed block is located in deep and ultra-deep waters, a drill ship with Dynamic Positioning (DP) and specialized deep water technology tools will be used for drilling activities.
8Then again, because of extreme temperature and pressures at these depths, special drilling muds will have to be used to prevent formation of hydrates at the sea bed level and to combat dual gradients.
8The NELP-I offshore block KG-DWN-98/2 is located 22-45 kms off the coast of the Godavari Delta in the east coast of India.
8First oil is expected in 2020 and first gas by June 2019
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8The ONGC Board has given approval on Monday the new capex plan, thereby clearing the decks for the project to go ahead.
8Sources said that ONGC was able to established a 30-40% cut in the earlier full field development (capex) estimate of Rs 31,782 crore
8The earlier full field development (non-capex) of Rs 4,986 crore has been brought down by 30% while drilling cost estimates are down by 30-45% from the earlier capex of Rs 12,810 crore. Similar cuts have been achieved in non-capex drilling work as well, well placed ONGC sources said.
8The earlier drilling plan has been fine tuned and the current plan is to drill 35 wells, made up of 15 oil producers, 12 water injection and 8 free gas producers. The facilities include a Floating, Production, Storage and Offloading (FPSO) system and a fixed offshore platform.
8Besides the surface facilities, the E&P major also plans to set up subsea production systems (SPS) and subsea pipelines. About 430 Kms Sub-sea pipelines of various sizes from 6” to 22”, about 151 kms umbilical and 10 manifolds, riser base manifolds and onshore gas handling terminal will be erected.
8The drilling depth of the wells will be between 2,000 to 3,000 meters from the sea bed. The water depth in the area ranges from 320 to 3100 metres.
8Each well will take around 90-100 days to drill.
8As this proposed block is located in deep and ultra-deep waters, a drill ship with Dynamic Positioning (DP) and specialized deep water technology tools will be used for drilling activities.
8Then again, because of extreme temperature and pressures at these depths, special drilling muds will have to be used to prevent formation of hydrates at the sea bed level and to combat dual gradients.
8The NELP-I offshore block KG-DWN-98/2 is located 22-45 kms off the coast of the Godavari Delta in the east coast of India.
8First oil is expected in 2020 and first gas by June 2019
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A set of criteria has been approved for evaluation of the extension request, including:
-- The contractor should have drilled 70% of the development wells due for drilling on the date of application for the last 10 years.
-- He should have complied with the provisions for creation of a Site Restoration Fund and Site Restoration Plan as per the PSC or propose their creation under the extended contract.
8The government reserves the right to invite fresh bids if any of the conditions elucidated are not fulfilled.
8The seat of arbitration will be Delhi nothwithstanding any other provision in the existing PSC and will be subject to the Indian Arbitration & Conciliation Act,1996.
8The contracts will be extended for a duration of 10 years.
8The contractor will also submit a Bank Guarantee equal to 10% of the total estimated annual expenditure of the work programme approved by the Management Committee
8The website carries here the list of 28 fields for which the new provisions will apply.
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-- The contractor should have drilled 70% of the development wells due for drilling on the date of application for the last 10 years.
-- He should have complied with the provisions for creation of a Site Restoration Fund and Site Restoration Plan as per the PSC or propose their creation under the extended contract.
8The government reserves the right to invite fresh bids if any of the conditions elucidated are not fulfilled.
8The seat of arbitration will be Delhi nothwithstanding any other provision in the existing PSC and will be subject to the Indian Arbitration & Conciliation Act,1996.
8The contracts will be extended for a duration of 10 years.
8The contractor will also submit a Bank Guarantee equal to 10% of the total estimated annual expenditure of the work programme approved by the Management Committee
8The website carries here the list of 28 fields for which the new provisions will apply.
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The PSC will not be automatically extended. Certain conditions will have to be fulfilled by the applicant, including:
-- A valid mining lease should be available
-- The area for which the PSC is to be extended should have ongoing test or commercial production
-- Any new discoveries in the lease area will be included if plans for their development have already been submitted for approval of the Mangement Committee
-- Areas for which extension is sought should have firm exploration programmes along with relevant bank guarantees
The application will have to additionally fulfill the following eligibility criteria:
8Balance recoverable reserves are proved through third party validation
8If the remaining reserves have a 50% certainty of being produced and the recoverable reserves are more than 5 MMBBL.
8The revised FDP will have to include a base (do nothing profile) and recommended production profile including corresponding work programme, programme quantity, including IOR/EOR components, whenever applicable.
8The Management Committee will have to provide conditional approval for such developmental plan subject to extension of the PSC. But such a conditional approval will not confer any right to the contractor for an extension of the PSC.
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-- A valid mining lease should be available
-- The area for which the PSC is to be extended should have ongoing test or commercial production
-- Any new discoveries in the lease area will be included if plans for their development have already been submitted for approval of the Mangement Committee
-- Areas for which extension is sought should have firm exploration programmes along with relevant bank guarantees
The application will have to additionally fulfill the following eligibility criteria:
8Balance recoverable reserves are proved through third party validation
8If the remaining reserves have a 50% certainty of being produced and the recoverable reserves are more than 5 MMBBL.
8The revised FDP will have to include a base (do nothing profile) and recommended production profile including corresponding work programme, programme quantity, including IOR/EOR components, whenever applicable.
8The Management Committee will have to provide conditional approval for such developmental plan subject to extension of the PSC. But such a conditional approval will not confer any right to the contractor for an extension of the PSC.
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The government has announced a new policy for extension of Production Sharing Contracts for small and medium sized discovered fields operated by the private sector.
8Applications for contracts will have to be submitted two years before the expiry of the PSC but not more than six years in advance.
8Importantly, the DGH will make a recommendation for extension within six months of the submission of application. The government in turn will take a decision within three months.
8For the operator, the extension will come at a steep cost:
8The profit petroleum to be paid will be 10% higher
8Royalty and cess will be at the prevailing rate applicable for nomination blocks and not at the earlier concessional rates. The new rates will be paid by operators in proportion to their participating interest.
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8Applications for contracts will have to be submitted two years before the expiry of the PSC but not more than six years in advance.
8Importantly, the DGH will make a recommendation for extension within six months of the submission of application. The government in turn will take a decision within three months.
8For the operator, the extension will come at a steep cost:
8The profit petroleum to be paid will be 10% higher
8Royalty and cess will be at the prevailing rate applicable for nomination blocks and not at the earlier concessional rates. The new rates will be paid by operators in proportion to their participating interest.
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There is no doubt a large business opportunity available here for Indian and foreign companies and policy makers within them must look at the document carefully.
8Trunk product and gas pipelines are to be built connecting the North East to the rest of India, and there are opportunities there for suppliers and service providers.
8Also, the government has spelt out a novel service contract mechanism to enhance production from the region's ageing oil fields. This is a new concept and the details show that it is indeed possible to implement such a scheme.
8National oil companies will be allowed to provide their services to third parties in the region for a fee.
8There is also a grand plan to create a service providers hub in the north east with a range of incentives.
8Challenging blocks in the North East will be given the status of deepwater blocks, with timelines extended to 12 years instead of 8, with the tax holiday period also pushed up to 12 years.
8Single window environmental clearances, batch clearances for exploratory wells, flexibility to carry out exploration work in similar blocks, time bound approvals matrices for PSCs, and introduction of what is being called as Zero Phase exploration period are among the initiatives which will be undertaken in the region, according to the report.
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8Trunk product and gas pipelines are to be built connecting the North East to the rest of India, and there are opportunities there for suppliers and service providers.
8Also, the government has spelt out a novel service contract mechanism to enhance production from the region's ageing oil fields. This is a new concept and the details show that it is indeed possible to implement such a scheme.
8National oil companies will be allowed to provide their services to third parties in the region for a fee.
8There is also a grand plan to create a service providers hub in the north east with a range of incentives.
8Challenging blocks in the North East will be given the status of deepwater blocks, with timelines extended to 12 years instead of 8, with the tax holiday period also pushed up to 12 years.
8Single window environmental clearances, batch clearances for exploratory wells, flexibility to carry out exploration work in similar blocks, time bound approvals matrices for PSCs, and introduction of what is being called as Zero Phase exploration period are among the initiatives which will be undertaken in the region, according to the report.
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The Executive Council's main job will be to ensure that hurdles are removed so that the target of investing a massive Rs 1,30,000 crore to rejuvenate the petroleum business in the North East of India over a 15 year period is achieved.
8Of the total investment, Rs 80,000 crore is earmarked for upstream activities, Rs. 20,000 crore for midstream and Rs 30,000 crore for downstream segments..
8The idea is to pump in Rs 10,000 crore every year
8The present crude oil production in North East is around 12,444 TPD and the average rate of gas production is around 11.32 mmscmd. The total refining capacity of four Assam-based refineries presently stand at around 7 MTPA and the total length of pipeline network in the region is around 32,000 km. The plan is to double these figures in the next 15 years.
8The Council's job will be to push key initiatives in the upstream sector in the North East including introduction of production enhancement contracts, promotion of new technology, enhancement of new exploration activities, provision of a premium on price for gas produced from challenging blocks and development of service provider hubs at Dibrugarh, Jorhat and Agartala.
8The midstream initiatives would include new pipeline projects for crude, natural gas, petroleum products and LPG, and development of an energy corridor that connects the North East to the rest of India and to neighbouring Myanmar, Bangladesh and Bhutan.
8The downstream activities would include expansion of refinery capacity from 7 MTPA to around 16 MTPA and promotion of bio ethanol and other special products in the region.
“The objectives is to leverage the region’s hydrocarbon potential, enhance access to clean fuels, improve availability of petroleum products, facilitate economic development and to link common people to the economic activities in this sector,” said Ajay Sawhney, chairman of the committee
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8Of the total investment, Rs 80,000 crore is earmarked for upstream activities, Rs. 20,000 crore for midstream and Rs 30,000 crore for downstream segments..
8The idea is to pump in Rs 10,000 crore every year
8The present crude oil production in North East is around 12,444 TPD and the average rate of gas production is around 11.32 mmscmd. The total refining capacity of four Assam-based refineries presently stand at around 7 MTPA and the total length of pipeline network in the region is around 32,000 km. The plan is to double these figures in the next 15 years.
8The Council's job will be to push key initiatives in the upstream sector in the North East including introduction of production enhancement contracts, promotion of new technology, enhancement of new exploration activities, provision of a premium on price for gas produced from challenging blocks and development of service provider hubs at Dibrugarh, Jorhat and Agartala.
8The midstream initiatives would include new pipeline projects for crude, natural gas, petroleum products and LPG, and development of an energy corridor that connects the North East to the rest of India and to neighbouring Myanmar, Bangladesh and Bhutan.
8The downstream activities would include expansion of refinery capacity from 7 MTPA to around 16 MTPA and promotion of bio ethanol and other special products in the region.
“The objectives is to leverage the region’s hydrocarbon potential, enhance access to clean fuels, improve availability of petroleum products, facilitate economic development and to link common people to the economic activities in this sector,” said Ajay Sawhney, chairman of the committee
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As Assam heads to elections, the petroleum ministry has announced a 12-memeber Executive Council which will implement the Hydrocarbon Vision 2030 for the North East.
8The Council is made up of two additional secretaries, three joint secretaries, one representative that will represent the state governments in the North East while another will represent the public ector oil companies, the managing director of NRL, a representative of Assam Gas Cracker, the DG of the PPAC, the secretary of the OIDB and a director of the petroleum ministry.
The mandate of the Executive Council will to:
-- Guide the implementation of the recommended action plan set out in the Vision 2030 document
-- Establish sub-committees or refocus the recommendations in the Vision document as deemed fit
-- Report on a regular basis to the petroleum ministry on implementation progress progress and submit quarterly reports
8Members of the Executive Council, in addition to serving on the council, can be appointed on co-chairs of the individual sub-committees and implementation teams.
8The Implementation teams in turn will develop and institutionalize monitoring metrics and protocols that will provide an objective record of how well the goals are achieved within the set time frame.
8Appropriate members from the sub committees will review these results and report to the Executive Council twice a year.
8The Executive Council can invite representatives of the MEA, MOEF, MoF and industry organizations whenever required.
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8The Council is made up of two additional secretaries, three joint secretaries, one representative that will represent the state governments in the North East while another will represent the public ector oil companies, the managing director of NRL, a representative of Assam Gas Cracker, the DG of the PPAC, the secretary of the OIDB and a director of the petroleum ministry.
The mandate of the Executive Council will to:
-- Guide the implementation of the recommended action plan set out in the Vision 2030 document
-- Establish sub-committees or refocus the recommendations in the Vision document as deemed fit
-- Report on a regular basis to the petroleum ministry on implementation progress progress and submit quarterly reports
8Members of the Executive Council, in addition to serving on the council, can be appointed on co-chairs of the individual sub-committees and implementation teams.
8The Implementation teams in turn will develop and institutionalize monitoring metrics and protocols that will provide an objective record of how well the goals are achieved within the set time frame.
8Appropriate members from the sub committees will review these results and report to the Executive Council twice a year.
8The Executive Council can invite representatives of the MEA, MOEF, MoF and industry organizations whenever required.
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The following details are also carried about the project:
8Geological setting of the deepwater block
8Map showing the proposed drilling locations
8Drilling process to be adopted
8Deepwater drilling technology to be used
8Deepwater well abandonment process to be followed
8Subsea equipment, pipelines and architecture
8Offshore processing facilities
8Risks in exploratory drilling operations
8Risk mitigation measures
8Response of marine ecosystems to oil spills
8Oil spill contingency plan
8Coordinates of the proposed locations
Click here for more information. Details
8Geological setting of the deepwater block
8Map showing the proposed drilling locations
8Drilling process to be adopted
8Deepwater drilling technology to be used
8Deepwater well abandonment process to be followed
8Subsea equipment, pipelines and architecture
8Offshore processing facilities
8Risks in exploratory drilling operations
8Risk mitigation measures
8Response of marine ecosystems to oil spills
8Oil spill contingency plan
8Coordinates of the proposed locations
Click here for more information. Details
