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May 2016
It is time for the ONGC brass to do a reassessment of its KG-DWN-98/2 investment.
8It is not known whether the sensitivity analysis for the investment had factored in a sub $ 4/mmbtu ex-ship price of LNG at the time of first gas.
8Did it also take into account the fact that this price of LNG may prevail for another 10 years? If so does the NPV stay positive?
8There is no doubt the company was under pressure from the government to announce a big investment in the aftermath of the deepwater gas price policy but should it invest at its own peril?
8ONGC had also skinned the project to its bare bones by knocking off the price tag from Rs 53,000 crore to Rs 34,000 crore. There is no margin for error whereas the treacherous geology of the basin should call for a large contingency allowance.
8The Board of Directors must review the investment once again.
8And if the economics look wobbly in the light of the crash in LNG prices, ONGC's chairman -- who had once earned the industry's respect for dragging the petroleum ministry to court fearing an intervention in his attempt to highlight the spiriting away of gas by RIL's D-6 well from his KD-DWN-98/2 block -- must write a letter to the ministry saying that he will only go ahead with the investment if there is an assurance that the gas price is supported in some manner by the government should it fall below the hurdle rate.
8The letter can also serve as an insurance policy for the ONGC brass should a later government open the files on the decision making process if the investment were to go wrong for some reason or the other.
8If KG-DWN-98/2 starts bleeding, ONGC will have to use the dwindling margins in its western offshore fields, including the prolific Daman field, to cross subsidize the KG Basin output for a very long time to come.
Click on Reports to find out more. Details
8It is not known whether the sensitivity analysis for the investment had factored in a sub $ 4/mmbtu ex-ship price of LNG at the time of first gas.
8Did it also take into account the fact that this price of LNG may prevail for another 10 years? If so does the NPV stay positive?
8There is no doubt the company was under pressure from the government to announce a big investment in the aftermath of the deepwater gas price policy but should it invest at its own peril?
8ONGC had also skinned the project to its bare bones by knocking off the price tag from Rs 53,000 crore to Rs 34,000 crore. There is no margin for error whereas the treacherous geology of the basin should call for a large contingency allowance.
8The Board of Directors must review the investment once again.
8And if the economics look wobbly in the light of the crash in LNG prices, ONGC's chairman -- who had once earned the industry's respect for dragging the petroleum ministry to court fearing an intervention in his attempt to highlight the spiriting away of gas by RIL's D-6 well from his KD-DWN-98/2 block -- must write a letter to the ministry saying that he will only go ahead with the investment if there is an assurance that the gas price is supported in some manner by the government should it fall below the hurdle rate.
8The letter can also serve as an insurance policy for the ONGC brass should a later government open the files on the decision making process if the investment were to go wrong for some reason or the other.
8If KG-DWN-98/2 starts bleeding, ONGC will have to use the dwindling margins in its western offshore fields, including the prolific Daman field, to cross subsidize the KG Basin output for a very long time to come.
Click on Reports to find out more. Details
How is Qatar, the world's largest supplier of LNG, going to behave if Asian demand for LNG cools down?
8That is a billion dollar question.
8A hunt for newer markets will force Qatar to send its cargoes to Europe, where they will do battle with US LNG cargoes, Norwegian gas supplies and Russian pipeline gas.
8Depending on the quantities at stake, there is a risk that a price war could start in Europe as Norway and Russia fight for market share.
8In such a battle, Norway could be the first to shut-in production if prices are too low compared to its production costs, whereas Russian gas is quite cheap and could be delivered to Europe at prices as low as $3/mmbtu.
8Much like Saudi Arabia is doing with crude oil, Qatar may look to eliminating not just competition from LNG suppliers but also all high cost producers of gas.
8India will come under special focus from Qatar. For this country is seen as the only beacon of hope in Asia, where demand is going to go up significantly.
8Qatar in fact is quite capable of keeping the price of LNG tantalizing below the cost of production of deepwater gas produced by ONGC and RIL.
8Qatar will wage a fight to the finish to keep all competition at bay to retain and deepen its monopoly over Indian markets.
8Shutting down Indian deepwater production could well be a strategic move on the part of the Qataris.
Click on Reports to find out more. Details
8That is a billion dollar question.
8A hunt for newer markets will force Qatar to send its cargoes to Europe, where they will do battle with US LNG cargoes, Norwegian gas supplies and Russian pipeline gas.
8Depending on the quantities at stake, there is a risk that a price war could start in Europe as Norway and Russia fight for market share.
8In such a battle, Norway could be the first to shut-in production if prices are too low compared to its production costs, whereas Russian gas is quite cheap and could be delivered to Europe at prices as low as $3/mmbtu.
8Much like Saudi Arabia is doing with crude oil, Qatar may look to eliminating not just competition from LNG suppliers but also all high cost producers of gas.
8India will come under special focus from Qatar. For this country is seen as the only beacon of hope in Asia, where demand is going to go up significantly.
8Qatar in fact is quite capable of keeping the price of LNG tantalizing below the cost of production of deepwater gas produced by ONGC and RIL.
8Qatar will wage a fight to the finish to keep all competition at bay to retain and deepen its monopoly over Indian markets.
8Shutting down Indian deepwater production could well be a strategic move on the part of the Qataris.
Click on Reports to find out more. Details
What happens to the GAIL's balance sheet if it were to take a hit of $ 1 billion?
8Its yearly profits of a meager Rs 4000 crore will be wiped clean and will be replaced with a loss of Rs 2000 to Rs 3000 crore.
8A few years of such losses will eat away at its ample balance sheet.
8At least on documents available, there are no terms for renegotiation of the $3/mmbtu fixed cost to be paid to LNG liquefaction terminals in the US.
8The terminal owners are not willing to discuss a renegotiation as they in turn have back-to-back loan arrangements with US lenders.
8There is going to be some kind of a bloodbath in the US if there is a default.
8US lenders are not like Indian public sector banks.
8They are likely to turn against the offtakers of gas such as GAIL and take them to task.
8A big default by GAIL in the US is not something that will go down well either in India or abroad.
8The liabilities, along with their interest payments, will continue to mount year after year and these will have to be taken into account in the company's balance sheet.
8A long and bitter struggle awaits GAIL in the years ahead.
Click on Reports to find out more Details
8Its yearly profits of a meager Rs 4000 crore will be wiped clean and will be replaced with a loss of Rs 2000 to Rs 3000 crore.
8A few years of such losses will eat away at its ample balance sheet.
8At least on documents available, there are no terms for renegotiation of the $3/mmbtu fixed cost to be paid to LNG liquefaction terminals in the US.
8The terminal owners are not willing to discuss a renegotiation as they in turn have back-to-back loan arrangements with US lenders.
8There is going to be some kind of a bloodbath in the US if there is a default.
8US lenders are not like Indian public sector banks.
8They are likely to turn against the offtakers of gas such as GAIL and take them to task.
8A big default by GAIL in the US is not something that will go down well either in India or abroad.
8The liabilities, along with their interest payments, will continue to mount year after year and these will have to be taken into account in the company's balance sheet.
8A long and bitter struggle awaits GAIL in the years ahead.
Click on Reports to find out more Details
For reference purposes the website carries here the following tenders:
8Dig site verification and rectification of anomalies in pipelines, Sendra [IOC] Details
8Procurement of Magnetic Flowmeters, Digboi Refinery [IOC] Details
8Interphase piping for product pipelines and laying of additional product line [IOC] Details
8Overhauling and testing of Heat Exchangers, Mangalore [MRPL] Details
You can also click on Tenders for more
For reference purposes the website carries here the following Newsclips:
8Cairn can't export crude till India attains self sufficiency, says government Details
8Modi to visit Iran this month Details
8Egypt to receive first LNG shipment in May Details
8ExxonMobil launches venture for low-cost carbon capture Details
8Algeria aims to boost oil products output and become an exporter Details
8Chesapeake to drill more natgas wells in Utica shale Details
8Russia's Rosneft says delivers first LNG cargo to Egypt Details
8India to gradually move to gas-based economy: Dharmendra Pradhan Details
8Diesel to be cheaper by 54 p/litre as Delhi govt slashes VAT Details
8LNG terminal at Gangavaram Port awaits backing from AP govt Details
8Domestic crude export not economically justified: Centre to High Court Details
8New Saudi minister is believer in reform and low oil price Details
8Maharashtra Natural Gas Limited eyes piped gas supply to 1 lakh homes by July-end Details
8Indonesian govt approved $1.5 bln of oil and gas projects from Jan-Apr Details
8Govt allows Iranian oil firm NIOC to buy office in Mumbai, to allow three Iranian banks to open branches in India Details
8Congress urges President Mukherjee for probe into Rs 20K cr GSPC scam Details
8Amit Shah, Dharmendra Pradhan to launch Pradhan Mantri Ujjwala Yojana in Gujarat on May 15 Details
You can also click on Newsclips for more Details
8Dig site verification and rectification of anomalies in pipelines, Sendra [IOC] Details
8Procurement of Magnetic Flowmeters, Digboi Refinery [IOC] Details
8Interphase piping for product pipelines and laying of additional product line [IOC] Details
8Overhauling and testing of Heat Exchangers, Mangalore [MRPL] Details
You can also click on Tenders for more
For reference purposes the website carries here the following Newsclips:
8Cairn can't export crude till India attains self sufficiency, says government Details
8Modi to visit Iran this month Details
8Egypt to receive first LNG shipment in May Details
8ExxonMobil launches venture for low-cost carbon capture Details
8Algeria aims to boost oil products output and become an exporter Details
8Chesapeake to drill more natgas wells in Utica shale Details
8Russia's Rosneft says delivers first LNG cargo to Egypt Details
8India to gradually move to gas-based economy: Dharmendra Pradhan Details
8Diesel to be cheaper by 54 p/litre as Delhi govt slashes VAT Details
8LNG terminal at Gangavaram Port awaits backing from AP govt Details
8Domestic crude export not economically justified: Centre to High Court Details
8New Saudi minister is believer in reform and low oil price Details
8Maharashtra Natural Gas Limited eyes piped gas supply to 1 lakh homes by July-end Details
8Indonesian govt approved $1.5 bln of oil and gas projects from Jan-Apr Details
8Govt allows Iranian oil firm NIOC to buy office in Mumbai, to allow three Iranian banks to open branches in India Details
8Congress urges President Mukherjee for probe into Rs 20K cr GSPC scam Details
8Amit Shah, Dharmendra Pradhan to launch Pradhan Mantri Ujjwala Yojana in Gujarat on May 15 Details
You can also click on Newsclips for more Details
Will all the oil deals during the Congress regime be subject to the same kind of scrutiny that the defence deals are undergoing at this point in time?
8The answer to this question will depend critically upon how much traction the Congress can get out of dragging Narendra Modi's name into the so-called GSPC scam.
8If Modi gets embroiled, then his lieutenant Dharmendra Pradhan will have no option but to hit back with stories of similar bungling in oil and gas deals by ONGC, GAIL and Oil India when the Congress was in power.
8The $5.19 billion deal in Mozambique will be touted as an example of gross mismanagement by the previous regime.
8The escalation of ONGC PetroAdditions' project cost from Rs 8000 crore to Rs 27,000 crore will be touted as another example of thoughtless extravagance.
8GAIL's $ 1 billion a year payment liability for purchase of LNG from US terminals which the public sector gas major cannot sell to India because of a higher price tag will be bandied as a misadventure.
8ONGC's failed investment in Imperial Energy will come into focus as will the Kochi LNG terminal which is now in hibernation because a gas evacuation network hasn't been built.
8Pradhan has already begun talking about these projects to the press but his language so far is sober. He is calling them challenges which have to be overcome but if the political battle turns ugly, his language can turn defensive, even, shrill and accusative.
8Narendra Modi will always have the first right to Pradhan's allegiance and not the oil companies under his administration.
8The Agusta helicopter scam has now snowballed into a full fledged war. The government is now talking of investigating all major defence contracts during the Congress regime.
8If the GSPC fire spreads to the petroleum ministry, all hell can break loose.
8The size and scale of deals by central sector oil companies which have gone wrong are far bigger than what the Congress party is accusing Prime Minister Narendra Modi of mishanding in GSPC.
8The un-hedged risks run up by the likes of ONGC, OIL and GAIL are several times the figure that Vijay Mallya has been accused of running away with.
8Pradhan however must be careful if he chooses to go this route.
8The bitterness will stay on and while political battles are won and lost, the real victim will be the oil and gas industry in India.
8In his heart the minister will know that unlike defence contracts, there are inherent risks in oil and gas deals. A deal can go sour for reasons outside the control of the deal maker but if Pradhan were to turn this logic on its head and start a witch hunt for political exigency, he will deal a body blow to the industry from which it will take many years to recover. Details
8The answer to this question will depend critically upon how much traction the Congress can get out of dragging Narendra Modi's name into the so-called GSPC scam.
8If Modi gets embroiled, then his lieutenant Dharmendra Pradhan will have no option but to hit back with stories of similar bungling in oil and gas deals by ONGC, GAIL and Oil India when the Congress was in power.
8The $5.19 billion deal in Mozambique will be touted as an example of gross mismanagement by the previous regime.
8The escalation of ONGC PetroAdditions' project cost from Rs 8000 crore to Rs 27,000 crore will be touted as another example of thoughtless extravagance.
8GAIL's $ 1 billion a year payment liability for purchase of LNG from US terminals which the public sector gas major cannot sell to India because of a higher price tag will be bandied as a misadventure.
8ONGC's failed investment in Imperial Energy will come into focus as will the Kochi LNG terminal which is now in hibernation because a gas evacuation network hasn't been built.
8Pradhan has already begun talking about these projects to the press but his language so far is sober. He is calling them challenges which have to be overcome but if the political battle turns ugly, his language can turn defensive, even, shrill and accusative.
8Narendra Modi will always have the first right to Pradhan's allegiance and not the oil companies under his administration.
8The Agusta helicopter scam has now snowballed into a full fledged war. The government is now talking of investigating all major defence contracts during the Congress regime.
8If the GSPC fire spreads to the petroleum ministry, all hell can break loose.
8The size and scale of deals by central sector oil companies which have gone wrong are far bigger than what the Congress party is accusing Prime Minister Narendra Modi of mishanding in GSPC.
8The un-hedged risks run up by the likes of ONGC, OIL and GAIL are several times the figure that Vijay Mallya has been accused of running away with.
8Pradhan however must be careful if he chooses to go this route.
8The bitterness will stay on and while political battles are won and lost, the real victim will be the oil and gas industry in India.
8In his heart the minister will know that unlike defence contracts, there are inherent risks in oil and gas deals. A deal can go sour for reasons outside the control of the deal maker but if Pradhan were to turn this logic on its head and start a witch hunt for political exigency, he will deal a body blow to the industry from which it will take many years to recover. Details
Projections made by international consultancies are that the project is unlikely to come on stream before 2025 and that is only if there is a marked upswing in global LNG demand.
The following reasons are advanced as to why the project won't come up any time soon:
-- There is going to be an LNG over supply situation globally because China's vast appetite for gas is being fulfilled by giant pipelines from Russia and Central Asia It also has a massive 1000 TCF of gas reserves (conventional and shale gas included) that it can tap in the forseeable future.
-- LNG demand from Japan and South Korea likely to go down instead of up
8If the project is delayed by another 10 years, it has dire implications for ONGC and OIL.
8The cost of the $5.19 billion premium will double in terms of interest to be paid, leave alone currency depreciation and other imponderables. Both companies paid India's Videocon Group’s $ 2.475 billion for a 10 per cent stake.
8ONGC took a loan of $ 1.5 billion while OIL borrowed $ 900 million. Additionally, OVL bought US energy major Anadarko Petroleum’s 10 per cent stake in the same block for $ 2.64 billion, again paid by raising loans.
8The deals were done in 2014. One year later, the oil market crashed.
8And if gas prices continue to remain competitive, the duo may never get a return on the investment for an interminably long time.
8Will this investment be a complete washout?
8That is a probability too, if disruptive technologies like the electric car and grid sized battery storage gain traction along with higher levels of energy efficiency, as they will end up dampening the appetite for fossil fuels, including gas.
8Gas is being touted as a cleaner substitute to coal but what if in 10 years the world jumps from fossil fuel dependency to renewal energy in one gigantic technology-enabled step?
8These variables will come into play if the Mozambique asset has to wait for 10 years to go into production
Click on Reports for more Details
The following reasons are advanced as to why the project won't come up any time soon:
-- There is going to be an LNG over supply situation globally because China's vast appetite for gas is being fulfilled by giant pipelines from Russia and Central Asia It also has a massive 1000 TCF of gas reserves (conventional and shale gas included) that it can tap in the forseeable future.
-- LNG demand from Japan and South Korea likely to go down instead of up
8If the project is delayed by another 10 years, it has dire implications for ONGC and OIL.
8The cost of the $5.19 billion premium will double in terms of interest to be paid, leave alone currency depreciation and other imponderables. Both companies paid India's Videocon Group’s $ 2.475 billion for a 10 per cent stake.
8ONGC took a loan of $ 1.5 billion while OIL borrowed $ 900 million. Additionally, OVL bought US energy major Anadarko Petroleum’s 10 per cent stake in the same block for $ 2.64 billion, again paid by raising loans.
8The deals were done in 2014. One year later, the oil market crashed.
8And if gas prices continue to remain competitive, the duo may never get a return on the investment for an interminably long time.
8Will this investment be a complete washout?
8That is a probability too, if disruptive technologies like the electric car and grid sized battery storage gain traction along with higher levels of energy efficiency, as they will end up dampening the appetite for fossil fuels, including gas.
8Gas is being touted as a cleaner substitute to coal but what if in 10 years the world jumps from fossil fuel dependency to renewal energy in one gigantic technology-enabled step?
8These variables will come into play if the Mozambique asset has to wait for 10 years to go into production
Click on Reports for more Details
Gautam Adani's empire is large but his profits are shrinking
8The group posted a total income from operations of Rs 44,032 crore in 2015-16
8The EBDITA however was Rs 3,114 crore
8The profit after tax was just Rs 1,041 crore.
8The last quarter wasn't good, with profits dipping to a mere Rs 167 crore on consolidated income from operations of Rs 10,950 crore.
8The current year is going to be challenging for the controversial business tycoon.
Click on Reports for more Details
8The group posted a total income from operations of Rs 44,032 crore in 2015-16
8The EBDITA however was Rs 3,114 crore
8The profit after tax was just Rs 1,041 crore.
8The last quarter wasn't good, with profits dipping to a mere Rs 167 crore on consolidated income from operations of Rs 10,950 crore.
8The current year is going to be challenging for the controversial business tycoon.
Click on Reports for more Details
For reference purposes, the website carries here the details of GE Shipping's latest operating details for its fleet of
8Platform supply vessels
8Anchor handing tug cum supply vessels
8Multipurpose platform supply and support vessels
8Platform ROV support vessels
8350 feet jack up rigs
8Crude carriers
8Product carriers
8Gas carriers
Details on recent sale and purchase activities are also given here.
Click on Reports for more Details
8Platform supply vessels
8Anchor handing tug cum supply vessels
8Multipurpose platform supply and support vessels
8Platform ROV support vessels
8350 feet jack up rigs
8Crude carriers
8Product carriers
8Gas carriers
Details on recent sale and purchase activities are also given here.
Click on Reports for more Details
For reference purposes, the website carries here a report on the financial performance of government companies and corporations as revealed from their accounts.
Impact of revision of accounts as well as significant comments issued as a result of supplementary audit of the financial statements of the CPSEs conducted by the CAG for the year 2014-15 (or earlier years) is given in this report.
8The report contains the impact of comments issued by the CAG on the financial statements of the statutory corporations where CAG is the sole auditor.
8It also gives an overall picture of the status of the adherence of CPSEs to the guidelines issued by the Department of Public Enterprises (DPE) and Securities and Exchange Board.
Click on Reports for more Details
Impact of revision of accounts as well as significant comments issued as a result of supplementary audit of the financial statements of the CPSEs conducted by the CAG for the year 2014-15 (or earlier years) is given in this report.
8The report contains the impact of comments issued by the CAG on the financial statements of the statutory corporations where CAG is the sole auditor.
8It also gives an overall picture of the status of the adherence of CPSEs to the guidelines issued by the Department of Public Enterprises (DPE) and Securities and Exchange Board.
Click on Reports for more Details
The Kandla Port Trust plans to develop a fresh oil jetty to handle liquid cargoes.
8It also intends to put up a ship bunkering terminal at the old port.
8In all, an ambitious plan has been drawn up to expand its barge handing capacity and multi purpose cargo terminal.
8It will also mechanize its dry cargo facility while also building a rail over bridge..
Click on Reports for investments costs and other details.
Details
8It also intends to put up a ship bunkering terminal at the old port.
8In all, an ambitious plan has been drawn up to expand its barge handing capacity and multi purpose cargo terminal.
8It will also mechanize its dry cargo facility while also building a rail over bridge..
Click on Reports for investments costs and other details.
Details
The following new faculties are already in the process of being set up at the Kochi refinery:
810.5 MMTPA crude distillation unit
83.84 MMTPA delayed coker unit
83 MMTPA VGO-HT
84.40 MMTPA DHDT
80.36 MMTPA NHT/ISOM
82.2 MMTPA PFCC
8131 KTPA hydrogen unit
82 X 340 TPD sulphur recovery unit
Click on Reports for more Details
810.5 MMTPA crude distillation unit
83.84 MMTPA delayed coker unit
83 MMTPA VGO-HT
84.40 MMTPA DHDT
80.36 MMTPA NHT/ISOM
82.2 MMTPA PFCC
8131 KTPA hydrogen unit
82 X 340 TPD sulphur recovery unit
Click on Reports for more Details
BPCL's Kochi refinery is currently expanding its capacity from 9.5 MMTPA to 15.5 MMTPA. The expanded capacity will be able to handle 100% high sulphur crude but it will only be able to produce BS-IV and BS-V quality fuels.
8BPCL is now planning to put in additional investments in the MS block to be able to shift to BS-VI grade to meet the 2020 deadline set by the government.
8BS-VI quality HSD fuel standards in the expanded capacity will be met by blending of stream without new facilities.
RFQs are now expected to be taken out for the following main processing units:
81.5 MMTPA hydrotreater unit
80.7 MMTPA light naphtha isomerization unit
80.8 MMTPA continuous catalytic reformer unit
Click on Reports for more Details
8BPCL is now planning to put in additional investments in the MS block to be able to shift to BS-VI grade to meet the 2020 deadline set by the government.
8BS-VI quality HSD fuel standards in the expanded capacity will be met by blending of stream without new facilities.
RFQs are now expected to be taken out for the following main processing units:
81.5 MMTPA hydrotreater unit
80.7 MMTPA light naphtha isomerization unit
80.8 MMTPA continuous catalytic reformer unit
Click on Reports for more Details
Despite a sharp fall in the price of spot LNG and low prevailing price of domestic gas, fertilizer units will continue to pay a high pooled price for gas, as per provisional data, for the month of May, 2016.
8The advance price is notified internally to fertilizer units under the pooled pricing guidelines issued by the petroleum ministry.
8The high price is on account of an 80% concentration of long term Ras Gas component in the imported LNG segment of the gas consumed by fertilizer units.
Click on Details to find out more about the exact price and the logic why the fertilizer industry finds it convenient to stick to long term gas contracts, even though they are relatively more expensive. Details
8The advance price is notified internally to fertilizer units under the pooled pricing guidelines issued by the petroleum ministry.
8The high price is on account of an 80% concentration of long term Ras Gas component in the imported LNG segment of the gas consumed by fertilizer units.
Click on Details to find out more about the exact price and the logic why the fertilizer industry finds it convenient to stick to long term gas contracts, even though they are relatively more expensive. Details
For the ONGC-OIL combine, the Mozambique LNG project is turning out to be a real nightmare.
8The duo paid a massive premium of $5.19 billion to pick up a 20% stake in the Rovuma Area of Mozambique.
8Even for Bharat Petro Resources Ltd (BPRL), a subsidiary of BPCL, which walked into the project much earlier in 2008 without paying the high upfront premium paid by ONGC and OIL, the cost economics is turning out to be below the hurdle rate on its 10% stake.
8This premium paid by ONGC-OIL is over and above the money that they will have to provide for their share of developing the project.
8The price tag for the upstream-cum-LNG development in Mozambique has been pegged at anywhere between $18-20 billion.
8The point to note is that there are two stages to the viability problem with the project as far as ONGC and OIL are concerned.
8Even assuming that the LNG project is viable on a standalone basis, it does not mean that ONGC-OIL can breakeven on its investments.
8The combine will still have to find a return on the $5.19 billion upfront premium that it paid for the 20% stake.
8It is patently evident that the IRR will be negative on such investments, given the abysmally low price of gas at present or anytime soon in the future. Details
8The duo paid a massive premium of $5.19 billion to pick up a 20% stake in the Rovuma Area of Mozambique.
8Even for Bharat Petro Resources Ltd (BPRL), a subsidiary of BPCL, which walked into the project much earlier in 2008 without paying the high upfront premium paid by ONGC and OIL, the cost economics is turning out to be below the hurdle rate on its 10% stake.
8This premium paid by ONGC-OIL is over and above the money that they will have to provide for their share of developing the project.
8The price tag for the upstream-cum-LNG development in Mozambique has been pegged at anywhere between $18-20 billion.
8The point to note is that there are two stages to the viability problem with the project as far as ONGC and OIL are concerned.
8Even assuming that the LNG project is viable on a standalone basis, it does not mean that ONGC-OIL can breakeven on its investments.
8The combine will still have to find a return on the $5.19 billion upfront premium that it paid for the 20% stake.
8It is patently evident that the IRR will be negative on such investments, given the abysmally low price of gas at present or anytime soon in the future. Details
For reference purposes the website carries here the following tenders:
8Provision of Online Bio-Diesel blending facilities [IOC] Details
8Supply of Sulphuric Acid, Haldia Refinery [IOC] Details
8Supply of Calibration Gas, Panipat Refinery [IOC] Details
8Engineering services for above ground OWS System for phase I & II Refinery complex area, Mangalore [MRPL] Details
8Providing of HP/MP/TP manifolds for 8 wells, Cauvery Asset [ONGC] Details
You can also click on Tenders for more
For reference purposes the website carries here the following Newsclips:
8PSU OMCs slide on higher crude oil prices Details
8Why cornering oil assets is important to India Details
8Oil Minister Dharmendra Pradhan questions UPA government’s costly investments in sector Details
8Cut in coal imports may save Rs 40,000 crore this fiscal: Piyush Goyal Details
8How falling gasoline prices are helping car giants sell 'bigger and better' Details
8UAE's Dana Gas Q1 net profit halves, hit by energy price drop Details
8U.S. crude oil exports in March reached 508,000 bpd - U.S. Census Bureau Details
8Nigeria starts oil production outside of Niger delta Details
8Alberta declares emergency as fires threaten Canada oil town Details
8Engineers India bags project Details
8 Corporate houses owe Rs 5 lakh crore to banks, Adani's debt is Rs 72,000 crore, says Pawan Verma of JD (U) Details
8Noble Energy may lift U.S. shale spend if oil breaches $50/bbl Details
8CNG Fuelling facilities of IGL in Delhi & NCR enough to meet increase in demand, can dispense 35 lakh kg per day Details
8Ban on diesel taxis could hit BPO sector, cost India $1.2 billion, Centre tells SC Details
You can also click on Newsclips for more Details
8Provision of Online Bio-Diesel blending facilities [IOC] Details
8Supply of Sulphuric Acid, Haldia Refinery [IOC] Details
8Supply of Calibration Gas, Panipat Refinery [IOC] Details
8Engineering services for above ground OWS System for phase I & II Refinery complex area, Mangalore [MRPL] Details
8Providing of HP/MP/TP manifolds for 8 wells, Cauvery Asset [ONGC] Details
You can also click on Tenders for more
For reference purposes the website carries here the following Newsclips:
8PSU OMCs slide on higher crude oil prices Details
8Why cornering oil assets is important to India Details
8Oil Minister Dharmendra Pradhan questions UPA government’s costly investments in sector Details
8Cut in coal imports may save Rs 40,000 crore this fiscal: Piyush Goyal Details
8How falling gasoline prices are helping car giants sell 'bigger and better' Details
8UAE's Dana Gas Q1 net profit halves, hit by energy price drop Details
8U.S. crude oil exports in March reached 508,000 bpd - U.S. Census Bureau Details
8Nigeria starts oil production outside of Niger delta Details
8Alberta declares emergency as fires threaten Canada oil town Details
8Engineers India bags project Details
8 Corporate houses owe Rs 5 lakh crore to banks, Adani's debt is Rs 72,000 crore, says Pawan Verma of JD (U) Details
8Noble Energy may lift U.S. shale spend if oil breaches $50/bbl Details
8CNG Fuelling facilities of IGL in Delhi & NCR enough to meet increase in demand, can dispense 35 lakh kg per day Details
8Ban on diesel taxis could hit BPO sector, cost India $1.2 billion, Centre tells SC Details
You can also click on Newsclips for more Details
The desperate search by the ONGC-BPCL-OIL combine for Indian buyers for LNG from its Mozambique LNG project seems to have failed.
8The combine is reported to be looking at a slope of 14% to the crude price whereas Indian bulk buyers such as GAIL and Petronet LNG are unwilling to concede a slope of not more than 11%.
8At the slope at which buyers are willing to consider commitments does not make the project viable, well placed sources said.
8The project promoters have been unsuccessfully trying to book capacity for the 12 MMTPA LNG terminal that is sought to be set up based on a high potential upstream gas block in the Rovuma Area of Mozambique. The fact that the LNG market is currently in a grossly over supplied position is working as a dampener for the promoters in finding a market for the gas.
8"It is a buyers market entirely and when the going slope is around 11% or so, no one is willing to sign up at 14%," well placed sources told this website.
8Without the offtake tie-ups, the promoters -- led by Anadarko of US -- are unable to confirm loans of around $15 billion required to build the giant terminal.
8India was thought to be the ideal market for Mozambique gas. A vessel trip to India will take only 7 days compared to 14 for Japan and yet there are no takers for the gas. Details
8The combine is reported to be looking at a slope of 14% to the crude price whereas Indian bulk buyers such as GAIL and Petronet LNG are unwilling to concede a slope of not more than 11%.
8At the slope at which buyers are willing to consider commitments does not make the project viable, well placed sources said.
8The project promoters have been unsuccessfully trying to book capacity for the 12 MMTPA LNG terminal that is sought to be set up based on a high potential upstream gas block in the Rovuma Area of Mozambique. The fact that the LNG market is currently in a grossly over supplied position is working as a dampener for the promoters in finding a market for the gas.
8"It is a buyers market entirely and when the going slope is around 11% or so, no one is willing to sign up at 14%," well placed sources told this website.
8Without the offtake tie-ups, the promoters -- led by Anadarko of US -- are unable to confirm loans of around $15 billion required to build the giant terminal.
8India was thought to be the ideal market for Mozambique gas. A vessel trip to India will take only 7 days compared to 14 for Japan and yet there are no takers for the gas. Details
For reference purposes, the website carries here the following information:
8The average daily consumption of LNG in 2015-16
8The methodology to be used to determine the selection criteria for the “Pradhan Mantri Ujjwala Yojana” for providing LPG connections to 5 crore women
8Efforts made to eliminate benami dealerships
8State-wise LPG connections and new connections released in the last two years
8Government's policy for “Appraisal of Un-appraised Areas of all sedimentary basins of India” and a policy for geoscientific data acquisition under Non-exclusive Multi-client Survey and exploration under Hydrocarbon Exploration and Licensing Policy.
8The details of revision in Retail Selling Price (RSP) of Petrol and Diesel at Delhi since 1 st March 2016.
8State-wise Prognosticated CBM Reserves and Established CBM Reserves
8Data on crude oil import quantity and its value along with per barrel cost during the last five years.
Click on Reports for more Details
8The average daily consumption of LNG in 2015-16
8The methodology to be used to determine the selection criteria for the “Pradhan Mantri Ujjwala Yojana” for providing LPG connections to 5 crore women
8Efforts made to eliminate benami dealerships
8State-wise LPG connections and new connections released in the last two years
8Government's policy for “Appraisal of Un-appraised Areas of all sedimentary basins of India” and a policy for geoscientific data acquisition under Non-exclusive Multi-client Survey and exploration under Hydrocarbon Exploration and Licensing Policy.
8The details of revision in Retail Selling Price (RSP) of Petrol and Diesel at Delhi since 1 st March 2016.
8State-wise Prognosticated CBM Reserves and Established CBM Reserves
8Data on crude oil import quantity and its value along with per barrel cost during the last five years.
Click on Reports for more Details
After vast quantities of gas was found in the KG Basin, the coast of Bengal came in for focus for the oil and gas industry. There is a hunt for hydrocarbon reserves in this belt.
8But so far the search has not led to much.
8The Bengal Basin occupies an area of 92,000 sq. km. in total of which about 57,000 sq. km. is onland and 35,000 sq. km. offshore up to 400m bathymetry.
8ONGC has so far drilled 43 exploration wells.
8Hydrocarbon indication has been observed in two exploratory wells, Ichapur-1 and Golf Green-1 in an onland area. And commerciality has not been established in them as yet.
8This is a low hit rate by any yardstick.
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8But so far the search has not led to much.
8The Bengal Basin occupies an area of 92,000 sq. km. in total of which about 57,000 sq. km. is onland and 35,000 sq. km. offshore up to 400m bathymetry.
8ONGC has so far drilled 43 exploration wells.
8Hydrocarbon indication has been observed in two exploratory wells, Ichapur-1 and Golf Green-1 in an onland area. And commerciality has not been established in them as yet.
8This is a low hit rate by any yardstick.
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The GSPC's Board of Directors is made up entirely of bureaucrats and professors. There was no one with hands-on oil and gas experience despite the fact that the company invested the largest chunk of its money in a highly complicated offshore block in the KG Basin. Moving from being a district collector to a secretary, none of them could have possibly been schooled in the difference between a tight gas reservoir and a conventional one and yet they took decisions worth billions of dollars in the block unmindful of the risks.
8The advantage however of being a bureaucrat is that he can just move on quietly from one post to another. His track record is never questioned for he never really takes responsibility for the decisions he takes. Evidence has now surfaced of ego battles between the babus in GSPC that may have eventually had an adverse impact on the performance of the company.
8The irony is that the politician is the one who takes the hit but the babu just gets transferred to another job.
8The rap for the failure of a company should always be taken by the board of directors first.
The following was the composition of the Board of Directors of the GSPC as per its 2014-15 balance sheet:
-- G. R. Aloria, IAS (w.e.f. 28th July, 2015)
-- Dr. J. N. Singh, IAS (w.e.f 12th November, 2014)
-- L. Chuaungo IAS (w.e.f 12th November, 2014)
-- Dr. Manjula Subramaniam, IAS (Retd.) (w.e.f. 30th March, 2015)
-- M. M. Srivastava, IAS (Retd.)
-- K. Kailashnathan, IAS (Retd.)
-- Dr. N. Ravichandran, IIM professor
-- Dr. Ravindra Dholakia (w.e.f. 2nd March, 2015), IIM professor
-- Prof. Yogesh Singh (w.e.f. 30th March, 2015), computer engineer
-- Atanu Chakraborty, IAS (w.e.f 1st November, 2014) and currently DGH
Click on Reports for more Details
8The advantage however of being a bureaucrat is that he can just move on quietly from one post to another. His track record is never questioned for he never really takes responsibility for the decisions he takes. Evidence has now surfaced of ego battles between the babus in GSPC that may have eventually had an adverse impact on the performance of the company.
8The irony is that the politician is the one who takes the hit but the babu just gets transferred to another job.
8The rap for the failure of a company should always be taken by the board of directors first.
The following was the composition of the Board of Directors of the GSPC as per its 2014-15 balance sheet:
-- G. R. Aloria, IAS (w.e.f. 28th July, 2015)
-- Dr. J. N. Singh, IAS (w.e.f 12th November, 2014)
-- L. Chuaungo IAS (w.e.f 12th November, 2014)
-- Dr. Manjula Subramaniam, IAS (Retd.) (w.e.f. 30th March, 2015)
-- M. M. Srivastava, IAS (Retd.)
-- K. Kailashnathan, IAS (Retd.)
-- Dr. N. Ravichandran, IIM professor
-- Dr. Ravindra Dholakia (w.e.f. 2nd March, 2015), IIM professor
-- Prof. Yogesh Singh (w.e.f. 30th March, 2015), computer engineer
-- Atanu Chakraborty, IAS (w.e.f 1st November, 2014) and currently DGH
Click on Reports for more Details
Who really controls GSPC?
8According to official data, the government of Gujarat holds about 86% equity in GSPC.
814% is held by other Gujarat state units.
8The Gujarat government's stake is around Rs 2841 crore, of which the paid-up capital is Rs 257 crore whereas the share premium quantum is Rs 2584 crore. The money was invested from the state exchequer.
8GSPC's total investments stand at a massive Rs 25,385 crore. Of this Rs 5,761 crore is in the form of share capital and internal accruals
8The debt overhang is a massive Rs 19,624 crore.
8Since it is 100% owned by the state government, it is not listed on the stock exchanges.
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8According to official data, the government of Gujarat holds about 86% equity in GSPC.
814% is held by other Gujarat state units.
8The Gujarat government's stake is around Rs 2841 crore, of which the paid-up capital is Rs 257 crore whereas the share premium quantum is Rs 2584 crore. The money was invested from the state exchequer.
8GSPC's total investments stand at a massive Rs 25,385 crore. Of this Rs 5,761 crore is in the form of share capital and internal accruals
8The debt overhang is a massive Rs 19,624 crore.
8Since it is 100% owned by the state government, it is not listed on the stock exchanges.
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Reeling under a debt burden brought about by unwieldy assets, Gujarat State Petroleum Corporation (GSPC) has decided to get out of all its overseas operations.
8The company has exited from three blocks each in Egypt and Yemen and one block in Indonesia.
8GSPC was the operator in all these blocks.
8It has also decided to draw the curtains on two blocks in Australia in which it was not the operator.
8According to latest data available, GSPC has completed the Minimum Work Priogramme (MWP) in Egypt and Indonesia and has decided to call it quits after there was no exploration success.
8In Yemen, the GSPC withdrew on account of rising militancy.
8In Australia, one block has already been relinquished after completion of the MWP whereas in the second block, the MWP has just been completed and it is under relinquishment.
8In India too, it is rapidly shedding fat. Of the 53 blocks in which it had interests, 28 blocks have either been relinquished or have been proposed for relinquishment.
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8The company has exited from three blocks each in Egypt and Yemen and one block in Indonesia.
8GSPC was the operator in all these blocks.
8It has also decided to draw the curtains on two blocks in Australia in which it was not the operator.
8According to latest data available, GSPC has completed the Minimum Work Priogramme (MWP) in Egypt and Indonesia and has decided to call it quits after there was no exploration success.
8In Yemen, the GSPC withdrew on account of rising militancy.
8In Australia, one block has already been relinquished after completion of the MWP whereas in the second block, the MWP has just been completed and it is under relinquishment.
8In India too, it is rapidly shedding fat. Of the 53 blocks in which it had interests, 28 blocks have either been relinquished or have been proposed for relinquishment.
Click on Reports for more Details
It is also to be noted that ONGC does not have the best track record for completing projects on time.
8Cost over runs are common. So are time over runs. In case of the KG-DWN-98/2 however, overruns will have a deadly impact on the hurdle rate.
8The cost of the project has been scaled down from Rs 53,000 crore to Rs 34,000 crore, a 36% cut.
8Since the design changes are minimal, the cut is going to come almost entirely by negotiating prices down with vendors.
8Having skinned the project to its bare bones, ONGC will have little room for error.
8Geological surprises cannot be ruled out. In the adjacent blocks, both RIL and GSPC have got their geology horribly wrong and both are paying a high price for it.
8The question that is going to be raised now is the quality of the analysis behind the decision to invest. In the usual paradigm, ONGC had always taken base price scenarios at huge discounts to current prices when it comes to doing sensitivity analysis of its projects but with the KG-DWN-98/2 block that was not the case
8The basis of the assumptions and deviations from past practices can be a subject of scrutiny later.
8Then again, did it depend on one consultant or did it do a multi-consultant review of the project economics? Did it pick one from the usual bunch of local management consultants -- PWC, Ernst & Young and Deloitte -- who invariably do a shoddy job or did it get its sensitivity analysis validated by a first rate global consultant?
8There is no doubt pressure on the company to invest. Big investments always help the economy. Raising domestic gas production is good from the energy security point of view.
8But when it comes to a $5 billion investment of public money, the economics better be good, or else the management will have a lot to answer for.
Click on Reports for more Details
8Cost over runs are common. So are time over runs. In case of the KG-DWN-98/2 however, overruns will have a deadly impact on the hurdle rate.
8The cost of the project has been scaled down from Rs 53,000 crore to Rs 34,000 crore, a 36% cut.
8Since the design changes are minimal, the cut is going to come almost entirely by negotiating prices down with vendors.
8Having skinned the project to its bare bones, ONGC will have little room for error.
8Geological surprises cannot be ruled out. In the adjacent blocks, both RIL and GSPC have got their geology horribly wrong and both are paying a high price for it.
8The question that is going to be raised now is the quality of the analysis behind the decision to invest. In the usual paradigm, ONGC had always taken base price scenarios at huge discounts to current prices when it comes to doing sensitivity analysis of its projects but with the KG-DWN-98/2 block that was not the case
8The basis of the assumptions and deviations from past practices can be a subject of scrutiny later.
8Then again, did it depend on one consultant or did it do a multi-consultant review of the project economics? Did it pick one from the usual bunch of local management consultants -- PWC, Ernst & Young and Deloitte -- who invariably do a shoddy job or did it get its sensitivity analysis validated by a first rate global consultant?
8There is no doubt pressure on the company to invest. Big investments always help the economy. Raising domestic gas production is good from the energy security point of view.
8But when it comes to a $5 billion investment of public money, the economics better be good, or else the management will have a lot to answer for.
Click on Reports for more Details
The website carries here the weighted average spot prices for crude for IOC, HPCl and BPCL.
8The data is given for the past three years
8Since spot prices vary from time to time, a large differential is seen in the prices paid by each of these companies.
Click on Details for more Details
8The data is given for the past three years
8Since spot prices vary from time to time, a large differential is seen in the prices paid by each of these companies.
Click on Details for more Details
To be able to put the oil and gas dynamics of India in the right perspective, policy makers must know the great game that China is playing to harness oil and gas resources in all of Eurasia.
8Today, more than any time since the collapse of the Silk Route five centuries ago, understanding the geo-politics of the region has become imperative for policy makers.
India will have to act quickly to the near-fanatical pace at which China is building energy corridors that run through Central Asia, Russia, Pakistan and Myanmar.
8China is building these pipelines to secure its energy resources in the absence of a blue water navy. It is also using Pakistan to contain India's access to central Asia and Iran.
8One of the objectives of this Chinese game of checkers is to isolate India.
8This website has been a votary of using all means possible to secure pipelines from Iran and Central Asia. Pushing these projects through must be one of the primary reasons for continuing dialogue with Pakistan.
8The cost benefits are immense.
8A series of research papers has shown that alternate sources of gas supply, even if under-utilized, help bring down the cost of energy. Europe, for example, keeps its LNG capacity grossly underutilized but uses it as a bargaining chip to coerce the Russian to push down the price of gas supplied via pipeline.
8Central Asian countries are nervous of being completely dependent on China as a market for their gas. Turkmenistan is as keen as India on the pipeline as it is seen as escape from the stranglehold of the Chinese.
8It is complex game that energy planners in Shastri Bhavan tend to overlook.
8What the ministry needs are more officers from the MEA in its rank and file.
8For reference purposes, the website carries here a full report that explains India's position with respect to Great Game that is being played out over energy resources in Asia and Europe.
Click on Reports for more Details
8Today, more than any time since the collapse of the Silk Route five centuries ago, understanding the geo-politics of the region has become imperative for policy makers.
India will have to act quickly to the near-fanatical pace at which China is building energy corridors that run through Central Asia, Russia, Pakistan and Myanmar.
8China is building these pipelines to secure its energy resources in the absence of a blue water navy. It is also using Pakistan to contain India's access to central Asia and Iran.
8One of the objectives of this Chinese game of checkers is to isolate India.
8This website has been a votary of using all means possible to secure pipelines from Iran and Central Asia. Pushing these projects through must be one of the primary reasons for continuing dialogue with Pakistan.
8The cost benefits are immense.
8A series of research papers has shown that alternate sources of gas supply, even if under-utilized, help bring down the cost of energy. Europe, for example, keeps its LNG capacity grossly underutilized but uses it as a bargaining chip to coerce the Russian to push down the price of gas supplied via pipeline.
8Central Asian countries are nervous of being completely dependent on China as a market for their gas. Turkmenistan is as keen as India on the pipeline as it is seen as escape from the stranglehold of the Chinese.
8It is complex game that energy planners in Shastri Bhavan tend to overlook.
8What the ministry needs are more officers from the MEA in its rank and file.
8For reference purposes, the website carries here a full report that explains India's position with respect to Great Game that is being played out over energy resources in Asia and Europe.
Click on Reports for more Details
For reference purposes the website carries here the following tenders:
8Hiring of Expert Services for Calibration & Maintenance of Turbine Gas Flow meter [GAIL] Details
8Procurement of Sodium Hypochlorite, Vijaipur [GAIL] Details
8Procurement of Seamless Pipes, Mangalore [MRPL] Details
8Hiring of services for laying of Pipelines, Duliajan [OIL] Details
8Hiring of services for Evacuation, Cleaning and Steam Coil Replacement, Duliajan [OIL] Details
You can also click on Tenders for more
For reference purposes the website carries here the following Newsclips:
8Indian firms to hold stakes in Middle-East oilfields & Gulf companies to invest here: Dharmendra Pradhan Details
8Gujarat govt defends GSPC on KG investment, lambasts Congress Details
8India to pay 1.5% interest on $6.5 billion Iran oil dues Details
8Have come with new policy called HELP regarding new bidding round: Dharmendra Pradhan, Oil Minister Details
8Saudi's SABIC eyes U.S. shale as top gas source for petrochemicals Details
8Venezuela 2016 oil output seen down at 2.35 mln bpd Details
8Vedanta back on track, may be in for a re-rating soon Details
8Petronet LNG gains as cost of gas imports from Qatar declines twofold Details
8China's CNOOC adding new tanks to expand Fujian LNG terminal Details
8Reliance Power gets in-principle nod for LNG-based plant in Bangladesh Details
8 Shell cuts capex by 10 pct to $30 bln, still ahead of Exxon Mobil by around $7 billion Details
8Congress member Pramod Tiwari attacks govt in RS over diesel price hike Details
8ONGC to put Ratna, R-Series oil fields to production in 2019 Details
8Low inflation shows oil price benefit passed on: Pradhan Details
8Rs 3,000 crore per annum plan to boost nuclear power sector Details
8Reliance gets approval for Bangladesh project Details
8Different Rates for Supply of Natural Gas in States Details
8Reforms in Oil and Gas Exploration Details
8Utilisation of Coal Bed Methane Details
8New Delhi Keen to set up LNG Terminal in Iran Details
You can also click on Newsclips for more Details
8Hiring of Expert Services for Calibration & Maintenance of Turbine Gas Flow meter [GAIL] Details
8Procurement of Sodium Hypochlorite, Vijaipur [GAIL] Details
8Procurement of Seamless Pipes, Mangalore [MRPL] Details
8Hiring of services for laying of Pipelines, Duliajan [OIL] Details
8Hiring of services for Evacuation, Cleaning and Steam Coil Replacement, Duliajan [OIL] Details
You can also click on Tenders for more
For reference purposes the website carries here the following Newsclips:
8Indian firms to hold stakes in Middle-East oilfields & Gulf companies to invest here: Dharmendra Pradhan Details
8Gujarat govt defends GSPC on KG investment, lambasts Congress Details
8India to pay 1.5% interest on $6.5 billion Iran oil dues Details
8Have come with new policy called HELP regarding new bidding round: Dharmendra Pradhan, Oil Minister Details
8Saudi's SABIC eyes U.S. shale as top gas source for petrochemicals Details
8Venezuela 2016 oil output seen down at 2.35 mln bpd Details
8Vedanta back on track, may be in for a re-rating soon Details
8Petronet LNG gains as cost of gas imports from Qatar declines twofold Details
8China's CNOOC adding new tanks to expand Fujian LNG terminal Details
8Reliance Power gets in-principle nod for LNG-based plant in Bangladesh Details
8 Shell cuts capex by 10 pct to $30 bln, still ahead of Exxon Mobil by around $7 billion Details
8Congress member Pramod Tiwari attacks govt in RS over diesel price hike Details
8ONGC to put Ratna, R-Series oil fields to production in 2019 Details
8Low inflation shows oil price benefit passed on: Pradhan Details
8Rs 3,000 crore per annum plan to boost nuclear power sector Details
8Reliance gets approval for Bangladesh project Details
8Different Rates for Supply of Natural Gas in States Details
8Reforms in Oil and Gas Exploration Details
8Utilisation of Coal Bed Methane Details
8New Delhi Keen to set up LNG Terminal in Iran Details
You can also click on Newsclips for more Details
The government has confirmed that ONGC will need a price of $6.57/mmbtu in 2019-20 to elicit a return of 14% in the KG DWN-98/2 block.
8This return will be available on an investment of $5.076 billion (Rs 34011 crore at a dollar rate of Rs 67).
8The estimated in place volume in cluster-II area of NELP Block KG-DWN- 98/2 -- where the development will happen -- is 141.72 MMTOE (90.06 MMT Oil and 51.66 BCM Gas.
8As per the field development plan, estimated peak oil and gas production are 77,305 barrels of oil per day (bopd) and 16.29 MMSCMD respectively.
8The sensitivity analysis of variation in capital cost or time over run is not known.
8According to the gas pricing formula currently in vogue for the deepwater blocks, the gas price is to be linked to Platt's ex-ship spot cargo rate in the West Coast of India.
8This price is currently at around $4-$4.5/mmbtu.
8All evidence points to this price being at $4/mmbtu or even lower in 2019-20 and well into the 2020s, even going up to 2030. This is a full $2.67/mmbtu lower than the price assumed by ONGC to get a 14% return.
8So how does ONGC break even at this price?
8What if a giant LNG terminal -- near the KG-DWN-98/2 onshore terminal -- delivers 10 million tonnes of LNG at a price of $5/mmbtu (assuming a $4/mmbtu ex-ship price and $1 as liquefaction price) -- at the outer flange of the gasification plant?
8What if in a desperate fight for market share in a massively over supplied market, Qatar decides to declare all out war on Australian and American gas producers, like Saudi Arabia is doing with crude oil at the moment, and bring down the ex-ship price to $3.75 or $3.5/mmbtu? These are now realistic scenarios not just whimsical assumptions.
8How will ONGC compete then with the LNG gasification terminal next door?
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8This return will be available on an investment of $5.076 billion (Rs 34011 crore at a dollar rate of Rs 67).
8The estimated in place volume in cluster-II area of NELP Block KG-DWN- 98/2 -- where the development will happen -- is 141.72 MMTOE (90.06 MMT Oil and 51.66 BCM Gas.
8As per the field development plan, estimated peak oil and gas production are 77,305 barrels of oil per day (bopd) and 16.29 MMSCMD respectively.
8The sensitivity analysis of variation in capital cost or time over run is not known.
8According to the gas pricing formula currently in vogue for the deepwater blocks, the gas price is to be linked to Platt's ex-ship spot cargo rate in the West Coast of India.
8This price is currently at around $4-$4.5/mmbtu.
8All evidence points to this price being at $4/mmbtu or even lower in 2019-20 and well into the 2020s, even going up to 2030. This is a full $2.67/mmbtu lower than the price assumed by ONGC to get a 14% return.
8So how does ONGC break even at this price?
8What if a giant LNG terminal -- near the KG-DWN-98/2 onshore terminal -- delivers 10 million tonnes of LNG at a price of $5/mmbtu (assuming a $4/mmbtu ex-ship price and $1 as liquefaction price) -- at the outer flange of the gasification plant?
8What if in a desperate fight for market share in a massively over supplied market, Qatar decides to declare all out war on Australian and American gas producers, like Saudi Arabia is doing with crude oil at the moment, and bring down the ex-ship price to $3.75 or $3.5/mmbtu? These are now realistic scenarios not just whimsical assumptions.
8How will ONGC compete then with the LNG gasification terminal next door?
Click on Reports for more Details
Indian planners will have to take into account the massive impact that these pipeline networks in China will have on global LNG demand at a time when a spate of fresh LNG liquefaction capacity is going to come on stream.
8With increasing use of nuclear power and renewal energy, it is now projected that LNG demand from South Korea and Japan will go down and not up by early 2020s or earlier.
82018 may well turn out to be a watershed year for the global LNG industry when two major pipeline networks in China become operational. This is when the LNG industry is going to face its severest test.
8Both ONGC and RIL-BP combine will have to study the implications of these developments on their project economics in the KG Basin.
8There is now wide anticipation that LNG prices will hover at sub $4/mmbtu level well into the forseeable future.
8This will come at a time when the KG Basin projects are going to go on stream by around 2018-19 or 2019-20.
8Sources said that ONGC's Field Development Plan for the KG-DWN-98/2 has a rather perfunctory set of assumptions on prevailing gas prices. And the sensitivity analysis carried out was based on shallow fundamentals produced by its consultant.
8The RIL-BP duo on the other hand is likely to do a more vigorous modeling of its proposed investment in the KG basin.
8It is safe to assume that GSPC's Deendayal field in the KG Basin is unlikely to show a positive return, as an estimated investment of $4 billion is anticipated to go in to produce an initial 5 mmscmd of gas.
8Unless innovative thinking is applied, and the government takes proactive steps by leading from the front instead of sitting pretty after announcing a new cap on deepwater gas price, international researchers may be correct in assuming that 50% of India's gas reserves will stay untapped.
Click on Reports for more Details
8With increasing use of nuclear power and renewal energy, it is now projected that LNG demand from South Korea and Japan will go down and not up by early 2020s or earlier.
82018 may well turn out to be a watershed year for the global LNG industry when two major pipeline networks in China become operational. This is when the LNG industry is going to face its severest test.
8Both ONGC and RIL-BP combine will have to study the implications of these developments on their project economics in the KG Basin.
8There is now wide anticipation that LNG prices will hover at sub $4/mmbtu level well into the forseeable future.
8This will come at a time when the KG Basin projects are going to go on stream by around 2018-19 or 2019-20.
8Sources said that ONGC's Field Development Plan for the KG-DWN-98/2 has a rather perfunctory set of assumptions on prevailing gas prices. And the sensitivity analysis carried out was based on shallow fundamentals produced by its consultant.
8The RIL-BP duo on the other hand is likely to do a more vigorous modeling of its proposed investment in the KG basin.
8It is safe to assume that GSPC's Deendayal field in the KG Basin is unlikely to show a positive return, as an estimated investment of $4 billion is anticipated to go in to produce an initial 5 mmscmd of gas.
8Unless innovative thinking is applied, and the government takes proactive steps by leading from the front instead of sitting pretty after announcing a new cap on deepwater gas price, international researchers may be correct in assuming that 50% of India's gas reserves will stay untapped.
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Someone will have to do a cost benefit analysis in terms of return on investment in the oil and gas sector in India.
8After all, everyone including the public sector companies, is in this business to make money.
8Latest government data shows that the NELP rounds brought in $25 billion worth of investments. The investment brought about 5154 bopd of crude production and 11 mmsmd of gas
8Investment in CBM brought in $1.167 billion. CBM production achieved is 1.1 mmsmd.
8Are these figures dangled by the government good enough to encourage future investment?
8Even assuming that the oil and gas assets discovered through these investments have an income stream well into the future, do they actually provide a justifiable return on investment?
8The answer is "No"
8Are there other places in the world where an investor can go an elicit a better return?
8The answer is "Yes"
8The government should therefore be careful in doling out such figures without doing the right homework. The data is based on a wrong set of assumptions.
8This kind of data will frighten investors away.
8Clearly enough, public sector companies do make money from the E&P industry but not from their NELP investments but from blocks that they have got through the nomination route. Private sector companies are making money from pre-NELP blocks and not so much from NELP blocks. BP has lost nearly $8 billion and RIL claims it did not made much money either from its KG Basin block (if the portfolio divestment to BP is excluded) after taking into account contingent liabilities arising from penalties imposed by the government
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8After all, everyone including the public sector companies, is in this business to make money.
8Latest government data shows that the NELP rounds brought in $25 billion worth of investments. The investment brought about 5154 bopd of crude production and 11 mmsmd of gas
8Investment in CBM brought in $1.167 billion. CBM production achieved is 1.1 mmsmd.
8Are these figures dangled by the government good enough to encourage future investment?
8Even assuming that the oil and gas assets discovered through these investments have an income stream well into the future, do they actually provide a justifiable return on investment?
8The answer is "No"
8Are there other places in the world where an investor can go an elicit a better return?
8The answer is "Yes"
8The government should therefore be careful in doling out such figures without doing the right homework. The data is based on a wrong set of assumptions.
8This kind of data will frighten investors away.
8Clearly enough, public sector companies do make money from the E&P industry but not from their NELP investments but from blocks that they have got through the nomination route. Private sector companies are making money from pre-NELP blocks and not so much from NELP blocks. BP has lost nearly $8 billion and RIL claims it did not made much money either from its KG Basin block (if the portfolio divestment to BP is excluded) after taking into account contingent liabilities arising from penalties imposed by the government
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Pricing of ATF is not at all transparent and there is a fair amount of gold plating in the entire system.
8Currently, the Posted Airfield Price is linked to import parity price (IPP), which in turned is linked to Platts' Jet Kero Gulf rate.
8Added to it are no transparent levies such as marketing margins, marketing costs and other elements. No audit is done of these costs beyond a point.
8Since the government does not control the ATF price, anti competitive agencies should be given the right to investigate whey the PAP is linked to the IPP not the EPP?
8Anti competitive agencies must look at the pricing practices that allows for huge discounts over published prices.
8There is also a good case for pushing for the inclusion of ATF in the unified goods and service tax or according it the status of “declared goods". ATF will then attract lower and uniform taxes. This will be a big help as taxes vary wildly from state to state.
8Also a specific rate of duty instead of ad-valorem duty will be a big help.
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8Currently, the Posted Airfield Price is linked to import parity price (IPP), which in turned is linked to Platts' Jet Kero Gulf rate.
8Added to it are no transparent levies such as marketing margins, marketing costs and other elements. No audit is done of these costs beyond a point.
8Since the government does not control the ATF price, anti competitive agencies should be given the right to investigate whey the PAP is linked to the IPP not the EPP?
8Anti competitive agencies must look at the pricing practices that allows for huge discounts over published prices.
8There is also a good case for pushing for the inclusion of ATF in the unified goods and service tax or according it the status of “declared goods". ATF will then attract lower and uniform taxes. This will be a big help as taxes vary wildly from state to state.
8Also a specific rate of duty instead of ad-valorem duty will be a big help.
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The hallmark of a great minister is his capacity to look at the big picture while keeping in mind interest of his own constituency.
8One of the big decisions he can take is to get the ATF segment supervised by appropriate regulators.
8This will cut monopoly practices and help bring down prices.
8The idea will be opposed by the oil marketing trio of OIL, BPCL and HPCL but the minister will earn the goodwill of the aviation industry and millions of fliers if he can truly free up this important market.
Pradhan can, for example, work as a catalyst to provide the PNGRB with the power to impose common carrier principles on ATF pipelines immaterial of distance and usage of tanks at airports, at the back as well as the front end of the industry.
8This will allow for real access to competitors
8According to Chellam, the current anti competition acts are not effective enough to control monopoly pricing of ATF. The regulators need to be given more teeth
8The hands of agencies such as the PNGRB and the Airport Economic Regulatory Authority have to be strengthened.
8Airport Economic Regulatory Authority Act, for example, cannot arbitrate on matters that fall under the purview of the Competition Act, 2002 and this dilutes the fight against monopoly action.
8Will the minister take upon himself to look at the ATF issue in its entirety? He can perhaps rope in the civil aviation minister so as to find common ground.
8The minister may have to go beyond the narrow brief furnished by his own companies and bureaucrats.
8His predecessors couldn't see beyond what they were briefed. Can he be different?
8His brief should be to let ATF prices be determined by competitive forces.
8He can then calculate the benefit of lower prices to fliers and take credit for it.
8Importantly, this can be done without necessarily damaging the interests of the public sector oil companies.
8To let competitive forces come into play is a basic tenet of sound economic policy. In the long run competition strengthen companies not weaken them.
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8One of the big decisions he can take is to get the ATF segment supervised by appropriate regulators.
8This will cut monopoly practices and help bring down prices.
8The idea will be opposed by the oil marketing trio of OIL, BPCL and HPCL but the minister will earn the goodwill of the aviation industry and millions of fliers if he can truly free up this important market.
Pradhan can, for example, work as a catalyst to provide the PNGRB with the power to impose common carrier principles on ATF pipelines immaterial of distance and usage of tanks at airports, at the back as well as the front end of the industry.
8This will allow for real access to competitors
8According to Chellam, the current anti competition acts are not effective enough to control monopoly pricing of ATF. The regulators need to be given more teeth
8The hands of agencies such as the PNGRB and the Airport Economic Regulatory Authority have to be strengthened.
8Airport Economic Regulatory Authority Act, for example, cannot arbitrate on matters that fall under the purview of the Competition Act, 2002 and this dilutes the fight against monopoly action.
8Will the minister take upon himself to look at the ATF issue in its entirety? He can perhaps rope in the civil aviation minister so as to find common ground.
8The minister may have to go beyond the narrow brief furnished by his own companies and bureaucrats.
8His predecessors couldn't see beyond what they were briefed. Can he be different?
8His brief should be to let ATF prices be determined by competitive forces.
8He can then calculate the benefit of lower prices to fliers and take credit for it.
8Importantly, this can be done without necessarily damaging the interests of the public sector oil companies.
8To let competitive forces come into play is a basic tenet of sound economic policy. In the long run competition strengthen companies not weaken them.
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The government has said in a public statement today that it has given permission to Reliance Industries Limited (RIL) and Shell India Markets Private Limited for marketing of Aviation Turbine Fuel (ATF)
8But the problem is that the public sector has ran up a monopoly in the ATF distribution business. So much so that a company such as Shell has been able to make little headway in pushing ATF in Indian airports.
8RIL too has run into a high wall and is finding it difficult to make inroads.
8The website carries here a detailed note on ATF policy has evolved over the years and how the public sector has increased its grip.
8The price of monopoly is a near-complete non-transparency in the pricing of ATF, says KS Chellam, an old industry insider.
8The Posted Airfield Price (PAP) is based on import parity price but the fact is that each oil company enters into a contract with an airline at discuonted prices only known to contracting parties.
8Unless pricing is brought under regulatory control of the PNGRB, the public sector companies will continue to extract monopoly rent.
8This is where the petroleum minister Dharmendra Pradhan can step in to free up the sector and make pricing a transparent process.
8Indian airlines pay a much higher price compared to those in Singapore or other transportation hubs for ATF
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8But the problem is that the public sector has ran up a monopoly in the ATF distribution business. So much so that a company such as Shell has been able to make little headway in pushing ATF in Indian airports.
8RIL too has run into a high wall and is finding it difficult to make inroads.
8The website carries here a detailed note on ATF policy has evolved over the years and how the public sector has increased its grip.
8The price of monopoly is a near-complete non-transparency in the pricing of ATF, says KS Chellam, an old industry insider.
8The Posted Airfield Price (PAP) is based on import parity price but the fact is that each oil company enters into a contract with an airline at discuonted prices only known to contracting parties.
8Unless pricing is brought under regulatory control of the PNGRB, the public sector companies will continue to extract monopoly rent.
8This is where the petroleum minister Dharmendra Pradhan can step in to free up the sector and make pricing a transparent process.
8Indian airlines pay a much higher price compared to those in Singapore or other transportation hubs for ATF
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For oil and gas suppliers, business development opportunities can arise from ONGC's plans to implement a Comprehensive Security Solution (CSS) across all of its offshore assets.
8This is going to be a state-of-the-art integrated system that will provide continuous sea, air and water surveillance for oil platforms.
8Supplies in this business must step up their interface with the team in ONGC which is implementing this work to see where future business development prospects will come up.
8The website will keep you posted on future requirement of equipment and services and RFQ dates along with key contacts on this front.
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8This is going to be a state-of-the-art integrated system that will provide continuous sea, air and water surveillance for oil platforms.
8Supplies in this business must step up their interface with the team in ONGC which is implementing this work to see where future business development prospects will come up.
8The website will keep you posted on future requirement of equipment and services and RFQ dates along with key contacts on this front.
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That GSPC is in trouble is borne out by the fact that it has cut its E&P investment by 40% at a time when it needed to step it up to stabilize production in its Deendayal field in the KG basin.
8The field's geological structure is highly complicated. High pressure and high temperature reserves is one problem. The other is that the tight oil formations in the field require multiple drilling and fracturing to sustain production.
8With little revenue coming in, the company seems to have been pushed into a corner with its loan overhang even as it faces a higher investment requirement.
8A salvage operation has to be launched.
8But with the opposition demanding an investigation into the company, who is going to bell the cat?
8In the meanwhile, of the two blocks, KG-OSN-2001/3 -- in which the Deendayal field is located -- and KG-ONN-2004/2 in KG basin, it is relinquishing the latter.
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8The field's geological structure is highly complicated. High pressure and high temperature reserves is one problem. The other is that the tight oil formations in the field require multiple drilling and fracturing to sustain production.
8With little revenue coming in, the company seems to have been pushed into a corner with its loan overhang even as it faces a higher investment requirement.
8A salvage operation has to be launched.
8But with the opposition demanding an investigation into the company, who is going to bell the cat?
8In the meanwhile, of the two blocks, KG-OSN-2001/3 -- in which the Deendayal field is located -- and KG-ONN-2004/2 in KG basin, it is relinquishing the latter.
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It is often argued that India's E&P industry, because of its complete dominance by the public sector, has remained immune to the volatility noticed in the global market.
8Global oil and gas investments have fallen by 25% in 2015 and is slated to go down by 19% in 2016.
8Is the story different in India?
8While speaking to a large sample of oil and gas equipment and service providers, the website found that business is indeed down. Some companies have downsized their operations while others are just about hanging in. They claim that the investment cycle has slowed down.
8Are these observations based on facts?
Click on Reports to figure out what is going on in the industry. Look at operator-wise investment details to find out more. Details
8Global oil and gas investments have fallen by 25% in 2015 and is slated to go down by 19% in 2016.
8Is the story different in India?
8While speaking to a large sample of oil and gas equipment and service providers, the website found that business is indeed down. Some companies have downsized their operations while others are just about hanging in. They claim that the investment cycle has slowed down.
8Are these observations based on facts?
Click on Reports to figure out what is going on in the industry. Look at operator-wise investment details to find out more. Details
What the government needs is a good price forecasting division within the PPAC. Today there is little or no forecasting done even though it is so vital for a country like India. The tools and skills are simply not there.
8Good in house data can add more punch into the decision making process. It can also help fine-tune policy.
8Right now the PPAC reports are just an accumulation of data from public sector companies and the DGH.
8What the agency does is add some mundane and shallow analysis to the numbers.
8What Pradhan can one day do is take time off his busy schedule to read a report prepared by the EIA and what is turned out by the PPAC on a subject such as consumption data.
8He will immediately figure out the difference in quality.
8One can reasonably argue that the US is always a step ahead in numbers and analysis and it will unfair to do a comparison between the PPAC and the IEA.
8But he can try reading similar reports published by government agencies in other countries such as Canada, Australia or the UK and then see the difference.
8He can perhaps get a point by point analysis made of the differences between reports put out by the PPAC and similar agencies worldwide. That is not a difficult exercise to do.
8Bringing in more transparency into oil and gas statistics and lacing it with good analyses is another significant contribution he can make to the sector.
8But the point is who is going to tell him what to do?
8He has no doubt efficient and well meaning people around him but do they have the ideas or the exposure?
8It is clear that PPAC does not have the people or the wherewithal. Should he bring in an agency such as Accenture to help do the job?
8Bilateral agreements with the likes of IEA to help shore up the PPAC's quality have not worked so far. After all, if there is no talent, no amount of coaxing or extra training will help.
The minister should do well to avoid the temptation of hiring the likes of PriceWaterHouse or McKinsey or Deloitte for such work.
8All of them have learnt the art of gaming the government's L-1 tendering system. Like the PPAC, they too have lost their luster. They will not challenge the imagination needed to transform India's oil and gas sector.
8They have had a near-monopoly in preparing reports and if a fair scrutiny is done of the research they have turned in, it will only show shoddy workmanship. Their projections and predictions have been way off track.
8Sensitivity analyses done by these agencies on some of ONGC's oil and gas projects and a comparison with what the reality actually turned out to be, will tell the whole story.
8What Pradhan should do is to push his ministry and his companies to the next level of expertise. He needs to dig deeper and tap into consultancies that are more entrenched in the oil and gas sector. They may not be in India as they possibly find the tendering system too cumbersome to handle.
8He will need to identify them first, invite them over and see what they have to say, gain a fresh perspective and then decide on the next course of action.
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8Good in house data can add more punch into the decision making process. It can also help fine-tune policy.
8Right now the PPAC reports are just an accumulation of data from public sector companies and the DGH.
8What the agency does is add some mundane and shallow analysis to the numbers.
8What Pradhan can one day do is take time off his busy schedule to read a report prepared by the EIA and what is turned out by the PPAC on a subject such as consumption data.
8He will immediately figure out the difference in quality.
8One can reasonably argue that the US is always a step ahead in numbers and analysis and it will unfair to do a comparison between the PPAC and the IEA.
8But he can try reading similar reports published by government agencies in other countries such as Canada, Australia or the UK and then see the difference.
8He can perhaps get a point by point analysis made of the differences between reports put out by the PPAC and similar agencies worldwide. That is not a difficult exercise to do.
8Bringing in more transparency into oil and gas statistics and lacing it with good analyses is another significant contribution he can make to the sector.
8But the point is who is going to tell him what to do?
8He has no doubt efficient and well meaning people around him but do they have the ideas or the exposure?
8It is clear that PPAC does not have the people or the wherewithal. Should he bring in an agency such as Accenture to help do the job?
8Bilateral agreements with the likes of IEA to help shore up the PPAC's quality have not worked so far. After all, if there is no talent, no amount of coaxing or extra training will help.
The minister should do well to avoid the temptation of hiring the likes of PriceWaterHouse or McKinsey or Deloitte for such work.
8All of them have learnt the art of gaming the government's L-1 tendering system. Like the PPAC, they too have lost their luster. They will not challenge the imagination needed to transform India's oil and gas sector.
8They have had a near-monopoly in preparing reports and if a fair scrutiny is done of the research they have turned in, it will only show shoddy workmanship. Their projections and predictions have been way off track.
8Sensitivity analyses done by these agencies on some of ONGC's oil and gas projects and a comparison with what the reality actually turned out to be, will tell the whole story.
8What Pradhan should do is to push his ministry and his companies to the next level of expertise. He needs to dig deeper and tap into consultancies that are more entrenched in the oil and gas sector. They may not be in India as they possibly find the tendering system too cumbersome to handle.
8He will need to identify them first, invite them over and see what they have to say, gain a fresh perspective and then decide on the next course of action.
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The global gas industry is depending on India to carry the burden of demand destruction in China, Japan and Korea.
8But the gas market in India is extremely shallow. And India's fragile shoulders cannot carry that load.
8Most upcoming gasification units in India are looking for markets to sell their gas and are finding it difficult to do so. Some of the East Coast LNG units are not coming up simply because there isn't a big enough market. There is talk of ferrying LNG by truck to markets in a 400 km range in the absence of pipeline networks.
8The projections of massive demand for gas is only a paper exercise, done within the air conditioned confines of offices in New Delhi with little link with ground realities. Bulk gas markets in the power and fertilizer sectors are shackled, with demand and supply determined through inter-ministerial committees.
8The city gas distribution forays in the established markets in Delhi and Mumbai are extremely shallow enterprises.
8The population of greater London is 10 million whereas Delhi has double that figure and yet Delhi's consumption of gas is just one-tenth of London.
8Bureaucrats have been forced to set piped gas connection targets to the CGD companies to fulfill because, on their own, the companies won't do the job.
8While the possibilities are immense, the will is lacking.
8Public sector sloth and a monopoly mindset among the major CGD players in the country have impeded growth.
8CGD players are now arrayed in a raging fight with the PNGRB for protection of their monopoly status in city networks. The idea is to seek rent by keeping other players out of the market.
8A time has come for the petroleum minister Dharmendra Pradhan to break these monopolies and set more ambitious targets for use of gas, not just for cooking but for use in electrical appliances in households and commercial buildings.
8It has been proven that gas based airconditioning and heating can be cheaper than the use of power.
8Then again unless GAIL is broken up into its trading and transmission arms and unless competitive forces are unleashed, it will be all that more difficult for the Indian gas market to achieve its true potential.
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8But the gas market in India is extremely shallow. And India's fragile shoulders cannot carry that load.
8Most upcoming gasification units in India are looking for markets to sell their gas and are finding it difficult to do so. Some of the East Coast LNG units are not coming up simply because there isn't a big enough market. There is talk of ferrying LNG by truck to markets in a 400 km range in the absence of pipeline networks.
8The projections of massive demand for gas is only a paper exercise, done within the air conditioned confines of offices in New Delhi with little link with ground realities. Bulk gas markets in the power and fertilizer sectors are shackled, with demand and supply determined through inter-ministerial committees.
8The city gas distribution forays in the established markets in Delhi and Mumbai are extremely shallow enterprises.
8The population of greater London is 10 million whereas Delhi has double that figure and yet Delhi's consumption of gas is just one-tenth of London.
8Bureaucrats have been forced to set piped gas connection targets to the CGD companies to fulfill because, on their own, the companies won't do the job.
8While the possibilities are immense, the will is lacking.
8Public sector sloth and a monopoly mindset among the major CGD players in the country have impeded growth.
8CGD players are now arrayed in a raging fight with the PNGRB for protection of their monopoly status in city networks. The idea is to seek rent by keeping other players out of the market.
8A time has come for the petroleum minister Dharmendra Pradhan to break these monopolies and set more ambitious targets for use of gas, not just for cooking but for use in electrical appliances in households and commercial buildings.
8It has been proven that gas based airconditioning and heating can be cheaper than the use of power.
8Then again unless GAIL is broken up into its trading and transmission arms and unless competitive forces are unleashed, it will be all that more difficult for the Indian gas market to achieve its true potential.
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There is now a growing feeling that China's dependency on LNG will not just come down but may in fact simply not exist as its economy slows down and massive pipeline projects it is building to ferry gas from Central Asia and Russia come to fruition.
8A dip in LNG imports is likely to come in 2018 when the gigantic $400 billion East West Pipeline from Russia becomes operational in 2018.
8Not just that, both Russia and China signed an LOI for another pipeline that will supply another 30 billion cubic metres of gas for 30 years beginning 2019.
8Going a step further, China's CNPC is talking of undertaking two more West-East natural gas pipeline projects whose annual capacity is expected to be 45 billion m3
8Then again, China has expanded its pipeline network from Central Asia. The Central Asian gas pipeline system is an enormous multi-staged project whose construction started in the previous decade.
8As the world’s largest pipeline project, it is composed of four sections through which Central Asian gas will be exported to China, of which the bulk is Turkmen, while Kazakh and Uzbek gas account for the rest.
8Scheduled for its full operation by 2018, the pipeline will supply 85 billion cubic metres of gas (approximately 40% of its gas imports) once it is fully operational.
8At the rate at which pipeline gas is getting pumped into China, and the speed at which it is ramping up shale gas production, the county may have little or no requirement of LNG at all in the 2020s.
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8A dip in LNG imports is likely to come in 2018 when the gigantic $400 billion East West Pipeline from Russia becomes operational in 2018.
8Not just that, both Russia and China signed an LOI for another pipeline that will supply another 30 billion cubic metres of gas for 30 years beginning 2019.
8Going a step further, China's CNPC is talking of undertaking two more West-East natural gas pipeline projects whose annual capacity is expected to be 45 billion m3
8Then again, China has expanded its pipeline network from Central Asia. The Central Asian gas pipeline system is an enormous multi-staged project whose construction started in the previous decade.
8As the world’s largest pipeline project, it is composed of four sections through which Central Asian gas will be exported to China, of which the bulk is Turkmen, while Kazakh and Uzbek gas account for the rest.
8Scheduled for its full operation by 2018, the pipeline will supply 85 billion cubic metres of gas (approximately 40% of its gas imports) once it is fully operational.
8At the rate at which pipeline gas is getting pumped into China, and the speed at which it is ramping up shale gas production, the county may have little or no requirement of LNG at all in the 2020s.
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For reference purposes the website carries here the following tenders:
8Rate contract for construction of pipeline and associated facilities for supply of Gas [GAIL] Details
8Installation and commissioning of Ethanol storage tanks with allied pipelines and miscellaneous works [IOC] Details
8Thickness gauging of high temperature piping, Panipat Refinery [IOC] Details
8Supply of Gas Detectors, Mathura Refinery [IOC] Details
8Supply of Level Transmitters [IOC] Details
8Supply of Master Calibrators and Measuring Instruments for Compressor stations [GAIL] Details
You can also click on Tenders for more
For reference purposes the website carries here the following Newsclips:
8India to pay 1.5% interest on over Rs 43,000 crore Iran oil dues as goodwill gesture Details
8UCO Bank sees 50% drop in deposits from Iran oil importers Details
8Will stall RS proceedings if no discussion on GSPC: Congress Details
8Revised Qatar LNG deal cuts gas price to below $5 per mmBtu: Dharmendra Pradhan Details
8India keen on setting up LNG terminal at Iranian port Details
8Begusarai MP Bhola Singh sends LS into peals of laughter enquiring Pradhan about pressure from oil and gas corporates Details
8Chinese energy official joins IEA as advisor for first time Details
8Gujarat Congress delegation to raise KG Basin issue with President Details
8Now, Qatar gas costs below $5 a unit Details
8Remittances slip on oil, down $1.5 billion Details
You can also click on Newsclips for more Details
8Rate contract for construction of pipeline and associated facilities for supply of Gas [GAIL] Details
8Installation and commissioning of Ethanol storage tanks with allied pipelines and miscellaneous works [IOC] Details
8Thickness gauging of high temperature piping, Panipat Refinery [IOC] Details
8Supply of Gas Detectors, Mathura Refinery [IOC] Details
8Supply of Level Transmitters [IOC] Details
8Supply of Master Calibrators and Measuring Instruments for Compressor stations [GAIL] Details
You can also click on Tenders for more
For reference purposes the website carries here the following Newsclips:
8India to pay 1.5% interest on over Rs 43,000 crore Iran oil dues as goodwill gesture Details
8UCO Bank sees 50% drop in deposits from Iran oil importers Details
8Will stall RS proceedings if no discussion on GSPC: Congress Details
8Revised Qatar LNG deal cuts gas price to below $5 per mmBtu: Dharmendra Pradhan Details
8India keen on setting up LNG terminal at Iranian port Details
8Begusarai MP Bhola Singh sends LS into peals of laughter enquiring Pradhan about pressure from oil and gas corporates Details
8Chinese energy official joins IEA as advisor for first time Details
8Gujarat Congress delegation to raise KG Basin issue with President Details
8Now, Qatar gas costs below $5 a unit Details
8Remittances slip on oil, down $1.5 billion Details
You can also click on Newsclips for more Details
In times past, oil prices were highly sensitive to turmoil in the Middle East. The region is now witness to more destabilizing conflicts than at any other time in recent history, yet the markets seem unpersuaded by their ability to threaten global supply.
8But there is the real possibility that low oil prices will threaten the solvency of Middle East producers and accelerate the worsening security situation.
8Spending budgets of most Middle Eastern countries are becoming unsustainable.
8In addition to their high-cost social programs, Middle East nations are also increasing their spend on various wars and national security efforts.
8If the spending in 2016 and the drawdown from reserves mirrors 2015, then the Middle East will have a problem sooner than anybody imagined.
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8But there is the real possibility that low oil prices will threaten the solvency of Middle East producers and accelerate the worsening security situation.
8Spending budgets of most Middle Eastern countries are becoming unsustainable.
8In addition to their high-cost social programs, Middle East nations are also increasing their spend on various wars and national security efforts.
8If the spending in 2016 and the drawdown from reserves mirrors 2015, then the Middle East will have a problem sooner than anybody imagined.
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Will an independent LNG trading hub, like the Henry Hub in the US, ever emerge in Asia?
8Japan, China and Singapore have launched separate efforts to establish LNG pricing for Asia through futures trading on their respective commodity exchanges.
8Japan launched an LNG futures contract on the Japan Over-the-Counter Exchange (JOE) in September 2014
8China offered its own version through the Shanghai Oil and Gas Exchange in July 2015.
8Both are struggling to attract traders’ interest.
8Singapore Exchange Limited, which reported the first trade of its Singapore SGX LNG Index Group (SLInG) futures contract in January 2016, is also expected to face stiff competition from the well established informal LNG paper market.
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8Japan, China and Singapore have launched separate efforts to establish LNG pricing for Asia through futures trading on their respective commodity exchanges.
8Japan launched an LNG futures contract on the Japan Over-the-Counter Exchange (JOE) in September 2014
8China offered its own version through the Shanghai Oil and Gas Exchange in July 2015.
8Both are struggling to attract traders’ interest.
8Singapore Exchange Limited, which reported the first trade of its Singapore SGX LNG Index Group (SLInG) futures contract in January 2016, is also expected to face stiff competition from the well established informal LNG paper market.
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Will Asian producers ever move away from indexation of LNG to crude oil?
8A paper shows that the Japanese Crude Cocktail (JCC) formula for pricing LNG to “remain the principal mechanism in Japan and Asia up to at least the early 2020s.”
8Even with the prospects of increased spot trades and the use of alternative pricing systems, there is no clear answer as to what will be the single most promising alternative to JCC.
8Calls by Asian countries, which account for 75% of global LNG consumption, to break from the JCC pricing formula reached feverish pitch between 2012 and early 2014 when crude oil prices hovered well above US$100/bbl.
8Following the oil market collapse from mid-2014, demands for such ‘price reforms’ have virtually disappeared in recent months, as many in the industry now believe that oil and gas prices are likely to remain low for years.
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8A paper shows that the Japanese Crude Cocktail (JCC) formula for pricing LNG to “remain the principal mechanism in Japan and Asia up to at least the early 2020s.”
8Even with the prospects of increased spot trades and the use of alternative pricing systems, there is no clear answer as to what will be the single most promising alternative to JCC.
8Calls by Asian countries, which account for 75% of global LNG consumption, to break from the JCC pricing formula reached feverish pitch between 2012 and early 2014 when crude oil prices hovered well above US$100/bbl.
8Following the oil market collapse from mid-2014, demands for such ‘price reforms’ have virtually disappeared in recent months, as many in the industry now believe that oil and gas prices are likely to remain low for years.
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The PAC has found the petroleum ministry's views on the pricing of Cairn India's Rajasthan crude to be highly contradictory.
8Cairn was unable to impose the conditionality of retrospective revision in the price of crude on private offtakers despite the ministry's insistence that the crude price was "provisional" and subject to final review.
8ONGC has been told to play a more active role in the award of contracts for the Rajasthan block subsequent to anomalies in the tendering and award of tenders by Cairn India. It was found that ONGC's approval for contracts came much after the letters of award were given by Cairn. ONGC is a partner with Cairn in the block.
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8Cairn was unable to impose the conditionality of retrospective revision in the price of crude on private offtakers despite the ministry's insistence that the crude price was "provisional" and subject to final review.
8ONGC has been told to play a more active role in the award of contracts for the Rajasthan block subsequent to anomalies in the tendering and award of tenders by Cairn India. It was found that ONGC's approval for contracts came much after the letters of award were given by Cairn. ONGC is a partner with Cairn in the block.
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The PAC has also been highly critical of both the government and the DGH for lack of due diligence that resulted in wasteful expenditure incurred by Indian Oil Corporation in building spur lines for offtake of crude from the Barmer field which was eventually never lifted.
8The duo came in for sharp criticism for their inability to ensure the lifting of Barmer crude from the Mundra port, which then led to a chain of events including the shifting of the evacuation pipeline from the Barmer fields, first to Salaya and then to Bhogat. The switch from Salaya to Bhogat was prompted by the fact that Salaya was rejected as an evacuation destination on account of ecological considerations.
8The delay in laying the evacuation pipeline also led to a slowdown of production from the Barmer field.
8Similarly, IOC too was unilaterally nominated by the government as an offtaker of Rajasthan crude. Two sets of evacuation pipelines were built only to be left unused as IOC did not find the sticky Barmer crude suitable for processing in its refineries.
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8The duo came in for sharp criticism for their inability to ensure the lifting of Barmer crude from the Mundra port, which then led to a chain of events including the shifting of the evacuation pipeline from the Barmer fields, first to Salaya and then to Bhogat. The switch from Salaya to Bhogat was prompted by the fact that Salaya was rejected as an evacuation destination on account of ecological considerations.
8The delay in laying the evacuation pipeline also led to a slowdown of production from the Barmer field.
8Similarly, IOC too was unilaterally nominated by the government as an offtaker of Rajasthan crude. Two sets of evacuation pipelines were built only to be left unused as IOC did not find the sticky Barmer crude suitable for processing in its refineries.
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The PAC has castigated the petroleum ministry over its inability to collect the transport differential from Cairn India, the operator of the Barmer block, for recovering the cost of transport of crude oil beyond the statutory delivery point.
8HPCL's unwillingness to lift crude despite being a government nominated offtaker forced Cairn India to deliver crude to MRPL and RIL at its own cost.
8The fuel was transported via vessels to RIL and MRPL.
8Cairn subsequently claimed it as cost against revenue.
8The DGH had objected to such deductions but the CAG observed that it had been four years now, and yet the differential had not been mopped up from Cairn India.
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8HPCL's unwillingness to lift crude despite being a government nominated offtaker forced Cairn India to deliver crude to MRPL and RIL at its own cost.
8The fuel was transported via vessels to RIL and MRPL.
8Cairn subsequently claimed it as cost against revenue.
8The DGH had objected to such deductions but the CAG observed that it had been four years now, and yet the differential had not been mopped up from Cairn India.
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The petroleum ministry has tightened the approval process for work programmes and budgets for all E&P blocks.
8The approvals will have to necessarily come from the Management Committee (MC) before the beginning of the financial year.
8Earlier, the deadline were flexible and work programmes were occasionally approved well after a financial year had begun.
8The recent strictures by the Public Accounts Committee of Parliament over the lackadaisical manner in which work programmes were approved has come as a rap on the knuckles.
8All MC approvals will now be made before the beginning of the financial year provided Operating Committee approved work programmes are submitted before the approved deadline.
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8The approvals will have to necessarily come from the Management Committee (MC) before the beginning of the financial year.
8Earlier, the deadline were flexible and work programmes were occasionally approved well after a financial year had begun.
8The recent strictures by the Public Accounts Committee of Parliament over the lackadaisical manner in which work programmes were approved has come as a rap on the knuckles.
8All MC approvals will now be made before the beginning of the financial year provided Operating Committee approved work programmes are submitted before the approved deadline.
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There is no clarity yet on when Matix Fertilizer and Chemical Ltd (MFCL) is going to start production from its Panagarh ammonia-urea complex in West Bengal.
8The plant has been ready for the past several months but Essar has not been abe to supply the requisite amount of CBM gas as yet. from its Raniganj field
8A certain minimum quantum of gas is needed to start the unit. It requires 2.4 mmscmd of gas to be able to run at full capacity and Essar is far from producing that quantity of gas
8The ammonia plant has a capacity of 3850 MTPD and it will make 2200 MTPD of urea. The cost of the plant is over Rs 5000 crore.
8Sources said that a compensatory agreement has been worked out between Essar and Matix and this will get reflected in the annual results of Matix
8No details are however available.
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8The plant has been ready for the past several months but Essar has not been abe to supply the requisite amount of CBM gas as yet. from its Raniganj field
8A certain minimum quantum of gas is needed to start the unit. It requires 2.4 mmscmd of gas to be able to run at full capacity and Essar is far from producing that quantity of gas
8The ammonia plant has a capacity of 3850 MTPD and it will make 2200 MTPD of urea. The cost of the plant is over Rs 5000 crore.
8Sources said that a compensatory agreement has been worked out between Essar and Matix and this will get reflected in the annual results of Matix
8No details are however available.
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What is the current price of gas supplied under long term contract by RasGas ?
8The price of gas is linked to crude oil prices and is ruling at sub-$ 5/mmbtu levels.
8Even though RasGas' price is at a low, spot prices are even lower.
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8The price of gas is linked to crude oil prices and is ruling at sub-$ 5/mmbtu levels.
8Even though RasGas' price is at a low, spot prices are even lower.
Click on Details for more Details
For reference purposes the website carries here the following tenders:
8Carrying out Gas pipeline repair works by de-watering and de-sludging method [GCGSCL] Details
8Supply of Diammonium Phosphate, Haldia Refinery [IOC] Details
8Supply of Hydrogen Peroxide, Haldia Refinery [IOC] Details
8Shell and Tube Heat Exchanger for DHDS Unit, Gujarat Refinery [IOC] Details
8Carrying out Catalyst and Desiccant replacement in Dryer & Reactor, Panipat [IOC] Details
You can also click on Tenders for more
For reference purposes the website carries here the following Newsclips:
8Modi under fire on GSPC issue, Opposition forces 3 adjournments in RS over CAG report Details
8IGL sets up 72 CNG stations in 4 months, Odd-Even & CNG-taxis up demand Details
8Halliburton/Baker Hughes merger aborted, had earlier raised large EU competition concerns Details
8US shale firm's bankruptcy exit shows new chapter just as tough Details
8Environment Ministry panel defers environment clearance to Ib-Valley washery of Coal India Details
8Gujarat KG basin issue a "diversionary" ploy of Congress: Arun Jaitley Details
8Cash transfer for LPG in May to be Rs. 108.35, under-recoveries for kerosene Rs. 9.12 per litre Details
8Won't succumb to pressure in resolving oil disputes: Dharmendra Pradhan Details
8Iran's USD 6.5 billion oil dues to be cleared by India Details
8Oil down 3 percent on OPEC output hike, speculative ramp-up in Brent Details
8Modi govt has the guts to deal with oil, gas disputes Details
8Congress turns to KG fuel for Agusta firefight Details
8Power sector may import 48MT coal in FY'17 Details
8Core sector expands 6.4% in March to 16-month high Details
You can also click on Newsclips for more Details
8Carrying out Gas pipeline repair works by de-watering and de-sludging method [GCGSCL] Details
8Supply of Diammonium Phosphate, Haldia Refinery [IOC] Details
8Supply of Hydrogen Peroxide, Haldia Refinery [IOC] Details
8Shell and Tube Heat Exchanger for DHDS Unit, Gujarat Refinery [IOC] Details
8Carrying out Catalyst and Desiccant replacement in Dryer & Reactor, Panipat [IOC] Details
You can also click on Tenders for more
For reference purposes the website carries here the following Newsclips:
8Modi under fire on GSPC issue, Opposition forces 3 adjournments in RS over CAG report Details
8IGL sets up 72 CNG stations in 4 months, Odd-Even & CNG-taxis up demand Details
8Halliburton/Baker Hughes merger aborted, had earlier raised large EU competition concerns Details
8US shale firm's bankruptcy exit shows new chapter just as tough Details
8Environment Ministry panel defers environment clearance to Ib-Valley washery of Coal India Details
8Gujarat KG basin issue a "diversionary" ploy of Congress: Arun Jaitley Details
8Cash transfer for LPG in May to be Rs. 108.35, under-recoveries for kerosene Rs. 9.12 per litre Details
8Won't succumb to pressure in resolving oil disputes: Dharmendra Pradhan Details
8Iran's USD 6.5 billion oil dues to be cleared by India Details
8Oil down 3 percent on OPEC output hike, speculative ramp-up in Brent Details
8Modi govt has the guts to deal with oil, gas disputes Details
8Congress turns to KG fuel for Agusta firefight Details
8Power sector may import 48MT coal in FY'17 Details
8Core sector expands 6.4% in March to 16-month high Details
You can also click on Newsclips for more Details
The petroleum ministry's deposition before the PAC seems to indicate that the the revenue sharing model for E&P blocks was ushered in more for convenience and to avoid the onerous task of managing the profit petroleum regime.
8"In fact, today also, a lot of people feel that perhaps production sharing contract is a better regime because it is less risky to the investor. But our experience, over so many years of NELP, has seen that today 90 per cent of problems, which we are facing, and all arbitrations and litigations, are basically related to cost recovery," the petroleum ministry said before the PAC.
8The ministry then went on to say, "We give more freedom to the operators to operate and we are concerned with the end-result as to how much production he is doing and with the production related to whatever Government’s stake is there, that should come. He should not be able to do any mischief in that and our attempt is to ensure this".
8Was a more risky investment regime ushered in for the sake of convenience? Both the PAC and the ministry believe that the revenue sharing model has its distinct advantages.
8But this website is till of the opinion that for a hydrocarbon deficit country such as India, a revenue sharing model may not be the right vehicle to pull in investments and certainly not a revenue sharing formula. More so in today's environment which is fraught with uncertainties.
Comment: How would a company know by scanning sparse seismic data made available in a DGH data room on a deepwater block whether it will have enough oil or gas for it to come up with a revenue share number while bidding for the block? A deepwater well can cost anywhere above $ 25 to 100 million and it is not possible for anyone to accurately project what kind of revenue it will generate at the very beginning, even before exploration work can starts in the block. The revenue share model can work when there is some kind of certainty on the prospectivity of a block or the exploration work has been completed and a Field Development Plan has been drawn up. Then again, with plunging oil and gas prices, it will be difficult to get investors to make long term commitments on a revenue sharing model. There is also uncertainty over how the oil and gas sector will fare in the years ahead given changes on the ground brought about by global warming and disruptive technologies. Lobbies are already calling for keeping more than 50% of India's gas reserves untapped in order to ensure that global warming does not cross the 2 degree threshold. This website predicts that the revenue sharing model may not succeed in India.
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8"In fact, today also, a lot of people feel that perhaps production sharing contract is a better regime because it is less risky to the investor. But our experience, over so many years of NELP, has seen that today 90 per cent of problems, which we are facing, and all arbitrations and litigations, are basically related to cost recovery," the petroleum ministry said before the PAC.
8The ministry then went on to say, "We give more freedom to the operators to operate and we are concerned with the end-result as to how much production he is doing and with the production related to whatever Government’s stake is there, that should come. He should not be able to do any mischief in that and our attempt is to ensure this".
8Was a more risky investment regime ushered in for the sake of convenience? Both the PAC and the ministry believe that the revenue sharing model has its distinct advantages.
8But this website is till of the opinion that for a hydrocarbon deficit country such as India, a revenue sharing model may not be the right vehicle to pull in investments and certainly not a revenue sharing formula. More so in today's environment which is fraught with uncertainties.
Comment: How would a company know by scanning sparse seismic data made available in a DGH data room on a deepwater block whether it will have enough oil or gas for it to come up with a revenue share number while bidding for the block? A deepwater well can cost anywhere above $ 25 to 100 million and it is not possible for anyone to accurately project what kind of revenue it will generate at the very beginning, even before exploration work can starts in the block. The revenue share model can work when there is some kind of certainty on the prospectivity of a block or the exploration work has been completed and a Field Development Plan has been drawn up. Then again, with plunging oil and gas prices, it will be difficult to get investors to make long term commitments on a revenue sharing model. There is also uncertainty over how the oil and gas sector will fare in the years ahead given changes on the ground brought about by global warming and disruptive technologies. Lobbies are already calling for keeping more than 50% of India's gas reserves untapped in order to ensure that global warming does not cross the 2 degree threshold. This website predicts that the revenue sharing model may not succeed in India.
Click on Reports for more Details
The petroleum ministry has long opposed the separation of the DGH into its technical and regulatory functions.
8The recommendation to attach the regulatory powers to the PNGRB was mooted in the past too but the ministry had all along side stepped this advisory.
8On similar lines, the ministry is opposed to the splitting up of GAIL into its gas transmission and trading arms as was recommended by the PNGRB.
8Nor is the government keen to part with powers to the PNGRB to regulate the pricing of petroleum products, ostensibly because the price of sensitive petroleum products, such as kerosene and LPG are fixed in accordance with the social priorities of the government.
8This argument somehow bypasses allegations of gold plating by public sector oil marketing companies in the price build-up of not just petrol and diesel but a whole set of other products, such as naphtha, ATF, FO, Bitumen and greases.
8The reluctance of the ministry to dilute the powers of the DGH stems from the fact that every file relating to the PSC and every management committee decision needs the approval of none other than the petroleum minister himself.
8This is patronage that no political power centre would like to do away with.
8But many regard Dharmendra Pradhan as a minister with a difference.
8Will he be able to give away powers that all of his predecessors found difficult to part with?
8If he wants to leave his footprints on the sands of time, he should.
Click on Reports for more Details
8The recommendation to attach the regulatory powers to the PNGRB was mooted in the past too but the ministry had all along side stepped this advisory.
8On similar lines, the ministry is opposed to the splitting up of GAIL into its gas transmission and trading arms as was recommended by the PNGRB.
8Nor is the government keen to part with powers to the PNGRB to regulate the pricing of petroleum products, ostensibly because the price of sensitive petroleum products, such as kerosene and LPG are fixed in accordance with the social priorities of the government.
8This argument somehow bypasses allegations of gold plating by public sector oil marketing companies in the price build-up of not just petrol and diesel but a whole set of other products, such as naphtha, ATF, FO, Bitumen and greases.
8The reluctance of the ministry to dilute the powers of the DGH stems from the fact that every file relating to the PSC and every management committee decision needs the approval of none other than the petroleum minister himself.
8This is patronage that no political power centre would like to do away with.
8But many regard Dharmendra Pradhan as a minister with a difference.
8Will he be able to give away powers that all of his predecessors found difficult to part with?
8If he wants to leave his footprints on the sands of time, he should.
Click on Reports for more Details
