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Nov 2015
In what is now increasingly becoming the precedent, consumers are now tapping the PNGRB for enforcing gas supply contracts that gas pipeline companies sometimes willfully violate.
8PNGRB has found prima facie evidence of unfairness on the part of GSPC in denying access to glass maker Saint Gobain Pvt Ltd to the natural gas pipeline from Amboli to Jaghda on the state turn gas major's Hazira-Ankleshwar pipeline.
8The gas maker has moved the regulator saying that the denial of access is in violation of Regulation 9 of the PNGRB (Exclusivity for City or Local Natural Gas Distribution Network) Regulations, 2008 when read with PNGRB's Access Code for Common Carrier or Contract Carrier Natural Gas Pipelines Regulations.
8The PNGRB was moved by Saint Gonbain to issue directions to GSPC to provide access to the pipeline on the basis of the spot gas agreement signed in May, 2015 for sale of 1800 MMBTU of natural gas at the prevailing market price.
8The case has been accepted by the regulator for formal hearing.
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8PNGRB has found prima facie evidence of unfairness on the part of GSPC in denying access to glass maker Saint Gobain Pvt Ltd to the natural gas pipeline from Amboli to Jaghda on the state turn gas major's Hazira-Ankleshwar pipeline.
8The gas maker has moved the regulator saying that the denial of access is in violation of Regulation 9 of the PNGRB (Exclusivity for City or Local Natural Gas Distribution Network) Regulations, 2008 when read with PNGRB's Access Code for Common Carrier or Contract Carrier Natural Gas Pipelines Regulations.
8The PNGRB was moved by Saint Gonbain to issue directions to GSPC to provide access to the pipeline on the basis of the spot gas agreement signed in May, 2015 for sale of 1800 MMBTU of natural gas at the prevailing market price.
8The case has been accepted by the regulator for formal hearing.
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Can gas ever replace coal in the power sector, for if that happens, it will be a game changer for the gas and LNG industry?
The answer is "yes" but only under the following circumstances:
8Domestic coal pricing in India will have to be deregulated. If the cost of coal goes up to import parity price, then it helps the investment case for gas.
8Against this, gas usage will go up only if imported LNG price is low enough.
8If renewal power is cost efficient, and if imported LNG price stays low, a case can me made out for the "renewable-plus-gas" combine to compete aggressively with coal.
8Then again, it is argued that the “renewables-plus-gas” option becomes more attractive if there is a substantial difference in the cost of capital, favouring renewables. This is possible, but would require direct government intervention
8From India, according to the IEA, it requires a regulatory regime that will enable lenders to canalize long-term finance in the gas and renewal segments,
8From the international community, conscious that the carbon intensity of India’s power generation is a critical barometer of the success or failure of global climate policy, it requires a framework to channel low-cost financing to low-carbon investment in India.
8And this is when the "renewal-plus-gas" option can begin to work.
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The answer is "yes" but only under the following circumstances:
8Domestic coal pricing in India will have to be deregulated. If the cost of coal goes up to import parity price, then it helps the investment case for gas.
8Against this, gas usage will go up only if imported LNG price is low enough.
8If renewal power is cost efficient, and if imported LNG price stays low, a case can me made out for the "renewable-plus-gas" combine to compete aggressively with coal.
8Then again, it is argued that the “renewables-plus-gas” option becomes more attractive if there is a substantial difference in the cost of capital, favouring renewables. This is possible, but would require direct government intervention
8From India, according to the IEA, it requires a regulatory regime that will enable lenders to canalize long-term finance in the gas and renewal segments,
8From the international community, conscious that the carbon intensity of India’s power generation is a critical barometer of the success or failure of global climate policy, it requires a framework to channel low-cost financing to low-carbon investment in India.
8And this is when the "renewal-plus-gas" option can begin to work.
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Higher investments in the E&P sector is likely to have a bigger impact on gas production than oil in India, the IEA has claimed.
8But even here there is a limitation. Combined recoverable gas reserves from conventional reservoirs, CBM and shale gas have been pegged at 7.93 tcf in 2014.
8India’s natural gas production increases from 35 bcm in 2013 to to nearly 90 bcm in 2040, but this still leaves a sizeable gap of around 80 bcm that needs to be met by imported gas. Conventional gas production is dominated today by ONGC's ageing Vasai field.
8Onshore conventional production consists of many small projects, only a handful of which contribute more than 5% of total onshore supply.
8There is potential for new gas discoveries onshore, considering the extent of unexplored acreage, but the larger potential lies offshore, with the deepwater Krishna-Godavari basin the centre of activity since the initial discovery by Reliance at the KG-D6 block (since followed by large discoveries in neighbouring blocks by Reliance and ONGC).
8With the contribution from conventional onshore fields set to stagnate, the opportunities for substantial growth are first in the offshore basins, followed by onshore coalbed methane (CBM), which we assume to increase in the 2020s, and the possibility of shale gas output later in the projection period.
8Although resources are large, all of these sources of gas face substantial uncertainties: the problems faced byReliance’s KG-D6 block have tempered expectations for offshore development.
8CBM projects have gotten off to a reasonable start, but development costs are still high.
8Shale gas resources are understood to be large, but appraisal is at a very early stage and large-scale production could run into significant problems over land use, water availability and acceptance by local communities.
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8But even here there is a limitation. Combined recoverable gas reserves from conventional reservoirs, CBM and shale gas have been pegged at 7.93 tcf in 2014.
8India’s natural gas production increases from 35 bcm in 2013 to to nearly 90 bcm in 2040, but this still leaves a sizeable gap of around 80 bcm that needs to be met by imported gas. Conventional gas production is dominated today by ONGC's ageing Vasai field.
8Onshore conventional production consists of many small projects, only a handful of which contribute more than 5% of total onshore supply.
8There is potential for new gas discoveries onshore, considering the extent of unexplored acreage, but the larger potential lies offshore, with the deepwater Krishna-Godavari basin the centre of activity since the initial discovery by Reliance at the KG-D6 block (since followed by large discoveries in neighbouring blocks by Reliance and ONGC).
8With the contribution from conventional onshore fields set to stagnate, the opportunities for substantial growth are first in the offshore basins, followed by onshore coalbed methane (CBM), which we assume to increase in the 2020s, and the possibility of shale gas output later in the projection period.
8Although resources are large, all of these sources of gas face substantial uncertainties: the problems faced byReliance’s KG-D6 block have tempered expectations for offshore development.
8CBM projects have gotten off to a reasonable start, but development costs are still high.
8Shale gas resources are understood to be large, but appraisal is at a very early stage and large-scale production could run into significant problems over land use, water availability and acceptance by local communities.
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It takes an outside agency such as the IEA to come up with an understandable matrix of Indian energy sector and how it is going to behave going forward till the year 2040.
8That is when the country sits up and takes notice
8The agency's Indian specific report estimates that an investment of a massive $2.8 trillion will be required in the energy sector in the next 15 years, amounting to an investment of more than $100 billion a year. In other words, around Rs 700,000 crore of fresh money and business opportunities will be available every year in this segment for the next 25 years.
8Another $0.8 trillion will be needed to improve energy efficiency levels across different sector of the economy.
8The IEA believes that every segment -- oil & gas, coal, power generation and transmission and distribution -- will continue to play significant roles in India well up to 2040.
8The oil sector -- including upstream, transportation and refining sectors -- will eat up an investment of a massive $285 billion.
8The gas sector too will need an investment of $212 billion.
8The use of coal, it is projected, will go up instead of coming down, growing at 8% a year. About $199 billion will be absorbed by this sector.
8The biggest investment will be in power generation, a mind boggling $1.27 trillion, followed by transmission and distribution at $845 billion.
8Clearly, there is no other segment anywhere else in the world that will absorb a higher quantum of investment in any one country than the Indian energy sector, going forward till 2040.
8Clearly, the mix might change a little bit in the future but business development opportunities will remain robust for all players in the game.
8In fact, for equipment and service suppliers, the current slowdown in orders is temporary and they are likely to be busier ahead than ever before.
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8That is when the country sits up and takes notice
8The agency's Indian specific report estimates that an investment of a massive $2.8 trillion will be required in the energy sector in the next 15 years, amounting to an investment of more than $100 billion a year. In other words, around Rs 700,000 crore of fresh money and business opportunities will be available every year in this segment for the next 25 years.
8Another $0.8 trillion will be needed to improve energy efficiency levels across different sector of the economy.
8The IEA believes that every segment -- oil & gas, coal, power generation and transmission and distribution -- will continue to play significant roles in India well up to 2040.
8The oil sector -- including upstream, transportation and refining sectors -- will eat up an investment of a massive $285 billion.
8The gas sector too will need an investment of $212 billion.
8The use of coal, it is projected, will go up instead of coming down, growing at 8% a year. About $199 billion will be absorbed by this sector.
8The biggest investment will be in power generation, a mind boggling $1.27 trillion, followed by transmission and distribution at $845 billion.
8Clearly, there is no other segment anywhere else in the world that will absorb a higher quantum of investment in any one country than the Indian energy sector, going forward till 2040.
8Clearly, the mix might change a little bit in the future but business development opportunities will remain robust for all players in the game.
8In fact, for equipment and service suppliers, the current slowdown in orders is temporary and they are likely to be busier ahead than ever before.
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The upstream oil and gas sector will attract an investment of 189 billion dollars over the next 15 years.
8The yearly investment will be around $12 billion, that is around Rs 80,000 crore per year.
8The gas transportation segment will attract another $84 billion
8That's a sizeable pie by any yardstick.
8Pertinently, though investments will continue, there will however be a stark mismatch between domestic resources and demand for oil.
8Proven reserves of oil are at 5.7 billion barrels (our of a total remaining recoverable reserves of 24 billion barrels) in comparison with an annual crude demand of 1.4 billion and rising ever year.
8Crude oil import dependency will go up to a whopping 90% from 70% now.
8The dependency on the Middle East will increase and not come down
8The projection is that Bitumen will come in from Canada, and imports will also come from Africa and Latin America but their share will come down.
8The import bill will be high: $480 billion by 2040.
8So crude carriers will be required in larger numbers along with attendant port infrastructure to import such huge volumes of crude.
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8The yearly investment will be around $12 billion, that is around Rs 80,000 crore per year.
8The gas transportation segment will attract another $84 billion
8That's a sizeable pie by any yardstick.
8Pertinently, though investments will continue, there will however be a stark mismatch between domestic resources and demand for oil.
8Proven reserves of oil are at 5.7 billion barrels (our of a total remaining recoverable reserves of 24 billion barrels) in comparison with an annual crude demand of 1.4 billion and rising ever year.
8Crude oil import dependency will go up to a whopping 90% from 70% now.
8The dependency on the Middle East will increase and not come down
8The projection is that Bitumen will come in from Canada, and imports will also come from Africa and Latin America but their share will come down.
8The import bill will be high: $480 billion by 2040.
8So crude carriers will be required in larger numbers along with attendant port infrastructure to import such huge volumes of crude.
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It is important for service and equipment providers in the oil & gas business to be able to identify early business opportunity trends.
8A careful reading of the document is recommended.
8Opportunities will be available in abundance but where will they lie?
8Studies should be made on which segments will emerge stronger and accordingly pick the opportunities ahead.
8For those who do agency work, it is time to diversify the basket of companies.
8Transmission is a big opportunity and so is distributed, standalone renewable energy projects.
8Smart metering, battery storage and green buildings, air based cooling towers, etc. are great growth opportunities in the future.
8Future scouting tours abroad must include meetings with these companies.
8Clearly, the current stagnation in orders is temporary and the gloom will lift soon.
8So hold on to your seat belts and prepare for the ride.
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8A careful reading of the document is recommended.
8Opportunities will be available in abundance but where will they lie?
8Studies should be made on which segments will emerge stronger and accordingly pick the opportunities ahead.
8For those who do agency work, it is time to diversify the basket of companies.
8Transmission is a big opportunity and so is distributed, standalone renewable energy projects.
8Smart metering, battery storage and green buildings, air based cooling towers, etc. are great growth opportunities in the future.
8Future scouting tours abroad must include meetings with these companies.
8Clearly, the current stagnation in orders is temporary and the gloom will lift soon.
8So hold on to your seat belts and prepare for the ride.
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The IEA is not sure whether the Revenue Sharing model -- in comparison to the profit sharing regime currently in vogue -- is going to be a success in India.
8"It remains to be seen whether the balance of risk and reward will be sufficient to attract new investors in the upstream sector, especially for acreages that require exploration," the IEA said.
8The IEA echoes the views of a segment of the E&P industry that it will be difficult to commit investments through a revenue sharing model when it is unclear what kind of hydrocarbon reserves will be discovered in the new blocks that are to be auctioned by the government.
8In a veiled criticism of the oil and gas policies of the government, the IEA said that success has been constrained by India's "complex business environment", forcing a relinquishment of many E&P blocks. Of the 254 blocks auctioned so far, only 11 fields have been developed and put into production.
8Domestic crude output is now expected to fall before it picks up speed again but output will not go up beyond a point.
8The boost to output due to the discoveries in Rajasthan subsides by 2020 and, although additional onshore discoveries of the magnitude seen in Rajasthan are not excluded, neither these nor the envisaged development of new reserves from the offshore basins will be sufficient to outweigh the effects of declining production from existing fields.
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8"It remains to be seen whether the balance of risk and reward will be sufficient to attract new investors in the upstream sector, especially for acreages that require exploration," the IEA said.
8The IEA echoes the views of a segment of the E&P industry that it will be difficult to commit investments through a revenue sharing model when it is unclear what kind of hydrocarbon reserves will be discovered in the new blocks that are to be auctioned by the government.
8In a veiled criticism of the oil and gas policies of the government, the IEA said that success has been constrained by India's "complex business environment", forcing a relinquishment of many E&P blocks. Of the 254 blocks auctioned so far, only 11 fields have been developed and put into production.
8Domestic crude output is now expected to fall before it picks up speed again but output will not go up beyond a point.
8The boost to output due to the discoveries in Rajasthan subsides by 2020 and, although additional onshore discoveries of the magnitude seen in Rajasthan are not excluded, neither these nor the envisaged development of new reserves from the offshore basins will be sufficient to outweigh the effects of declining production from existing fields.
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Uncertainty continues to bog down the gas sector in India, according to the IEA.
8To be able to produce 90 BCM of gas per year from 35 BCM at present, the government's current gas pricing formula will have to undergo a change.
8The IEA claims that based on the current pricing formula, and taking into account future international price projections, the domestic price will recover from today’s levels of around $4/MBtu to reach around $7/MBtu in 2025 and close to $9 MBtu by 2040.
8But the IEA has warned that prices at these levels would not generate sufficient investment to meet the target of 2000 BCM of new gas reserves
The target can only be achieved under the following price scenarios:
--Deepwater gas: $9-14/MBtu
--Shale gas: $7-9/MBtu
--Coalbed methane: $7-12/MBtu
--Onshore conventional gas: $7-10/MBtu
--Offshore shallow water gas: $4-8/MBtu
8Interestingly, a higher gas price is not the only variable that affects the prospects for investment. The situation could also be altered by a change in the fiscal terms for upstream activity, or a reduction in the perception of risk associated with investment in India.
8Unconventional gas could also fundamentally change India’s supply cost curve, if coalbed methane or shale could be brought on at an average cost of $7/MBtu or less.
8But the challenges are significant, especially given the intensity of drilling that would be required to bring down costs to these levels.
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8To be able to produce 90 BCM of gas per year from 35 BCM at present, the government's current gas pricing formula will have to undergo a change.
8The IEA claims that based on the current pricing formula, and taking into account future international price projections, the domestic price will recover from today’s levels of around $4/MBtu to reach around $7/MBtu in 2025 and close to $9 MBtu by 2040.
8But the IEA has warned that prices at these levels would not generate sufficient investment to meet the target of 2000 BCM of new gas reserves
The target can only be achieved under the following price scenarios:
--Deepwater gas: $9-14/MBtu
--Shale gas: $7-9/MBtu
--Coalbed methane: $7-12/MBtu
--Onshore conventional gas: $7-10/MBtu
--Offshore shallow water gas: $4-8/MBtu
8Interestingly, a higher gas price is not the only variable that affects the prospects for investment. The situation could also be altered by a change in the fiscal terms for upstream activity, or a reduction in the perception of risk associated with investment in India.
8Unconventional gas could also fundamentally change India’s supply cost curve, if coalbed methane or shale could be brought on at an average cost of $7/MBtu or less.
8But the challenges are significant, especially given the intensity of drilling that would be required to bring down costs to these levels.
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Those setting up LNG terminals but despairing about how quickly India can absorb the gas can derive some strength from the IEA's projection that gas imports will reach 80 BCM by 2040, with 85% of this being brought in as LNG and the rest via international pipelines.
8India currently has around 28 BCM of LNG capacity in place, so there is a lot of scope for growth.
8IEA in fact sees the potential for one or both of the international gas pipelines proejcts -- the TAPI and the Iran-Pakistan-India pipeline -- going on stream in the long term and project that pipeline based gas imports to India will start in the latter part of the 2020s.
8In either case, Turkmenistan’s large resources may have an important role to play, either directly as supplier in the case of TAPI or indirectly in the case of IPI (with increased Turkmenistan exports to Iran meeting a part of northern Iranian demand and freeing up Iranian gas in the south, where most of Iran’s gas is produced, for export.
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8India currently has around 28 BCM of LNG capacity in place, so there is a lot of scope for growth.
8IEA in fact sees the potential for one or both of the international gas pipelines proejcts -- the TAPI and the Iran-Pakistan-India pipeline -- going on stream in the long term and project that pipeline based gas imports to India will start in the latter part of the 2020s.
8In either case, Turkmenistan’s large resources may have an important role to play, either directly as supplier in the case of TAPI or indirectly in the case of IPI (with increased Turkmenistan exports to Iran meeting a part of northern Iranian demand and freeing up Iranian gas in the south, where most of Iran’s gas is produced, for export.
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Unlike in the US, the IEA claims that they do not envisage a situation where a case for coal fired case disappears and the peaking load stations will become gas fired to complement the use of renewal energy.
8There are a number of reasons, chief among which is the sheer scale of the electricity demand.
8Keeping pace with power consumption growth at 4.9% per year is already a stern challenge for India, even with all generation options on the table.
8Relying on a very rapid pace of wind and solar deployment to meet a much larger share of rising demand could also run into significant supply-side challenges, stemming – in the early years at least – from disinclination in India to rely too heavily on imported solar panels and wind turbines.
8If solar and wind power supply goes up dramatically, there will still be a need for conventional power plants that are fired by coal and gas.
8This is because wind and solar output is variable. Solar power is not available at night while windpower waxes and wanes with the monsoons.
8Because the transmission network is weak in India, conventional coal or gas fired power plants will be required to crease out this variability in renewal power supply.
8The main uncertainty for imported natural gas relates to price and how and where this gas can find a niche in the Indian domestic market.
8In the power sector, for example, LNG (even at $6/MBtu) is too expensive to compete with imported coal as a fuel for baseload or most mid-merit electricity demand, leaving gas with only a limited role as a way to balance the system and meet peaks in power demand.
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8There are a number of reasons, chief among which is the sheer scale of the electricity demand.
8Keeping pace with power consumption growth at 4.9% per year is already a stern challenge for India, even with all generation options on the table.
8Relying on a very rapid pace of wind and solar deployment to meet a much larger share of rising demand could also run into significant supply-side challenges, stemming – in the early years at least – from disinclination in India to rely too heavily on imported solar panels and wind turbines.
8If solar and wind power supply goes up dramatically, there will still be a need for conventional power plants that are fired by coal and gas.
8This is because wind and solar output is variable. Solar power is not available at night while windpower waxes and wanes with the monsoons.
8Because the transmission network is weak in India, conventional coal or gas fired power plants will be required to crease out this variability in renewal power supply.
8The main uncertainty for imported natural gas relates to price and how and where this gas can find a niche in the Indian domestic market.
8In the power sector, for example, LNG (even at $6/MBtu) is too expensive to compete with imported coal as a fuel for baseload or most mid-merit electricity demand, leaving gas with only a limited role as a way to balance the system and meet peaks in power demand.
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The IEA has projected that there will be a significant saving in gas consumption on account of the ongoing energy efficiency drive in the urea sector.
8The energy intensity of urea production has decreased significantly from 0.84 toe/tonne of urea in 1990 to around 0.64 toe/tonne urea in 2013.
8Future energy intensity reductions become more limited as 0.26 toe/tonne of energy is needed as a feedstock, and best practice energy use for urea plants is currently around 0.19 toe/tonneurea (Figure 2.13).
8In IEA's projections, the energy intensity of urea production decreases further to 0.55 toe/tonne urea by 2040 (a further 15% improvement compared with today), representing a reduction of 4 Mtoe (4.8 bcm) in the amount of natural gas required compared to a situation if there were no future efficiency gains.
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8The energy intensity of urea production has decreased significantly from 0.84 toe/tonne of urea in 1990 to around 0.64 toe/tonne urea in 2013.
8Future energy intensity reductions become more limited as 0.26 toe/tonne of energy is needed as a feedstock, and best practice energy use for urea plants is currently around 0.19 toe/tonneurea (Figure 2.13).
8In IEA's projections, the energy intensity of urea production decreases further to 0.55 toe/tonne urea by 2040 (a further 15% improvement compared with today), representing a reduction of 4 Mtoe (4.8 bcm) in the amount of natural gas required compared to a situation if there were no future efficiency gains.
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The draft guidelines from the ministry of Road Transport for advancing the imposition of BS-V and BS-VI norms in the country from APril, 2022 to April 2019 has been issues for the four wheeler category.
8The aim is to ensure an earlier date for a significant reduction in NOx/4C levels that the new norms will enshrine.
8The norms for two and three wheeler categories will be also be notified shortly with timelines similar to those for four wheeler category.
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8The aim is to ensure an earlier date for a significant reduction in NOx/4C levels that the new norms will enshrine.
8The norms for two and three wheeler categories will be also be notified shortly with timelines similar to those for four wheeler category.
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Conserving money and sticking to familiar ground would be a good piece of advise for BPCL.
8Doubling or tripling its investment rate in doubtful assets may not be the best way out.
8That fact that BPCL is a first rate retail company has never been in doubt.
8It has been making good money of late and the PAT curve has been inching up over the last few years.
8The thruput per retail outlet in the first half of this year was at 189 KL as against 164 for HPCL and 156 for IOC
8Over 6300 automated outlets -- out of a total of 13,019 outlets -- generate over 75% of the total retail sales volume.
8The management is made of an experienced team.
8What is needed now are innovative ideas.
8The BPCL brass carries the weight of history on its back and at this crucial point, every decision counts. Any wrong move can lead to disaster.
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8Doubling or tripling its investment rate in doubtful assets may not be the best way out.
8That fact that BPCL is a first rate retail company has never been in doubt.
8It has been making good money of late and the PAT curve has been inching up over the last few years.
8The thruput per retail outlet in the first half of this year was at 189 KL as against 164 for HPCL and 156 for IOC
8Over 6300 automated outlets -- out of a total of 13,019 outlets -- generate over 75% of the total retail sales volume.
8The management is made of an experienced team.
8What is needed now are innovative ideas.
8The BPCL brass carries the weight of history on its back and at this crucial point, every decision counts. Any wrong move can lead to disaster.
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There is a need for the company to do a more honest appraisal of the risks that it faces.
8BPCL must come clean on the cost of its global E&P assets and the risks that they entail.
8Strategic teams within the company must look at ways to diversify risks and open up investment avenues where the carbon footprint is lower.
8A chunk of the Rs 100,000 crore outlay must go into clean energy. Bets have to be spread more widely and eggs laid in a few more baskets.
8Consultants have to be hired to redefine priorities. The company should ask these consultants whether it should defiantly try and become an integrated company with global assets or should it cut its risks and have a less ambitious template.
8Can it support its sky high ambitions on a networth of just Rs 25,000 crore?
8It is quite possible that some of the E&P assets that BPCL holds may be selling at a far lower price than the acquisition cost and the company does not have any option but to necessarily put up the money needed to develop them.
8The best that the company can do is to be honest with itself.
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8BPCL must come clean on the cost of its global E&P assets and the risks that they entail.
8Strategic teams within the company must look at ways to diversify risks and open up investment avenues where the carbon footprint is lower.
8A chunk of the Rs 100,000 crore outlay must go into clean energy. Bets have to be spread more widely and eggs laid in a few more baskets.
8Consultants have to be hired to redefine priorities. The company should ask these consultants whether it should defiantly try and become an integrated company with global assets or should it cut its risks and have a less ambitious template.
8Can it support its sky high ambitions on a networth of just Rs 25,000 crore?
8It is quite possible that some of the E&P assets that BPCL holds may be selling at a far lower price than the acquisition cost and the company does not have any option but to necessarily put up the money needed to develop them.
8The best that the company can do is to be honest with itself.
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Can BPCL's financial base support a Rs 100,000 spending spree in four years?
8The company's current networth is around Rs 25,000 crore and it has a debt equity ratio of around 0.7. The profit after tax is around Rs 5000 crore.
8In this context, pushing through a Rs one lakh crore capex will stretch its balance sheet far too thin, sharply raising its debt equity ratio to levels that the company hadn't seen even when oil prices were sky high and it had to borrow heavily to finance the under-recovery gap.
8The other problem is where is this money going to be spend? If it is going to be concentrated on very high risk African and Brazilian oil and gas assets, where returns are not necessarily guaranteed.
8There is no harm in reminding the company that to keep global warming at two degrees most of the world's fossil fuel reserves will have to be kept untapped and this is going reflect on returns that BPCL will elicit on such investments. At current LNG prices, BPCL's investment in Mozambique is not viable.
8The company may even have to be careful about expanding its refining assets as the advent of the electric car may change the way the world and also India use liquid fuels for personal transportation.
8Similarly, attempts to muscle in a subsidy backed investment in the Numaligarh refinery is fraught with risks.
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8The company's current networth is around Rs 25,000 crore and it has a debt equity ratio of around 0.7. The profit after tax is around Rs 5000 crore.
8In this context, pushing through a Rs one lakh crore capex will stretch its balance sheet far too thin, sharply raising its debt equity ratio to levels that the company hadn't seen even when oil prices were sky high and it had to borrow heavily to finance the under-recovery gap.
8The other problem is where is this money going to be spend? If it is going to be concentrated on very high risk African and Brazilian oil and gas assets, where returns are not necessarily guaranteed.
8There is no harm in reminding the company that to keep global warming at two degrees most of the world's fossil fuel reserves will have to be kept untapped and this is going reflect on returns that BPCL will elicit on such investments. At current LNG prices, BPCL's investment in Mozambique is not viable.
8The company may even have to be careful about expanding its refining assets as the advent of the electric car may change the way the world and also India use liquid fuels for personal transportation.
8Similarly, attempts to muscle in a subsidy backed investment in the Numaligarh refinery is fraught with risks.
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All energy companies are at crossroads today and BPCL is no exception. The company has drawn up a very ambitious plan to spend a whopping Rs 100,000 crore in the next four years, according to a presentation vailable with this website.
8The company will have to speed up its capex by a whopping 2.5 times annually from its current level of Rs 10,000 crore a year, and all of it in the next four years.
8Where exactly will this money go?
8There is no clarity yet but a lot of it is likely to be sunk in its upstream assets, including funding its 10% stake in the Rovuma basin in Mozambique, where gas reserves are estimated at between 50 to 70 TCF..
8More money will go into the Whaoo basin in Brazil, where reserves are estimated at 200 MMBOE and where the company holds a stake in partnership with Videocon.
8BPCL also has an assortment of rather lackluster E&P assets in India in which it holds stakes of between 20 to 40%. Cash calls have to be attended in these assets as well.
8Investments are also planned in upgradation and expansion of refineries, gas and marketing infrastructure in India.
Click on Reports to find out more about BPCL's Rs 100,000 crore investment plan.
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8The company will have to speed up its capex by a whopping 2.5 times annually from its current level of Rs 10,000 crore a year, and all of it in the next four years.
8Where exactly will this money go?
8There is no clarity yet but a lot of it is likely to be sunk in its upstream assets, including funding its 10% stake in the Rovuma basin in Mozambique, where gas reserves are estimated at between 50 to 70 TCF..
8More money will go into the Whaoo basin in Brazil, where reserves are estimated at 200 MMBOE and where the company holds a stake in partnership with Videocon.
8BPCL also has an assortment of rather lackluster E&P assets in India in which it holds stakes of between 20 to 40%. Cash calls have to be attended in these assets as well.
8Investments are also planned in upgradation and expansion of refineries, gas and marketing infrastructure in India.
Click on Reports to find out more about BPCL's Rs 100,000 crore investment plan.
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Reliance India Limited (RIL), the operator of the CY-DWN- 2001/2 block, has chalked out a plan to drill another eight exploratory wells in the off coast of Tamil Naidu.
8RIL has already been accorded environmental clearance for drilling of 11 wells in the block in March 2005.
8Subsequently, 9 wells were drilled in this block and RIL did find some prospective hydrocarbon locations in the block.
8Out of the 9 wells drilled, 6 wells were dry wells and hence they were closed and abandoned while 3 wells were hydrocarbon bearing.
8Hence in order to ascertain the real quantum of hydrocarbons in the block, RIL is planning to carry out an additional exploratory drilling programme
8The deep-water block -- with a water depth varying between 500 and 3250 metres -- falls in the Bay of Bengal, off the east coast of India between Pondicherry and Karaikal.
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8RIL has already been accorded environmental clearance for drilling of 11 wells in the block in March 2005.
8Subsequently, 9 wells were drilled in this block and RIL did find some prospective hydrocarbon locations in the block.
8Out of the 9 wells drilled, 6 wells were dry wells and hence they were closed and abandoned while 3 wells were hydrocarbon bearing.
8Hence in order to ascertain the real quantum of hydrocarbons in the block, RIL is planning to carry out an additional exploratory drilling programme
8The deep-water block -- with a water depth varying between 500 and 3250 metres -- falls in the Bay of Bengal, off the east coast of India between Pondicherry and Karaikal.
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Due to limited storage spaces on rigs, a shore-based supply facility shall be invariably required to provide logistic and other support to the drill rig that will carry out the activity.
8RIL's existing supply base at Kakinada, Andhra Pradesh, which were established for the on-going exploratory and development projects in the D-6 block will be used for this drilling campaign also.
8Helibase facilities of RIL at Gadimoga and Pondicherry airport (Pondicherry) will be used for the helicopter movement to and from from rig for manpower movement.
8RIL said that it will engage an offshore drilling rig and attendant service providers based on international competitive bidding processes.
8It is not planning to create any new shore based support for this drilling campaign.
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8RIL's existing supply base at Kakinada, Andhra Pradesh, which were established for the on-going exploratory and development projects in the D-6 block will be used for this drilling campaign also.
8Helibase facilities of RIL at Gadimoga and Pondicherry airport (Pondicherry) will be used for the helicopter movement to and from from rig for manpower movement.
8RIL said that it will engage an offshore drilling rig and attendant service providers based on international competitive bidding processes.
8It is not planning to create any new shore based support for this drilling campaign.
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The proposed drilling rig and the supply vessels will have Diesel Generators (DG) sets on-board to generate the power whereas at the supply base, power requirement will be met either with local power supply.
8Fuel consumption for the rig and support vessels will be approx. 1800 - 2000 KL/Month. A helicopter will make approx. 2 sorties per day.
8Most of the drilling by RIL will be carried out with Water Based Mud (WBM) or Synthetic Based Mud (SBM) (which will be used in special cases only) or both.
8As the block is in deep-water one, the rig will be positioned several kilometres off the shore.
8RIL sources said that the drilling campaign will be undertaken in 2016 and currently it is in the process of evaluating the kind of rates that it will elicit from equipment and service providers.
8We are looking at a very large cut in prices over previous quotes, a company official said, as and when we carry out the drilling programme.
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8Fuel consumption for the rig and support vessels will be approx. 1800 - 2000 KL/Month. A helicopter will make approx. 2 sorties per day.
8Most of the drilling by RIL will be carried out with Water Based Mud (WBM) or Synthetic Based Mud (SBM) (which will be used in special cases only) or both.
8As the block is in deep-water one, the rig will be positioned several kilometres off the shore.
8RIL sources said that the drilling campaign will be undertaken in 2016 and currently it is in the process of evaluating the kind of rates that it will elicit from equipment and service providers.
8We are looking at a very large cut in prices over previous quotes, a company official said, as and when we carry out the drilling programme.
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The rather lukewarm response to the request for proposals by the Department of Fertilizers (DOF) for investors in two new Rs 6000 crore urea plants -- at Gorakhpur and Sindri -- has not come as a surprise to the fertilizer industry.
8Reports say that there were just one bidder each -- Matix Fertilizers for Gorakhpur and Adani for Sindri -- for these plants.
8Clearly, large Indian fertilizer companies did not find bidding for the new units feasible as they claim that there are far too many variables to be taken into account in these units.
8Matix is a company which is still struggling to complete a fertilizer plant based on CBM to be supplied from Essar's Raniganj field. It is already under pressure and it seems onerous that it has taken on the responsibility of setting up another unit that has to come up quickly to be able to avail of the enabling facilities of the government's urea investment policy.
8One problem with policy seems to be the unwillingness of the government to assure a 100% buyback. Policy provisions provide a buyback only up to a certain point, beyond which if imported urea is cheaper, domestic production will be not be prioritized. There is reluctance among authorities to acknowledge the industry's argument that profits actually come from incremental output beyond the cut off point due to the very nature of the normative subsidy dispensation regime.
8So the question then essentially boils down to the fact that India does not have the comparative advantage to make urea from gas. It will be far cheaper to produce it in the US where Henry Hub prices will be much lower than the cost of pooled gas in India.
8The government on the other hand feels that importing gas is a preferred option in comparison to importing urea.
8Both arguments have merit but the fertilizer industry is not buying the government's argument yet as most of them, baring the exception of Chambal Fertilzers -- have no plans just as yet to set up fresh capacity.
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8Reports say that there were just one bidder each -- Matix Fertilizers for Gorakhpur and Adani for Sindri -- for these plants.
8Clearly, large Indian fertilizer companies did not find bidding for the new units feasible as they claim that there are far too many variables to be taken into account in these units.
8Matix is a company which is still struggling to complete a fertilizer plant based on CBM to be supplied from Essar's Raniganj field. It is already under pressure and it seems onerous that it has taken on the responsibility of setting up another unit that has to come up quickly to be able to avail of the enabling facilities of the government's urea investment policy.
8One problem with policy seems to be the unwillingness of the government to assure a 100% buyback. Policy provisions provide a buyback only up to a certain point, beyond which if imported urea is cheaper, domestic production will be not be prioritized. There is reluctance among authorities to acknowledge the industry's argument that profits actually come from incremental output beyond the cut off point due to the very nature of the normative subsidy dispensation regime.
8So the question then essentially boils down to the fact that India does not have the comparative advantage to make urea from gas. It will be far cheaper to produce it in the US where Henry Hub prices will be much lower than the cost of pooled gas in India.
8The government on the other hand feels that importing gas is a preferred option in comparison to importing urea.
8Both arguments have merit but the fertilizer industry is not buying the government's argument yet as most of them, baring the exception of Chambal Fertilzers -- have no plans just as yet to set up fresh capacity.
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Given the breathtaking pace of change in the world of energy today, the Talcher coal gasification plant -- promoted by GAIL, RCF and Coal India Ltd -- seems to be no longer a viable proposition until more information is available on how energy costs are going to behave a few years from now.
8It is now established that governments will levy a carbon emission cost that may well make the cost of coal too high for gasification purposes to produce urea.
8The mathematics are still being worked out, but it has been established by BP in a detailed set of calculations that even a modest $40 per tonne tax on CO2 emission makes natural gas the lowest cost option in relation to coal.
8However with a higher carbon tax -- and this tax may even go up to $100 per tonne -- using Carbon Capture and Storage technology becomes more viable for users of coal and gas. Under this scenario too gas becomes a cheaper option than coal.
8There are however caveats to the advantage of gas over coal. The calculations have been done only for natural gas in the US and not for LNG.
8The use of LNG -- as is likely in India -- may well be more expensive than coal or renewable energy, everything else being the same.
8Essentially, the cost of coal will depend upon the quantum of carbon tax and the competitiveness of renewable energy in relation to coal based power. In case there is a switch from coal based power to renewal energy, the price of coal may fall on account of lack of demand.
8Since a coal gasification plant will have to take into account a long term cost-benefit perspective, it will be impossible to put together such an enterprise, particularly in India where the pricing uncertainty is going to be higher than in the US, unless all the variables are captured accurately in a modeling exercise.
8The way the energy scenario is evolving right now, and given the yet unknown consequences of disruptive technology, it is impossible to predict where coal will figure in the energy equilibrium a few years from now.
8Till the dust settles down, it will be foolhardy to start a gasification project using technologically challenging high ash content --and therefore high cost -- Indian coal.
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8It is now established that governments will levy a carbon emission cost that may well make the cost of coal too high for gasification purposes to produce urea.
8The mathematics are still being worked out, but it has been established by BP in a detailed set of calculations that even a modest $40 per tonne tax on CO2 emission makes natural gas the lowest cost option in relation to coal.
8However with a higher carbon tax -- and this tax may even go up to $100 per tonne -- using Carbon Capture and Storage technology becomes more viable for users of coal and gas. Under this scenario too gas becomes a cheaper option than coal.
8There are however caveats to the advantage of gas over coal. The calculations have been done only for natural gas in the US and not for LNG.
8The use of LNG -- as is likely in India -- may well be more expensive than coal or renewable energy, everything else being the same.
8Essentially, the cost of coal will depend upon the quantum of carbon tax and the competitiveness of renewable energy in relation to coal based power. In case there is a switch from coal based power to renewal energy, the price of coal may fall on account of lack of demand.
8Since a coal gasification plant will have to take into account a long term cost-benefit perspective, it will be impossible to put together such an enterprise, particularly in India where the pricing uncertainty is going to be higher than in the US, unless all the variables are captured accurately in a modeling exercise.
8The way the energy scenario is evolving right now, and given the yet unknown consequences of disruptive technology, it is impossible to predict where coal will figure in the energy equilibrium a few years from now.
8Till the dust settles down, it will be foolhardy to start a gasification project using technologically challenging high ash content --and therefore high cost -- Indian coal.
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Indian companies will need to watch out for possible impact on them from the 2015 Paris Climate Conference.
Decisions will include:
8Increasing energy efficiency in industry, buildings and transport
8Phasing out the use of least efficient coal fired power plants
8Increasing investment in renewables, including hydro
8Gradual phasing out of inefficient fossil fuel subsidies
8Reducing methane emissions from oil and gas production
The target seems to be to ensure that emissions peak by 2020 before they begin coming down.
The window seems to be very narrow to be able to limit temperature change to two degress centigrade. Already around 40 per cent of the allowable emissions to keep temperature change to 2 degrees have been exhausted, and the entire quota will be over by 2040.
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Decisions will include:
8Increasing energy efficiency in industry, buildings and transport
8Phasing out the use of least efficient coal fired power plants
8Increasing investment in renewables, including hydro
8Gradual phasing out of inefficient fossil fuel subsidies
8Reducing methane emissions from oil and gas production
The target seems to be to ensure that emissions peak by 2020 before they begin coming down.
The window seems to be very narrow to be able to limit temperature change to two degress centigrade. Already around 40 per cent of the allowable emissions to keep temperature change to 2 degrees have been exhausted, and the entire quota will be over by 2040.
Click on Reports for more Details
For reference purposes, the website carries here a breakeven comparison of LNG project costs for our readers.
8The breakeven points take into account the the cost of freight as well.
8Some breakeven levels are very high
8There are quite a few LNG projects which have break-even points of $10/mmbtu or higher when looked at with their attached E&P properties.
8Most of them are in Canada and Australia.
8The US Gulf Coast and East Africa have below $10/mmbtu levels but they are still high compared to current prevailing prices.
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8The breakeven points take into account the the cost of freight as well.
8Some breakeven levels are very high
8There are quite a few LNG projects which have break-even points of $10/mmbtu or higher when looked at with their attached E&P properties.
8Most of them are in Canada and Australia.
8The US Gulf Coast and East Africa have below $10/mmbtu levels but they are still high compared to current prevailing prices.
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Did oilex drum up too much hype over the success of its Cambay E&P block?
8Did the company brass overstepped its brief when it spoke grandiosely of an investment plan of between $800 million and a massive $2.4 billion over a period of 10 years that will entail the drilling of hundreds of wells in the block when there wasn't enough confirming data from the ground?
8After all, as of now, Oilex only has its much touted workover programme from its wells to show case and that raises the output to between 130 and 170 boepd.
8Are billion dollar plans justified on this premise?
8The answer, according to GSPC, which partners Oilex in the block, is "No".
8The state sector firm has expressed its no confidence by refusing to participate in cash calls on the ground that Oilex is trying to be too ambitious too quickly with the field with not enough technical information.
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8Did the company brass overstepped its brief when it spoke grandiosely of an investment plan of between $800 million and a massive $2.4 billion over a period of 10 years that will entail the drilling of hundreds of wells in the block when there wasn't enough confirming data from the ground?
8After all, as of now, Oilex only has its much touted workover programme from its wells to show case and that raises the output to between 130 and 170 boepd.
8Are billion dollar plans justified on this premise?
8The answer, according to GSPC, which partners Oilex in the block, is "No".
8The state sector firm has expressed its no confidence by refusing to participate in cash calls on the ground that Oilex is trying to be too ambitious too quickly with the field with not enough technical information.
Click on Details for more Details
Now that everything is in stalemate, is there a possibility of orders being released for the drilling campaign anytime soon?
8Even by best estimates, it will take anywhere between 60 to 90 days for drilling rig mobilization.
8Oilex has now said that a go-ahead has not been given for the programme, and there is no commitment on the timeline yet
8So for how long will the award of major contracts be on hold?
Click on Details as the website analyzes what is in store for suppliers of goods and services Details
8Even by best estimates, it will take anywhere between 60 to 90 days for drilling rig mobilization.
8Oilex has now said that a go-ahead has not been given for the programme, and there is no commitment on the timeline yet
8So for how long will the award of major contracts be on hold?
Click on Details as the website analyzes what is in store for suppliers of goods and services Details
There was much enthusiasm over the success of the Cambay 77H well among the promoters of Oilex.
8Oilex fired the imagination of the E&P world in India by drawing parallels between the geologies of the prolific Marcellus field in the US which went on the become one of the largest US gas fields in the world with its Cambay field, using the 77H well as an example.
8Oilex now thinks that it will be able to repeat the Marcellus example in Cambay.
8In the Cambay 77H well, Oilex successfully perforated, isolated and treated eight fractures over four stages through a horizontal drilling. It goes on to claim that the company's directional drilling capacity will improve as the wells that are to be drilled from here on will be repetitive in nature.
8The Cambay 77H has proven that the Eocene reservoir is amenable to this kind of exploitation, Oilex claims.
8Bur clearly GSPC wasn't impressed with the results and did not think that the American shale gas experience can be implanted into India lock stock and barrel, and wanted to wait for a longer period before pushing more money into such a technology.
Click on Details for more Details
8Oilex fired the imagination of the E&P world in India by drawing parallels between the geologies of the prolific Marcellus field in the US which went on the become one of the largest US gas fields in the world with its Cambay field, using the 77H well as an example.
8Oilex now thinks that it will be able to repeat the Marcellus example in Cambay.
8In the Cambay 77H well, Oilex successfully perforated, isolated and treated eight fractures over four stages through a horizontal drilling. It goes on to claim that the company's directional drilling capacity will improve as the wells that are to be drilled from here on will be repetitive in nature.
8The Cambay 77H has proven that the Eocene reservoir is amenable to this kind of exploitation, Oilex claims.
8Bur clearly GSPC wasn't impressed with the results and did not think that the American shale gas experience can be implanted into India lock stock and barrel, and wanted to wait for a longer period before pushing more money into such a technology.
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The problem with companies in the oil and gas industry today is that there is a lot of uncertainty about the future.
8And the manner in which Oilex was treated in the stock market -- where trading had to be halted -- and by its activist investors is a good indication of the growing anxiety over the performance of oil and gas companies today.
8Zeta Resources Limited, a shareholder of Oilex, refused to pay up its share of capital and is now taking Oilex to court for not being informed about its differences with GSPC. A bitter court battle may well be in the offing.
8Then again, Sundeep Bhandari, a non-executive director, had to take the rap for his apparentl failure to contain GSPC. He is not being nominated for directorship again.
8Low oil and gas prices have made everyone very jittery in the industry.
8There is a lot less tolerance today than before
Click on Reports for more on what Oilex is going to do next Details
8And the manner in which Oilex was treated in the stock market -- where trading had to be halted -- and by its activist investors is a good indication of the growing anxiety over the performance of oil and gas companies today.
8Zeta Resources Limited, a shareholder of Oilex, refused to pay up its share of capital and is now taking Oilex to court for not being informed about its differences with GSPC. A bitter court battle may well be in the offing.
8Then again, Sundeep Bhandari, a non-executive director, had to take the rap for his apparentl failure to contain GSPC. He is not being nominated for directorship again.
8Low oil and gas prices have made everyone very jittery in the industry.
8There is a lot less tolerance today than before
Click on Reports for more on what Oilex is going to do next Details
The Oilex brass is trying to ride over the storm by claiming that it stands by its statements that the Cambay block indeed has a lot of potential that is waiting to be tapped.
The company made the following points:
8It is re-looking at its financing plan and negotiating with GSPC for a solution
8It will review the company structure and appoint suitably qualified directors as desired by shareholders.
8It stands by its observations that using shale extraction technology in Cambay will yield the desired results
8The workover campaign has been successful.
8The wells that are sought to be drilled in the block will be commercially viable and ultimately create significant value.
8The company is now actively reviewing alternative funding opportunities to assist in realising its goalsin Cambay
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The company made the following points:
8It is re-looking at its financing plan and negotiating with GSPC for a solution
8It will review the company structure and appoint suitably qualified directors as desired by shareholders.
8It stands by its observations that using shale extraction technology in Cambay will yield the desired results
8The workover campaign has been successful.
8The wells that are sought to be drilled in the block will be commercially viable and ultimately create significant value.
8The company is now actively reviewing alternative funding opportunities to assist in realising its goalsin Cambay
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Nov 26 : Oilex moves into uncertain territory in Cambay-VI: GSPC is not an easy company to deal with
For the record, GSPC is not an easy company to do business with. It has a long record of intolerance when it comes to dealing with its E&P partners
8A case at point is the rabid opposition that the state owned company had towards its Canadian partner GeoGlobal Resources, a 10% partner in its Deendayal field in the KG Basin.
8The state owned company carried out a long and vicious battle to get GeoGlobal off the block.
8Then again, GSPC has refused to part with the operatorship of the block CB-ONN-2000/1 to its partner, GAIL, even though there was a specific agreement that they will take turns being operators.
8Now it is the turn of Oilex to face the ire of GSPC.
8The problem is that when a large publicly owned company takes up cudgels against a smaller player, it is impossible to fight back.
8Expect in the case of GAIL, which has its own clout, companies such as Oilex and GeoGlobal do not have the wherewithal to fight back.
8A major reason for such battles is that GSPC is run by IAS officers who in turn are under directions from state politicians. Some of them have little understanding about how the oil and gas sector works.
8Since the E&P sector is full of risks, managing partners requires a certain skill set that the GSPC top brass often do not have the patience or time to acquire.
Click on Details for more information on GSPC and how it deals with its partners Details
8A case at point is the rabid opposition that the state owned company had towards its Canadian partner GeoGlobal Resources, a 10% partner in its Deendayal field in the KG Basin.
8The state owned company carried out a long and vicious battle to get GeoGlobal off the block.
8Then again, GSPC has refused to part with the operatorship of the block CB-ONN-2000/1 to its partner, GAIL, even though there was a specific agreement that they will take turns being operators.
8Now it is the turn of Oilex to face the ire of GSPC.
8The problem is that when a large publicly owned company takes up cudgels against a smaller player, it is impossible to fight back.
8Expect in the case of GAIL, which has its own clout, companies such as Oilex and GeoGlobal do not have the wherewithal to fight back.
8A major reason for such battles is that GSPC is run by IAS officers who in turn are under directions from state politicians. Some of them have little understanding about how the oil and gas sector works.
8Since the E&P sector is full of risks, managing partners requires a certain skill set that the GSPC top brass often do not have the patience or time to acquire.
Click on Details for more information on GSPC and how it deals with its partners Details
E&P companies are now adapting quickly to the tough environment they find themselves in.
8Everybody has to work under the below $50/bbl paradigm.
8In some companies operating efficiencies have brought about as much 20% savings.
8Add to this cost savings through bargaining with contactors, and the figure adds up to a very significant amount.
8There is also a very significant reduction in discretionary spending. Organizations are being restructured, personnel laid off and decision making processes are being redrawn.
8Capital investments are now lower at more than 30%
8Efficiencies are being brought into raw material consumption. Transportation costs are being slashed.
8There is now a complete company–wide review and gap analysis, and there is emphasis on improving contract management, simplifying category spend.
8There is increased project management focus on civil work and logistics support, rig drilling and services performance along with improved inventory management strategies.
Click on our Reports section to find out more on how companies are coping Details
8Everybody has to work under the below $50/bbl paradigm.
8In some companies operating efficiencies have brought about as much 20% savings.
8Add to this cost savings through bargaining with contactors, and the figure adds up to a very significant amount.
8There is also a very significant reduction in discretionary spending. Organizations are being restructured, personnel laid off and decision making processes are being redrawn.
8Capital investments are now lower at more than 30%
8Efficiencies are being brought into raw material consumption. Transportation costs are being slashed.
8There is now a complete company–wide review and gap analysis, and there is emphasis on improving contract management, simplifying category spend.
8There is increased project management focus on civil work and logistics support, rig drilling and services performance along with improved inventory management strategies.
Click on our Reports section to find out more on how companies are coping Details
There is now likely to be intense competition for customers in the global LNG market.
8Is the glass half full or half empty? That will depend upon whether you are a buyer or seller of gas.
8An LNG supplier has recently given out the following figures to prove that the demand will remain very strong going ahead and if you are a buyer it is up to you to believe his spin o not.
8Global contractual supply is expected to be at least 30 MTPA short of demand in 2022, the argument goes,
8The shortage will go up to 120 MTPA by 2025.
8As demand increases, old contracts will roll off: And this is when low cost producers can entice buyers.
8Fresh contracts will always come up as few long term contracts have been signed in the past two to three years
8More than 25 MTPA of net existing contracts will expire in Japan, Korea and Taiwan between 2020 and 2025, leaving region around 40 MTPA of new demand for LNG contracts.
8So a low cost LNG producer sees an opportunity instead of a challenge in this mareket, the argument concludes.
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8Is the glass half full or half empty? That will depend upon whether you are a buyer or seller of gas.
8An LNG supplier has recently given out the following figures to prove that the demand will remain very strong going ahead and if you are a buyer it is up to you to believe his spin o not.
8Global contractual supply is expected to be at least 30 MTPA short of demand in 2022, the argument goes,
8The shortage will go up to 120 MTPA by 2025.
8As demand increases, old contracts will roll off: And this is when low cost producers can entice buyers.
8Fresh contracts will always come up as few long term contracts have been signed in the past two to three years
8More than 25 MTPA of net existing contracts will expire in Japan, Korea and Taiwan between 2020 and 2025, leaving region around 40 MTPA of new demand for LNG contracts.
8So a low cost LNG producer sees an opportunity instead of a challenge in this mareket, the argument concludes.
Click on Reports for more Details
Sweeping changes in the energy markets are forcing all stakeholders to look for new and dramatic solutions to bring down costs and greenhouse emissions.
8In this context, Indian players are way out of leagues with advances in technology as the approach here seems to be more reactive than proactive.
8The website will henceforth showcase new and disruptive technologies that may have have impact in India at some point in time.
8A case at point is a Japanese model -- that has been successful in a few countries -- that combines in-situ bitumen recovery, processing and co-gasification of coal, blended with a fraction of a non-distillable bitumen combined with electric power generation and production of dimethyl ether (DME).
8The integrated technology will generate significant quantities of electric power and nitrogen-based fertilizer (urea).
8Molten, non-leachable ash produced by co-gasification will be utilized in roads construction.
8Any CO2 generated will be required for urea synthesis, enhanced oil recovery (EOR) as well as DME production.
8Utilization of all by-products generated by the technology will further increase the effectiveness of process economics and eliminate its harmful impact on the environment.
8The integration will bridge the transition from carbon-based to carbon-neutral energy generation.
Click on Reports for more Details
8In this context, Indian players are way out of leagues with advances in technology as the approach here seems to be more reactive than proactive.
8The website will henceforth showcase new and disruptive technologies that may have have impact in India at some point in time.
8A case at point is a Japanese model -- that has been successful in a few countries -- that combines in-situ bitumen recovery, processing and co-gasification of coal, blended with a fraction of a non-distillable bitumen combined with electric power generation and production of dimethyl ether (DME).
8The integrated technology will generate significant quantities of electric power and nitrogen-based fertilizer (urea).
8Molten, non-leachable ash produced by co-gasification will be utilized in roads construction.
8Any CO2 generated will be required for urea synthesis, enhanced oil recovery (EOR) as well as DME production.
8Utilization of all by-products generated by the technology will further increase the effectiveness of process economics and eliminate its harmful impact on the environment.
8The integration will bridge the transition from carbon-based to carbon-neutral energy generation.
Click on Reports for more Details
Are low crude prices spurring demand for charter hire of crude carriers?
8Even as news emerges of the possibility of prices hitting lower levels well into 2016, the crude carrier market recorded robust activity.
8The winter has just commenced and this has brought about a spurt in activity.
8VLCC rates are also firming up, particularly out of Africa as the continent is trying to move stocks are larger discounts.
Click on Reports for prevailing freight rates and indicative rates and an analysis of the markets. Details
8Even as news emerges of the possibility of prices hitting lower levels well into 2016, the crude carrier market recorded robust activity.
8The winter has just commenced and this has brought about a spurt in activity.
8VLCC rates are also firming up, particularly out of Africa as the continent is trying to move stocks are larger discounts.
Click on Reports for prevailing freight rates and indicative rates and an analysis of the markets. Details
There has been little buying activity in the market shipping market last week.
Two deals have been reported:
8In the Aframax sector, there was the sale of the “PACIFIC LONDON” (113,334dwt-blt 99, S. Korea) which was sold to Bakri Navigation price in the region of $15.5 million.
8In the same sector, we had the sale of the “AEGEAN LEGEND” (105,278dwt-blt 00, S. Korea) which was sold to Indonesian buyers, for a price in the region of $18.5m.
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Two deals have been reported:
8In the Aframax sector, there was the sale of the “PACIFIC LONDON” (113,334dwt-blt 99, S. Korea) which was sold to Bakri Navigation price in the region of $15.5 million.
8In the same sector, we had the sale of the “AEGEAN LEGEND” (105,278dwt-blt 00, S. Korea) which was sold to Indonesian buyers, for a price in the region of $18.5m.
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The average price of crude for the period November 11-23, 2015 has been pegged at $41.01 per bareel.
8This is a really low price by any yardstick but projections are that prices will fall further..
8The under recoveries however continue in SKO and LPG, as their domestic prices are pegged at a low levels.
8The under recovery on SKO as on November 1, 2015 is Rs 13.31 per litre.
8As for LPG, the cash transfer element is Rs 127.18 per cylinder under DBTL
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8This is a really low price by any yardstick but projections are that prices will fall further..
8The under recoveries however continue in SKO and LPG, as their domestic prices are pegged at a low levels.
8The under recovery on SKO as on November 1, 2015 is Rs 13.31 per litre.
8As for LPG, the cash transfer element is Rs 127.18 per cylinder under DBTL
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There seems to be no end to the drama over how oil prices are behaving. And no one seems to be able to predict which directions they will go next.
8Just about a month ago, there was a projection that prices will move upwards but that has turned out to be wrong.
8Some are in fact predicting another sharp slump in the oil price to around $35 per barrel or even lower.
8There is now a big glut of crude in the market, totaling up to three billion barrels of crude which is equivalent to a month of world production. The markets have never been this saturated since 2009.
8It is now estimated that the glut may last well up to 2016.
8In the meantime, physical oil cargoes are trading at large discounts as oil has started to strain ports and storage, with vessels in queue to unload at some major hubs. The glut has already seen Iraqi crude grades selling as low as $30 a barrel, while official selling prices from Nigeria too have fallen to their lowest in more than a decade.
8Elevated output, a slowdown in demand growth in China and the expectation that the Iran nuclear deal will introduce large quantities of oil to an already brimming global stockpile, are making the crude markets weary. Details
8Just about a month ago, there was a projection that prices will move upwards but that has turned out to be wrong.
8Some are in fact predicting another sharp slump in the oil price to around $35 per barrel or even lower.
8There is now a big glut of crude in the market, totaling up to three billion barrels of crude which is equivalent to a month of world production. The markets have never been this saturated since 2009.
8It is now estimated that the glut may last well up to 2016.
8In the meantime, physical oil cargoes are trading at large discounts as oil has started to strain ports and storage, with vessels in queue to unload at some major hubs. The glut has already seen Iraqi crude grades selling as low as $30 a barrel, while official selling prices from Nigeria too have fallen to their lowest in more than a decade.
8Elevated output, a slowdown in demand growth in China and the expectation that the Iran nuclear deal will introduce large quantities of oil to an already brimming global stockpile, are making the crude markets weary. Details
Isn't it rather strange that while POL sales in October went up by 17.5% in India, there was a decline in gas sales of a significant 2.39% to 3,167 mmscm as compared to 3,244 mscm in October, 2014.
8Cumulatively, consumption declined by 2.83% from 22,398 MMSCM during April to October 2014 to 21,764 MMSCM during the same period this year.
8This has happened when gas prices -- both domestic and LNG -- are ruling at low levels.
8The official reason attributed to this is the decline in domestic gas production and lower offtake by some buyer segments.
8It is necessary to analyze the decline in more details to understand the underlying trends. It is noticed from the data that power and fertilizer sector sales in October were higher by 7.27% and 2.76% respectively. "Internal consumption" by the gas producers themselves (to run their pipelines and compressors on gas) has gone up by around 5%.
8So what then accounts for the decline in sales? This is coming from a whopping 40.61% decline in the consumption of gas by the "others" segment, which include steel, sponge iron, refineries, manufacturing, and other miscellaneous industries.
8These industries are not doing all that badly, and this cannot be an excuse for the sharp decline in gas offtake.
8What in fact is really happening is that these industries are finding liquid fuels such as naphtha, HSD and FO/LHS more economical to use than LNG. This is despite the fact that LNG prices are today at a record low.
8The evidence of substitution can be seen from the 31.3% jump in naphtha use in October. Between April and October, naphtha consumption had gone up by 21.7%. Similarly there was a 28% rise in sales of FO/LSHS in October while LDO sales went up by an unprecedented 59.9%.
8There are no doubt other reasons too for the upsurge in demand for liquid liquid fuels for industrial use but substitution is clearly emerging as an important factor. Details
8Cumulatively, consumption declined by 2.83% from 22,398 MMSCM during April to October 2014 to 21,764 MMSCM during the same period this year.
8This has happened when gas prices -- both domestic and LNG -- are ruling at low levels.
8The official reason attributed to this is the decline in domestic gas production and lower offtake by some buyer segments.
8It is necessary to analyze the decline in more details to understand the underlying trends. It is noticed from the data that power and fertilizer sector sales in October were higher by 7.27% and 2.76% respectively. "Internal consumption" by the gas producers themselves (to run their pipelines and compressors on gas) has gone up by around 5%.
8So what then accounts for the decline in sales? This is coming from a whopping 40.61% decline in the consumption of gas by the "others" segment, which include steel, sponge iron, refineries, manufacturing, and other miscellaneous industries.
8These industries are not doing all that badly, and this cannot be an excuse for the sharp decline in gas offtake.
8What in fact is really happening is that these industries are finding liquid fuels such as naphtha, HSD and FO/LHS more economical to use than LNG. This is despite the fact that LNG prices are today at a record low.
8The evidence of substitution can be seen from the 31.3% jump in naphtha use in October. Between April and October, naphtha consumption had gone up by 21.7%. Similarly there was a 28% rise in sales of FO/LSHS in October while LDO sales went up by an unprecedented 59.9%.
8There are no doubt other reasons too for the upsurge in demand for liquid liquid fuels for industrial use but substitution is clearly emerging as an important factor. Details
OIL has drilled 19 wells in the Baghjan regions so far.
8The structure itself has been identified way back in 1991 based on limited seismic data and later re-defined based on additional 2D seismics in 1999-2000 .
8When the wells were first drilled, gas was discovered in two sands within the Lakadong+Therria structure. Minor amounts of light oil and condensate was also found.
8The Baghjan area was covered with 3D seismic for further development of the field in 2004-2005.
8OIL is planning to drill the ERD wells with high technology.
8The petroleum system present in Baghjan region is essentially a Langpar and Lakadong+Theria formation and all wells at Baghjan encountered this formation, consisting mainly of rich organic matter which have TAI values of more than 2.0.
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8The structure itself has been identified way back in 1991 based on limited seismic data and later re-defined based on additional 2D seismics in 1999-2000 .
8When the wells were first drilled, gas was discovered in two sands within the Lakadong+Therria structure. Minor amounts of light oil and condensate was also found.
8The Baghjan area was covered with 3D seismic for further development of the field in 2004-2005.
8OIL is planning to drill the ERD wells with high technology.
8The petroleum system present in Baghjan region is essentially a Langpar and Lakadong+Theria formation and all wells at Baghjan encountered this formation, consisting mainly of rich organic matter which have TAI values of more than 2.0.
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There are indeed disturbing signs that crude prices may continue to keep going down.
8There has been a “recent steep rise” in the number of derivatives being bought that would pay out if oil falls as low as $35 a barrel by next March. For US benchmark West Texas Intermediate (WTI) crude, there has been a doubling of bets on a slump to $30 a barrel.
8And Goldman Sachs has said a very mild winter in the US -- which has been predicted -- would bring about a lower demand for heating oil and that could leave oil languishing at “cash prices” of around $20 a barrel.
8There was a view earlier that demand would pick up now that prices are lower. But the IEA is now suggesting that world demand growth for oil would slow next year to 1.2 million barrels a day after reaching a five-year high of 1.8 million barrels a day in 2015. With Japan, once again in recession and the European economy in doldrums, concerns about the state of the global economy is also dampening the demand outlook and indeed the overall scenario.
8Many are now projecting another downturn in prices by March 2016, as forecasts for an unusually warm winter would dent demand further and Iran prepares for post-sanctions crude oil exports. Details
8There has been a “recent steep rise” in the number of derivatives being bought that would pay out if oil falls as low as $35 a barrel by next March. For US benchmark West Texas Intermediate (WTI) crude, there has been a doubling of bets on a slump to $30 a barrel.
8And Goldman Sachs has said a very mild winter in the US -- which has been predicted -- would bring about a lower demand for heating oil and that could leave oil languishing at “cash prices” of around $20 a barrel.
8There was a view earlier that demand would pick up now that prices are lower. But the IEA is now suggesting that world demand growth for oil would slow next year to 1.2 million barrels a day after reaching a five-year high of 1.8 million barrels a day in 2015. With Japan, once again in recession and the European economy in doldrums, concerns about the state of the global economy is also dampening the demand outlook and indeed the overall scenario.
8Many are now projecting another downturn in prices by March 2016, as forecasts for an unusually warm winter would dent demand further and Iran prepares for post-sanctions crude oil exports. Details
There is of course the other side of the story.
8And that is: With low prices, investments in exploring and subsequently producing oil and gas have come down by 20% and more cuts are expected in 2016. About $ 200 billion of oil and gas projects have been delayed or cancelled in 2015.
8There was a similar crisis three decades ago when prices had gone really low. But then there was a lot more spare capacity globally in the 1980s than there is today, meaning that balances may be restored more quickly this time if demand were to pick up.
8Natural production declines coupled with investment cut backs will adversely impact supply of oil and once record inventories are drawn down, prices will climb upwards very quickly, some analysts believe.
8This school of thought will take inspiration from the whopping 17.5% increase in POL demand in India.
Clearly there are two sides to a coin, and it is difficult to know how prices are going to behave in 2016. Details
8And that is: With low prices, investments in exploring and subsequently producing oil and gas have come down by 20% and more cuts are expected in 2016. About $ 200 billion of oil and gas projects have been delayed or cancelled in 2015.
8There was a similar crisis three decades ago when prices had gone really low. But then there was a lot more spare capacity globally in the 1980s than there is today, meaning that balances may be restored more quickly this time if demand were to pick up.
8Natural production declines coupled with investment cut backs will adversely impact supply of oil and once record inventories are drawn down, prices will climb upwards very quickly, some analysts believe.
8This school of thought will take inspiration from the whopping 17.5% increase in POL demand in India.
Clearly there are two sides to a coin, and it is difficult to know how prices are going to behave in 2016. Details
Big oil companies are now touting the substitution of coal by gas as a way of tackling global warming. Gas is meant to be a cleaner fuel and its usage will produce less greenhouse emissions than coal.
8BP has projected that if a carbon emission tax is levied, gas emerges as the cheapest fuel to produce power but the study was relevant only for the US where Henry Hub prices are significantly lower than, say, in India.
8Will gas be the ideal substitute in India, particularly when coal is abundantly (and cheaply) available?
8The answer is "probably not". What holds for the US may not work for India.
8If gas prices continue to remain low, then axiomatically crude prices will also stay down. In that case even if the price of imported LNG (it is assumed that incremental gas supplies will only come via the LNG route) is at a reasonable level, liquid fuels such as naphtha and FO/LSHS may turn out to be cheaper alternatives.
8Then again, if there is a carbon tax, the use of Carbon Capture and Storage may become an attractive enough proposition for using coal, both for power and gasification, instead of LNG.
8The maths will of course have to be worked out but at the margin, unless the government overtly pushes for usage of gas, it is not necessary that there will an automatic appetite for LNG in India. Details
8BP has projected that if a carbon emission tax is levied, gas emerges as the cheapest fuel to produce power but the study was relevant only for the US where Henry Hub prices are significantly lower than, say, in India.
8Will gas be the ideal substitute in India, particularly when coal is abundantly (and cheaply) available?
8The answer is "probably not". What holds for the US may not work for India.
8If gas prices continue to remain low, then axiomatically crude prices will also stay down. In that case even if the price of imported LNG (it is assumed that incremental gas supplies will only come via the LNG route) is at a reasonable level, liquid fuels such as naphtha and FO/LSHS may turn out to be cheaper alternatives.
8Then again, if there is a carbon tax, the use of Carbon Capture and Storage may become an attractive enough proposition for using coal, both for power and gasification, instead of LNG.
8The maths will of course have to be worked out but at the margin, unless the government overtly pushes for usage of gas, it is not necessary that there will an automatic appetite for LNG in India. Details
GMR Rajahmundry Energy Ltd (GREL), a subsidiary of GMR Energy, has announced last week the successful commencement of commercial operation of its 2X384MW gas based combined cycle power plant in Rajahmundry, Andhra Pradesh.
8The commercial operation commenced with the beginning of gas supply under the e-bid RLNG Scheme (“Scheme for Utilization of Stranded Gas based power plants”), which was launched by Government of India in March, 2015.
8The company said that the 768MW power plant can now operate at 50% Plant Load Factor (PLF). Current Operations will continue upto March 2016, depending on gas availability and thereafter the government will call for a fresh round of bidding in March 2016.
8GMR's Vemagiri Power plant also went operational under the same scheme.
T8he point to note however is that a subsidy is being paid for power generated from these plants, at Rs.1.44 per unit, from the Power Sector Development Fund. Without the subsidy, the cost of gas based power would have been unafforadable for state electricity boards which buy this power.
8Pertinently, the landed price of LNG is low or else, the burden of keeping these gas plants viable would have been much higher.
8So, in the long run, unless gas based power is subsidized, viability will remain in doubt.
8As of this point in time, coal remains the economical option. The rapid spread of solar power will plug the gap to some extent andt gas based power plants can work as base load stations in consonance with day-time solar power.
8But how exactly will the economics pan out when carbon taxes are levied in the future remains to be seen.
8There are far too many balls up in the air at this juncture to predict the future. Details
8The commercial operation commenced with the beginning of gas supply under the e-bid RLNG Scheme (“Scheme for Utilization of Stranded Gas based power plants”), which was launched by Government of India in March, 2015.
8The company said that the 768MW power plant can now operate at 50% Plant Load Factor (PLF). Current Operations will continue upto March 2016, depending on gas availability and thereafter the government will call for a fresh round of bidding in March 2016.
8GMR's Vemagiri Power plant also went operational under the same scheme.
T8he point to note however is that a subsidy is being paid for power generated from these plants, at Rs.1.44 per unit, from the Power Sector Development Fund. Without the subsidy, the cost of gas based power would have been unafforadable for state electricity boards which buy this power.
8Pertinently, the landed price of LNG is low or else, the burden of keeping these gas plants viable would have been much higher.
8So, in the long run, unless gas based power is subsidized, viability will remain in doubt.
8As of this point in time, coal remains the economical option. The rapid spread of solar power will plug the gap to some extent andt gas based power plants can work as base load stations in consonance with day-time solar power.
8But how exactly will the economics pan out when carbon taxes are levied in the future remains to be seen.
8There are far too many balls up in the air at this juncture to predict the future. Details
One of the reasons why global oil prices are low is because demand for petroleum products is not going up as fast as it was projected on account of increasing energy efficiency.
8The IEA has projected a cooling down of demand in 2016 and energy efficiency has contributed in a large way to correcting rising demand..
8Per capita energy consumption in IEA countries has dropped to levels not seen since the 1980s yet income per capita has never been higher. Energy efficiency investments over the last 25 years are the primary reason for this uncoupling of energy consumption from economic growth, and have enabled consumers in IEA countries to spend USD 5.7 trillion less on energy, while enjoying higher levels of energy service.
8In 2014, the estimate of avoided total final consumption (TFC) from energy efficiency investments increased to over 520 million tonnes of oil equivalent (Mtoe) or 22 exajoules (EJ).
8Energy efficiency has sucked up excess demand and this is one big reason why, besides contributions to supply from US shale gas and oil, crude prices are at such low levels today.
Here are some interesting facts about energy efficiency:
8The energy intensity of countries belonging to the Organisation for Economic Co-operation and Development (OECD) improved by 2.3% in 2014. OECD energy consumption is now as low as it was in 2000, while GDP has expanded by USD 8.5 trillion, an increase of 26%.
8In 2014 alone, at least 190 Mtoe of primary energy imports were avoided in IEA countries, saving USD 80 billion in import bills.This "virtual supply" from energy efficiency is increasingly competing with oil, gas and electricity.
8Energy efficiency improvements in IEA countries since 1990 have avoided a cumulative 10.2 billion tonnes of CO2 emissions, helping to make the 2 degree warming goal more achievable.
Investments worldwide in energy efficiency in buildings, which account for more than 30% of global energy demand, are estimated to be USD 90 billion
8Electricity consumption in IEA countries has flattened partly as a result of energy efficiency improvements. Energy efficiency investments since 1990 saved 2 200 terawatt hours (TWh) in 2014. In the face of flat electricity demand, various electricity utilities are diversifying into energy efficiency services businesses to increase profits. Details
8The IEA has projected a cooling down of demand in 2016 and energy efficiency has contributed in a large way to correcting rising demand..
8Per capita energy consumption in IEA countries has dropped to levels not seen since the 1980s yet income per capita has never been higher. Energy efficiency investments over the last 25 years are the primary reason for this uncoupling of energy consumption from economic growth, and have enabled consumers in IEA countries to spend USD 5.7 trillion less on energy, while enjoying higher levels of energy service.
8In 2014, the estimate of avoided total final consumption (TFC) from energy efficiency investments increased to over 520 million tonnes of oil equivalent (Mtoe) or 22 exajoules (EJ).
8Energy efficiency has sucked up excess demand and this is one big reason why, besides contributions to supply from US shale gas and oil, crude prices are at such low levels today.
Here are some interesting facts about energy efficiency:
8The energy intensity of countries belonging to the Organisation for Economic Co-operation and Development (OECD) improved by 2.3% in 2014. OECD energy consumption is now as low as it was in 2000, while GDP has expanded by USD 8.5 trillion, an increase of 26%.
8In 2014 alone, at least 190 Mtoe of primary energy imports were avoided in IEA countries, saving USD 80 billion in import bills.This "virtual supply" from energy efficiency is increasingly competing with oil, gas and electricity.
8Energy efficiency improvements in IEA countries since 1990 have avoided a cumulative 10.2 billion tonnes of CO2 emissions, helping to make the 2 degree warming goal more achievable.
Investments worldwide in energy efficiency in buildings, which account for more than 30% of global energy demand, are estimated to be USD 90 billion
8Electricity consumption in IEA countries has flattened partly as a result of energy efficiency improvements. Energy efficiency investments since 1990 saved 2 200 terawatt hours (TWh) in 2014. In the face of flat electricity demand, various electricity utilities are diversifying into energy efficiency services businesses to increase profits. Details
In India too there is huge scope for ushering in new energy efficiency norms.
8There are lessons that policy makers can be learnt from examples abroad.
8No doubt the fall in oil and gas prices have caused the efficiency drive to stall in few countries but strong government support continues to create sizeable opportunities.
8In the US, an increase in the share of light-duty trucks in 2014 stalled progress on fuel efficiency gains in the new passenger vehicle fleet as a whole, but transport efficiency continues to improve in Germany, driven largely by government fuel economy standards and changing consumer practices.
8The fall in oil prices has also provided favorable conditions in some countries to reduce end-use fossil fuel subsidies, which undermine the economic attractiveness of energy efficiency investments.
8More than the central government, it is cities and subnational entities that are pushing energy efficiency world over.
8Tokyo has implemented a suite of transport policies that enabled an increase of 4.9 billion passenger-kilometres while reducing transport energy consumption by 35%.
8London has introduced innovative legislation to drive improvements in the private rental sector.
8In India too, energy efficiency drives have to be conducted in a larger scale -- both at a central and decentralized level -- and in mission mode to be able to arrest the sharp increase noticed in POL consumption. Details
8There are lessons that policy makers can be learnt from examples abroad.
8No doubt the fall in oil and gas prices have caused the efficiency drive to stall in few countries but strong government support continues to create sizeable opportunities.
8In the US, an increase in the share of light-duty trucks in 2014 stalled progress on fuel efficiency gains in the new passenger vehicle fleet as a whole, but transport efficiency continues to improve in Germany, driven largely by government fuel economy standards and changing consumer practices.
8The fall in oil prices has also provided favorable conditions in some countries to reduce end-use fossil fuel subsidies, which undermine the economic attractiveness of energy efficiency investments.
8More than the central government, it is cities and subnational entities that are pushing energy efficiency world over.
8Tokyo has implemented a suite of transport policies that enabled an increase of 4.9 billion passenger-kilometres while reducing transport energy consumption by 35%.
8London has introduced innovative legislation to drive improvements in the private rental sector.
8In India too, energy efficiency drives have to be conducted in a larger scale -- both at a central and decentralized level -- and in mission mode to be able to arrest the sharp increase noticed in POL consumption. Details
GAIL (India) Limited is planning to hire a third party agency to tackle what it called "obstacle clearance" issues in regard to the proposed Vijaipur-Auraiya-Phulpur Spurline (VAPPL) pipeline.
8The agency will be required to obtain prior permission from authorities concerned for laying of pipeline parallel to and across various obstacles such as forest, national highway, state highway, roads, railway, river, canal and water bodies.
8GAIL's proposed pipeline will ferry natural gas from its existing facility at Vijaipur, Madhya Pradesh to Phulpur, Uttar Pradesh.
8The tentative length of the proposed Vijaipur -Dibiyapur- Sachendi – Thulendi section pipeline is 526.90 Kms and that of the Thulendi- Phulpur section is 139.792 Kms.
8The completion time of the contract will be18 months from date of acceptance.
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8The agency will be required to obtain prior permission from authorities concerned for laying of pipeline parallel to and across various obstacles such as forest, national highway, state highway, roads, railway, river, canal and water bodies.
8GAIL's proposed pipeline will ferry natural gas from its existing facility at Vijaipur, Madhya Pradesh to Phulpur, Uttar Pradesh.
8The tentative length of the proposed Vijaipur -Dibiyapur- Sachendi – Thulendi section pipeline is 526.90 Kms and that of the Thulendi- Phulpur section is 139.792 Kms.
8The completion time of the contract will be18 months from date of acceptance.
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Oil India Limited has forwarded its application to obtaied TOR approved so that it can quickly get going with its Extended Reach Drilling (ERD) project in Tinsukia,Assam.
8OIL intends to drill seven ERD wells in Baghjan area in Tinsukia.
8The price tag is Rs 280 crore.
8The wells are being drilled below the Dibru-Saikhowa national park with the Dangori river in the south and Brahmaputra in north.
8The part is out of bounds for drilling and that's the reason why the ERDs are being drilled.
8Oil India Ltd is of the view that there is a strong possibility that there are hydrocarbons below the park and beyond the mining lease demarcation of the Bhagjan block.
8Ariund 5000 bbl of oil has been produced from 19 wells in Baghjan region per day.
8The seven locations are planned from the existing three well plinths
8The wells will extend 2 km into the forest
8The target depth is 3950 m.
8A total in-place resource of 11.5 MMSKLS has been estimated for the identified prospects. The recoverable resources are estimated at 3.45 MMSKLS.
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8OIL intends to drill seven ERD wells in Baghjan area in Tinsukia.
8The price tag is Rs 280 crore.
8The wells are being drilled below the Dibru-Saikhowa national park with the Dangori river in the south and Brahmaputra in north.
8The part is out of bounds for drilling and that's the reason why the ERDs are being drilled.
8Oil India Ltd is of the view that there is a strong possibility that there are hydrocarbons below the park and beyond the mining lease demarcation of the Bhagjan block.
8Ariund 5000 bbl of oil has been produced from 19 wells in Baghjan region per day.
8The seven locations are planned from the existing three well plinths
8The wells will extend 2 km into the forest
8The target depth is 3950 m.
8A total in-place resource of 11.5 MMSKLS has been estimated for the identified prospects. The recoverable resources are estimated at 3.45 MMSKLS.
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There has been a dramatic fall in price of crude over the past one year but this has not hindered indigenous oil and gas output all that much in India.
8Indigenous crude oil production during October, 2015 was at 3151.178 TMT which was 2.53% higher than the target of 3072.332 TMT for the month but only 2.08% lower than the production during corresponding period of last year.
8Cumulative crude oil production during April-October, 2015 at 21831.941 TMT was 1.49% higher than target for the period and 0.06% more than the production during corresponding period of last year.
8What does this really prove?
8That Indian oil and gas production is inelastic to price. While prices are less than half of what it was a year ago, production is only marginally down and that too for technical reasons not as a reaction to lower prices.
8The reason for this inelasticity is that the cost of production of crude continues to be lower in most cases than what is the ruling market price.
8Most of the production is coming from old and ageing fields of ONGC and OIL where extraction costs remain low.
8Cairn India's Rajasthan block too has a very low production cost though the company is now slowing down investments -- while waiting for prices to rise -- and this may impact overall output going ahead.
8RIl's wells are currently under performing but whether that is on account of lower prevailing prices or on account of technical reservoir related issues -- such as high water cut and sand ingress -- will be difficult to tell.
8The point to note however is that output will remain inelastic even if crude prices were to rise because, unlike with gas reserves, there is no spare capacity that can be pumped up suddenly.
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8Indigenous crude oil production during October, 2015 was at 3151.178 TMT which was 2.53% higher than the target of 3072.332 TMT for the month but only 2.08% lower than the production during corresponding period of last year.
8Cumulative crude oil production during April-October, 2015 at 21831.941 TMT was 1.49% higher than target for the period and 0.06% more than the production during corresponding period of last year.
8What does this really prove?
8That Indian oil and gas production is inelastic to price. While prices are less than half of what it was a year ago, production is only marginally down and that too for technical reasons not as a reaction to lower prices.
8The reason for this inelasticity is that the cost of production of crude continues to be lower in most cases than what is the ruling market price.
8Most of the production is coming from old and ageing fields of ONGC and OIL where extraction costs remain low.
8Cairn India's Rajasthan block too has a very low production cost though the company is now slowing down investments -- while waiting for prices to rise -- and this may impact overall output going ahead.
8RIl's wells are currently under performing but whether that is on account of lower prevailing prices or on account of technical reservoir related issues -- such as high water cut and sand ingress -- will be difficult to tell.
8The point to note however is that output will remain inelastic even if crude prices were to rise because, unlike with gas reserves, there is no spare capacity that can be pumped up suddenly.
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Crude production by ONGC in October was 2.76% higher than the target for the month. Output was also higher than what was achieved in the corresponding month in the previous year. Even though the cumulative April-October figure was lower by 0.25% of the target, it was higher by 1.42% for the corresponding period in 2014.
8Then again, private and JV crude oil production during October, 2015 was 975.876 TMT which was 7.27% higher than the target for the month though 4.10% lower than production of corresponding month of last year.
8But overall output was dragged down by the poor performance of Oil India Ltd (OIL). The company's crude oil production during October 2015 was 265.949 TMT was a whopping 12.97% lower than the target for the month and 10.50% below the output achieved in the corresponding month in the previous year.
8OIL’s cumulative production during April-October, 2015 was 1915.610 TMT, 7.41% lower than the target and 4.46% lower than the production during the corresponding period of last year.
Higher water cuts and less and planned contribution from workover wells were blamed for the lackadaisical performance but a point to note was that there was a permanent loss of the crucial Makum and Hapjan OCS after the wells were reopened subsequent to a blockade called by the “Sadou Moran Chatra Santha”.
8The website had written earlier that there was a general sense of frustration in the OIL head office in Duliajan over the ham handed manner in which the government is handling the selection of a chairman to the company.
8OIL has mostly been run by people -- mostly of Assamese origin -- who know the peculiar socio-political circumstances in Assam. For its the bandhs and the ebb and flow of militancy that determine production in the oil fields of Assam.
8Unless someone understands the local dynamics well, the company's performance is bound to suffer. A rank outsider will not be able to do his job, as he will not be in a position to understand the dynamics on the ground. He also faces the prospect of sabotage from within the company.
8The shabby treatment suffered by Rupshikha Saikia Borah, the company's finance director, for having been selected once by the PESB only to be rejected by the PMO, has not gone down well within the rank and file of the company.
8In fact, the people of the North Eastern state take a disproportionately xenophobic interest in who is the chairman of OIL, perhaps because there is pride in what is the only functioning and profitable enterprise to be headquartered in the state. In the past, dissenting voices were raised by outfits like the All Assam Students Union as and when a non-Assamese is selected as the chairman.
8And in this case, the rejection of an Assamese woman, who would have been the first woman CEO of an E&P company, did not go down well at all in the state, and also among the Assamese dominated rank and file of the company..
8Further, without a fulltime chairman in place, there is no one available to direct the affairs of the company to keep production going under what is a volatile situation on the ground.
8To some extent, the general disaffection amongst the rank and file had also had an adverse impact on production figures.
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8Then again, private and JV crude oil production during October, 2015 was 975.876 TMT which was 7.27% higher than the target for the month though 4.10% lower than production of corresponding month of last year.
8But overall output was dragged down by the poor performance of Oil India Ltd (OIL). The company's crude oil production during October 2015 was 265.949 TMT was a whopping 12.97% lower than the target for the month and 10.50% below the output achieved in the corresponding month in the previous year.
8OIL’s cumulative production during April-October, 2015 was 1915.610 TMT, 7.41% lower than the target and 4.46% lower than the production during the corresponding period of last year.
Higher water cuts and less and planned contribution from workover wells were blamed for the lackadaisical performance but a point to note was that there was a permanent loss of the crucial Makum and Hapjan OCS after the wells were reopened subsequent to a blockade called by the “Sadou Moran Chatra Santha”.
8The website had written earlier that there was a general sense of frustration in the OIL head office in Duliajan over the ham handed manner in which the government is handling the selection of a chairman to the company.
8OIL has mostly been run by people -- mostly of Assamese origin -- who know the peculiar socio-political circumstances in Assam. For its the bandhs and the ebb and flow of militancy that determine production in the oil fields of Assam.
8Unless someone understands the local dynamics well, the company's performance is bound to suffer. A rank outsider will not be able to do his job, as he will not be in a position to understand the dynamics on the ground. He also faces the prospect of sabotage from within the company.
8The shabby treatment suffered by Rupshikha Saikia Borah, the company's finance director, for having been selected once by the PESB only to be rejected by the PMO, has not gone down well within the rank and file of the company.
8In fact, the people of the North Eastern state take a disproportionately xenophobic interest in who is the chairman of OIL, perhaps because there is pride in what is the only functioning and profitable enterprise to be headquartered in the state. In the past, dissenting voices were raised by outfits like the All Assam Students Union as and when a non-Assamese is selected as the chairman.
8And in this case, the rejection of an Assamese woman, who would have been the first woman CEO of an E&P company, did not go down well at all in the state, and also among the Assamese dominated rank and file of the company..
8Further, without a fulltime chairman in place, there is no one available to direct the affairs of the company to keep production going under what is a volatile situation on the ground.
8To some extent, the general disaffection amongst the rank and file had also had an adverse impact on production figures.
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Were low gas prices to be blame for domestic gas output to fall 6.77% below target in October, 2015?
It is fair to assume that that higher gas prices would allow ONGC and others such as the RIL-BP combine or the GSPC consortium to tap gas reserves that have already been discovered in India's offshore basins.
But the bulk of the lower output in October, it will be safe to assume, is on account of technical and reservoir problems rather than any adverse cost economics wrought by low prevailing prices of gas.
8Cumulative natural gas production during April-October, 2015 was 19243.859 MMSCM which was 5.74% lower than the target for the period and 2.10% lower than the production during corresponding period of last year.
8ONGC’s natural gas production during October, 2015 was 1838.484 MMSCM which was 9.23% below target for the month and 1.85% lower than the production achieved in the corresponding month of last year.
8ONGC’s cumulative output for April-October, 2015 was 12676.372 MMSCM which was 7.67% lower than the cumulative target and 1.37% lower than the production during the corresponding period of last year.
8Reasons given for the shortfall in ONGC's assets were:
--Bassein & Satelite: Less production from new well/side-track wells and decline in Bassein / B-55 fields
--EOA: Delay in commencement of production from one deep water well. Closure of both the deep water wells of G1 field (G1-10 & 11) was enforced on account of maintenance activities in GAIL's pipeline network.
--Ahmedabad: Closure of wells was due to unplanned shut down of GAIL's gas line from Ahmedabad/Kalol to Ramol. There was also a decline in associated gas production in South Kadi, Jhalora, Wadu & Peliyad fields
--Tripura: Less off take by OTPC due to operational issues
--Rajahmundry: Closure of 40 wells has to be ordered as GAIL's pipelines in Tatipaka-Lanco & Endamaru-Oduru sections were shut down for maintenance.
--Cauvery: There was a closure of wells to help maintain reservoir health. This was also followed by a decline in associated gas production in Geleki & Lakwa fields
--Assam: Closure of well for maintaining reservoir health. Decline in associated gas production in Geleki & Lakwa fields
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It is fair to assume that that higher gas prices would allow ONGC and others such as the RIL-BP combine or the GSPC consortium to tap gas reserves that have already been discovered in India's offshore basins.
But the bulk of the lower output in October, it will be safe to assume, is on account of technical and reservoir problems rather than any adverse cost economics wrought by low prevailing prices of gas.
8Cumulative natural gas production during April-October, 2015 was 19243.859 MMSCM which was 5.74% lower than the target for the period and 2.10% lower than the production during corresponding period of last year.
8ONGC’s natural gas production during October, 2015 was 1838.484 MMSCM which was 9.23% below target for the month and 1.85% lower than the production achieved in the corresponding month of last year.
8ONGC’s cumulative output for April-October, 2015 was 12676.372 MMSCM which was 7.67% lower than the cumulative target and 1.37% lower than the production during the corresponding period of last year.
8Reasons given for the shortfall in ONGC's assets were:
--Bassein & Satelite: Less production from new well/side-track wells and decline in Bassein / B-55 fields
--EOA: Delay in commencement of production from one deep water well. Closure of both the deep water wells of G1 field (G1-10 & 11) was enforced on account of maintenance activities in GAIL's pipeline network.
--Ahmedabad: Closure of wells was due to unplanned shut down of GAIL's gas line from Ahmedabad/Kalol to Ramol. There was also a decline in associated gas production in South Kadi, Jhalora, Wadu & Peliyad fields
--Tripura: Less off take by OTPC due to operational issues
--Rajahmundry: Closure of 40 wells has to be ordered as GAIL's pipelines in Tatipaka-Lanco & Endamaru-Oduru sections were shut down for maintenance.
--Cauvery: There was a closure of wells to help maintain reservoir health. This was also followed by a decline in associated gas production in Geleki & Lakwa fields
--Assam: Closure of well for maintaining reservoir health. Decline in associated gas production in Geleki & Lakwa fields
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OIL’s natural gas production during October, 2015 was 254.334 MMSCM which was 6.84% lower than the target for the month.
8OIL’s cumulative natural gas production during April-October, 2015 was 1598.299 MMSCM which was 8.88% lower than the cumulative target.
8Reasons for the shortfall are given below:
--Shortfall is mainly due to low uplifitment by the Lakwa Thermal Power Station and Brahmaputra Crackers & Polymers Limited.
--Production and sales also suffered due to strikes and blockades
8Private and JV natural gas production during October, 2015 was 702.206 MMSCM which was 0.38% higher than the target for the month and 6.57% lower than the production achieved in the corresponding month of last year.
8The cumulative private and JV cumulative natural gas production during April-October, 2015 was 4969.188 MMSCM which was 0.76% higher than the cumulative target and 4.63% lower than the production during the corresponding period of last year.
8Reasons for the shortfall are given below:
--RIL (KG-D6): Underperformance of MA associated gas wells.
--JV of BG, RIL & ONGC (M&S Tapti): Under performance of recently drilled 6 wells. Operator has now called for abandonment of the field
--GSPC (KG-OSN-2001/3): There has been a decline in gas production and this can be a reaction to the lower gas price as GSPC has the capacity to pump up production
--CBM: Output for October was down 42% because of extended dewatering currently going on in the Raniganj South field (GEECL), Delayed forest clearance in Raniganj East (Essar) also lead to lower output in comparison from what was the target.
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8OIL’s cumulative natural gas production during April-October, 2015 was 1598.299 MMSCM which was 8.88% lower than the cumulative target.
8Reasons for the shortfall are given below:
--Shortfall is mainly due to low uplifitment by the Lakwa Thermal Power Station and Brahmaputra Crackers & Polymers Limited.
--Production and sales also suffered due to strikes and blockades
8Private and JV natural gas production during October, 2015 was 702.206 MMSCM which was 0.38% higher than the target for the month and 6.57% lower than the production achieved in the corresponding month of last year.
8The cumulative private and JV cumulative natural gas production during April-October, 2015 was 4969.188 MMSCM which was 0.76% higher than the cumulative target and 4.63% lower than the production during the corresponding period of last year.
8Reasons for the shortfall are given below:
--RIL (KG-D6): Underperformance of MA associated gas wells.
--JV of BG, RIL & ONGC (M&S Tapti): Under performance of recently drilled 6 wells. Operator has now called for abandonment of the field
--GSPC (KG-OSN-2001/3): There has been a decline in gas production and this can be a reaction to the lower gas price as GSPC has the capacity to pump up production
--CBM: Output for October was down 42% because of extended dewatering currently going on in the Raniganj South field (GEECL), Delayed forest clearance in Raniganj East (Essar) also lead to lower output in comparison from what was the target.
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