With gas output from its flagship KG-D6 fields dipping to an all-time low, Reliance Industries Chairman Mukesh Ambani has said the company will invest over $5 billion in "a series of projects" to reverse the trend.RIL and its British partner BP have submitted to the government plans to bring to production satellite fields in the eastern offshore KG basin block to raise output that has plummeted to less than 16 million standard cubic meters per day from about 64 mmscmd achieved three years ago."We are planning to invest in a series of projects to develop around 4 trillion cubic feet of discovered natural gas resources from the block," Ambani said in the company's annual report for 2012-13.While RIL-BP have planned various activities including work-overs, side tracks and compressor addition to maximise recovery from the existing wells, new production would be added in 4-5 years using existing infrastructure, he said."The field development plan for the R-Series project (in the KG-D6 block) has been submitted to the Government of India for approval. This along with other projects is expected to add incremental production in the next four to five years," he said.RIL has discovered 18 gas fields in KG-D6 block. Of these, only two (Dhirubhai-1 and 3) have been put to production. Satellite fields are now being planned to be developed."We believe gas from these projects will deliver energy to millions of Indians and would significantly help India in reducing import dependence," Ambani added.RIL said average production from KG-D6 block during 2012-13 was 26 mmscmd of gas and 9,225 barrels of oil per day."The fall in production is mainly attributed to geological complexity, natural decline in the fields and higher than envisaged water ingress," the annual report said.To augment production from the current fields (D1-D3 and MA), various Base Management actions including work overs, side tracks, compressor, enhancement of water handling capacity and a new well in the MA field will be undertaken in FY 2013-14."The next wave of projects in KG-D6 block are envisaged to be undertaken over the next three to five years and entail a potential total investment in excess of $5 billion to develop around 4 trillion cubic feet (TCF) of discovered natural gas resources," RIL said.At current international LNG prices, it would cost more than $50 billion to import this volume of gas into India.The field development plan for R-Cluster, submitted in January 2013, proposed to maximise infrastructure utilisation of existing D1 and D3 hub. (PTI)
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The Central government has asked for certain clarifications from Reliance Industries (RIL) on the revised investment plan the company had submitted for the main gas producing fields in the eastern offshore KG-D6 block.RIL and its partners BP Plc. of UK and Niko Resources “in August 2012 had submitted revised field development plan (RFDP) for D1 and D3 fields with downward revision in reserves,” Minister of State for Petroleum & Natural Gas Panabaka Lakshmi said in a written reply to a question in Rajya Sabha.Without giving details of the RFDP, she said “Clarifications have been sought from the operator RIL.”The company had filed revised field development plans for the Dhirubhai-1 and 3 (D1 and D3) gas fields as well as D-26 MA oil and gas field - the only producing areas among a total of 19 oil and gas discoveries made in KG-DWN-98/3 or KG-D6 block.Sources said the company has scaled down Capex in D1 and D3 fields to $5.928 billion from $8.836 billion two-phase spending it had proposed in 2006.In the RFDP for MA field, RIL has scaled down the investment by 276 million to $1.96 billion. The RFDP for MA field has been approved.Production DownLakshmi said as per the 2006 development plan, D1 and D3 fields were to produce 61.88 million standard cubic metres per day (mmscmd) from 22 wells in 2011-12 and 80 mmscmd from 31 wells in the year thereafter.“The average gas production from D1 and D3 gas fields of KG-D6 block during 2012-13 was about 20.88 mmscmd against the production target of 80 mmscmd,” she said. Gas production in April was about 15.89 mmscmd.The decline in gas output was due to half of the 18 wells, which were put on production, ceasing due to water loading/sand ingress.RIL has stated that gas output lagging projections was also due to “substantial variance in reservoir behaviour and character being observed vis-a-vis the prediction and there seemed to be reservoir constraints in achieving the gas production rates,” the Minister said.Also, pressure decline was several times higher than originally envisaged and early water production in some of the wells was not predicted in the initial reservoir simulations, though overall field water production is small, she said.To a separate question, Oil Minister M. Veerappa Moily said RIL has been asked to drill more wells and undertake remedial measures to revive the sick wells.Besides, the company’s proposal to install compressor at onshore terminal to increase gas recovery from D1 and D3 has been approved, he said adding that the development plan for another four satellite gas fields has also been approved.(PTI)
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As the war between Coal India and NTPC escalates, the Coal Ministry has directed the state miner to continue supplying at least 50 per cent of fuel requirements to NTPC for the time being. "The supply (of coal by CIL to NTPC) has not been discontinued. CIL had taken a decision. But the instructions have been sent by our ministry (to CIL) that for the time being at least 50 per cent of supply should continue," Coal Minister Sriprakash Jaiswal said on Friday, 5 April 2013 on the sidelines of a conference organised by Policy Development Initiative.The comment comes following media reports that Coal India (CIL) has switched off fuel supply to power major in the wake of NTPC holding back payments. In fact, there is a fear that Coal India could halt eastern region supplies to the country's largest power producer by the end of April, as a row over quality between the two state-run giants escalated, raising fears of mass blackouts. On 3 April, NTPC had refused to sign fuel supply agreements with Coal India Ltd (CIL) as it feels the state-run firm was supplying inferior quality coal.The Prime Minister's Office (PMO) is pushing CIL to sign FSAs for supply of a minimum threshold of coal to power producers but NTPC feels the world's largest coal producer was supplying "rocks and boulders" just to meet its supply commitment.NTPC Chairman and Managing Director Arup Roy Choudhury said it has agreed on almost all terms and conditions of the FSAs and is ready to sign the agreements provided CIL promises to give a minimum calorific value coal."They are giving us poor quality coal ... we don't want it," he said, adding that the quality of coal NTPC receives is "extremely" poor and sometimes "it is full of stones, boulders and dirt".The row underscores the difficulties India faces in extracting coal quickly and efficiently enough to eliminate power shortages that hurt economic growth, and to reduce its reliance on costlier imports. The head of Eastern Coalfields Limited (ECL), a subsidiary of Coal India, the world's largest coal mining company, said onFriday it could halt supplies to two plants of NTPC after the latter stopped paying the full price for shipments. An NTPC official, who did not want to be identified because of the sensitivity of the matter, said the company had "taken a stand" against its supplier, but added that it expected Coal India to revolve the dispute soon. R. Sinha, the chairman and managing director of ECL, said the Coal India unit had been forced to cash in fixed deposits topay employees' salaries, to make up for the fact that NTPC's non-payments amounted to Rs 1000 crore. "We are open-minded. If NTPC resolves the issues, they can get coal as they were getting. We can't keep coal at our pithead because it will catch fire. So, we have to stop production if they don't resolve the issues," he said."If this month again I have to encash some of the fixed deposits, then I have to stop their coal supply, if they don't pay us our dues," he added.Elite CompanyBottlenecks in the power sector notwithstanding, NTPC had managed to stay in the BW Real 500 top 10 last year. (Read: Elite Company) The country’s largest utility saw an increase in its capacity addition from 2,500 MW in FY11 to 2,820 MW in FY12 (34,810 MW is the total capacity). This translated into an increase in net profit from Rs 9,348.23 crore in 2010-11 to Rs 9,814.66 crore in the last fiscal. NTPC’s internal accruals are sufficient to finance its equity needs and its ‘most favoured borrower’ status enables it to raise debt at competitive rates. The company has already tied up domestic loans to the tune of Rs 57,229 crore.The company’s decision to import coal directly led to 20 per cent cost savings. “Earlier, we were importing coal through MMTC and STC, which raised our cost by 8-10 per cent, due to which the state electricity boards were having trouble in paying us back. However, by importing directly we were able to source coal cheaper,” says Arup Roy Choudhury, CMD. But coal shortages and land acquisition issues in states such as Orissa and Bihar have impacted NTPC in terms of lowering its capacity-addition targets. The company has been experiencing problems in getting coal for its future projects and has had to carry over plans to add 11,000 MW to the 13th Plan. Besides, land issues have stalled projects to the tune of 4,520 MW.The recent restructuring scheme announced to bail out distribution utilities comes as a breather for NTPC, which faced defaults from distribution companies in Delhi. Another positive is its entry into the distribution arena through its wholly owned subsidiary, NTPC Electric Supply Company Limited Quality ControlCommenting on the quality of coal being supplied to NTPC, the minister said: "We are ready for third party inspection (of coal) but at the loading point....But we are not ready for third party inspection at reaching point (of coal)."Replying to another question, he said: "There are few issues (with regard to FSAs) which would be resolved." As mentioned before, NTPC, the country's largest power producer has refused to sign fuel supply agreements (FSAs) with Coal India Ltd (CIL) as it feels the state-run firm was supplying inferior quality coal. The Prime Minister's Office is pushing CIL to sign FSAs for supply of a minimum threshold of coal to power producers but NTPC feels the world's largest coal producer was supplying "rocks and boulders" just to meet its supply commitment.NTPC buys close to 140 million tonnes of coal to fire its thermal power plants. While most of CIL's other customers have signed on dotted lines, NTPC has not signed FSA for 4,500 MW power generation capacity.NTPC said the company has resolved all the issues with CIL and the only matter coming in the way of signing the FSAs is "poor quality" coal. Power Secretary P Uma Shankar on the other hand had said that his ministry and Coal ministry should be able to solve the problem amicably. India sits on the world's fifth-largest coal reserves. But state-controlled mining operations are riddled with corruption and the theft of good quality coal by criminals colluding with Coal India officials and police, a parliamentary panel said last year.A massive blackout last July, when power was cut for two consecutive days in a massive area home to 670 million people, showed how far the country still has to travel in terms of providing reliable power.Read Also: Wasted Watts Read Also: Idle Assets Come Under Scanner NTPC gets the bulk of its coal through long-term fuel supply agreements (FSAs) with Coal India. The utility has delayed signing a new supply pact for 4,500 MW, however, citing quality issues, its chairman said in February. ECL supplies coal from its Rajmahal mine in Jharkhand state to NTPC's Kahalgaon and Farakka plants, and plans to expand the mine's capacity to 17 million tonnes from 14 million tonnes could be scuppered if NTPC does not pay its dues, Sinha said."We have taken a stand," an NTPC official said by telephone, acknowledging the company had not paid in full for the coal supplies but declining to give specifics. "We've always had issues with supplies there," the official said about coal shipments in India's east. ECL is headquartered in the eastern state of West Bengal, where it has mines, as well as in neighbouring Jharkhand."Coal India is also an equally responsible organisation. I think they will very soon come up with a good plan," the official said, without saying how a compromise could be reached.Both coal supplier and power producer now jointly monitor the quality of coal extracted from mines, opening up the possibility of wrangles over its true worth. The government plans to change that by mandating a third party to judge value.Dipesh Dipu, a partner at Jenissi Management Consultants, played down the chances of the dispute escalating to the point where Coal India would pull the plug on supplies and cause mass power shortages. "I don't suspect it will lead to that kind of extreme measures, because at the end of the day, both public sector entity heads are responsible to their political bosses."
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Petronet LNG has signed an initial agreement with Houston-based United LNG to buy 4 million tonnes of liquefied natural gas (LNG) a year for 20 years, a senior Petronet executive said on Thursday.India has been scouting for oil and gas assets abroad to meet rising local demand. Booming shale gas production following advances in drilling technology has put the United States in a position to be a net exporter."If everything goes well supplies from United LNG will begin in 2018. We hope to finalise commercial terms and sign SPA (sale purchase agreement) by the end of this year," Petronet's head of finance, R.K. Garg, told Reuters.Asia's third-largest economy is seeking long-term LNG contracts and aims to triple its LNG import capacity to 45 million tonnes in five years, Garg said.India's gas output has been curbed by problems in the D6 block off India's east coast, operated by Reliance Industries, while state-run Oil and Natural Gas Corp is struggling to arrest declining production from an ageing field.Fuel shortages, due to the lower local gas output and less-than-estimated coal production, have crippled India's power stations.United LNG would supply the super cooled gas from the Main Pass Energy Hub project in the Gulf of Mexico, Garg said, adding this would be Petronet's first gas purchase deal with prices linked to U.S. Henry-Hub natural gas futures.LNG is expensive in Asia, at about $15 per million British thermal units (mmBtu), as it is linked to oil, while a boom in U.S. shale gas output has pushed down prices there to around $4.2 per mmBtu.Petronet also discussed buying a stake in United LNG's liquefaction facility in the Gulf of Mexico, Garg said."The deal is preliminary, numbers and pricing are yet to be finalised," he added.Petronet buys 7.5 million tonnes of LNG a year under a long-term deal with Qatar at its 10 million tonnes a year LNG terminal at Dahej in western India.It is also building a 5-million-tonne-per-year terminal in the southern Indian city of Kochi and has a deal to buy 1.5 million tonnes of LNG a year from Australia's Gorgon project.Kochi terminal, which was to be commissioned by end-2012, will now start operations in July, Garg said. "Commissioning is linked with readiness of consumers and pipeline network. We hope everything will be in place by July," he added.Petronet also aims to build a 5 million tonne a year LNG terminal at Gangavaram in the east coast by 2016.(Reuters)
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In 2030, global energy demand will be 36 per cent higher than it is today. India and China will account for half this growth, with India outpacing China.Compiled by Anup JayaramClick Here To View Graphics: Madhumangal Singh(This story was published in BW | Businessworld Issue Dated 22-04-2013)
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Concerned over a large number of officials joining private companies after retirement, a Parliamentary panel asked the government to probe the "unholy nexus" between bureaucrats and the companies which were allocated coal blocks.The Parliamentary Standing Committee on Coal and Steel, headed by Trinamool Congress leader Kalyan Banerjee, named three top officials who joined private firms after retirement.The officials named by the Committee are former Power Secretary R.V. Shahi -- an independent director of Jindal Steel and Power, former Chief Secretary of Jharkhand P.P. Sharma joining Abhijeet Group and former Coal India Chairman N.C. Jha joining Monnet Energy and Ispat.The Committee, however, did not go into the merits of whether these officers had violated government norms while joining the private companies. But, it expressed anguish over no inquiry being conducted on the issue by the Coal Ministry in past."The Committee fail to understand as to why no inquiry has been conducted so far to expose the unholy nexus between such bureaucrats and coal companies who have been alloted captive coal blocks," said the Committee report tabled in Parliament.It also said that the officers in the ministries and PSUs "directly or indirectly connected with the allotment of coal blocks joining the private mining companies after their retirement raises serious doubts about their being impartial when they were associated with the process of allotment of coal blocks". .The report added: "The Committee, therefore, desire that the Ministry of Coal should immediately conduct an enquiry into the matter and furnish details of the officers of the Ministry of Coal, Coal India and its subsidiaries and CMPDIL who have joined private companies against the guidelines set for the purpose..."...action may be initiated against those officers who have joined private mining companies without prior permission of the government or the company as provided in Department of Personnel and Department of Public Enterprises guidelines." The Committee noted that Director level officers of coal companies need government permission regarding employment after retirement/VRS, while below Board-level officials of PSUs are required to seek permission from the respective companies to join private companies after retirement.(PTI)
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Government of India on 22 April buried a proposal to pool prices of imported and domestic coal to make the fuel affordable to new power plants, owing to sharp opposition to the scheme. "Price pooling is out of the window," a source attending the Cabinet Committee on Economic Affairs on the issue said here.While no formal reason was given for burying the proposal, the source said power projects commissioned before 2009 will continue to get coal at pre-fixed (below market) rates.New projects commissioned after 2009 largely have a cost-plus mechanism for calculation of electricity tariff and so any higher imported cost of coal will be passed through to the consumers, he said.Private power producers wanted the sub-market domestic coal prices to be averaged out with international price of imported coal so as to have a uniform fuel price and remove the disadvantage new projects faced as compared to older ones.The pooling was being opposed for various reasons by older power plants and domestic coal producers."For the remaining 24,000 MW projects it is work in progress...remaining being which have tariff based linkages, which have no PPAs or which have tapering linkages," the source said.The committee, which was looking into the issue, will come back to CCEA (Cabinet Committee of Economic Affairs), he added. Coal ImportsIndia will need to import 165 million tonnes of coal in 2013-14 to meet a supply shortfall, the state minister for coal said, as local availability of the fuel which runs more than half of the country's power generation will continue to lag demand. India, the world's fourth-biggest importer of coal, is estimated to produce 604.55 million tonnes of the fuel in the year to March 2014, Pratik Prakashbapu Patil told MPs, in a written reply to tthe Rajya Sabha. Demand in the world's third-largest producer is estimated at about 770 million tonnes, he said. "Thus the gap estimated of 165.14 million tonnes of coal will need to be met through imports," Patil said.(Agencies)
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Shares in Adani Power gained as much as 15 per cent on Wednesday, 3 April after regulators allowed the power utility to raise tariffs for electricity on a temporary basis, in a ruling that could brighten the prospects of other power producers like Tata Group and Reliance Power with projects locked in litigation with state utilities after costly coal imports raised electricity costs. The Central Electricity Regulatory Commission (CERC) has allowed Adani Power to charge "compensatory" tariffs for electricity from its Mundra plant in the west coast state of Gujarat, until supply conditions improve.The regulator said Adani should be allowed such a tariff, citing the "unforeseen" events of the rising cost of imported coal from Indonesia, coupled with the shortages of domestic supplies from the state-run Coal India Ltd."As and when the hardship is removed or lessened, the compensatory tariff should be revised or withdrawn," the regulator said in an order, adding that a committee should be set up to establish the amount of the tariff.It did not say how long the provision for higher tariffs would run, but added that the supply problem was a "temporary phenomenon and is likely to be stabilized after some time".An external spokeswoman for Adani Power declined to comment.It's been a double whammy for power plants which run on imported coal. While the spike in the prices of imported coal made it commercially unviable for producers to keep their plants humming, the unavailability of domestic linkages is affecting their technical viability."Imported coal-based plants have had issues of affordability. Within technical limits, blending with domestic coal can help in both optimising performance and lowering costs of supplies. While imports are expensive, the supplies of domestic coal may help better utilisation of the plants. Although there are constraints in domestic coal supplies, the plants may be considered on a case-to-case basis, for which domestic coal blended with imported coal makes good economic sense," says Dipesh Dipu, director- consulting, mining, Deloitte Touche Tohmatsu India.Read Also: Power EquationRead Also: Power Pecking OrderThe three power companies that have to grin and bear it are JSW Energy, Adani Power and Tata Power. These producers invested in imported coal-based plants to skirt the domestic fuel shortage logjam. What they failed to take into account was the sudden increase in the price of imported coal.Seventy per cent of the coal for these plants is imported, but it is the residual 30 per cent which is the real spanner in the works. That's because the coal linkages provided in January 2010 were withdrawn by the coal ministry in April last year. Ironically, the plants now feed only on costly imported coal which has brought down the plant load factor (PLF). The power ministry has requested the coal ministry to restore the linkages provided to these plants so that they can function at an optimum level. Apparently, the coal linkages were withdrawn without its consent, informs a senior official.Adani Power shares were up 13 percent at 12:17 p.m. Shares in Tata Power Company Ltd and Jaiprakash Power Ventures Ltd were up more than 4 percent each.A decision on similar cases filed by Tata and Reliance Power could be taken within 10 days or so, S. Jayaraman, a CERC official, told the Indian news channel CNBC-TV 18.
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