The petroleum ministry has struck down Reliance Industries Ltd's plan to recover $1.2 billion in costs before the energy major starts sharing profits with the government from its gas field off the country's east coast, newspapers reported on Friday.The ministry has disallowed the costs recovery from the KG D6 gas field because of Reliance's failure to meet drilling commitments and blamed the company for violating production sharing contract obligations, the Business Standard said, citing a notice sent to the company.Calls to a Reliance spokesman was not immediately answered.Under India's exploration policy, the government allows companies to first recover their cost from oil and gas revenue, and subsequently share profits with the government.Reliance's growth outlook has been marred by falling gas output from its huge gas fields, with production less than half of what was originally estimated.The CAG last year criticised both Reliance and the government over development of the KG gas field, and the company's shares slumped by a third in 2011.The company has earlier said unexpected geology has caused the decline in output and drilling more wells would not help, but this has been rejected by the oil ministry.In November, Reliance had sent an arbitration notice to the government over cost recovery, but the ministry has so far refused to join arbitration.(Reuters)
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Turkmenistan plans this week to sign a long-awaited agreement to supply natural gas to Pakistan and India through an ambitious U.S.-backed pipeline that would cross Afghanistan, a source in the Central Asian country's government told Reuters on Monday.Turkmenistan, which holds more than 4 per cent of the world's natural gas reserves, plans to sign the sales and purchase agreement for the TAPI pipeline on Wednesday, during an international gas conference in the Caspian Sea resort of Avaza."The plan is to sign the TAPI natural gas sales and purchase agreement with Islamabad and Delhi on May 23 in Avaza, by the Caspian, where the gas congress is opening," the government source said, on condition of anonymity.He gave no details of the content of the agreement.The idea of the TAPI pipeline, an acronym formed from the initials of the four countries through which it would pass, was first raised in the mid-1990s but construction has yet to begin.In a sign a deal might be imminent, India's cabinet last week allowed state-run gas-firm GAIL (India) Ltd to sign a gas purchase agreement with Turkmenistan.Turkmen officials have said the proposed 1,735-km (1,085-mile) pipeline could carry 1 trillion cubic metres of gas over a 30-year period, or 33 billion cubic metres a year.But the route, particularly the 735-km (450-mile) leg through the Afghan provinces of Herat and Kandahar, presents significant security challenges and will require billions of dollars in funding.A U.S. official estimated in March that the pipeline could cost between $10 billion and $12 billion to construct.Daniel Stein, senior adviser to the U.S. State Department's special envoy for Eurasian energy, also said that two major U.S. oil companies were interesting in participating in the project. He declined to name the companies.Ex-Soviet Turkmenistan is promoting the TAPI pipeline as a key element in plans to cut reliance on supplies to Russia and to boost annual gas exports to 180 billion cubic metres by 2030.BP data show Turkmenistan's natural gas reserves equal to those of Saudi Arabia and behind only Russia, Iran and Qatar.The country aims to supply gas from its Galkynysh field, better known by its previous name, South Iolotan. Auditor Gaffney, Cline & Associates has ranked the field the world's second largest, with gas reserves of between 13.1 trillion and 21.2 trillion cubic metres.Volumes And FeesTurkmenistan's unflinching policy of selling gas at its own borders means Pakistan and India would need to settle volumes, price and transit fees with each other and with Afghanistan.The Indian government said in a statement on May 17 that the pipeline would be operational in 2018. India and Pakistan would each get 38 million cubic metres per day (mcmd) of gas, while the remaining 14 mcmd would be supplied to Afghanistan, it said.Indian Petroleum Minister S. Jaipal Reddy is scheduled to lead his country's delegation to Turkmenistan to sign the agreement. India has nominated GAIL for the purchase of gas.Separately, an Indian Oil Ministry official said last week that the transit fee for the gas had been fixed at about 50 cents per million British thermal units (mmBtu).India, Asia's third largest oil consumer, imports about 80 per cent of its oil needs while falling local gas output has forced it to buy costly liquefied natural gas."We expect that India will more than double gas consumption over the next 25 years," Ulrich Benterbusch, director of the Global Energy Dialogue at the International Energy Agency, told an international energy conference in Uzbekistan last week."Domestic gas production in India will not be able to keep up," he said.(Reuters)
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Airport charges are going up In India but some cities will prove cheaper than others if the Airport Authority of India's (AAI) proposals to airports regulator go through. AAI's new terminals at Chennai and Kolkata are seeking an increase in charges and have proposed a new levy — a user development fee (UDF) — in line with those levied by private airports in Mumbai and Delhi. The increases and charges are, however, not as high as the private airports.Speaking to BW, AAI chairman V.K. Aggarwal said the new Chennai airport will be operational by end-June, while the one at Kolkata is likely to be completed by the Puja festival. The state governments played a key part in the completion of the two projects, Tamil Nadu being more proactive than West Bengal.According to Aggarwal, the charges at the two airports are likely to go up by around 50 per cent (they would still be far lower than the increases at Delhi and Mumbai). At Chennai airport, a UDF of Rs 160 has been proposed for domestic passengers and Rs 500 for international passengers. At Kolkata, the UDF will be higher at Rs 400 for domestic and Rs 1,100 for international passengers (see chart). This is because Kolkata sees a lower volume of traffic than Chennai. AAI officials said their airports would provide services similar to the private airports but at a much lower cost. They said that some of the private airports had built very large infrastructure that was not immediately needed and that a phased development may have been a better approach to avoid the kind of losses they claim they are making. "Hyderabad, for instance, was in my view premature. The traffic did not justify such a large set-up with such high costs.Therefore, one can expect them to make losses," said one official. In contrast, in Chennai, the existing domestic terminal has already reached saturation since the traffic is higher than the handling capacity. The new terminal built by AAI is meant to cater to 10 million passengers and will reach saturation by 2017-18. The state is planning a new green field airport after 2018 to cater to traffic demands.While the look and feel of the new terminal built by AAI in Chennai is remarkably similar to that of the private airports, the final proof of the pudding will be in the eating. It remains to be seen whether the AAI staff and employees will cooperate to create a facility that is as efficient and smoothly run as the private ones. Going by their past record, one can't blame the travelling public for being sceptical. (This story was published in Businessworld Issue Dated 28-05-2012)
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India-focused private equity firm Jacob Ballas, backed by New York Life International, has invested $38 million in Marg Karaikal Port, a unit of MARG Ltd, for a minority stake, the south Indian infrastructure firm said on Wednesday.The port will use the funds to expand capacity to 28 million metric tonnes per annum, it said in a statement.MARG Karaikal Port is an all-weather port on the south east coast of India.Last year, Ascent Capital invested about Rs 200 crore to pick a minority stake in the firm.The Indian Infrastructure Fund backed by India's IDFC and Citigroup had invested in the port in 2010.(Reuters)
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Petronet LNG Ltd. will invest Rs 4,500 crore to build a liquefied natural gas (LNG) terminal on India's east coast by 2016 to help meet the growing demand of the energy-hungry nation.Companies are building LNG import and regasification facilities on the east coast to meet demand of eastern and central part of India as plants are now located only on the west coast.Petronet, partly owned by GAIL, Indian Oil Corp and refiner Bharat Petroleum Corp, has signed an agreement with Gangavaram Port Ltd. to build the 5-million-tonne-a-year plant in southern Andhra Pradesh state, the gas importer said in a statement on Wednesday.Problems at the D6 block, off India's east coast operated by Reliance Industries, have curtailed domestic output while state-run Oil and Natural Gas Corp (ONGC) struggles to arrest declining production from its ageing field.Asia's third-largest economy is scouting for long-term LNG contracts to help power electricity generation, fertiliser production, city gas distribution and industries.Gas accounts for about 10 percent of India's primary energy basket versus the world average of 24 percent, and the country's gas demand is expected to grow at 14 percent in the next five years, P ri me Minister Manmohan Singh said in September.India aims to increase its LNG handling capacity to 50 million tonnes a year by 2017 from 13.5 million tonnes now, Oil Minister Jaipal Reddy said in March.Petronet buys 7.5 million tonnes of LNG under a long-term deal with Qatar at Dahej and has tied up 1.5 million tonnes of LNG annually from Australia's Gorgon project from 2014 for its Kochi plant.India aims to double its LNG imports from Qatar and has sought 3 million tonnes of LNG for immediate requirement in the country.Petronet operates a 10 million tonnes a year LNG terminal at Dahej in western Gujarat state and plans to commission a 5-million-tonne-a-year terminal by December on the west coast at Kochi, in southern Kerala state.India has an LNG terminal on the west coast at Hazira in Gujarat, while commissioning of Dabhol LNG plant on the west coast is imminent.Last month, French utility GDF Suez signed a deal with Andhra Pradesh Gas Distribution Corporation for developing India's first floating LNG terminal.State-run Indian Oil Corp is also building a 5 million tonnes per year LNG terminal at Ennore in southern India, which is expected to come online by 2014.(Reuters)
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il trader Trafigura has made its first move into refining in Asia, investing up to $130 million for a 24 per cent stake in Nagarjuna Oil Corp Ltd's (NOCL) planned refinery in Tamil Nadu and replacing BP as NOCL's crude supplier.India and other emerging markets are boosting refining capacity to feed rising regional demand, while their counterparts in the United States and Europe restructure or shut plants as fuel sales slow.This is the first direct investment in the refining business by Trafigura Pte Ltd, a unit of the world's third largest crude oil trader Trafigura Beheer B.V., which has so far invested in the refining business through its unit, Puma Energy LLC."With BP, Nagarjuna Oil had a commercial agreement for crude supplies and export of products but Trafigura has come as a strategic investor ... they are buying a stake in the project," said a source privy to the deal."There can be only one strategic investor in the project. BP is not there now," the source said.He said Trafigura will have marketing rights for its share of refined fuels from the 120,000 barrels-per-day (bpd) plant -- India's third privately owned coastal refinery after Essar Oil and Reliance Industries, owner of the world's biggest refining complex."Geographically, the facility is well positioned to receive crude oil from Trafigura's international producer partners," Trafigura said in a statement.NOCL, which will initially control about 3 per cent of India's current 4.3 million bpd refining capacity, will look at local sales of fuel through state refiners as private companies do not get compensation from the government for selling fuel at subsidised rates set by New Delhi."Selling into the Indian market without the support of state-owned companies is a loss-maker, so the focus will be on export or trade," said Alex Yap at energy consultant FACTS Global Energy.He said India was a strategic place to sell gasoil and jet fuel into Europe and gasoline into southeast Asia, the Middle East and Africa."This deal also gives them a foot in the door for storage, which traders can't get enough of," he addedTrafigura is also investing $120 million for construction of storage facilities at the site.Commissioning of the project, initially scheduled to be completed by November 2011, is expected to start this year with commercial operations scheduled to begin during the first half of 2013, Trafigura's statement said.NOCL said on its website that the refinery would be expanded to 300,000 bpd by 2015.The new refinery and storage project will be located on the east coast of India, and will be able to receive supertankers, which typically can load up to 2 million barrels of oil.The refinery, which will be processing mainly heavy sour crudes, w ill be gearing up to produce distillates like gasoline, and gas oil in line with Euro IV standards.Other project partners includes TIDCO, owned by the local Tamil Nadu state government, and Tata Petrodyne, a subsidiary of India's largest corporate house Tata Group, the statement said.Shares of Nagarjuna Oil Refinery Ltd. closed more than 9 per cent higher on Thursday at 8.90 rupees, while the broader benchmark index was up 0.77 per cent."India is fast emerging as a leading hub for oil refining, with domestic demand rising and an increasing trend towards cleaner refined products," said Trafigura's Jonathan Pegler, director of Oil Asia Pacific.(Reuters)
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Denying relief to Indraprastha Gas Ltd, the Delhi High Court on Wednesday refused to stay the Petroleum and Natural Gas Regulatory Board (PNGRB) order, which slashed the network tariff and CNG compression charge on sale of piped natural gas (PNG) and CNG."We are not staying the (PNGRB) decision. Put up for final arguments on April 19," a bench of Acting Chief Justice A K Sikri and Justice Rajiv Sahai Endlaw said.Appearing for oil regulator PNGRB, Additional Solicitor General A S Chandhiok assured the court that no coercive steps would be taken against the state-owned IGL during the pendency of the petition before the bench.IGL, sole supplier of PNG and CNG in Delhi and its suburbs, has moved the high court against the PNGRB order which has slashed network tariff and CNG compression charge and asked IGL to refund the excess amount charged by it from consumers since 2008.Senior advocate Ashok Desai, appearing for IGL, said the gas distributor has challenged the constitutional validity of the decision of PNGRB, which has no right to decide the rate of network tariff and CNG compression charge."It (right to fix the rate) is simply beyond the right of PNGRB," Desai said, adding that the decision to slash the rate with retrospective effect would lead to a financial burden to the tune of Rs 1,500 crore "which is more than the net worth of the IGL".He sought court's indulgence saying "meanwhile, the order of the oil regulator be stayed till final outcome of the case.The ASG opposed the plea saying the oil regulator is not "pocketing" the money as it has simply asked the IGL to pass on the benefits to consumers.(PTI)
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Shares of Indraprastha Gas (IGL) went into a tailspin after the The Petroleum & Natural Gas Regulatory Board (PNGRB) asked the company to lower its network tariff for compressed natural gas (CNG) and liquefied petroleum gas (LPG) by over 60 per cent in New Delhi and the NCR and asked the firm to refund to consumers the excess amount charged since 2008, a decision IGL challenged in Delhi High Court on Tuesday.IGL's net worth will erode if the order remains unchanged, said IIFL's Harshvardhan Dole, talking to CNBC-TV18. Under this scenario, IGL could struggle to make even normative returns on the capital it has invested in the business.IGL Managing Director M Ravindran told reporters the company was not given a "fair chance" to implede its case before PNGRB passed its order.The regulator has said that its order be implemented immediately. The new tariff is effective retrospectively from 1 April 2008 and as per rough estimates, the excess tariff charged could be around Rs 1,600 crore. "IGL has approached today Delhi high court, where we have challenged the constitutionality and legality of the powers of the PNGRB (Petroleum and Natural Gas Regulatory Board) to fix the tariff," said Ravindran.PNGRB's directive had sent shares in gas utilities reeling, with IGL closing down 34 per cent on Tuesday, while Gujarat Gas ended down 15 per cent and Petronet LNG down 3.1 per cent.The Petroleum and Natural Gas Regulatory Board (PNGRB) in an April 9 order fixed pipeline transportation tariff at Rs 38.58 per million British thermal unit as against Rs 104.05 per mmBtu sought by IGL. Gas compression prices were reduced to Rs 2.75 per mmBtu from Rs 6.66, both changes being effective from April 1, 2008. IGL, which potentially may be impacted by Rs 1,000 crore to Rs 1,700 crore in past dues, said it is not implementing the order immediately pending its appeal against the directive in the Delhi High Court."We are not clear how they (PNGRB) have calculated this tariff. We do not know the assumptions they have made," IGL Managing Director M Ravindran said. "We have today approached Delhi High Court, challenging the constitutionality and legality of the powers of the PNGRB to fix the tariff."IGL plunged as much as 51 per cent to Rs 170 before closing at Rs 229.80 on the Bombay Stock Exchange (BSE).Ravindran said the company was not given a "fair chance" to implede its case before PNGRB passed its order. "There are differences (with PNGRB) on many counts... the gas volumes, capacity utilisation and the pipeline network (taken into account for calculating the tariff)."IGL may not be able to raise its margins to accommodate the refund on tariff as the margins too would be determined by PNGRB. IGL in 2010-11 had a total revenue of Rs 1,750.46 crore and a net profit of Rs 259.77 crore. If it were to implement the order, its outgo would be a minimum Rs 1,000 crore and may go up to Rs 2,200 crore if some analysts are to be believed.Though IGL insisted that it was not duly consulted before PNGRB passed the order, the 13-page order stated that the Board and its consultants had sought clarifications over data on capital and operating expenditure submitted by IGL in May 2009."During the process of verifying the cost and other data for determination of the network tariff and compression charge for CNG in respect of the Delhi city gas distribution network, certain issues arose on which clarifications were requested from IGL, by both the consultants and the board."Since the exercise of obtaining clarifications from IGL and their appropriate resolution is time-consuming requiring cooperation of all the stakeholders and also given the fact that determination of transportation tariff was being carried out for the first time, closure o this issue could be affected only by June 2011," the order stated.IGL's challenge on PNGRB's constitutional and legal powers to fix the tariff may also face hurdle as the PNGRB Act of 2006 specifically entrusts the Board of the responsibility to lay down the transportation tariff for city or local natural gas distribution network.Fears of similar PNGRB orders for other CGD distributors triggered fall in shares of Gujarat Gas Co, which fell 15.10 per cent, and Gujarat State Petronet Ltd that dropped 7.50 per cent on BSE. GAIL India Ltd, the nation's biggest gas distributor and part-owner of IGL, declined 1.82 per cent.Petronet LNG was down 3.1 per cent.
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