State-owned Oil and Natural Gas Corporation (ONGC) might just have hit pay dirt. The oil giant's special engineering team has drilled to the shale-rock fault in the Raniganj coal-bed methane block (CBM) of Damodar Basin in West Bengal. It is now set to hydro-fracture the rock with specially imported pumps from the US to extract gas. Hydrofracturing involves injecting water under high pressure into a bedrock formation through the well to increase the size of fractures."We have completed the drills. And after gathering the data and completing the tests, we will start hydro-fracturing the shale rock next week," says ONGC's executive director (offshore) P.K. Ghosh.His colleague and project manager of this exploration Ravi Mishra adds that most of the data had been gathered "and we now know this block a lot better. Hydro-fracturing, though, is the real challenge".ONGC has teamed up with Schlumberger of Germany for shale gas exploration in the country with an initial capital outlay of about $28 million (Rs 126 crore). Drilling began in September 2010. Sources in Schlumberger say the data will be sent to its Terra Tek geo-mechanics laboratory in Salt Lake City in Utah, US. This analysis will take six months to complete.Success in this block would mean that India would be able to understand its shale gas potential better. Global energy tracker Platts quoted Schlumberger officials as saying that India's shale gas reserves range anywhere between 600 and 2,000 trillion cubic feet (tcf). This figure is, however, open to debate as no study has been conducted on the shale bedrocks in western and north-western India.It takes years to commercially exploit such drills. It is believed that the country has good shale gas reservoirs in the basins of Assam's Arakan, Indus, Ganges, Krishna-Godavari, Mahanadi and Cambay. Compared to the wide estimate of 600-2,000 tcf of India's shale gas potential, the US has 3,500 tcf and China 2,500 tcf. Western Europe along with Australia and New Zealand, too, are eyeing shale gas as an energy source.Like ONGC, Oil India, too, has initiated a similar project in Assam that is in its early stages. Will these shale-gas hunts deliver? Essar Oil's chief operating officer, Prem Sawhney, is a conservative voice when it comes to the potential of shale, but is hopeful of a brighter future for this unconventional source of energy. He argues that most of the shale gas reservoirs in India are beneath CBM blocks. And to that extent there would be an overlap of blocks, "there has to be policy on territorial rights", he says. He feels that a fiscal package (read a favourable taxation regime) for such forays will be critical. Be that as it may, during the course of US President Barack Obama's recent visit, a memorandum of understanding (MoU) was signed between the two countries on sharing technology to understand the potential of the sub-continent's shale gas reservoirs. As per some agreements, the US Geological Survey would give its report on shale rock fields in the country.The director-general of hydrocarbons, S.K. Srivastava, has been on record saying that results pouring in from recent expression blocks of shale rock are encouraging. His office is on an overdrive mode towards framing a policy for the allocation of shale gas blocks by end of 2011. The need for a separate legislation on shale oil and gas compared to that extracted from hydrocarbons too has been aired of late.The success of the ongoing drills in the Raniganj block will have a bearing on the crafting of a separate legislation on shale rock extractions. This legislation would allow the definition of shale gas as separate from hydrocarbons and minerals.(This story was published in Businessworld Issue Dated 24-01-2011)
Read More
Vedanta Resources Plc completed its long-delayed $8.7-billion purchase of a majority stake in Cairn Energy Plc's Indian unit, more than a year after the deal was first announced, in a move that turns India-focused Vedanta into a diversified resources group.London-listed Vedanta now holds 58.5 per cent of Cairn India, it said on Thursday, of which 20 per cent is held through its Sesa Goa unit.Cairn Energy, which will retain a 22 per cent stake in Cairn India, confirmed it would return around $3.5 billion to shareholders.Cairn Energy agreed in August last year to sell a majority stake in Cairn India to Vedanta. But the sale, one of the largest in India's energy sector, was delayed for months due to a disagreement over royalty payments."Today marks a key milestone for Vedanta as it puts to bed a deal drawn out for well over a year that has contributed to underperformance on fears of deal terms uncertainty and balance sheet stress," analysts at Liberum said in a note."Oil has been a solid performer over the course of 2011 ... we see the Cairn India inclusion as the key factor in repairing Vedanta's balance sheet and boosting bottom-line performance."(Reuters)
Read More
Energy major Reliance Industries will suspend oil and gas drilling pending an internal valuation of its exploration and production strategy, the Mint newspaper reported on Monday citing sources briefed by the company.The firm, India's most valuable company by market capitalization, has seen its growth outlook and market value hit hard this year by falling gas output from its huge gas fields off the east coast.Reliance will halt drilling for an unspecified time until the review is completed and submitted to the government, three analysts present at a company meeting told the newspaper.A Reliance spokesman declined to comment on the report when contacted by Reuters.Controlled by billionaire Mukesh Ambani, Reliance posted its highest ever quarterly net profit in its Q2 results on Saturday, but analysts focused on slowing gas output and said refining margins were still below expectations.Last month, India's upstream regulator said Reliance was producing 44 mscmd (million standard cubic metres per day) from its main D6 block, lower than the 60 mscmd it was producing a year earlier and far off the planned peak capacity of 80 mscmd.The CAG last month criticised Reliance and the government over development of the gas field in the Krishna Godavari (KG) basin and called for revamping profit-sharing arrangements from oil and gas blocks.Earlier this year, Reliance sold a 30 percent stake in 23 oil and gas blocks, some in the KG basin, to BP in a 7.2 billion deal.The British company, with deepwater exploration expertise, has said it is confident of raising gas output from the field from 2014.(Reuters)
Read More
A Committee of Secretaries (CoS) under the chairmanship of Cabinet Secretary Ajit Seth, in principle has agreed to reconstitute the Director General of Hydrocarbons (DGH), as an independent technical attached office of Ministry of Petroleum and Natural Gas (MoPNG).This has been a contentious issue. But the Committee on Allocation of Natural Resources (CANR) has suggested that reconstitution of DGH will bring in two separate functioning. Sources in the MoPNG ministry said: "It would help the regulator to focus on regulatory functions." The matter will be soon taken up by the CoS again for a final recommendation to the Cabinet for its approval.At the last meeting of CoS held a fortnight ago, MoPNG and Department of Economic Affairs (DEA) wanted to come back with a detailed proposal, hence the matter was deferred till next meeting.As per the suggestion of CANR, the CoS has decided, that an inter-ministerial group led by DEA, would study the international best practices and identify the functions that could possibly be hived off to an upstream regulator. The inter-ministerial Group will submit its report by December 2011. MoPNG has agreed to this proposal. "We want to have an independent regulator, but, there cannot be separate appointing body," says a top official in MoPNG.The matter assumes significance following the Ashok Chawla committee's final report was submitted in May 2011. A Group of Ministers (GoM) on corruption chaired by Finance Minister Pranab Mukherjee, had suggested the creation of a new statutory body for appointing regulators for major sectors.Officials who attended the meeting of CoS last fortnight said CANR reiterated the points made by the Chawla committee. It had stressed importance of independent regulator for increased transparency in the allocation of natural resources. "CoS cannot ignore the Chawla committee report recommendations," said a one of the Secretary who attended the meeting of CoS. However, the Secretary was non-committal, if CoS would agree to the Chawla committee suggestions, to take away the power to appointment regulator, from administrative ministry responsible for the sector. Chawla Committee was also categorical about recruiting from outside administrative and secretarial staff working in the regulatory body. Currently, most of the administrative and secretarial staff in DGH is from the Ministry of MoPNG and public sector major Oil and Natural Gas Commission (ONGC).
Read More
The price of compressed natural gas (CNG) has been hiked by Rs 1.75 per kg in the national capital with effect from midnight tonight, mainly on account of rupee depreciation against the US dollar.Indraprastha Gas Ltd, which sells CNG to automobiles and piped cooking gas to households in Delhi and neighbouring towns, said the new prices would be effective from midnight on Friday."The revision in prices would result in increase of Rs 1.75 per kg in the consumer price of CNG in Delhi and Rs 2.00 per kg in the consumer price of CNG in Noida, Greater Noida and Ghaziabad," the company said in a press statement in New Delhi.The new consumer price in Delhi will be Rs 33.75 per kg, while it will be Rs 37.90 per kg in Noida, Greater Noida and Ghaziabad.This is the fifth increase in CNG rates this year. IGL had last raised CNG prices in Delhi by Rs 2 per kg to Rs 32 per kg from October 1.IGL Managing Director M Ravindran said: "We have been forced to increase the retail price of CNG due to a major increase in the input cost of entire pool of natural gas being sourced by us as a result of recent appreciation of the dollar vis-?-vis the rupee and the increased dependence on imported LNG."The hike was necessitated because IGL bought expensive imported LNG to make up for the stoppage of supplies from Reliance Industries' eastern offshore KG-D6 gas field because of a fall in output.In addition, rupee depreciation has made the raw material -- that is, natural gas -- even costlier. The rupee was hovering around Rs 49.50 per US dollar at the time of the last price hike, while today, it is about Rs 53 to a US dollar.IGL contracted 0.308 million standard cubic metres per day of gas from RIL, but following a 35 per cent drop in KG-D6 output, supply to city gas projects has been cut so that demand of the priority power and fertiliser sectors can be met.IGL gets up to 2.7 mmscmd of gas from domestic fields of Oil and Natural Gas Corp (ONGC), called APM gas, and buys another 0.6 mmscmd of LNG.Ravindran said, "With the allotted APM gas having already been fully utilised and complete stoppage of KG-D6 supplies due to a decrease in production, IGL is left with no other alternative but to source costly spot LNG to meet the ever-increasing demand, which has contributed to the higher cost of sourcing the gas."The base price of natural gas procured by IGL from all its sources, i.e. APM, KG?D6, long-term R-LNG, as well as spot R-LNG, is in dollars per mmbtu and the dollar has appreciated by 14 per cent vis-?-vis the rupee since the last price revision of CNG.Ravindran said the increase would have a minor impact on the per kilometre running cost of vehicles. "For autos, the increase would be 5 paise per km, for taxis it would be 8 paise per km and in the case of buses, the increase would be 50 paise per km, which translates to less than one paisa per passenger-km," he said.(Reuters)
Read More
Iran threatened on Tuesday to stop the flow of oil through the Strait of Hormuz if foreign sanctions were imposed on its crude exports over its nuclear ambitions, a move that could trigger military conflict with economies dependent on Gulf oil.Western tensions with Iran have increased since a Nov. 8 report by the UN nuclear watchdog saying Tehran appears to have worked on designing an atomic bomb and may still be pursuing research to that end. Iran strongly denies this and says it is developing nuclear energy for peaceful purposes.Iran has defiantly expanded nuclear activity despite four rounds of UN sanctions meted out since 2006 over its refusal to suspend sensitive uranium enrichment and open up to UN nuclear inspectors and investigators.Many diplomats and analysts believe only sanctions targeting Iran's lifeblood oil sector might be painful enough to make it change course, but Russia and China - big trade partners of Tehran - have blocked such a move at the United Nations.Iran's warning on Tuesday came three weeks after EU foreign ministers decided to tighten sanctions over the UN watchdog report and laid out plans for a possible embargo of oil from the world's No. 5 crude exporter."If they (the West) impose sanctions on Iran's oil exports, then even one drop of oil cannot flow from the Strait of Hormuz," the official Iranian news agency IRNA quoted Iran's First Vice President Mohammad Reza Rahimi as saying.EU ministers said on Dec. 1 that a decision on further sanctions would be taken no later than their January meeting but left open the idea of an embargo on Iranian oil.Countries in the 27-member European Union take 450,000 barrels per day of Iranian oil, about 18 percent of the Islamic Republic's exports, much of which go to China and India.China, the biggest buyer of Iranian crude, has warned against "emotionally charged actions" that might aggravate tension in the nuclear standoff with Iran.Russia for its part has warned against "cranking up a spiral of tension", saying this would undermine the chances of Iran cooperating with efforts to ensure it does not build atom bombs.About a third of all sea-borne oil was shipped through the Strait of Hormuz in 2009, according to the US Energy Information Administration (EIA), and US warships patrol the area to ensure safe passage.Most of the crude exported from Saudi Arabia, Iran, the United Arab Emirates, Kuwait and Iraq - together with nearly all the liquefied natural gas from lead exporter Qatar - must slip through the Strait of Hormuz, a 4-mile (6.4 km) wide shipping channel between Oman and Iran.Iran has also hinted it could hit Israel and U.S. interests in the Gulf in response to any military strike on its nuclear installations - a last resort option hinted at by Washington and the Jewish state.However, some analysts say Iran would think hard about sealing off the Strait since it could suffer just as much economically as Western crude importers, and could kindle war with militarily superior big powers.Saudis Ready To Replace Iran CrudeIndustry sources said on Tuesday No. 1 oil exporter Saudi Arabia and other Gulf OPEC states were ready to replace Iranian oil if further sanctions halt Iranian crude exports to Europe.Iranian Oil Minister Rostam Qasemi had said that Saudi Arabia had promised not to replace Iranian crude if sanctions were imposed."No promise was made to Iran, its very unlikely that Saudi Arabia would not fill a demand gap if sanctions are placed," an industry source familiar with the matter said.Gulf delegates from the Organization of the Petroleum Exporting Countries (OPEC) said an Iranian threat to close the Strait of Hormuz would harm Tehran as well as the major regional producers that also use the world's most vital oil export channel."If the sanctions take place, the price of oil in Europe would increase and Saudi and other Gulf countries would start selling there to fill the gap and also benefit from the higher price," said a second industry source who declined to be named.Brent crude oil futures jumped nearly a dollar to over $109 a barrel after the Iranian threat, but a Gulf OPEC delegate said the effect could be temporary. "For now, any move in the oil price is short-term, as I don't see Iran actually going ahead with the threat," the delegate told Reuters.The industry source said that in the case of EU sanctions, Iran would most likely export more of its crude to Asia, while Gulf states would divert their exports to Europe to fill the gap until the market is balanced again.A prominent analyst said that if Iran did manage to shut down the Strait of Hormuz, the ensuing spike in oil prices could wreck the global economy, so the United States was likely to intervene to foil such a blockade in the first place."First, the U.S. will probably not allow Iran to close the Strait. That's a major economic thoroughfare and not just for oil. You shut that Strait and we are talking a major hit on many Middle East economies," said Carl Larry, president of Oil Outlooks in New York."Second, there is no way that the Saudis (alone) have enough oil or quality of oil to replace Iranian crude. Figure Saudi spare capacity is 2 to 4 million at best. Of that spare, about 1-2 million is real oil that is comparable out of Iran. Lose Iran, lose 3.5 million barrels per day of imports. No way."French President Nicolas Sarkozy proposed hitting Iran with an oil embargo and won support from Britain, but resistance persists within and outside the European Union.An import ban might raise global oil prices during hard economic times and debt-strapped Greece has been relying on attractively financed Iranian oil.Iran's seaborne trade is already suffering from existing trade sanctions, with shipping companies scaling down or pulling out as the Islamic Republic faces more hurdles in transporting its oil. (Reuters)
Read More
India seems to be finally beginning to fix its broken power connections. The country has already added more than 10,000 megawatt (MW) of power-generation capacity in the current financial year (2010-11). This is the highest ever addition to the country's power-generation capacity in a single fiscal since Independence.By end-March, power ministry officials expect the total capacity addition during the fiscal to be in the region of 15,000 MW. That is almost 71 per cent of the total 21,180 MW of capacity added during the 10th Plan period (2002-07). The highest addition to power generation capacity achieved in a year earlier was 9,585 MW in 2009-10. The growth in power-generation capacity has been driven by an addition of close to 9,300 MW of thermal power capacity in the first nine months of the fiscal. This has been led by the private sector. The thermal capacity addition till now is already higher than the 9,100 MW capacity added in the last fiscal.A large chunk of the capacity addition this year has come from the private sector — 1,200 MW from Sterlite's plant at Jharsuguda (Orissa); 1,320 MW from Adani Power at Mundra (Gujarat) and 600 MW from JSW Energy at Ratnagiri (Maharashtra). At 3,120 MW, it accounts for almost a third of the total capacity addition.However, despite the seemingly positive performance in 2010-11, the country is still going to miss the reduced target of adding 62,374 MW of capacity during the 11th Plan (2007-12). The government had earlier lowered the target from the original 78,577 MW set at the start of the 11th Plan. Based on current additions, it is quite likely that the country will add close to 55,000 MW in the Plan period.Despite missing the target, the government has set an ambitious target of adding around 100,000 MW of capacity during the 12th Plan (2012-17) period. During the 12th Plan, 50 per cent of the power plants commissioned will be super critical. These plants operate at higher temperatures leading to greater efficiency.If the private sector continues to keep pace, that could be achievable. But meeting that target could become tough if industry faces problems in getting regulatory clearances quickly.(This story was published in Businessworld Issue Dated 07-02-2011)
Read More
Adani Power has put on hold its 6,500 megawatt of capacity expansion plan due to lack of clarity on coal supplies, Chief Executive Officer Ravi Sharma said on Tuesday.While the country holds 10 per cent of the world's coal reserves, power companies often struggle to access local supplies due to environmental and land acquisition delays, forcing expensive imports.Coal accounts for 55 per cent of India's power generation capacity of 182,344 megawatts.Earlier this month, the company had said it was confident of installing 16,000 MW operational capacity by FY2012.(Reuters)
Read More
