One-and-a-half decade ago, Reliance Industries Limited [RIL] had created history by announcing the biggest ever gas discovery in Krishna Godavari [KG] basin off the Andhra Pradesh coast with an estimated in-place reserve of 12 trillion cubic feet [tcf]. It started producing from its most prolific bloc KG-DWN-98/3 in 2009 with a promise to deliver 80 million standard cubic meter per day [mmscmd]. After reaching 69 mmscmd in March 2010, production started declining and the trend never got reversed. Currently, it produces only 7 mmscmd which is not even 1/10th of the promised quantity. The precipitous decline in production has remained shrouded in mystery even as the operator is entangled in four arbitration cases with Union Government over various aspects of...
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Category: Production vs imports
Gas – stop this obsession with higher price
Once again, Oil and Natural Gas Corporation [ONGC] – a Government of India [GOI] undertaking in the upstream oil and gas segment which accounts for over 70% of indigenous gas production of 80 million standard cubic meter per day [mmscmd] – has raised a hue and cry over the existing guidelines for pricing of natural gas. ONGC Chairman, Dinesh K Sarraf has argued that current natural gas price being significantly lower than the cost of production, for any company it does not make economic or commercial sense to invest in new fields or augmenting production from existing ones through fresh investment. He has requested ministry of petroleum and natural gas [MPNG] to review the existing domestic gas pricing formula and...
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RAISING ISSUES WITH GAS PRICING POLICY
The Government needs to re-look at the current pricing scheme for CBM production as it is not reaping returns. It must, instead, stick to extant formula-based guidelines The Cabinet Committee on Economic Affairs (CCEA) has approved marketing and pricing freedom to contractors/producers of coal-bed methane (CBM), or natural gas from coal seams, to sell it at arms length price in the domestic market. To discover arms length price, a contractor has to now follow a fully transparent and competitive bidding process from amongst users “with the objective that the best possible price is realised for the gas without any restrictive commercial practices”. This decision has come in response to a scenario, whereby producers such as, Reliance Industries Limited (RIL) and...
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Gas pricing – stop that policy drift
The Cabinet Committee on Economic Affairs [CCEA] has approved marketing and pricing freedom to contractors/producers of coal-bed methane [CBM] – or natural gas from coal seams – to sell it at arms length price in the domestic market. To discover arms length price, a contractor has to follow a fully transparent and competitive bidding process from amongst users “with the objective that the best possible price is realized for the gas without any restrictive commercial practices”. In the event, he cannot identify any buyer, sale can be made to any of its affiliates. Royalty and other dues to the government, however, shall be payable on the basis of Petroleum Planning & Analysis Cell (PPAC) notified prices or selling prices, whichever...
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Impending oil shock – expedite subsidy reforms
After protracted battle within the bloc [as also with countries outside], members of the Organization for Petroleum Exporting Countries [OPEC] – a conglomeration of oil exporting nations from the middle east – have agreed to reduce their combined output by about 1.2 million barrels a day. Likewise, 11 non-OPEC countries led by Russia have decided to knock off over 500,000 barrels from their supplies. The agreement is effective from January 1, 2017. The agreement has to be viewed in the backdrop of a steep decline in the international price of crude oil from the peak of US$ 117 per barrel in June 2014 to a low of US$ 27 per barrel in February, 2016. During the current calendar, even though...
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Energy security at stake
THE GAS FIASCO In its report submitted in November, 2015, De-Golyer and MacNaughthon (D&M) – a consultant appointed by the Centre following the dispute between the Oil and Natural Gas Corporation (ONGC) and the Reliance Industries Limited (RIL) over alleged migration of gas from former’s oil field discoveries in KG basin to latter’s fields in the same basin off Andhra coast – estimated that 0.4 trillion cubic feet (tcf) of gas had migrated from ONGC’s ‘idle fields’ to RIL. Following this, the government set up a committee under Justice A P Shah in December, 2015 to examine the matter and recommend measures to be taken against RIL for “the unjust benefit” it received from the migration of gas taking in...
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Gas fiasco – India’s energy security compromised
In its report submitted in November, 2015, De-Golyer and MacNaughthon [D&M] – a consultant appointed by Union government [following dispute between Oil and Natural Gas Corporation’s [ONGC] and Reliance Industries Limited [RIL] over alleged migration of gas from former’s G4PML and D1/E1 discoveries in KG-DWN-98/2 to latter’s D1 and D3 fields in KG-DWN-98/3 off Andhra coast [better known as KG-D6]] – estimated that 0.4 trillion cubic feet [tcf] of gas had migrated from ONGC ‘idle fields’ to RIL. Following this, the government set up a committee under justice A P Shah in December, 2015 to examine the matter and recommend measures to be taken against RIL for “the unjust benefit” it received from the migration of gas taking in to...
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ONGC/OIL ‘unshackled’ – government must stay on course
For Oil and Natural Gas Corporation [ONGC] and Oil India Ltd [OIL] – central public sector undertakings [PSUs] in the business of oil and gas exploration and production, the year 2016-17 brings unprecedented cheer. The ministry of petroleum and natural gas [MPNG] has proposed that the government won’t be asking them to share the burden of subsidies on LPG and kerosene. To put things in perspective, a bit of background is in order. During 2004-2014, under directions from then government, ONGC and OIL offered discount on supply of crude to downstream oil PSUs viz., Indian Oil Corporation Limited [IOCL], Hindustan Petroleum Corporation [HPCL] and Bharat Petroleum Corporation [BPCL] to cover a portion of under-recoveries that latter incurred on sale of...
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ONGC-GSPC tying knot – good for India’s energy security
There are reports of Oil and Natural Gas Corporation [ONGC] – a central public sector undertaking in the upstream oil & gas sector – picking up a majority stake in gas assets of Gujarat State Petroleum Corporation [GSPC] – an undertaking of Gujarat government – in Krishna-Godavari [KG] basin near coast of Andhra Pradesh. GSPC was awarded the high profile KG-OSN-2001/3 field in the second round of the new exploration and licensing policy [NELP]. Critics are branding this as an attempt by Modi – government at the centre [it was Narendra Modi who as then, chief minister, Gujarat in 2005 had announced discovery in this area with in-place reserves of over 20 trillion cubic ft] to bail out GSPC which...
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Gas pricing – has Modi succumbed to pressure tactics?
On March 10, 2016, the cabinet committee on economic affairs [CCEA] approved a policy to incentivize gas production from deep water, ultra-deep water and high-pressure-high-temperature areas. For such areas, which are yet to commence commercial production as on January 1, 2016 and for all future discoveries in such areas, the producers will be allowed marketing freedom including pricing freedom. This would be subject to a ceiling price based landed price of alternative fuels. The ceiling price will be determined as the lowest of the (i) landed price of imported fuel oil [FO]; (ii) landed price of imported LNG [liquefied natural gas] and (iii) weighted average imported landed price of substitute fuels viz., coal, FO and naphtha with weights of 30%,...
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