India's E&P rivalry with China: Just a lot of hype?

July 2: 8India has always considered China as its biggest competitor in the race for acquiring E&P assets all around the world. But the Chinese do not seem to harbour the same fears, given that they consistently trumped Indian bids for foreign oil and gas equity whenever challenged. In this regard, it is becoming increasingly clear that Indian oil companies like OVL and Chinese supermajors like CNPC and Sinopec are not on an even footing when it comes to their ability to make multi-billion dollar investments. OVL`s investments in foreign E&P till March 31, 2009,  totaled 10.489 billion (Rs 47,222.22 crore), which seem quite respectable until one considers the fact that only recently, the Chinese struck a loan-for-oil deal with Brazil that involves a $10 billion loan to Brazilian national oil company, Petrobras, against an increase in Brazil`s crude exports to China to 150,000 bopd in the current year, and to 200,000 bopd for the subsequent nine years.
 8The deal was struck within weeks of a similar $25 billion loan-for-oil transaction by CNPC with two Russian companies -- Rosneft and $10 billion to Transneft -- which guaranteed crude supplies of an average of 300,000 barrels per day over 20 years. China will lend $15 billion to Roseneft and $10 billion to Transneft . Transneft needs the loan to complete the first phase of East Siberian Pacific Ocean (ESPO) pipeline and also to implement other pipeline projects, while Rosneft has to repay its massive debts. While the disbursement ofloans to Russia will start from this year only, deliveries of crude to China will commence as soon as the ESPO pipiline is able to  supply crude to China.
 8There were other big deals too by China, in countries like Iran, where India has been trying to make headway, albeit unsuccessfully, for the past several years. China National Petroleum Corporation (CNPC), for example, signed a $4.7 billion deal with Iran granting it access to Phase-11 of the giant South Pars field and a long-term purchase plan for Iranian LNG. The gas from this field will provide the feedstock for two planned 5-MMTPA LNG trains. On top of this, National Iranian Oil Co. (NIOC) has inked a deal for development of the adjacent North Pars structure with China National Offshore Oil Corporation, which has already begun drilling its first exploratory well. Indian companies have been time and again reminding the Iranian government of the need to activate an agreement that was signed for their participation in a South Pars project, but the ease with which the Chinese have slid in the door seem to indicate that there is more to landing these lucrative contracts than merely being earnest.
 8There are other historic examples of the dollar might of the Chinese dragon leaving the Indian tiger out in the cold, as far as oil and gas contracts go, particularly in Africa. That Africa belongs invincibly to the Chinese was painfully brought home to New Delhi by Nigeria`s refusal in 2003 to allow ONGC Videsh Ltd to follow through on a $600 million deal for a 50% stake in offshore Block 18. The Nigerians exercised their Right of First Refusal (ROFR) to take the block away from India and gave it to China. This is because the Chinese have promised to make a billion dollar investment in sprucing up the Nigerian railways and North Block here could do nothing to match that kind of money. Since then, in deal after deal, the Chinese have been successfully edging out the Indians.
 8Readers should note that these are only a few examples of the massive investments made by the Chinese during the last decade. The least that India or ONGC can do is to study these transactions in detail so that they understand how they work. It is better to invest India`s large foreign exchange reserves in such equity oil or loan-for-oil deals than to keep them invested in low-interest US Treasury notes. Clearly, deals can be structured in a manner that provide India a definitive advantage -- either in terms of concessional price or a higher interest rate or a larger clout -- than what is earned from its foreign reserves at this juncture. (Click on Details for more information)   Details

Economic Survey 2008-09-I: Feeling the effects of the meltdown

July 2: 8In the backdrop of the global recessionary trend, India posted a GDP growth of 6.7% in 2008-09. While lower than projections made by the Department of Economic Affairs and the Central Statistical Office, and much lower than the 9.0% seen the previous year, this figure was much better than that of the OECD countries. Even as the Indian economy, to some extent, was insulated from the global economic crisis because of the regulatory framework that restricted exposure of banks and financial institutions to risky financial products, inadequate infrastructure growth and a languid central government, which has a huge role in the Indian economy, continue to constrain the nation's economic potential. The performance of six core industries related to infrastructure, comprising crude oil, petroleum refinery products, coal, electricity, cement and finished steel, grew at 2.7%, as compared to 5.9% in 2007-08. The index for crude oil declined by 1.8%, against an increase of 0.4% in 2007-08. There was a deceleration in the growth of cement and finished steel reflecting the negative sentiments in the construction and manufacturing sectors.
8All sectors, save mining and quarrying, and community, social and personal services, felt the effects of the slowdown. The electricity sector continued to be hampered by capacity constraints and the availability of coal, particularly during the first half of the year. This sector grew only by 3.4% over the fiscal, against the growth of 5.3% seen in 2007-08. As long as the coal sector remains a public sector monopoly, it would act as a bottleneck towards the accelerated development of the power sector. In addition, growth rates in the manufacturing and construction sectors decelerated to 2.4% and 7.2% respectively during 2008-09, from the corresponding figures of 8.2% and 10.1% in 2007-08. The slowdown in manufacturing can be attributed to lower exports, due to lower global demand, followed by a decline in domestic demand in the second half of the fiscal. Double digit inflation in the first half of the year, which contributed to extremely high input prices, and, consequently, the tight monetary policy followed by the Reserve Bank, which contributed to increased costs for credit, also adversely affected the sector. The construction industry, after going through a boom phase, with growth as high as 16.2% in 2005-06, has been, in more recent years, been impacted by increased construction costs due to a rise in the price of inputs, such as cement and steel, due to heightened demand from China. The rise in interest rates and the resulting slowdown in loans has also dented the industry.
8On the macroeconomic front, the growth in per capita GDP decelerated from 8.1% in 2006-07 to 4.6% in 2008-09, while the per capita consumption growth declined from 6.9% to 1.4% over the same period. The per capita income of the country, at constant 1999-2000 price levels, stood at Rs 31,278. More worryingly, the contribution of the more-efficient, private consumption to aggregate growth declined dramatically from 53.8% in 2007-08 to 27% in 2008-09. This decrease was cushioned by an increased contribution of government consumption. Consequently the overall contribution of consumption demand to growth was only marginally lower than that in 2007-08. In addition, for the year as a whole, the nominal value of the rupee declined from Rs 40.36 per US dollar in March 2008 to Rs 51.23 per US dollar in March 2009, reflecting a 21.2 per cent depreciation during the fiscal. Due to the increase in government spending, and not enough growth in taxable income in the private sector, the gross fiscal deficit of the Union Government increased from a reasonable 2.7% in 2007-08 to 6.2%, an unsustainable level in the long run. This would, in the medium to long run, crowd out private investments in the economy. On the brighter side, Gross Domestic Savings, and, consequently, Gross Capital Formation, have, as a proportion of GDP, have been increasing steadily since 2002-03, leading to better long term growth prospects.
8The good: Growth was not as low as in some other similar countries and OECD
The bad: The infrastructure sector, which contributes to long term GDP growth rates, has slowed down considerably. Interest rates still among the highest in the world.
The ugly: Increased influence of the government in aggregate consumption will distort markets and lead to lower growth in the future. The substantial decline of the Rupee can cause further erosion in balance of trade and inflationary pressures. Fiscal deficit can lead to higher real interest rates, depressing investments.
Click on 'Reports' to download the Economic Survey. By Abir Mandal

Economic Survey 2008-09-II: "Decontrol prices, target subsidies"

July 2: The Economic Survey 2008-09 released by the government today strongly advocated decontrol of the prices of petrol and diesel: "As long as domestic prices remained below the cost of imports, demand would continue to grow, accentuating the negative impact of the terms of trade effect on national income. In simple words such a situation is a form of foreign taxation of national income, with more tax being paid the more oil/petrol/diesel we consume. As the low prices of oil has provided a temporary window for costless decontrol of petrol and diesel, this window must be utilized at the earliest. Other elements of energy policy, such as open access to power, decontrol of coal also need to be addressed to have a viable and long-term solution to our dependence on foreign oil and the debilitating effect of power failure," the Survey said.
 8The Survey also called for reform of petroleum (LPG and kerosene), fertilizer and food subsidies to reduce leakages and ensure targeting, so that only the needy get the intended benefit. One recommendation was to limit LPG subsidy to a maximum of 6-8 cylinders per annum per household. Another was to phase out kerosene supply-subsidy by ensuring that every rural household (without electricity and LPG connection) had a solar cooker and solar lantern.
8Another recommendation was for issue of National ID cards to everyone based on unique identification number. The Survey called for rapid operationalization of the UID Authority (deadline:3 months), issue of UID to all residents (6 months) and creation of an integrated database of information on all actual and potential beneficiaries of government programmes, subsidies and transfers (one year). A Household ID (HHID) could be created simultaneously or in parallel by linking it to a set of UIDs of individuals constituting the household. These IDs will form the base of a multi-application smart cards (MASC) system that can be used to empower the poor and insure that they get the full benefits of all programmes such as NREGA, PDS, publicly provided education, skill development, health services, social security (to persons at special risk), fertilizer subsidy, solar lanterns, solar cookers, etc.
 (Click on our Reports section to download a copy of the Economic Survey 2008-09)

Multi-million appraisal programme set to begin in Mahanadi block

July 2: The stage is all set for major appraisal action in the Mahanadi gas block MN-OSN-2000/2. "The Mahanadi consortium is going to kick start a $100 million appraisal drilling programme by the end of this month or early next month," senior petroleum ministry sources, part of a recent meeting with the stakeholders of the offshore project, revealed to Indian Petro News on Thursday (July 2, 2009). The gas reserves estimate for the block -- owned by ONGC along with public sector consortium firms IOC, GAIL and OIL -- has been pegged at 1.89 trillion cubic feet (TCF). ONGC has reportedly sealed a deal to hire a drill ship from Reliance on assignment basis for the project.
8Three wells were drilled during during Phase-II of the Minimum Work Programme (MWP) in the NELP-II block. The first well was declared dry and subsequently abandoned. In the second well, a two-meter gaseous hydrocarbon zone was identified but no gas flow was discovered. It was only in the third well -- dubbed MDW-2A -- were three objects were identified (1: 1690-1694.5 metres, II: 1655.5-1659.5 and 1644-45metres, III: 1419-1421.5 metres) and tested. Good flow of gas was observed in this well.
8Subsequently, a Reservoir Characterization Study (RCS) to quantify the gas bearing pay was conducted that led to the discovery of stratigraphic features in the adjoining 853 sq km area -- now dubbed as the `discovery extension area` -- in addition to an area of 340 sq km of the block area which was the `discovery` area. The block MN-OSN-2000/2 was awarded in the second round of New Exploration Licensing Policy to a consortium of ONGC holding 40% stake and IOC, GAIL and OIL each holding 20% stake each in the block. By Sadiq Shaban   Details

D-3 block: Reliance plans to re-enter new well; awaits nod for appraisal drilling

July 2: Private sector E&P major Reliance Industries Ltd is planning to enter its latest exploratory well in the Krishna Godavari deepwater block KG-DWN-2003/1 soon. "The G-1 well is being re-entered in the block in the next few weeks," reliable Reliance sources, based in Mumbai, told Indian Petro News on Thursday (July 2, 2009). The well -- located around 20 km southwest of the Dhirubhai 39 and 41 discoveries -- was suspended after setting of 20" casing at 1,625 metres. G-1 is the third such well in D-3. Meanwhile the company is awaiting a final word from the petroleum ministry for its gas appraisal plan for two of its discoveries in the block.
8The operator's long term plan is to commence development concept studies after which Dhirubhai 39 and Dhirubhai 41 gas discoveries would be drilled in the block, towards the end of 2010. The management committee (MC) of the block -- comprising of representatives from the petroleum ministry, Directorate General of Hydrocarbons (DGH) and the participating companies -- is likely to approve the appraisal programme for both discoveries shortly.
8Dhirubhai 39 and Dhirubhai 41 are two major gas discoveries made by Reliance in the block during 2008. D-3 was previously operated by ONGC before it was put on offer under the New Exploration Licensing Policy. The public sector behemoth had failed to establish any hydrocarbon bearing sands in the NELP-V acreage. By Sadiq Shaban   Details

PPAC analysis-I: High base in May, 2008 held responsible for lower growth in May, 2009

July 2: High base in May, 2008 -- resulting from speculative hoarding in anticipation of a price hike -- contributed to a negative growth rate in the sale of petroleum products in May, 2009. The following product-wise analysis of sales in May was put forward by the PPAC:
 8Motor Spirit (MS): The growth rate of 4.9% in May 2009 should be considered to be robust in the context of the fact that consumption grew at a rapid 15.2% in May, 2008. Consumption of MS produced  by the public sector grew by 3.2% whereas private consumption of private sector output was up by a massive 434%, albeit from a very small base. The fact that the slowdown is winding it way down is evident from even higher growth rate of MS sales in June, 2009, as evident from preliminary sales data that has come in.
 8High Speed Diesel (HSD): PPAC`s argument is that the deceleration in diesel consumption of 1.3% in May should be understood against a 16.9% spurt in sales in May, 2008. Even in terms of absolute volume of diesel consumption, the May 2009 figure, at 4748 TMT, was higher than the average monthly consumption of 4306 TMT in 2008-09. PPAC claims that the negative growth figures were largely a result of a high base month impact. Otherwise, diesel consumption could be said to be "normal".  The PPAC acknowledges that a major reason for the negative growth could be a continuous decline in diesel consumed by the industrial sector, which is evident from the fact that direct sales recorded a negative growth for the sixth consecutive month, at -4.7% in May 2009.
 8Naphtha: Naphtha, during May 2009, witnessed a significant deceleration in its growth at -28.9%. Major reasons, cited by PPAC, for the poor performance of naphtha relate to lower upliftments by fertilizer plants (which stood at a mere 82 TMT in May 2009), as well as the shutdown of the petrochemical plant by HPL, Haldia (which resulted in a loss in sales to the tune of 115 TMT ). The main reason for the lower sales is the fact that around 28 mmscmd of RIL gas is now available in the market. RIL plans to move supplies up to 40 mmscmd in the coming months, and then to 80 mmscmd. This is likely to impact naphtha consumption sharply as the year progresses.
 8LPG: During May 2009, LPG saw a deceleration in its consumption for the fifth month in a row, due to a 52.9% decline in private imports under PMS. This is despite a growth of 2.2% in consumptions by the PSUs. Additionally, efforts by OMCs to stop diversion for auto use and reducing multiple connections are also contributing to low growth. The April-May cumulative growth in Auto LPG stood at around 20.6%
 8ATF: ATF sales too saw a negative growth in May 2009, which is in continuation to the trend of declining ATF sales every month, since September 2008. It must be noted that in May 2008, ATF sales growth stood at 11.8%, which is the highest in last 14 months.
 (Click on Details for more information)   Details

PPAC analysis: Crude imports rise 18.8% in May 2009

July 2: 8The import of petroleum products was down by 15% in May, 2009-10 in relation to the same period in the previous year. Imports by the public sector was up 21.3% whereas private imports were down by 46.9%. But the PPAC has warned that the import figures should be taken with a pinch of salt.  There is a long delay in getting private import data from the DGCIS. Some some private data, that of import of lubes, FO, bitumen, petroleum coke and the category collectively dubbed "others", are mere estimates. Crude import data by the public sector shows an 19.9% surge, contributing to higher imports by the public sector as a whole in relation to the private sector.
8According to the PPAC, some trends are obvious: Imports of LPG, naphtha, lubes and petroleum coke by the private sector show significant decline.
In the public sector, the import or HSD is up sharply, by 67% in May, 2009, at 621 TMT from 372 TMT in May, 2008.
Click on Details for more information    Details

PPAC analysis: Pace of decline in export growth comes down sharply in May, 2009

July 2: Export of petroleum products in May, 2009 saw a decline of 33.4%. For the April-May, 2009 period, exports were down 47.8%. In other words, there was marked let-up in the rate of decline in export growth in May.
 8Pertinently, the public sector posted a positive export figure of 2.6% May in relation to same month last year. This is an improvement from the 3.6% decline noticed for the April-May period in public sector exports. The largest spurt in export was seen in ATF, which registered a 121% increase in May. It looks like a fall in domestic consumption was made up with a gain in exports.
 8The private sector has recorded a 49.9% decline in exports. But the PPAC was quick to point out that RIL did not submit data on its SEZ refinery for the month. Since RIL is the biggest exporters of them all, the private sector data, or for that matter, the entire export data is not accurate. But as and when RIL's export data is included, the export picture will look much rosier than it does without the data.   Details

Hiring of hydro-fracturing stimulation technique-I: Job goes to Schlumberger on nomination basis

July 2: ONGC has awarded a contract for hiring of hydro-fracturing stimulation technique and associated services for its five wells in the Mandhali Sands of Sobhasan Complex in the Mehsana Asset to Schlumberger Asia Services Limited on a nomination basis. The contract will come into effect from the date of notice of award (NOA) and will be valid for a period of 180 days or completion of hydro fracturing services for five wells, whichever is earlier. The initial mobilization period is within 135 days from the date of NOA. The total cost implication of the contract works out to Rs 12.48 crore inclusive of all taxes.
8The proposed stimulation technique and associated services mainly consist of three activities:
--Hydro fracturing services 
--Supply of required hydro fracturing chemicals
--Logging and perforation services.
8A request for quotation was issued to Schlumberger Asia Services Ltd on a single tender nomination basis. Upon receipt of offer and subsequent evaluation, the bid was found to be techno-commercially acceptable. The quoted rates by Schlumberger were found to be lower than the rates of similar earlier contracts in the Ankleshwar Asset. But being a nomination case, the tender committee called Schlumberger for price negotiation to make an attempt to get the best reduced prices. During negotiations, the firm offered its reduced rates for the hydro fracturing services but it refused to reduce the rates for hydro-fracturing chemicals as well as logging and perforation services.
8Considering that the proposal was on a nomination basis and the rates were lower than the rates finalized for similar services for the Ankleshwar Asset about two years ago, the tender committee accepted the rates and awarded the contract to Schlumberger. (Click on Details for more information)   Details

Hiring of hydro-fracturing stimulation technique-II: Costing and crude oil gain details

July 2: The costing details of the hydro-fracturing stimulation technique and associated services hired from Schlumberger are as under:
8Cost of hydro-fracturing services: Total: Rs 4.23 crore
--Standby day rate: $29,000
--Operating day rate:  $ 42,000
--Mobilization charge: $ 90,000
--Demobilization charge: $ 58,000
8Cost of hydro-fracturing chemicals: Total: Rs 4.73 crore
8Cost of logging and perforation services: Rs 2.36 crore 
--Ultra sonic imaging tools, sonic scanner and HSD powet jet
8Total: Rs 11. 31 crore
8Service tax @ 10.3%: Rs 1.16 crore
8Grand total: Rs 12.48 crore 
After the proposed operations, it has been estimated that the approximate crude oil gain shall be as under:
--100 days: 12,148 MT
--200 days: 17,758 MT
--365 days: 20,750 MT    
8On the basis of the oil gain, the cash flow sensitivity analysis under various oil price and exchange rate scenario showed that the net present value (NPV) ranges from Rs 1.34 crore to Rs 5.53 crore over a period of 365 days. The NPV was positive and the internal rate of return (IRR) was found to be more than 12% under all the scenarios.  
(Click on Details for more information)     Details

ONGC's PEL blocks: An overview of achievements against MWP

July 2: The website carries here a basin-wise summary of the status of the Minimum Work Programme (MWP) in 79 nomination Petroleum Exploration License (PEL) areas being operated by Indian E&P major ONGC in the country as on April 1, 2009, vis-à-vis its actual achievements in these blocks. Data is provided on each of these blocks in terms of the existing area, the effective date of the PEL, the current year of the PEL and the MWP and actual achievement in respect of seismic acquisition and drilling targets during the first four years, the fifth year and the sixth and seventh years of the PEL cycle. Salient remarks with respect to ONGC's proposed course of action in these blocks is also provided. (Click on Details for more information)   Details

ONGC's PEL blocks: Future course of action

July 2: 8The website carries here, for reference purposes, a synopsis of ONGC`s proposed way forward in a total of 79 nomination acreages which it is currently operating in different basins. Of these, 58 blocks are in onland areas, 15 are in shallow offshore areas and six are deepwater blocks. These 79 blocks include three onland blocks in the Assam Basin -- namely Sivasagar district, Golaghat district and Merapani -- which have completed seven years of the regrant cycle, though a further extension is likely to be granted on account of excusable delays. The E&P major recently conducted a review of the exploration activities in these blocks in the regrant cycles and the results obtained in the interest of formulating a future exploration plan for each of these blocks, or taking a decision on acreage upgradation or relinquishment.
8It was seen that the envisaged work programme could be completed in 33 nomination blocks in the current cycle of the Petroleum Exploration License (PEL). These include 21 blocks currently running in the sixth and seventh years of the PEL and 12 blocks in the fourth and fifth year of the regrant cycle. Out of these blocks, ONGC has applied for Mining Lease (ML) status for three of the blocks and is considering making an application for ML status for another two blocks.
8Based on this review and keeping in mind the current status of seismic surveys, exploratory drilling and prospectivity of individual blocks, ONGC has categorised its remaining 46 blocks as follows:
--Eight blocks proposed for surrender
--Nine blocks qualifying for excusable delays
--Five blocks falling in deepwater areas qualifying for extension under proposed rig moratorium
--11 blocks requiring extension for sixth and seventh year for completing ongoing activities
--13 blocks requiring extension for a period of two years beyond the current cycle for completing planned exploratory activities, including appraisal of leads obtained. (Click on Details for more information)   Details

Crude production falls short of target in May, 2009: Private sector continues to struggle with shortfalls

July 2: 8Crude oil output from private and joint venture producers were down 12.9% in May, 2009, producing just 0.422 MMT of crude against the target of 0.484 MMT. This is on account of fact that output from RIL's 'MA" oil discovery hadn't re-started. Offshore private and JV output was down by 13.3% from target, at 398 TMT as against a target of 459 TMT. Private output from Assam was down too during the month, by a significant 68% from target.
8As far as the public sector concerned, ONGC missed out on its target for crude production in May, 2009, but by a hairline 0.2%, producing 2.063 MMT during the month against the plan of 2.067 MMT. The reasons attributed to the lower output are higher water cut, low gain from new development wells and power shutdowns in Gujarat and environmental reasons in Assam. The company's main workhorse, the Mumbai fields, were able to procure 100.4% of target, at 1.430 MMT of crude during the month, the shortfall coming in from onland areas like Gujarat, Assam and Andhra Pradesh.
8OIL was able to produce 0.8% more than target in May, producing 0.422 MMT of crude against a target of 0.484 MMT.
8According to the data available with this website, the total production of crude in the country during May, 2009, at 2.783 MMT MMT, was 2.3% less than the production target of 2.847 MMT. And during April-May, 2009, production amounted to 5.513 MMT, which was 1.6% less than the target production of 5.6 MMT for the period and 3.7% less than production in April-May, 2008.
8ONGC produced a total of 4.096 MMT during the April-May, 2009, period, which was 0.86% higher than the target of 4.061 MMT for the period, but 4.9% lower than its production of 4.308 MMT in the corresponding period of FY2008-09. OIL, on the other hand, produced 587 TMT (100.6%) during the period against a target of 583 TMT, which was 1.6% higher than its production last year as well, whereas private and joint venture producers registered a cumulative output of 783 TMT (86.3%) against a target of 907 TMT. (Click on Details for more Information)   Details

Gas output in May, 2009: RIL's D-6 block fails to deliver against target

July 2: Production of natural gas in the country during May, 2009,  fell short of the target by 9.6%, mainly on account of shortfall in targeted output from RIL`s KG-DWN-98/3 field.  A total of 3,414 MCM of natural gas was produced in the country during the month, against a target of 4,776MCM. However, this was 18.3% more than the amount gas produced during the same period in the previous fiscal, when output stood at 2,887 MCM. In terms of cumulative production during April-May, 2009, a total of 6,345 MCM of gas was produced against the target of 7,327 MCM, though it was higher than production of 5,678 MCM in April-May, 2008.
8While ONGC managed to exceed its production targets for the month, sister oil PSU Oil India Ltd (OIL) and private and JV players in the country fell miserably short of targets. ONGC produced 1,936 MCM of natural gas in May, 2009, 4.9% more than its target of 1,846 MCM for the month, while OIL posted slippage of 1.6% against its target,  producing 204 MCM of gas, against a target of 208 MCM. Private sector/JV  production was just 1,273 MCM during the month, missing the target of 1,722 MCM by 26.1%. In terms of cumulative production during April-May, 2009, ONGC produced a total of 3,830 MCM of gas against the target of 3,535 MCM, which was slightly less than production of 3,831 MCM in April-May, 2008. OIL, on the other hand, produced 404 MCM against the target of 405 MCM, while the private and joint venture producers registered cumulative output of 2,111 MCM against their target of 3,387 MCM.
8This website carries, for users reference, details of natural gas produced by all the public and private sector companies at various locations through out the country. (Click on Details for more Information)   Details

Refinery performance for May, 2009: RPL exceeds May target by 43%

July 2: 8Crude throughput at the Indian refineries during the month of May, 2009, was 12.770 MMT, which exceeded the planned throughput of 11.996 TMT by 6.5%. However, this was 4.3% less than the throughput in the corresponding month of FY2008-09. The refiners have also registered a surplus of 6.8% for the April-May, 2009, period -- with throughput of 25.34 MMT as compared to the target of 23.623 MMT -- though this was 4.4% less than the last year's performance (26.396 MMT) for the corresponding period.
8The public sector refineries processed a total of 8.785 MMT of crude during the month against a target of 8.776 MMT, a 0.1% overachievement, as compared to the private sector's achievement of 3.985 MMT in relation to a target of 3.220. This is a 23.8% increase against target. Both the public and private sector managed to achieve a surplus with respect to production during the April-May, 2009, period as well: the public sector refined 17.938 MMT of crude during the period against a target of 17.303 MMT, while the private sector refined 7.302 MMT against a target of 6.320 MMT.
8As per the data, the crude throughput of IOC's Guwahati, Koyali and Mathura refineries, HPCL's Mumbai and Visakh Refineries, CPCL's Manali Refinery, NRL's Numaligarh Refinery and Reliance Petroleum Ltd's SEZ refinery at Jamnagar exceeded their plan targets during the month under review. In the case of BPCL's Kochi Refinery, CPCL's Narimanam Refinery and ONGC's Tatipaka Refinery, production was close to or in line with the target. But the crude throughput at IOC's Barauni, Haldia, Digboi, Panipat and Bongaigaon refineries, BPCL's Mumbai Refinery, MRPL's Mangalore Refinery and Essar Oil's Vadinar Refinery was less than expected. Some of the reasons were:
--Barauni: Deferment of planned shutdown of AVU-III by nine days.
--Haldia: Emergency shutdown of CDU-1 and CDU-2 for 10 days and 1 day respectively.
--Digboi: Rescheduling of planned CDU shutdown from September, 2008, to April-May, 2009, and emergency shutdown of CDU, DCU and HGU.
--Panipat: Crude throughput was regulated as per availability.
--Bongaigaon: Deferment of planned shutdown of CDU-II by eight days.
8The highlight of May's performance is that Reliance Jamnangar refinery has exceed its target production of 2.070 MMT by producing 2.961 MMT.
(Click on Details for more Information)   Details

Assam-Nagaland border dispute: ONGC's E&P efforts suffer in the North East

July 2: 8One of the casualties of the turf war between Assam and Nagaland seems to have been E&P projects being operated by ONGC in Disputed Border Areas (DBAs), with the Nagaland state government ordering the stoppage of all work in these areas in the interest of "maintaining the peace and tranquility" of the sensitive areas. And in at least two of the blocks, AA-ONN-2001/3 and AA-ONN-2001/4, civil works at locations were stopped through the intervention of the CRPF at the behest of the Nagaland authorities. Subsequently, the Nagaland government has directed ONGC not to undertake planned 2D and 3D seismic surveys in the area and other NELP-awarded blocks falling in the DBA till further orders, since the Indian E&P major has not entered a Memorandum of Understanding (MoU) with Nagaland for carrying out exploratory activities in the DBA, which Nagaland claims falls in its territory. Additionally, exploration efforts have also been affected in the South of Geleki areas, in Sivasagar district, in another part of the Nagaland-Assam boundary.
8As of June 30, 2009, ONGC holds three nomination PELs, namely Bhagty-Bhandari, Singphan and Dimapur, and two NELP blocks, AA-ONN-2001/4 and AA-ONN-2002/4, which fall in the border locations disputed by Nagaland and Assam. All of these blocks are faced with the prospect of Minimum Work Programme (MWP) commitments being kept in abeyance until the border dispute between the states is resolved. ONGC has taken pains to soothe the Nagaland government's bruised sentiments on the issue, recently submitting a draft MoU to the Nagaland geology and mining department for operation of the blocks under its authority, which has now been placed for approval before the state government after modifications deemed fit by the authorities.
8But till date, no timeframe has been given for signing a MoU. ONGC has pointed out that since these surveys were planned to be carried out through outsourcing, it was faced with the prospect of paying contractors whose services could not be utilised.
8ONGC has now sought a special dispensation from the government for treating the time lost in obtaining statutory clearances till the signing of the MoU as a force majeure situation meriting an extension of the license period in the block. It has asked the Directorate General of Hydrocarbons (DGH) to formulate a mechanism for overcoming the issues arising under such circumstances with respect to managing outsourcing contracts. (Click on Details for more information)   Details

Dadri-Panipat R-LNG spur pipeline project-I: IOC ups project cost estimate by Rs 52 crore, pipeline laying resumes

July 2: 8Indian Oil Corporation (IOC) has been compelled to increase the cost estimates for its Dadri-Panipat R-LNG spur pipeline project, from Rs 298 crore to Rs 350 crore, in view of the steep compensation sought by local farmers for laying pipelines in certain sections of the Baghpat, Gautam Budh Nagar and Ghaziabad districts of Uttar Pradesh. This increase of Rs 52 crore has been approved by the company's board of directors, solely to afford the higher land, as well as crop, compensation for the farmers in the region.
8Subsequent to this cost revision, the refinery major has resumed laying pipe sections in the districts of Ghaziabad and Baghpat. "An agreement has been signed between farmers of Tyodi and Sarurpur Kalan villages in Baghpat district and IOC and the pipeline laying has commenced with effect from June 13, 2009", IOC sources revealed to this website today (July 2, 2009). However, given the recent fracas experienced during the land acquisition process, the corporation remains apprehensive about the project's future. "Even though major pipeline works in Haryana have been completed, we anticipate resistance from farmers in Panipat and Sonipat districts of the state while carrying out left-over works such as tie-in joints, hydro-testing and other surveys before commissioning the pipeline", company sources further revealed.
8It may be recalled that until mid-February 2009, IOC had completed all major pipeline work in the state of Haryana, while 11.7 km of the pipeline, out of the total of 81 km, had been laid in Uttar Pradesh. However, all activities came to an abrupt halt when local farmers started agitating, demanding higher recompense for providing Right of Use (RoU) for the pipeline. In line with section 3(I) of the Petroleum & Minerals Pipeline (PMP) Act, 1962, IOC had offered the farmers a RoU rate ranging from Rs 3 to Rs 119 per sq km. However, the farmers demanded compensation as per market values for the land. While a compromise has now been worked out, this issue has deferred the project's completion date, from May 2009, to December 2009. (Click on details for more information) By Neeraj Dhankher   Details

Dadri-Panipat R-LNG spur pipeline project-II: IOC accuses GAIL of setting a wrong precedent for RoU compensation

July 2: 8IOC has blamed GAIL for the mess it has experienced with regard to its Dadri-Panipat R-LNG spur pipeline project, after the refinery major was forced to dish-out substantially higher amounts to farmers as compensation for the vital Right of Use (RoU) in certain Delhi-adjoining regions of Uttar Pradesh. The agitation that preceded the settlement has caused the project to witness, both, cost and time overruns.
8The refinery major has claimed that, until January 2009, the farmers in these areas had accepted the recompense offered by IOC in line with the Petroleum & Minerals Pipeline (PMP) Act, 1962. This had allowed the company to proceed with laying pipeline sections in the Baghpat district. However, after observing the fact that GAIL had provided much higher compensation for laying its Dadri-Bawana gas pipeline, which runs close to IOC`s pipeline, the farmers have now refused to let work progress on the Dadri-Panipat pipeline, and have demanded compensation equivalent to at least what has been paid by GAIL.
8 "GAIL has provided a RoU compensation to the farmers at the rate of Rs 310 per sq km in Baghpat, between Rs 440 and Rs 649 per sq km in Ghaziabad and Rs 450 per sq km in Gautam Budh Nagar", an IOC source revealed to the website today (July 2, 2009)."Farmers are now demanding a much higher RoU compensation, at least at par with the one declared by GAIL for its Dadri-Bawana pipeline", the source further disclosed.
By Neeraj Dhankher   Details

IOC Briefs

July 2: 8IOC's Contracts Committee has awarded the contract for providing mooring and de-mooring services for the berthing of tankers at the Single Point Mooring (SPM) at Paradip, from May 2009 to October 2009, to Prime Maritime (India) Private Ltd, Hyderabad, at an estimated cost of Rs 7.64 crore. The contract has been awarded for an initial period of three months, with the provision of two further equivalent extensions. The contract was awarded to Prime Maritime in view of its past experience in carrying out tanker berthing operations under difficult conditions across the world. Notably, provision of berthing facilities for tankers at Paradip is critical to maintain an uninterrupted supply of crude oil for the refineries at Haldia and Barauni. The company plans to make arrangement for berthing of tankers beyond the weather window indicated by the Paradip Port Trust, so that the waiting time for tankers during bad weather is minimized.
8IOC has decided to procure gas turbine spares for its Panipat Refinery from BHEL-GE Gas Turbine Services Pvt Ltd, Secunderabad, at a landed cost of Rs 20.66 crore. The contract was awarded on single tender proprietary basis, recently, by the corporation's Contracts Committee.
8IOC's Contracts Committee has provided a post-facto approval for renewing Annual Maintenance Contract (AMC) towards SAP licenses from SAP India Pvt Ltd, at a total expenditure of Rs 10.12 crore. The AMC has been renewed for a one-year period, starting from April 1, 2009, on a single tender proprietary basis. At present, the corporation has a total of 8,000 SAP business suite licenses, purchased at a cumulative value of Rs 48.99 crore. All the SAP licenses were procured from SAP of Germany.

IOC to dedicate Manali-Chennai airport ATF pipeline to the nation on July 4, 2009

July 2: 8Indian Oil Corporation (IOC) will dedicate its Aviation Turbine Fuel (ATF) pipeline, spanning the distance from CPCL`s Manali refinery to Meenambakkam airport in Chennai, to the nation on July 4, 2009. The pipeline will be formally inaugurated by the petroleum minister, Murli Deora, and the ceremony will be witnessed by a host of ministers, including the minister of state for civil aviation, Praful Patel, and the home minister, P Chidambaram, along with other high-level officials.
8 "The pipeline has already been commissioned, and a formal inauguration ceremony has been scheduled for July 4, 2009", an IOC source close to the development revealed to the website today (July 2, 2009). The pipeline will supply 20,000 to 25,000 KL of ATF every month to the Chennai airport to meet refueling requirements, which, till now, were being met through tank trucks. "The ATF will be supplied from the Manali Refinery to seven of our storage tanks at the Chennai airport, which will then be supplied to the airport as per its requirements", it was further revealed.
8The pipeline has a capacity of 3,200 KL per day, of which 1,000 KL of ATF will also be supplied to the Meenambakkam airport, on a daily basis. Though the pipeline would initially be used only by IOC, considering that surplus capacity that will be available even after meeting the requirements of the Meenambakkam airport, it would eventually be made available to other oil PSUs as well, like HPCL and BPCL.(Click on details for more information) By Neeraj Dhankher.   Details

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