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Mumbai High South Redevelopment (Phase-III): ONGC approves capex of Rs 6,069 crore, two tenders to be floated in January

Nov 28: After the success of the first two phases of the Redevelopment of the Mumbai High South (MHS) schemes, ONGC is moving into Phase-III of the project to give a new lease of life to the giant field.
The company has approved a capital investment of Rs 6,069 crore for the project.
The project includes installation of three well platforms (dubbed RS-18, RS-20 and RS-21), setting up of two clamp-on facilities for wells on existing platforms, laying of 15 segments of pipelines spanning 114.35 kms, carrying out topside modifications on 18 platforms, installation of a booster compressor (3-15 Ksc) and drilling of 36 new wells and 34 sidetrack wells.
Of the total capex, Rs 2527 crore will be spent on setting up of facilities, Rs 1700 crore on drilling new wells and the balance Rs 1843 crore will be spent on side-tracking of wells.
ONGC has decided to execute the project through two tenders.
8While the scope for Tender-1 will include installation of three well platforms, setting up of two clamp-on facilities, laying of 114.35 km of pipelines and carrying out topside modifications on 18 platforms, the Tender-2 will include decommissioning of the upper deck of the WIS platform and installation of a booster compressor of 1.9 mmscmd.
8The clamp-on facilities planned under Tender-1 might be withdrawn at the time of execution of the tender to realize early oil gain.
8The tenders will be floated in January 2015, and are likely to awarded by June 2015.

8While the facilities under the project are scheduled to be installed by April, 2017, the drilling of wells and the overall project completion is expected to be completed by March, 2019.
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Mumbai High South Redevelopment (Phase-III): Company to mainly tap bypassed oil in L-III reservoir

Nov 28: The idea behind the implementation of the Phase-III of the Redevelopment of the Mumbai High South (MHS) project is to further develop L-II, S1 and Basal Clastic reservoirs, along with the major L-III reservoir, and integrating the required inputs.
The total original oil in-place (OOIP) in the MHS field was pegged at 1012 MMT. Of this, 28.65% has already been recovered.
The L-III reservoir is the major reservoir in the field having 1,545 MMT of oil-in-place amounting to 91.3% of the total in-place reserves.
8Of the total 441.25 MMT produced in the field, the L-III reservoir alone has, so far, produced 414.2 MMT (93.9%) of oil.
8The main focus under the Phase-III scheme will be on the L-III reservoir as it holds about 90% of the remaining reserves in the field.
Then again, the new leads found in the sub-sea well -- dubbed BH37-SS (in the L-II and S-1 reservoir) -- which was drilled recently will also be tapped.
8Overall, the implementation of the project will lead to an incremental gain of 7.547 million tonne (MMT) of crude oil and 3.864 billion cubic meter (BCM) of gas by 2030.
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Mumbai High South Redevelopment (Phase-III): Project IRR stands at 16.14%

Nov 28: The techno-economics of the Rs 6,069 crore Redevelopment of the Mumbai High South (Phase-III) plan suggests that the project provides a healthy internal rate of return (IRR) of 16.14%.
The NPV of the project is pegged at Rs 232.36 crore at a 14% discount rate.
Even taking into consideration the present fall in crude prices to around $70/barrel, the scheme is estimated to get a positive return as the project breaks even at an oil price of $50.6/barrel, as a base case scenario.
Even if crude price falls by another 10% from the base case of $50.6/barrel, the project will provide an IRR of 11.29%.
ONGC got the Field Development Plan (FDP) for the Phase-III scheme reviewed by the UK-based consultant Bayphase, which gave its go-ahead to the project after it was satisfied with the E&P major`s calculation of the economic returns.
However, as a word of caution, it said that the E&P major will have to know how to handle the recovery of liquids (value added products) in such a project.
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ONGC fails to complete 2D surveys because of water-logging in pre-NELP block AA-ONJ/2: DGH acts tough; refuses to reduce MWP

Nov 28: The DGH has refused to give any relaxation to ONGC, the operator of the pre-NELP block AA-ONJ/2, for carrying out 2D seismic surveys in the block.
ONGC could acquire only 283.3 GLK of 2D seismic data upto June 28, 2014, against the MWP of about 300 GLK in Phase-I.
The E&P major could not continue with work on June 29, 2014, as the low lying areas delineated for the remaining survey got water logged due to incessant pre-monsoon rainfall, making the area inaccessible to carry out 2D seismic surveys.
ONGC invoked Force Majeure clause for the period from June 29, to July 28, 2014, and requested to accept 283.3 GLK of 2D seismic data as completion of MWP.
The DGH agreed to grant force majeure for only two days (July 29-30) and going strictly by the book rejected the E&P major`s request for consideration of the shortfall in data as completion of work.
The upstream regulator has now advised ONGC to apply for an extension, as per the government`s extension policy, by giving 100% bank guarantee (BG) and paying 10% cash payment as agreed pre-estimated liquidated damage (LD) for the unfinished MWP.

Oil pipeline to Nepal: India refuses to grant funds for construction of Amlekhganj depot but ready to built it through Line of Credit

Nov 28: The Indian government has made up its mind not to grant funds for construction of an an oil depot at Amlekhganj in Nepal but is however ready to built it though a Line of Credit.
The idea of an oil pipeline from IOC`s depot at Raxaul (India) to Nepal Oil Corporation`s (NOC) depot at Amlekhganj was mooted by the Indian public sector company in 1997 and has been under discussion since then.
IOC is ready to fund the construction of the oil pipeline but the Nepalese side also wants the Amlekhganj depot to be built under GOI grant.
The depot at Amlekhganj is necessary to make the oil pipeline effective.
The total length of the pipeline envisaged is 41 km, two km in the Indian territory and 39 km in Nepal.
While the cost of the pipeline is pegged at Rs 200 crore, the construction of the depot is likely to cost Rs 300 crore.
The project is expected to reduce fuel transportation cost by around 40% and help the land-locked Himalayan country, which faces frequent fuel shortages.
The Indian government feels that in order to ensure commitment of Nepalese authorities to the safety, security and maintenance of the pipeline, it is essential that the Himalayan nation has a strong financial stake in the project.
8Then again, the GOI is also of the view that since Prime Minister Narendra Modi, on his recent visit to the Nepal, did not make any announcement regarding the setting up of a depot at Amlekhganj, there is no need for providing any grant for it.

PPAC's subsidy estimates for next three years: Details

Nov 28: The website carries here, for reference purposes, the estimated subsidy, worked out by the PPAC, on sensitive petroleum products for 2013-14, 2014-15 and 2015-16.
8Since diesel has been deregulated with effect from October 19, 2014, the actual under-recovery on the fuel for the period starting from April 1, to October 18, 2014, has been considered. However, keeping the subsidy on the other two fuels -- PDS kerosene and Domestic LPG -- the total under-recovery for the current year (2014-15) is estimated at Rs 92
,251 crore.
This is then estimated to go down to Rs 80,334 crore in 2015-16 and then a little higher at Rs 83,520 in 2016-17. Notably, the subsidy calculation for 2015-16 and 2016-17 does not include any under-recovery on diesel.
Of the total subsidy of Rs 80,334 crore for 2015-16, Rs 53,068 crore is on account of Domestic LPG, while the remaining Rs 27,266 crore is on account of PDS kerosene. Similarly, for 2016-17, the subsidy on Domestic LPG and PDS kerosene is estimated at Rs 56,254 crore and Rs 27,266 crore respectively.
8It is pertinent to note that the subsidy for 2015-16 and 2016-17 has been calculated considering crude price at $95/bbl and an exchange rate Rs 61.50/US$.

8Now that the crude price has gone further down to around $70/bbl, and if it sustains for a considerable period, the annual subsidy will go down further.

News Briefs

Nov 28: 8Hedging out future oil demand by booking future supplies at a low price: In the light of falling crude prices, the Cabinet Secretariat has asked the petroleum ministry to hedging out future oil demand by booking future supplies at the current low prices.
 --It is pertinent to note that the Committee of Secretaries (COS) had floated this idea in a meeting held earlier this month.
 --The Cabinet Secretariat has asked the ministry to submit an action taken report (ATR) in this regard.
8MRPL`s HR policy: In a short span of less than three years after attaining the its PSU status, MRPL has re-aligned its major Human Resource (HR) policies. The company`s entire manpower of 1715 employees has not only coped well but also quickly learnt to work under the new environment which entailed exhaustive training and re-training, coaching and mentoring and by interacting constantly with the parent company ONGC. The website carries here, for reference purposes, a detailed note on the HR policies followed by MRPL, under the following heads:
 --HR initiatives adopted by the company
 --Revamp of appraisal system
 --Introduction of long service awards to reward loyal employees
 --Enhancing employee retention by competitive compensation and caring work environment
 --Revamping of Training & Development (T&D) Policy
 --CSR policy, in terms of its objectives, thrust areas, budget, and reporting
 Click here for more information

Field-wise gas production and sales (2009-10 to 2013-14): Data

Nov 28: The website carries here, for reference purposes, field-wise gas production and sales data (only APM and Non-APM) from 2009-10 to 2013-14.
The details are carried in terms of total production during each year, total sales and the quantity of gas flared.
The data is given for the following pre-NELP fields: Amguri, Asjol, Bakrol, Dholka, Hazira, Indrora, Kanawara, Kharsang, Lohar, Mid and South Tapti, North Balol, Panna-Mukta, PY-1, Ravva, Sanganpur, CB-ON/2, CB-ON/3, CB-OS/2, PY-3 and RJ-ON-90/1.
Besides these, the data for the following NELP blocks is also carried: CB-ONN-2000/1, CB-ONN-2000/2 and KG-D6.
The data for the Raniganj CBM field is also given for the five-year period.
Click here for more information

Tender Briefs

Nov 28:  8ONGC floats tender for repair and maintenance of gas compressors at Uran: ONGC has floated a tender for signing of an annual rate contract (ARC) for repair and maintenance of gas compressors installed at its Uran plant for a period of three years.
 --The tender documents can be procured before December 18, 2014
 --The due date and time for submission of bids is December 29, 2014 (upto 17:00 hrs)
 Click here for more information

8IOC invites bids for supply of H2S gas responders for Barauni refinery: IOC has invited bids for supply of H2S gas responders for its Barauni refinery.
 --The last date and time for submission of bids is December 26, 2014 (upto 15:00 hrs)
 Click here for more information
More tenders: Some more tenders floated by oil and gas companies are:
 --Supply of reformer catalyst, Barauni refinery [IOC] Details
 --Repair of defective spare rotors, Mumbai [ONGC] Details
 --Hiring of semi-low bed trailers, Mehsana [ONGC] Details
 --Supply and installation of push button control systems for drilling rigs, Tripura [ONGC] Details
 --Rate contract for laying of flow lines, Cauvery Asset [ONGC] Details
 --Procurement of hoses for well services, Assam [ONGC] Details
 --Hazop studies for process units, Gujarat refinery [IOC] Details

India-Middle East deepwater pipeline: Promoter says it is not a pipedream

Nov 27: New Delhi based Subhod Kumar Jain, the promoter of South Asia Gas Enterprise Ltd (SAGE), which plans to set up an undersea gas pipeline from the Middle East to India, continues to doggedly pursue the project despite many a cynic dismissing it as nothing but a pipedream.
 8Jain claims to have made progress on the project in the last one year.
 8He has got companies such as GAIL and GSPC to come on board.
 8He has also persuaded the National Iranian Gas Export Company (NIGEC) to enter into Non Binding Tripartite Framework Agreements (NBTFAs) with GAI, IOC and GSPC.
 8Jain claims that SBI Caps has found the project to be "feasible".
 8He has in fact extracted a go-ahead from the Ministry of External Affairs (MEA) for Indian companies to sign NBTFAs with NIGEC. The MEA has said Indian companies should be encouraged to sign up up Iran and such NBFTAs do not in any way violate the sanctions imposed by the US on Iran.
 8Jain is now planning to go ahead with a full fledged front engineering of the project.
 8The date for commissioning of the pipeline has been set for 2018. 

Extensions to exploration period: Process streamlined

Nov 27: The petroleum ministry is seeking to streamline the decision making process involving any extensions to the exploration period beyond what is stipulated in the NELP and pre-NELP blocks.
 8A cabinet note has been proposed wherein any decisions taken for "extension of NELP andn pre-NELP blocks" that are taken at the level of of the Empowered Group of Secretaries -- made of the the secretaries of petroleum, finance and law -- would be informed to the petroleum minister instead of the CCEA as is the case now.
 8The ECS arrives at a decision after taking into account the rationale for such extensions proposed by an operator with the technical opinion given by the DGH.
 8Streamlining the process and restricting the information at the level of the minister will simplify the entire decision making process, the petroleum ministry has argued.

Raising crude imports through Haldia port-I: No takers so far

Nov 27: There seems to be no takers for a Floating Storage Facility along with a SBM proposed by the Kolkata Port Trust at the Haldia port.
 8The Haldia port is being bandied as providing the best connectivity to the East and the North East of India.
 8Kolkata Port Trust said that the new system will particularly suit Numaligarh Refinery that is planning to expand its capacity from 4 MMTPA to 9 MMTPA. The Haldia port will be nearer to Numaligarh than ferrying crude from Dhamra or Paradip.
 8But the Numaligarh refinery expansion plan is in trouble as one of the promoters, Oil India Ltd, is opposed to it, on the ground that the it does not make economic sense to pipe in the crude and then pipe out the finished products to sell in the mainland markets as the demand for products within the North East is limited.
 8Then again, with deregulation of diesel and petrol, intense competition in the market is likely to set in as big private players are planning to enter the retail market for diesel and petrol. This will in turn make refineries like Numaligarh unviable in the long run, once the 50% excise incentive is withdrawn from the North East.
 8IOC too has refused to source additional crude from Haldia, claiming that it has no proposals for expansion of either the Barauni refinery or the refineries in the North East.
 8What is more, it plans to source its crude from Paradip rather than Haldia, through its Paradip-Haldia and Haldia-Barauni pipelines. With the expansion of these pipelines and the present extra capacity available with the Haldia SPM, IOC says it does not require the use of any crude handling facility at Haldia.

Raising crude imports through Haldia port-II: Two mooring bays and one Floating Production system were planned

Nov 27: The Kolkotta Port Trust had planned on setting up two mooring buoys (CALM type) and one floating storage facility.
 8A sub sea pipeline would connect the two moorings
 8The floating storage would be of the ULCC specifications
 8Three daughter vessels will also be deployed.
 8The floating storage will be anchored at one of the moorings and the second mooring will be used for anchoring the mother-daughter tankers.
 8The mother crude tankers will carry loads of up to 300,000 tonne into the floating storage facility.
 8After the departure of the tankers, the daughter vessels of 30,000 tonne capacity will be loaded from the floating storage system
 8The loaded daughter vessels will then come to an oil jetty in the Haldia port for discharge, and the crude will then resume its onward journey through a pipeline network.
 8The total project cost was pegged at Rs 5235 crore and that includes a pipeline right up to Numaligarh.

Revival of old wells: ONGC reports success in Geleki field; OIL expedites work with FOROIL

Nov 27: The petroleum ministry's push for revival of old or closed wells by examining the possibility of using modern technology to do so, so that production possibilities form such fields are maximized, seems to be paying off as ONGC has reported success in a revival attempt in the old Geleki field in Upper Assam. Meanwhile, Oil India Ltd too is is speeding up its work with consultant FOROIL for revival of its own wells.
8ONGC and OIL had taken up the program of revival of old wells as a priority area, as per the ministry directive, and in accordance with a collaborative action plan with the DGH. The two companies were mandated to reduce the inventory of sick wells and increase efficiency of work over jobs.
8ONGC has reported success in Assam`s Geleki field, where well GLK#01 was completed with a plunger assisted intermittent gas lift valve. This method has been envisaged as a cost effective remedy for removing wax and liquids that accumulate in a well, making it non-flowing.
8OIL is also expediting work with FOROIL of  France, for reviving 22 shut wells in Assam.
8Pertinently, the first set of recommendations for revival of the wells were meant to be submitted by OIL  to the DGH in January, 2015 but now the submission will happen within November itself.
8Further, ONGC has already entered into a joint collaborative project with Schlumberger for identification of gaps and induction of new technology.
8DGH has also recommended using of new technologies for rigless well intervention using sickliness and coiled tubing units.

Upstream discount-I: ONGC and OIL can't bear same burden anymore

Nov 27: ONGC and OIL have sought a lowering of the upstream discount in the light of falling crude prices.
8The companies have claimed that in the wake of falling prices, it is difficult for them to continue contributing as per the existing methodology of $56/bbl on production of crude oil.
8They have argued that if the prevailing subsidy of $56/bbl continues, their price realization will fall sharply and crude oil production will become uneconomic.
8Notably, the subsidy of $56/bbl was fixed in 2011-12, when price if Indian crude basket was $111.89/bbl, and the same subsidy continues despite the fact that crude prices have fallen.
8Pertinently, during Q3 of FY`15, the international price elicited fo0r crude produced by ONCG and OIL have significantly reduced. As against the average price of the Indian crude basket of $104.34/bbl during H1 of FY`15, average price till November 12, 2014 works out to $85.10/bbl, which has further dipped to $80/bbl, a reduction of $24/bbl.
8Further, due to significant crude price reduction, coupled with deregulation of HSD, the total under recoveries of OMCs during H2 FY`15 would be much lower than that of H1 FY`15 and it is expected that the share of upstream oil companies including ONGC and OIL would be reduced in H2 FY`15.
8The two upstream companies are now seeking the minsitry`s intervention to resolve the imbroglio.

Upstream discount-II: Non conveying of provisional discount rates creates problems

Nov 27: ONGC and OIL are up in arms against the ministry for not having conveyed the provisional upstream discounts applicable during Q1 and Q2 of FY`15, the absence of which is creating a lot of problems for the companies, leading to serious cash flow problems.
8As per existing mechanism of sharing under recoveries of OMCs by upstream oil companies, provisional discount is extended by upstream companies during a quarter, and necessary adjustment is made based upon final discount rates communicated by ministry and the PPAC at the end of the quarter. However, despite repeated reminders, no notification has come in on the extension of the provisional discount from one quarter to the next.
8As a result, invoices are being raised by ONGC at the gross price, though payments are being made by refineries/OMCs considering the last available actual discount rates, without any specific directives from the ministry to do so.
These deductions by refineries/OMCs have not only affected ONGC`s cash flows severely, but also resulted in either higher or lower deductions by OMCs than the actual discounts conveyed by the ministry at the quarter end.
8Further, since billing is done on gross price, all ad-valorem statutory levies also need to be paid by ONGC on the gross price. Once ministry sends out the directives for sharing of discount rates at the end of the quarter, necessary adjustments of excess statutory levies paid during the quarter is done by ONGC. However, various tax authorities are raising serious objections to significant and subsequent adjustments made by ONGC and OIL.
8ONGC has requested ministry to convey the provisional discount rates during Q3 FY`15 at the earliest, and while also communicating to the oil marketing companies (OMCs) to wait for the ministry directive prior to making deductions for Q3 FY`15 from the bill raised by OIL and ONGC.

Petroleum ministry proposes auctioning CBM rights along with coal blocks

Nov 27: The Ministry of Petroleum & Natural Gas (MoP&NG) has asked the coal ministry to make a provisions for auction of exploration and exploitation rights for coal bed methane (CBM) while auctioning coal blocks for mining purpsoes.
8The petroleum ministry`s proposal is made in light of the coal ministry`s move to re-auction coal blocks recently cancelled by the Supreme Court.
8Stating that proper exploration and exploitation of CBM in the country has already been delayed, the petroleum ministry has proposed auctioning of CBM rights for the same block
8In this regard, the petroleum ministry stated that bidders participating in the auction of coal blocks shall quote for mining rights for both CBM and coal for the same block.
8For the proposed auctioning of both CBM and coal of the same block, the petroleum ministry further apprised that the terms and conditions of CBM Policy, 1997 will be required to be suitably incorporated in the bid documents.
 (Click on `Details` for more information)

OMCs take on CCI over monopoly pricing-I: Obtain stay from court; say PNGRB is the right authority

Nov 27: Oil marketing companies (OMCs) have taken on the Competition Commission of India (CCI) over their allegation of collusive behaviour in the pricing of petrol.
8The companies have obtained a stay order from the Delhi High Court against the CCI right to investigate collusive behaviour on the ground that it did not have the authority to do so.
8The OMCs have also claimed that PNGRB is the right regulatory authority in this matter, and CCI has no jurisdiction whatsoever.
8In a similar case, where RIL filed a complaint on collusive behaviour by the PMCs before the CCI with regard to ATF supply to Air India, the OMCs had challenged the jurisdiction of CCI, and had obtained a stay order on this case as well
8Pertinently, the Delhi High Court has passed a stay order for both petrol and ATF, and both cases are now pending on the issue of whether the jurisdiction to arbitrate on these cases lie with the CCI or the PNGRB.
8The OMCs are trying to warm up to the PNGRB instead of the CCI on two grounds:
 --Firstly, in an earlier complaint filed by RIL to PNGRB against alleged anti-competitive activities by OMCs with regard to petrol, PNGRB, subsequent to an investigation, concluded that OMCs were not indulging in any monopolistic pactices. Hence, in this case, the OMCs are now arguing, the PNGRB has already exercised its powers and examined the issues relating to cartelization and anti-competitive practices regarding petrol prices.
 --Secondly, although both CCI and PNGRB have power to deal with competition related issues, PNGRB is a specialized regulatory body constituted under a special Act, which has jurisdiction to investigate all matters related to petroleum products, the oil companies have claimed.

OMCs take on CCI over monopoly pricing-II: Claim prices cannot be different because of fear of loss of market share

Nov 27: The OMCs have claimed that petrol and diesel prices offered by different companies as well as at different locations must not be different because of fear of loss of market share
8Since the time petrol pricing has been deregulated, individual OMCs have been determining the selling prices of petrol independently even though prices tend to be the same, it is argued.
8With diesel being deregulated recently, OMCs feel that the market will become more complex and challenging, and they fear loss of market share in case differential pricing policies are followed. Private players are expected to enter the market in a big way now. Since petrol and diesel are sold from the same retail outlet, and petrol volumes being lower, only petrol deregulation was not attractive enough for private players. With diesel being deregulated, it now becomes economically viable for private players to enter.
IOC holds 45% of the market share of these products and has a big say in how prices are determined. Revision in prices by one seller automatically triggers revision by the others. However, OMCs fear that both, differentiated pricing, or even a delay in price revision by a company can lead to sales shifting from one company to another. It is in this context, that a single pricing system is followed.
8There are product differentiation programmes followed by different OMCs. All of them run loyalty programs, like Fleet Card by IOCL, through which customers elicit special benefits or prices. But beyond that, an active policy of differential pricing will not only adversely affect market share, and will be detrimental to both business volumes and margins. Hence, once a pricing decision is initiated by one player, all other OMCs are forced to follow suit quickly.
8In fact, since the market is very price sensitive, there have been past instances when delays in reduction of the retail price by OMCs vis a vis other OMCs have sparked a switchover to the competition, and hence prices of one company move in tandem with the others.



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