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Gas price imbroglio-I: Urea units willing to open LCs at higher gas price only after it is notified by the government

April 23: For reference purposes, the website carries here the discussions held between RIL and the fertilizer units over the signing of fresh GSPAs for the period from April 1, 2014 onwards, as also discussions held by the Fertilizer Secretary in which representatives from RIL, the fertilizer industry, the petroleum ministry and the Department of Fertilizers were present.
It now transpires that RIL had demanded letters of credit from fertilizer units calculated at an assumed price of $8.3 per mmbtu on GHV basis, but the fertilizer industry insisted that the LCs should be at an applicable rate of $4.2 per mmbtu.
The value will, however, be amended when the new prices are defined.
RIL also insisted on the payment of a marketing margin at $0.135 per mmbtu on NHV basis and $0.122 per mmbtu on GHV basis.
8The fertilizer industry was willing to go along with the proposal but subject to such a margin being notified by the government.

Gas price imbroglio-II: RIL continues to insist on security for gas price differential

April 23: Differences have cropped up between RIL and the fertilizer industry over what transpired in the meeting held by the fertilizer secretary to resolve the imbroglio over signing of fresh GSPAs from April 1, 2014.
The following is the RIL version of what transpired:
RIL denied that it had agreed to a gas price of $4.2.
The gas price of $4.2 was valid only upto March 31, 2014 and the government had come out with a notification listing out a new gas price formula. Under the circumstances clearly, therefore, the revised gas prices are applicable from April 1, 2014.
There is a requirement for providing security against the differential gas price.
8Gas will be supplied from April 1, 2014 only as per the term sheet supplied by RIL.

Gas price imbroglio-III: Urea units fear disruption in gas supply

April 23: The fertilizer industry is always quick to hit the "alert" button whenever their interests are at stake.
Even though the petroleum ministry has issued a written direction to the DGH that the price of gas would remain at $4.2/mmbtu and that GSPAs will have signed only at this price, the urea industry has fired off a letter to the Department of Fertilizers (DOF), claiming that a lot of "uncertainty" is brewing over supply of gas after RIL`s insistence on the furnishing of letters of credit for the amount equal to the differential gas price.
The urea industry fears that there will be a disruption in gas supply.
"Any disruption in gas supply will severely impact the coming Kharif season," the industry has proclaimed.
Apparently, requests from the industry for a meeting to sort out the problem had met with stony silence from RIL`s side. The company however denies the allegation.
Reacting to the letter, the DOF has shot off a missive to the petroleum ministry seeking assurance that gas supply will not be discontinued by RIL even though the company had never explicitly held out the threat of discontinuation of supply in any of their communications with the urea units.
8The petroleum ministry in turn is now readying a letter to the DOF, assuring that the gas price will remain at $4.2/mmbtu and new prices, whenever they become applicable, will be notified in advance.

Gas price imbroglio-IV: Everyone up in arms against RIL

April 23: It is not just the fertilizer industry that is crying hoarse over the terms of the new GSPA with RIL.
The power industry is also up in arms.
The petroleum ministry has been inundated by letters from gas suppliers, the Association of Power Producers of India, and other assorted users of gas, whose GSPAs with RIL are expiring on March 31, 2014.
No D-6 gas is supplied to any non-fertilizer user but all of them are keen on extending their GSPAs on the fond hope that once gas production goes up from the field, some gas may find its way to them.
The usual complaint of all the petitoners is that RIL is refusing to sign up unless the company has its way in terms of letters of credit for the differential price of gas as and when supplied.
8There are objections to other terms in the draft GSPA drawn up by RIL as well, which the buyers claim are "completely one sided".

Presentation by Boston Consulting Group: Lessons from Norway and Indonesia

April 23: The petroleum ministry is always looking for ways to revamp the regulatory authorities under its control.
8Foreign models are examined every once in awhile and their adaptability to Indian conditions assessed.
In this context, the Boston Consulting Group recently gave a presentation to the petroleum ministry, on the oil and gas industry structure in Norway and Indonesia, under the following heads:
Norway: Key stakeholders in the oil and gas sector
Roles of parliament, government and Ministry of Petroleum and Energy (MPE), Petero/Gassco
Role of the National Petroleum Directorate
Role of Petroleum Safety Authority
Indonesia: Key stakeholders in the oil and gas sector
Role of BP Migas
Organization structure of BP Migas
Role of Ditjen Migas
8Organization structure of Ditjen Migas

BHP Billiton's Mumbai basin blocks: DGH says imposing penalties for unfinished MWP may not be legally tenable

April 23: The DGH has said that it is not legally tenable to impose penalties for unfinished Minimum Work Program (MWP) in BHP Billiton's Mumbai basin blocks in the Arabian Sea.
The Indian Navy had denied permission for exploration work in all BHP blocks except MB-DWN-2005/2. Subsequently, conditional permission was granted for exploration in three blocks.
The DGH has made it clear that permission was denied after the PSCs were signed and in this context if one party, in this case, the government of India, modifies the terms and conditions of the contracts, then it is not legally tenable to impose penalties for non-adherence to the MWP.
8The upstream regulator has claimed that it is abundantly clear from the study of the statutes and judicial pronouncements that BHP may have an enforceable right of remedy against the government in case penalties are sought to be imposed for not adhering to timelines imposed by the MWP.

Shiv-Vani in financial trouble-I: Company fights to keep itself from being blacklisted by ONGC

April 23: Shiv-Vani Oil & Gas Exploration Ltd. is fighting to keep itself from being blacklisted by ONGC for various acts of omission and commission in drilling and seismic contracts awarded by the E&P major.
The company has also got into trouble for non payment of service tax involving a drilling contract in Tripura.
It is also facing a severe funds squeeze as ONGC has cancelled outstanding contracts with it.
Shiv-Vani has now appealed to the petroleum secretary for relief from being blacklisted by ONGC, claiming that a corporate restructuring package being worked out with banks hinges on the company continuing to execute ongoing contracts with public sector entities such as ONGC and OIL.
8It remains a moot point, however, whether the appeal will find favour with the ministry or with the public sector E&P giant.

Shiv-Vani in financial trouble-II: Badly treated by ONGC, complains company

April 23: Shiv-Vani has complained of being badly treated by ONGC.
The following issues were listed out by the company in its letter to the petroleum secretary:
Deductions as well as withholding of invoices by ONGC in drilling and seismic contracts by imposing the conditions beyond contractual provisions.
Non-consideration of Outside Expert Committee (OEC) recommendations in favour of Shiv-Vani, resulted in blockage of huge amounts of dues
A Rs 900 crore CBM contract to a Shiv-Vani consortium was foreclosed by ONGC after spending Rs 300 crore over a six year period while the contract was meant to have been completed by four years. ONGC was unable to fix drilling locations on account of land acquisition problems but, in the process, left Shiv-Vani in deep financial distress.
Due to a financial crunch, Shiv-Vani was unable to pay service tax on contracts with ONGC and OIL.  The oil companies are now remitting the outstanding amount directly to the service tax department from invoices raised by Shiv-Vani.
8In view of such restrictions, the company is unable to pay salaries to its employees and outstandings to sub-contractors.

Shiv-Vani in financial trouble-III: Rs 2000 crore debt restructuring package at risk

April 23: Under financial crunch, Shiv-Vani is working on a Corporate Debt Restructuring Package (CDRP)
The company had taken a Rs 2000 crore loan and is finding it difficult to pay back.
The banks however are not willing to throw bad money after good.
They are insisting that the CDRP be linked to the company completing its ongoing projects and bagging future projects in ONGC and OIL.
8At this juncture, Shiv-Vani is arguing that if ONGC were to blacklist the company, everything will be lost beyond redemption.

Shiv-Vani in financial trouble-IV: Winning ONGC's rig contracts key to survival

April 23: The Corporate Debt Restructuring Package (CDRP) of Shiv-Vani is dependent on the company bagging at least three contracts in ONGC and OIL for which it has been shortlisted.
 8Against five drilling rigs required by ONGC (3 in Agartala and 1 each in Rajamundry and the Frontier Basin), Shiv-Vani has been shortlisted along with John Energy. Shiv-Vani is sure to bag at least three rigs on account of the fact that the other remaining bidder had bid only for two rigs. The company claims to have mobilized rigs worth Rs 600 crore against this order.
 8Then again, against another ONGC tender for 4 rigs, the company has been shortlisted again, and while the competition is tough, John Energy and Essar have quoted for one rig each while ETA Star has offered two rigs , but Shiv-Vani claims it can win the tender. Accordingly, it has allocated rigs worth Rs 450 crore against the tender. The problem however is that ONGC has not raised any queries on Shiv-Vani against the tender, fueling speculation that this is because the company is in the process of being blacklisted.
 8There is yet another tender for five rigs floated by ONGC, against which Shiv-Vani is planning to bid for contracts worth over Rs 120 crore.
 The company`s plea now is that in case it is blacklisted, ONGC will not be able to meet its rig requirements. In some cases tenders will have to be refloated and this will cost both money and time.

Shiv-Vani in financial trouble-V: A lot at stake, says company

April 23: Shiv-Vani claims that there is a lot at stake and everything depends on its winning the tenders that had been floated by ONGC
In case the Corporate Debt Restructuring Proposal does not come through, its investments in rig and equipment will go waste.
The company has invested in 15 high-tech, 2000 hp drilling rigs at an investment of Rs 2000 crore.
These rigs will then remain undeployed.
What is more, it will hit both financial institutions, which will be saddled with Rs 2000 crore of bad debts, and shareholders, there are some 20,000 of them, alike.
8Over 3000 direct and indirect employees will also be hit, the company claimed in its letter to the petroleum secretary.

KG-D6 production update: Average gas output drops for week ending April 13, 2014

April 23: Figures collated by the DGH for the week ending April 13, 2014, show gas output at 12.54 MMSCMD, down from 12.91 MMSCMD and 13.28 MMSCMD recorded for the week ending March 30, 2014 and March 9, 2014, respectively.  The production for week ending February 16, 2014 and February 3, 2014 stood at 13.63 MMSCMD and 13.58 MMSCMD, respectively.
The output projection for the week commencing April 14, 2014 is still lower at 12.50 MMSCMD
There were eight wells on production during the week out of the total of 18 wells that have been drilled, completed and put on production in the field, so far. 10 wells were kept closed - wells A1, A2, A6, A10, B2, B4, B6 and B13 were closed due to high water cut; B1 was closed due to sand incursion; and B7 was closed due to low pressure and associated high water production.
8The following is an update on the production status of RIL`s D1, D3 and MA fields in the KG-D6 block as on April 14, 2014:
 --The average gas production in the period between period April 7, 2014 to April 13, 2014 was about 12.54 MMSCMD. 
 --The production from D1 and D3 fields for the week stood at 7.88 MMSCMD as compared to 8.05 for the week ending March 30, 2014, 8.17 for the week ended March 9, 2014 and 8.32 MMSCMD for the week ended February 16, 2014.
 --The balance 4.66 MMSCMD of gas was obtained from the MA field, as against 4.86 MMSCMD, 5.11 MMSCMD, 5.31 MMSCMD and 5.33 MMSCMD during the week ending March 30, 2014, March 9, 2014, February 16, 2014 and February 3, 2014, respectively.

8Oil production from MA field declines:

 --The average oil production from the field was recorded at 5,579 barrels per day for the week ending April 13, 2014, which was lower than 5,883 barrels per day for the week ending March 30, 2014 and much lower than 6,520 and 6,743 barrels per day for the week ending March 9, 2014 and week ending February 16, 2014.
 --Out of seven wells in the field, four wells are on production, while the well MA-6H is under work-over since January 16, 2014, and MA-7H is kept under shut-in, and MA-3H is ceased due to high water cut.
 --The average condensate production at the Onshore Terminal was 898 barrels per day and the average gas sale from onshore terminal was 4.66 MMSCMD during the week ended April 13, 2014 down from 966 barrels per day 4.86 MMSCMD, respectively for the week ending March 30, 2014.

Block KG-DWN-98/3: RIL's royalty remittances for October, 2013 for D1-D3 and D-26 (MA) fields

April 23: The website provides here for reference purposes, royalty remittances for October, 2013 related to Block KG-DWN-98/3 - D1-D3 and D-26 (MA) fields
under the following heads:
8Royalty calculation for crude oil for October, 2013 for D-26 (MA) field
8Royalty calculation for gas condensate for October, 2013 for D-26 (MA) field
8Royalty calculation for gas for October, 2013 for D-26 (MA) field
8Royalty calculation for gas for October, 2013 for D1-D3 field

Underground caverns-I: Filling cost pegged at Rs.25,145 crore

April 23: The cost of the crude oil required to fill up the 5.33 MMTPA underground caverns being constructed by the Indian Strategic Petroleum Reserves Ltd. (ISPRL) at Visakhapatnam, Mangalore and Padur has been pegged at Rs.25,145 crore, as per latest estimates.
8The total cost has been estimated for 7 out of the total 8 compartments in all three caverns, since one compartment would be used by HPCL exclusively.
8Crude oil would be imported for filling these cavern storages. Price of crude oil, for calculating the cost of filling has been assumed at $110 per barrel and exchange rate has been taken at Rs.62/$.
Site-wise breakup of filling cost:
 --Cost of filling 1.03 MMT compartment with capacity of 7.5 million barrels is Rs.5145 crore
 --Cost of filling 2 no.s 0.75 compartments each with capacity of 5.5 million barrels each is Rs.3750 crore each (totalling to 11.0 million barrels at cost of Rs.7500 crore)
 --Cost of filling 4 no.s 0.625 MMT compartments each with capacity of 4.6 million barrels each is Rs.3125 crore each (totalling to 36.9 million barrels at cost of Rs.25,145 crore)

Underground caverns-II: Fund requirement at different crude prices and exchange rates

April 23: For reference purposes the website carries here the fund requirement at different crude prices and exchange rates.
8The data is given here in terms of crude prices ranging from $100 to $140 per bbl.
8Fixed crude price of $110 / bbl and at different exchange rates
8Compartment-wise crude filling cost Vizag, Mangalore and Padur

IOCL Briefs

April 23:  8IOCL imports additional Propane and Butane worth Rs.288.12 crore from Tasweeq: Indian Oil Corporation Ltd. (IOCL) has imported an additional 45 TMT Propane and Butane from Tasweeq in April, 2014
  -- IOC imports 11.25 TMT of Propane at FOB price of $970/MT totaling to Rs.74.57 crore from Tasweeq in April, 2014
  -- IOC imports 33.75 TMT of Butane at FOB price of $970/MT totaling to Rs.213.55 crore from Tasweeq in April, 2014
  -- The price will be based on Saudi contract price for Propane and Butane for the relevant period.

 8IOCL extends Rs.7.34 crore contract with IOTIESL for 1.5 years: IOCL has extended the contract with IOT Infrastructure and Energy Service Ltd. (IOTIESL) for operating the Vadodara white oil terminal, Dumad for a period of 1.5 years, that is, from December 14, 2013 through June 13, 2015
  --The estimated cost is Rs.7.34 crore plus 12.36% service tax at the rate, terms and conditions as negotiated and agreed for, with a cumulative cost of Rs.40.07 crore plus service tax at 12.36% since commissioning of terminal, that is, December, 2001 to June 13, 2015.

Marketing rights for CNG-II: Domestic gas to flow to stations set up by non-CGD entiries

April 22: The following clarifications were given on the grant of marketing rights for CNG by the petroleum secretary in a meeting call to draw up a draft policy on the subject:
To the IOC chairman's apprehension about open access to gas pipelines, which is crucial for setting up CNG stations by other players, it was clarified that all the gas pipelines in the country are under an open-access regime mandated by the PNGRB. It was also emphasized that at present most of the existing CGD networks have exhausted their exclusivity period of 3-5 years, and therefore, third-party entities can avail gas transmission services in these networks.
The ministry however left it to the committee to address the specific concerns of IGL:
 --A free-for-all policy framework should not allow other entities to encroach upon the already established CNG outlets of the existing entities.
 --All entities being made eligible to market CNG should be entrusted with some responsibility for expanding the domestic PNG network also.
8The ministry took pains in the meeting that stress that the guidelines (dated 03.02.14), for allocation and supply of domestic gas for CNG, would also cover CNG stations set up by entities other than CGD entities and CNG stations set up outside Geographical Area, subject to availability.
 Click on Details for more

War of words over CAG audit of D-6 block-II: No action called for unless CAG asks for it specifically, says DGH

April 22: The exploration division and the DGH however have refuted the charge of "inaction" on the CAG's exceptions.
The DGH has claimed that RIL had  provided detailed and satisfactory reasons for extension of rig hiring contract from the same vendor without a tender due to market conditions prevailing at that time (when demand of drilling rigs was out-stripping its supply). RIL foresaw a significant risk of higher price in case of a tender for a rig and their strategy of re-negotiations with the existing rig owner led to savings in mobilization cost which would have been incurred if the vendor was changed.
The upstream regulator is of the view that no action is called for unless the CAG specifically requests for it
On the non-determination of abandonment cost, the DGH claims that under the PSC, the contractor has to notify, upon determination by him, the estimated remaining recoverable reserve of any field. This is essentially the net of operating costs equals two and half times the estimated abandonment cost.
This provision does not specify the time for determination of abandonment cost.
Therefore, delay in submission of abandonment cost does not entail contravention of any specific PSC provision.
8Nevertheless, the DGH has issued a reminder to the operator to come up with the estimates of the abandonment cost.

Green Gas Limited: Monthly progress report (January, 2014)

April 22: The website carries here for reference purposes details of Green Gas Limited`s CGD Implementation Progress Report for January, 2014 for Lucknow and Agra under the following heads:
 8Number of CNG Stations
8Compression Capacity
8Number of CNG Vehicles
8CNG Sales
8Gas purchased during the reporting month
8Average gas consumed during the month
8PNG consumer profile
8Total PNG sales
8Average RLNG sale
8Details of steel pipeline infrastructure
8Details of pipeline infrastructure for PNG

Blocks CY-ONN-2005/1 and RJ-ONN-2005/3: Bengal Energy and GSPC slipped up on submitting bank guarantees

April 22: Bengal Energy and Gujarat State Petroleum Corporation (GSPC) have slipped up on the submission of required bank guarantees, as per PSC provisions, for the blocks Blocks CY-ONN-2005/1 and RJ-ONN-2005/3, respectively.
8As per note submitted by the DGH to the petroleum ministry, both companies have failed to renew their bank guarantees and are in violation of Article 29.3.a of the PSC provision.
8In the case of Block CY-ONN-005/1, where GAIL is the operator, its partner, Bengal Energy, has not submitted the required bank guarantee.  Phase-I of the Minimum Work Programme is scheduled from March 3, 2010 to March 10, 2015 and includes an excusable delay of 373 days.
8Again, GSPC has slipped up in the case of Block RJ-ONN-2005/3, where Phase-I was scheduled from July 13, 2009 to January 12, 2014, including a first extension.  Excusable delay of 351 days has been recommended for the block by the DGH and approval is awaited.




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