Mar 28, 2012

Government likely to appoint regulator for natural gas pricing

The Indian government may appoint a regulator to help it determine the price of natural gas that is supplied by oil and gas explorers, such as Reliance Industries Ltd (RIL), to power and fertilizer firms.
An empowered group of ministers (eGoM) looking into the issue of allocating gas to fertilizer, power and some other companies has directed the oil ministry to “suggest an appropriate regulatory authority to aid and advise eGoM on the issue”. Mint has reviewed a copy of the minutes of the eGoM meeting on 24 February.
The suggestion follows a plea by RIL in 2010 to increase the price of gas midway through its five-year supply contracts with consumers on the grounds that the price it is charging is at a discount to global prices.
RIL started supplying gas from its D6 fields in the Krishna-Godavari (KG) basin in April 2009 to power and fertilizer companies at a base price of $4.2 (around Rs. 214 today) per million British thermal units. The supply contracts end in 2014, after which they have to be renegotiated.
“EGoM further noted that the gas prices fixed in 2009 were valid for a period of five years, and on this ground, the request of the contractor for revised prices was turned down in 2010 itself when international prices were comparatively lower,” according to the minutes of the meeting.
An oil ministry spokesperson declined to comment.
“We are not privy to such eGoM-ministry communications, therefore, cannot comment,” an RIL spokesperson said in a response to an emailed query.
To be sure, the oil and gas industry is already governed by two regulatory bodies. The Directorate General of Hydrocarbons (DGH) advises the oil ministry on technical and economic issues related to the sector. It comes under the oil ministry’s administrative control. The Petroleum and Natural Gas Regulatory Board (PNGRB) oversees transportation tariffs and other costs of petroleum commodities related to refining, processing, storage, transportation, distribution, marketing and sale.
Unlike DGH, PNGRB was created by an Act of Parliament and functions independently.
S. Krishnan, chairman of PNGRB, said he was not sure if the agency would be asked to regulate gas pricing. “I cannot say if such a move would contravene any existing guidelines,” he said.
Sunjoy Joshi, a former oil ministry official and director of the New Delhi-based Observer Research Foundation, said that in all likelihood, the government would go in for a new regulatory body. Observer Research Foundation is funded by RIL.
“The government needs an independent upstream regulator to regulate prices. So, it might go in for a new body,” Joshi said.
Dipesh Dipu, director of the consulting practice at Deloitte Touche Tohmatsu India Pvt. Ltd, disagreed.
“If the government does want to regulate natural gas prices, it will probably modify regulations to mandate the existing regulator (PNGRB) for that, otherwise there could be turf issues,” Dipu said.
RIL is facing criticism for declining gas production from the KG-D6 basin, and is involved in a dispute with the oil ministry over the denial of $1.24 billion in costs claimed by the company for developing the D6 field.
The group of ministers has also sought the advice of the law ministry and the attorney general on the issue.
On Friday, Prime Minister Manmohan Singh said that his government may change the gas pricing policy to offer incentives to producers of natural gas.
“We are conscious that remunerative energy prices are needed to ensure expanded energy supply,” Singh said at the 7th Asia Gas Partnership Summit 2012 in New Delhi on Friday. “Oil and gas are national resources and, therefore, should be within the framework of government and regulatory oversight.”
EGoM has also provided a temporary reprieve to non-urea fertilizer plants by declining to suspend gas supply from the KG-D6 field to them till at least May.
The proposed move has been “kept in abeyance” till 24 May and the fertilizer ministry has been asked to come up with guidelines on the move, which will then be reviewed by the group of ministers, according to the minutes of the eGoM meeting.
The oil ministry has held that companies producing non-urea fertilizers should be ordered to buy gas at market prices since the retail prices of non-urea fertilizers have been freed from the government control, and they can pass on the changes in input prices to consumers, Mint reported on 23 December.
Prices of non-urea fertilizers, including diammonium phosphate, muriate of potash and various categories of complex fertilizers, were freed in April 2010.
The government still regulates the retail price of urea, but is working on a draft policy to free this from its control.
The group of ministers also accepted the oil ministry’s view that existing and future allocations of gas discovered under the new exploration licensing policy to power plants be subject to the condition that the entire electricity produced shall only be sold at tariffs determined by the tariff regulator of the power plant.

Mar 26, 2012

India’s GAIL eyes up to 2 mln t/yr LNG import deal

GAIL India is
likely to sign a three-year deal within three months to buy up
to 2 million tonnes of LNG annually, Chairman B. C. Tripathi
said on Saturday.

The gas will supply the 5 million tonne-a-year Dabhol LNG
terminal in western India.

India is the world’s eighth-largest importer of LNG and
those imports could rise as much as five-fold in the next decade
as domestic gas output falls and demand surges.

“We are talking to various parties. We will decide on the
deal in next three months,” Tripathi told reporters at Asia Gas
Partnership Summit. “It all depends on how successful are we in
commissioning the terminal.”

He said a consortium of Indian companies which own the
Dabhol terminal was considering doubling the plant’s capacity to
10 million tonnes a year.

He did not specify when a decision on raising the capacity
would be taken.

The Dabhol terminal, which is due to start up later this
month, will initially operate at 50 percent capacity as the
breakwater is not yet ready, he said.

India needs gas to help power electricity generation, its
fertiliser sector, city gas distribution and for industries.

GAIL, Oil India keen on buying RGTIL

In a bid to make the best out of the opportunity, the state-run GAIL and Oil India has evinced keen interest in buying Reliance Gas Transport Infrastructure Ltd (RGTIL), which is currently up for sale, said the sources in the know of development.

RGTIL is closely held company by Mukesh Ambani and is involved in gas pipeline business. As per the sources, Ambani has selected JPMorgan, Citi and SBI Caps for the sale and is likely to seek a valuation close to Rs 10,000 crore.

The company was put up for sale after the Ambani noticed the continuous fall in the output from KG D6 Basin following which RGTIL was unable to justify large investments in the pipelines.

Currently, RGTIL operates the Rs 15,000 crore East-West gas pipeline (EWPL) that connects Kakinada to industrial hubs of Karnataka, Maharashtra and Gujarat. In 2007, following the booming output from the Basin, RGTIL was granted the licence to build two pipelines connecting Kakinada-Vizianagaram-Srikakulam and Kakinada-Ennore-Nellore-Chennai. However, the projects were put on hold due to the unavailability of gas.

Mar 22, 2012

Bangalore to get piped gas in 2013

If all goes well, Bangaloreans need no longer apply for for LPG cylinder refills and wait for its delivery; and this is bound to happen in 2012-13. The infrastructure to supply piped gas to Bangaloreans is expected to be ready this fiscal (2012-13) to allow residents the luxury of cooking gas supplied directly to their homes through a city gas distribution (piped) network.
Chief minister DV Sadananda Gowda, presenting the state budget on Wednesday, said the work of laying a natural gas pipeline from Dabhol (in Ratnagiri, Maharashtra) to Bangalore by Gas Authority of Indian Limited (GAIL) is expected to be completed in this fiscal year. A joint venture company with GAIL and Karnataka State Industrial Infrastructure & Development Corporation (KSIIDC) was formed in June 2011 to provide clean fuel for power plants, transport vehicles, industries and households in and around Bangalore.
According to an earlier GAIL statement, the project involves setting up natural gas infrastructure in industrial estates and clusters, besides city gas distribution networks as well as distributed power generation projects in industrial areas across the state.
It is the distribution networks that would supply piped gas to Bangaloreans’ homes, and compressed natural gas (CNG) to commercial vehicles, including state transport vehicles. This would also include distributing fuel through pipelines to industrial areas in the various parts of the state.
GAIL’s about `5,000-crore project of laying the 1,413-km Dabhol-Bangalore gas pipeline will enable carrying 16 million metric standard cubic metres (mmscm) of gas per day, and is expected to be competed by 2013.
KSIIDC hold 26% equity in the project while 24% is held by GAIL, while the rest 50% will be made up of holdings by private investors, financial institutions and strategic partners in varying equities.
Urban environmentalists say the most striking meritorious outcome of this project being completed and ready for operations would be the resulting drastic fall in pollution levels, as has been witnessed in Mumbai and New Delhi where compressed natural gas is being used by commercial vehicles.
Bangalore, at present, is experiencing severely high air pollution levels because of the absence of CNG, which in turn was because of the absence of a pipeline to deliver CNG to Bangalore. Things are expected to change for the better on this front from next year onwards.

Mar 13, 2012

PNGRB awards Rs 855 crore pipeline project to GSPL

Petroleum and Natural Gas Regulatory Board (PNGRB) of India awarded Rs 855 crore inter-state gas pipeline project in Jammu and Kashmir to Gujarat State Petronet (GSPL) led consortium.The project, Bathinda-Jammu-Srinagar gas pipeline project, will ensure unabated gas supply throughout the year to the state especially winters when energy needs rise. The 750 km long project passes through Bathinda in Punjab via Jammu to Srinagar.
Government called for close coordination between agencies and urged concerned parties to fast track the project. Assistance of the state government was also sought for future development of city gas distribution networks and clearance issues and other related matters.