May 17, 2012

Adani Gas raises CNG price to Rs 53 per kg

Citing adverse impact of currency exchange rates, Adani Gas Ltd — the city gas distribution arm of the Adani Group — has increased the price of its compressed natural gas (CNG) to Rs 53 per kg from Rs 50.20. This is the third hike in gas prices since November 2011.
Adani Gas had last effected a Rs 5-hike in March 2012. This hike will become effective from midnight on Thursday at 50 CNG stations in Ahmedabad and seven CNG stations in Vadodara, where the company supplies over 3.50 lakh kgs of CNG to over one lakh vehicles every day.
The company also revised the prices of gas for industrial customers. The prices have been revised to Rs 37.25 per cubic metre (excluding 15% VAT) from the current Rs 34.25 per cubic metre.
“This revision in the CNG prices have been necessitated mainly due to adverse impact of currency exchange rates.” said Rajeev Sharma, CEO of the company said.
There is no increase in the price of piped natural gas supplied to domestic customers.
The company also supplies natural gas to 1.50 lakh domestic customers, 700 industries and 1,100 commercial customers in Ahmedabad.

Estimated underrecovery for 2012-13 is around Rs 200,000 crore: RK Singh, Chairman & MD, BPCL

RK Singh: As you are aware, we had earlier announced the discovery of gas in the Mozambique block, and that was between 17 to 30 Tcf. In the same basin, the operator has drilled another well with a fresh discovery in addition to what was announced earlier. The fresh discovery has been established and the potential reserve is estimated at between 7 and 20 Tcf. So, the total reserve is now going to be between 24 and 50 Tcf.
ET Now: Is BPCL looking at monetising investments in the Mozambique block because your partner, Cove Energy, recently concluded a deal and sold its stake in the block?
RK Singh: No, no there is nothing on the cards but the Cove Energy deal has already been concluded and Shell bought the stake. We are going to stay on until gas production or thereafter doing the marketing. So we have no intention of selling our stake, which in any case is only 10 percent. Part-selling the stake makes no sense. We are going to stay on and by 2018-20, we expect gas to start flowing and we have every intention to get into the marketing of the gas, including bringing it to our own country. The total investment will be high. The outlay include developing the block as well as downstream infrastructure development at Mozambique so that the gas can be monetised. It can be liquefied and transported which would require the development of a pipeline, jetty and liquefaction plants.
ET Now: Do you foresee any regulatory risks with the Government of Mozambique as the Indian regulatory PNGRB is trying to cap marketing margins and Government of India has hiked cess on crude? Do you think any taxes or risks could emerge in Mozambique for you?
RK Singh: As of now the Government of Mozambique has been very investor friendly and there are some local taxes. For example, they levied a capital gains tax on Cove Energy but Shell went ahead and bought the stake for $1.8 billion anyway. So this is going to be the source of renewing but I do not see anything unusual happening which will affect us adversely.
ET Now: What are your estimates for FY13 underrecoveries?
RK Singh: Nothing can be stated at the moment because it all depends on the compensation that we receive from the government and we hope that it will continue to compensate us 100 percent. As we have been saying in the past, the government will have to raise prices and compensate us for the losses in combination with upstream compensation and also price increases. These three factors are important for us to be compensated 100 percent, and we hope to get it. Should that not happpen, we will not be able to generate revenue for future investment.
ET Now: When can we expect OMCs hiking prices of petrol as crude prices have not really come down due to the rupee's depreciation?
RK Singh: It is true that petrol has been deregulated and it is not covered under the subsidies scheme. But being a government company and the fact that any price increase will affect the public at large, consultation with the government is inevitable. Consultation is going on and I hope that very soon we will increase petrol prices as well.
ET Now: Can you exactly quantify underrecoveries for BPCL in both diesel and petrol?
RK Singh: Although, crude prices have come down so have prices of finished products. I am talking about the international price and all our refinery transfer prices are determined on the international price. But additionally, the rupee's depreciation has to the largest to neutralise the gain that we have on account of a reduction in crude and product prices. So, I do not think there is much difference as far as underrecoveries are concerned. Currently, we are losing about close to Rs 14 per litre on diesel, around Rs 480 on LPG, and Rs 30 on kerosene. If prices are not increased or duties on petrol reduced and if prices of crude and other products continue to be high and the rupee's depreciation continues, the estimated underrecovery for 2012-13 is around Rs 200,000 crore.

Oil regulator refuses to fix RIL gas marketing margin

Oil regulator PNGRB has refused to fix the marketing margin that firms like Reliance Industries and state-owned GAIL India Ltd could charge on sale of natural gas, saying it does not have powers to regulate the fuel.
The Petroleum and Natural Gas Regulatory Board (PNGRB) last week wrote to the Oil Ministry, saying it cannot decide on the marketing margins as natural gas as a product has not been formally notified by the government for adjudication by the Board, sources privy to the development said.
The Oil Ministry on December 26, 2011, asked PNGRB to determine the quantum of marketing margin chargeable on sale of natural gas to end consumers by a marketing entity.
The Board on February 14 issued notices to companies like RIL and GAIL seeking information on cost of production or import or acquisition of natural gas, the selling price of the fuel to end consumers and itemised detailed break-up of the difference between the two.
But PNGRB has now suddenly felt that it is not authorised to decide on the fuel. The full Board of PNGRB, sources said, felt that the ministry's December 26, 2011 reference was under Section 11(j) of the Petroleum and Natural Gas Regulatory Board Act of 2006.
Section 11(j) states that the Board will "perform such other functions as may be entrusted to it by the Central Government to carry out the provisions of this Act."
PNGRB Board felt that the regulator can take up the determination of marketing margin only under Section 11(f) of the Act which states that the Board can "monitor prices and take corrective measures to prevent restrictive trade practice by the entities" in respect of "notified petroleum, petroleum products and natural gas".

Since natural gas has not been notified by the government as a commodity whose prices it can regulate, PNGRB was not competent to regulate marketing margin, the Board felt.
Industry sources however expressed shock at the decision as PNGRB has for all these months been sitting on the issue and had even solicited data on marketing entities. If it was not authorised to deal in the natural gas, it should have said so at the every beginning.
Also, if natural gas has not been notified as a product for PNGRB to regulate, then a lot of activities that the Board is currently doing like city gas licensing would also be illegal, they felt.
RIL charges USD 0.135 per million British thermal unit as marketing margin over-and-above the KG-D6 gas sale price of USD 4.205 per mmBtu.
GAIL on the other hand charges a USD 0.20 per mmBtu marketing margin on gas produced from the BG Group-operated Panna/Mukta and Tapti fields in the Western Offshore and a similar margin on the sale of imported LNG.

IGL challenges PNGRB's decision to slash CNG rate in Delhi

NEW DELHI: Indraprastha Gas Ltd (IGL) today told the Delhi High Court that Petroleum and Natural Gas Regulatory Board (PNGRB)'s decision to slash network tariff and CNG compression charge on sale of piped natural gas (PNG) and CNG amounted to usurping the state's power by it.
"PNGRB has usurped the state function by misinterpreting the legal provisions," former Additional Solicitor General Parag Tripathi, appearing for Delhi government-owned IGL, told a bench of Acting Chief Justice A K Sikri and Justice Rajiv Sahai Endlaw.
The oil and gas regulator lacked the power to fix network tariff and compression charge for PNG and CNG, which, in any case, cannot be exercised with "retrospective" effect, said Tripathi.
"First of all, there was no such power (with PNGRB), even if it is assumed that there is such a power then it (price fixation) has to be fixed and implemented with prospective effect," the lawyer for IGL said and cited various case laws in support of his argument.
The IGL, sole supplier of PNG and CNG in Delhi and its suburbs, had earlier moved the court against the order of PNGRB, which has slashed network tariff and CNG compression charge and asked IGL to refund the excess amount charged by it from consumers since 2008.
Additional Solicitor General A S Chandhiok, appearing for PNGRB, however opposed the IGL's plea and said the regulator was "well within" its powers to slash the network tariff and CNG compression charge on sale of piped natural gas (PNG) and CNG here for extending benefits to consumers.
PNGRB, in its order on April 9, had not only fixed the charges with retrospective effect from April 1, 2008 but had also ordered IGL to refund extra money, charged by it, to customers.

May 14, 2012

GAIL, Oil India among 11 cos bidding for stake in Reliance Gas

Eleven firms including state-run GAIL (India) and Oil India have bid to buy stake in billionaire Mukesh Ambani’s privately owned firm Reliance Gas Transportation Infrastructure (RGTIL).
“There are five Indian and six foreign companies that have submitted expression of interest (EoI) for buying stake in the gas transportation company (RGTIL),” a source privy to the development said.
Gas utility GAIL and oil explorer OIL have submitted separate EoIs for the stake buy, which is being managed by JP Morgan, Citi and SBI Caps.
Other firms which have put in EoI may include NYSE-listed energy major Enbridge.
A company spokesperson declined to comment.
The source said the companies that have submitted EoI would visit data room of RGTIL and do a complete due diligence before making any financial bid.
RGTIL was originally a subsidiary of Reliance Industries Ltd (RIL) and was incorporated in March 2003 to transport natural gas from eastern offshore gas fields to consumption centres. Two years later, it was transferred to Mr Mukesh Ambani, Chairman of RIL.
It was said at that time that Mr Ambani may sell stake in the company through an initial public offering (IPO) once RIL’s eastern offshore KG-D6 field hit peak volumes of 80 mmscmd.
But with KG-D6 output plummeting to less than 34 mmscmd, he wants to sell the gas pipeline business.
Industry sources said RGTIL earlier this month held a meeting of its shareholders in Jamnagar, where its registered office is located, to seek approval for the stake sale. The stake sale was approved at the meeting.
RGTIL operates a 1,396-km East-West gas pipeline. The 48-inch pipeline from Kakinada in Andhra Pradesh to Bharuch in Gujarat ferries natural gas from KG—D6 fields. But the 80 million standard cubic meters per day capacity line is operating at less than half of its capacity as output from KG—D6 field has plummeted.
Relogistics Infrastructure Ltd (Relog), a subsidiary of RGTIL, has won government authorisation to lay Kakinada-Basudebpur-Howrah pipeline, Kakinada-Chennai line, Chennai- Bangalore-Mangalore pipeline and Chennai-Tuticorin line but work on these pipelines haven’t started because of uncertainty about availability of gas.
RIL is the operator of KG-D6 block with 60 per cent stake while UK-based BP Plc has 30 per cent interest. Canada’s Niko Resources owns the remaining 10 per cent.
While GAIL is nation’s largest pipeline utility by capacity, with a network of 8,500 km, OIL is keen on entering the gas business.

May 11, 2012

ONGC to foray into city gas distribution business

The company will enter city gas distribution business and sale of imported liquefied natural gas (LNG) through a new subsidiary - ONGC Gas. The new unit may be aimed at making amends to the company letting go lucrative opportunities to enter gas business. ONGC has virtually no presence in marketing of the environment friendly fuel. All of its gas is marketed by state-owned GAIL India. It had let go marketing rights on gas from even newer fields as also of LNG imported by Petronet LNG. ONGC holds 12.5 per cent stake in Petronet LNG. This is the same as the stake held by GAIL and IOC and BPCL. While others market a share of LNG imported by Petronet, ONGC had never demanded sale rights.
Also, plans to set up a LNG import facility at Mangalore in Karnataka are scrapped.

May 3, 2012

GSPL-led consortium to invest Rs 12,000-cr on gas pipelines

A consortium led by the State-promoted Gujarat State Petronet Ltd (GSPL), a subsidiary of the GSPC Ltd, plans to invest nearly Rs 12,000 crore over the next three years.
The investment is to create three cross-country natural gas transmission pipeline totalling around 4,000-km in length.
A joint venture agreement (JVA) was signed here on Monday by GSPL, holding a majority stake of 52 per cent, with three central PSU partners Indian Oil Corporation Ltd (26 per cent), Bharat Petroleum Corporation Ltd and Hindustan Petroleum Corporation Ltd (11 per cent each), official sources told Business Line here. As majority partner, GSPL would invest nearly Rs 6,500 crore on the prestigious grid it would be laying outside Gujarat for the first time. GSPL, a listed company, also informed the bourses accordingly.
At present, it has a nearly 2,000 km-long gas grid crisscrossing Gujarat, and expanding to another 200 km, and transmits 35 million metric standard cubic metres per day (mmscmd) of natural gas.
Hydrocarbon regulator Petroleum and Natural Gas Regulatory Board (PNGRB) had awarded the Letter of Authorisation to the four consortium partners on July 7, 2011, to develop the three pipeline projects.
The ambitious projects are the Mallavaram-Bhilwara pipeline (1,585 km), Mehsana-Bhatinda pipeline (1,670 km) and Bhatinda-Jammu-Srinagar pipeline (740 km). The consortium is expected to invest nearly Rs 3 crore per km on laying the pipelines which will together be 3,995 km long.
Initially, the Gujarat-to-Jammu & Kashmir pipeline is expected to carry 20 mmscmd of gas which would be gradually increased to 40 mmscmd.
GSPL is the country’s first company to purely transport natural gas on open access basis.
In January 2006, it had mopped up nearly Rs 375 crore through an IPO to part-fund its Rs 1,450 crore expansion plans.