All cars in Gujarat to switch to gas within a year: HC

In an order which would impact lakhs of people owning cars, the Gujarat high court on Wednesday directed the state government to pass necessary laws to make it compulsory for all four-wheelers registered in Gujarat to convert to natural gas within one year.

Further, the court gave two months to the state government to issue necessary orders to impose stringent restrictions to reduce pollution by fixing levels of emission to the minimum, at par with international norms. The order applies to both public and private vehicles running on petrol and diesel.

The order, passed by Chief Justice Bhaskar Bhattacharya and Justice J B Pardiwala, came in response to directions sought by Dhrangadhra Prakruti Mandal, through its vice-president Devjibhai Dhamecha, to the state and Centre as well as all gas and petrol companies operating in Gujarat.

The order said, "The state is directed to pass necessary orders compelling owners of all vehicles having registration in Gujarat to use natural gas and, if necessary, even at higher prices within the shortest possible period, not exceeding one year from today for the protection of lives of citizens."

The judges suggested gas prices be cheaper for public vehicles and higher for privately owned vehicles. Also, fares of public transport should be fixed at reasonable rates so that the end benefit goes to the public.

The Gujarat high court also directed the Central government to allocate natural gas for domestic and vehicular use to the city of Ahmedabad usage at the same rate as it is supplied to Delhi and Mumbai. "This is to enforce the right of equality," the judges said.

Will the govt learn from KG-D6?

The controversy over the KGD6 block has come to a head and the outcome will have a huge impact on downstream as well as the exploration and production (E&P) space. Reserves estimates have been lowered for the block.
June 2012 production was 30 million standard cubic metres per day (mmscmd), down from a high of 61 mmscmd. Reliance Industries (RIL) says production could dip to 20 mmscmd over the next two fiscals, due to technical difficulties.
RIL wants a market-linked price (roughly thrice the current price) for KGD6 gas once the current contract expires in April 2014. It also claims that, with the technical help of partner British Petroleum, and further expenditure, it could revive the block.
RIL also wants a large chunk of expenditure incurred over the past three fiscals to be written off. The government is unwilling to allow this. The government of India also says RIL hasn't fulfilled its drilling commitments. It is asking for a CAG audit of RIL's accounts. The production sharing contract (PSC) will have to be dissected and ambiguities cleared up so that this doesn't recur. Gas contributes about 10 per cent to the current Indian energy mix as well as being fertiliser feedstock. Over the next decade, gas' share in the energy mix could rise to 20-25 per cent. The power and fertiliser sectors generate roughly two-thirds of current gas demand. Demand from city gas distribution (CGD) networks servicing transport and domestic cooking needs is growing fast.
India's total gas consumption was about 56-57 billion cubic metres (bcm) in 2011-12. About 20 per cent of that was imported, with domestic production of 47-48 bcm. The fall in KGD6 production has meant a go-slow on pipeline infrastructure, and CGD development. The current policy offers sectors like power and fertiliser priority in supplies. Until KGD6 recovers, or other sources of domestic production are developed, CGD will be starved.
India will remain gas-deficient whatever happens. But it does have about 1,200 bcm worth of estimated reserves. At current production rates, that would be a reserve: production ratio of about 25 years. A coherent exploration policy would encourage more optimal E&P and reduce import dependence. Exploitation of other potential sources like coal-bed methane and shale gas have more extended time horizons but again, coherent policy making could speed things up.
Assuming KGD6 recovers and promising strikes like Gujarat State Petronet's Deen Dayal Field are developed, domestic production could hit 150 mmscmd by 2014-15. That would be significantly up from 2011-12 levels of 130 mmscmd. By then, demand will be about 230 mmscmd, implying nearly 80 mmscmd will be imported in 2014-15.
Imports will largely consist of LNG. Two LNG terminals in Hazira and Dahej are operational and terminals are under construction at Kochi and Dabhol. The ambitious 1,700 km TAPI pipeline from Turkmenistan via Afghanistan-Pakistan-India remains hostage to geopolitical complications.
Pricing policy will be a key factor in demand management. Gas has multiple benchmark prices. The Administered Pricing Mechanism (APM) price is currently $4.2 per mmbtu (million British thermal units) for producers like RIL and ONGC. RIL's demand is for a revised price of $12/mmbtu or more in 2014-15. Some Indian players have long-term LNG contracts with Qatar for $7. The TAPI pricing will supposedly be about $11.5 to $12.
Asian LNG spot pricing is linked to Japanese LNG rates. Japan is the world's largest LNG importer and demand there has grown since the Fukushima disaster. Japan's LNG pricing is a percentage of blended crude prices, known as the Japanese crude cocktail (JCC). Currently, JCC is above $16/ mmbtu. North America has lower gas prices due to shale extraction.
It's difficult for downstream industry to handle such volatility. Power, fertiliser and CGD have controlled tariffs and prices and cannot pass on sudden jumps in gas pricing. Bulk gas consumers will have to figure out how to stabilise gas costs to remain viable. Since energy is a politically sensitive issue, there will be a temptation to continue with APM. But if E&P activity is to be enhanced, policy must offer market-linked price incentives for new discoveries and production. Also, demand cannot develop in sustainable fashion unless prices are linked to market.
Demand for gas will grow, no question about that. But the government will have to display smart policy-making. Or else, gas will end up in a mess on the lines of diesel and kerosene. If all goes well, vast investment opportunities will open up. Pipelines, LNG terminals and CGD networks all have the potential to grow quickly along with E&P. Will the government learn a few lessons from KGD6? Valuations are low; any sensible policy movement could trigger a revival in stock prices.

Oil Min cancels authorisation for 4 pipelines of Rel Gas

The oil ministry has canceled the authorisation of pipelines that were to be implemented by the Mukesh Ambani promoted Reliance Gas Transportation & Infrastructure (RGTIL), reports CNBC-TV18's Nayantara Rai quoting sources.

Sources say that the oil ministry has accepted the PNGRBs recommendation and communicated this to RGTIL. Sources in the company have also confirmed receiving a letter and the fact that they are drafting a response to that letter.

PNGRB had recommended cancellation of authorization to pipeline stretching amounting to about 2175 km. The oil ministry has decided on this course of action believing it is in the best administrative interest and also because it was not impressed by the response that was given by RGTIL on why it was late in implementing the pipeline. It was because it had not finished and implemented the pipeline in the time allotted.

RGTIL had argued that there is no firm source of gas supply at the moment. Only when it is able to firm up a gas source, it will be rational for it to actually lay out those pipelines.

It had requested the oil ministry to help in tying up such a firm oil source and that it would require 36 months from the time of doing so. Sources in the oil ministry saying Reliance Gas is still not giving a firm commitment on when those pipelines could be completed and that is why it has decided to cancel those licenses.

So again it seems as the relations between Mukesh Ambani and the oil ministry are strained, will this one head into arbitration? Will there be any legal recourse? We will have to watch out.