OilMin cancels RGTIL's permits to lay gas pipelines

The Oil Ministry has cancelled permits issued to billionaire Mukesh Ambani's privately owned RGTIL for laying four natural gas pipelines, saying there were inordinate delays in construction of the 2,175-km lines.

"Orders cancelling authorisation issued to Reliance Gas Transportation Infrastructure Ltd (RGTIL) for laying of four pipelines from Kakinada in Andhra Pradesh to Howrah in West Bengal, Chennai and Tuticorin in Tamil Nadu and Mangalore in Karnataka were issued last week," a source said.

However, the letter cancelling the permit could not be served on RGTIL in the first instance because of incorrect or incomplete address and a new letter was sent.

RGTIL, whose bank guarantees totalling Rs 80 crore that were pledged as collateral for executing the pipelines, expired last year and the Ministry has asked the firm to furnish fresh securities of the like amount which the government will forfeit for failure to lay the pipeline, he said.

The Ministry refused to buy RGTIL's argument that the government has already allocated all of the projected mmscmd of gas output from the KG-D6 fields to customers in Andhra Pradesh, Maharasthra and other northern states, leaving no gas for transportation through its proposed pipelines from Kakinada to Howrah, Chennai, Tuticorin and Mangalore.

Sources said the ministry, which had in 2007 made it a condition that RGTIL cite a source of gas before it is given license or authorisation to lay the pipelines, has not agreed with the the company's assertion that in absence of any gas allocation the pipelines will be infructuous investment.

The Ministry also rejected the firm's assertion that it has done all ground work including route survey, pre- engineering and acquisition of right of use (ROU) and it would start work the moment government identifies a source of gas that would feed the pipelines.

The pipelines, RGTIL had asserted, would be ready one month before the source or field is ready to deliver the gas.

Sources said the ministry based its decision on a recommendation made by the oil regulator, Petroleum and Natural Gas Regulatory Board (PNGRB).

Relogistics Infrastructure Ltd (Relog), a subsidiary of RGTIL, had in 2007-08 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 hasn't yet started.

Relog cited uncertainty about availability of gas for not building the lines in the 3 year timeline specified in the 2007 authorisation. The three year period expires this month.

GSPC buys 65 pc stake in Gujarat Gas for Rs 2,464 crore

BG Group has sold the controlling stake in Gujarat Gas Co Ltd (GGCL) to state-owned Gujarat State Petroleum Corp (GSPC) for Rs 2,463.8 crore, after lengthy negotiations during which the deal value fell because of regulatory uncertainty and the withdrawal of some bidders under political pressure.
The deal, announced in the run up to assembly elections in the state, is politically significant and is widely expected to be showcased as a symbol of Gujarat pride as the company originally belonged to the state government. State government officials say that Gujarat Gas is a "prized catch" for chief minister Narendra Modi.

For BG, the exit is part of its global realignment of its portfolio. It requires $9 billion for exploration and production in Brazil and Australia. It recently sold stakes in offshore blocks in the Mahanadi and KG Basins.
"This transaction helps BG get closer to its announced $5-billion non-core assets divestiture programme while GSPC enters into new gas distribution markets in Gujarat increasing its size and scale. It's a win-win scenario for both parties," said Rahul Saraf, Director, Investment Banking at Citi India. Citibank was BG's advisor in the deal.
The acquisition makes GSPC the country's largest distributor of natural gas with total volume of close to 8 million cubic metres a day. It will acquire BG's 65.12 per cent stake at 295 per equity share of the country's largest city gas distribution (CGD) player in private sector with consumer base of 3.5 lakh in South Gujarat. On Wednesday, GGCL scrip closed at Rs 336.70 on Bombay Stock Exchange, down by 2.15 per cent, before GSPC group announced the inking of agreement in Singapore.
GSPC had initially bid for the stake along with state-run ONGC and BPCL, but finally acquired the stake alone. According to a top official in Gujarat's energy department, GSPC may face challenges in getting regulatory approvals in absence of central PSUs on board.
GSPC Group, which is already country's largest LNG trader, has also emerged as largest natural gas distributor with volume of 7-8 mmscmd. GSPC Group is now much larger than Indraprastha Gas and Mumbai based Mahanagar Gas.
Commenting on the development, state energy minister Saurabh Dalal said: "The synergy between GSPC Group and GGCL will benefit all the stakeholders. We are pleased with the positive outcome of the negotiations." However, GSPC Group officials remained silent about discontinuing the alliance with ONGC and BPCL. GSPC Group MD Tapan Ray said: "We are pleased to announce this acquisition that enhances GSPC Group's presence in Gujarat. The acquisition is in the long-term interests of the industrial and retail customers of Gujarat."
BG India head Shaleen Sharma could not be reached for his comments. GGCL MD Sugata Sircar said: "The deal is subject to the regulatory approvals. There is no change for GGCL in terms of operations. We will continue with our ongoing expansion plans worth Rs 150 crore." GGCL has close to 600 employees.
GSPC Group will approach Sebi, RBI and Competition Commission of India for regulatory approval. It will also try to get relief from issuing an open offer to minority shareholders to keep GGCL listed on bourses.
However, the valuations have shrunk since BG made its decision public late last year. It was initially expecting to raise close to Rs 3,150 crore ($600 million) through this divestment. Regulatory orders that threatened the viability of city gas business of Indraprastha Gas Ltd, along with withdrawal of rival bidders, strengthened GSPC's negotiating position.

After regulatory approvals, GSPC will launch an open offer for an additional 20%, although it is still not clear if the plan will eventually be to delist the company.
Analysts said the deal would improve valuation of GSPC's transmission arm Gujarat State Petronet Ltd while GSPC's proposed 5-mtpa LNG terminal would be viable as half of its capacity will be utilised by its own city distribution business.
In November 2011, BG Group announced to divest its controlling stake in GGCL to focus on exploration and production activities. At least half a dozen potential investors including Adani and Torrent groups expressed interests in acquiring GGCL. However, they did not submit their final bids for unknown reasons. Subsequently, GSPC-led consortium consisting of ONGC and BPCL emerged as the sole bidder. Now, only GSPC group emerged as acquirer. GGCL's market capitalisation eroded by 20 per cent as only single bidder remained in the fray.

GSPC Gas cuts industrial gas price in Gujarat

GSPC Gas, the city gas distribution (CGD) arm of state-owned GSPC, effected a minor reduction in industrial gas prices on Saturday. However, the prices of domestic piped natural gas (PNG) and compressed natural gas (CNG) have not been reduced.
Officials said that the price of industrial gas has been reduced from Rs30.70 per standard cubic metre (scm) to Rs29.70 per scm with effect from Sunday.
“The decision to cut the gas price will benefit about 1,600 industrial consumers of GSPC Gas across the state,” said an official.
The decision comes on the day of the DNA report which said that state government has unofficially asked CGD companies operating in the state to refrain from hiking CNG and domestic PNG prices till the assembly elections.
A GSPC Gas official attributed the reduction in industrial gas prices to the cooling of natural gas prices in the international markets in past couple of months. Spot LNG prices, which were quoting at around $18-19 per Million Metric British Thermal Units (MMBTU) a few weeks ago, are now in the region of $15 per MMBTU, which has provided some cushion to the CGD and enabled the price cut.
The official, who was speaking on condition of anonymity, did not offer any comment when asked if there was a possibility of cut in prices of CNG and domestic PNG. However, industry experts say that there may be slight reduction in CNG and domestic PNG prices if natural gas prices decline further. The state government levies 15% VAT on natural gas.

PNGRB slashes Gujarat State Petronet's gas grid tariff by 40%

India's downstream oil regulator Petroleum and Natural Gas Regulatory Board has cut the tariff charged by the Gujarat State Petronet Ltd for its 2,239 kilometer Gujarat gas grid by about 40%, after discrepancy was found in tariffs from different customers.
“Based on the details submitted by GSPL on the tariff during the pre-regulatory regime, it was found that currently GSPL is charging discriminatory tariffs from different customers which range from Rs 2.54 per mmBtu (million British thermal unit) to Rs 43.93 per mmBtu on GCV (Gross Calorific Value) basis,” PNGRB said in its order on Tuesday.
The regulator said that it has fixed the rate at Rs 23.9 per mmBtu, with effect from November 2008, against Rs 39.6 per mmBtu submitted by the company, the order said.
“In addition to the tariff, GSPL is also recovering system use gas including unaccounted gas from their customers in kind,” PNGRB said in the order.
The regulator has also asked the company to return the cost of entire system use gas, including unaccounted gas to the shippers/consumers from November 20, 2008 onwards and also cancel separate recovery either in cash or in kind with immediate effect.
PNGRB said that the difference between the tariff charged by the company and that approved by the regulator will be adjusted with customers in future billings.
Earlier in June, PNGRB agreed to give authorization to GSPL’s 2,239 km of Gujarat gas grid with a capacity to carry 30.46 million standard cubic meters of gas per day.

Separate transportation, marketing: oil regulator to gas firms

Oil regulator PNGRB wants gas utilities like GAIL India Ltd to separate their gas transportation and marketing businesses so that ownership of a pipeline does not provide any firm with an unfair advantage while selling the fuel.
The Petroleum and Natural Gas Regulatory Board (PNGRB) floated a concept paper on unbundling of activities of transportation and marketing of natural gas and has invited comments from industry by 15 October.
“The purpose of this policy is to ensure that pipeline ownership does not provide any competitive advantage to any gas seller and abuse of market power while establishing an efficient gas grid with open access for all the players on a non discriminatory basis,” the paper said.
PNGRB said monopoly behaviour is anti-competitive and, therefore, not in consumer interest.
“In case of a monopoly which provides a variety of services, splitting it vertically along the gas value chain is the end towards which all regulators in developed gas markets have endeavoured and also reached. Simply put, what is meant here is that where monopoly and non-monopoly services are
offered, splitting them into two parts is the objective of regulators in different parts of the world,” it said.
Detailing a roadmap, the regulator said accounts of pipeline transportation and gas marketing should first be segregated. This should be followed by creation of separate “identifiable legal entities along functional lines i.e., production, transportation, marketing of natural gas etc.”
Finally, the ownership and management control of these separate entities should be segregated.
“This structure envisages that the entity and its affiliates do not have common ownership as visualised under the proviso to section 21 of the PNGRB Act, 2006. Management control segregation would ensure that independent decision making processes exist in the entity and its affiliates,” the concept paper said.
It said accounts should be separated by 2013-14 while legal unbundling of the transportation segments of natural gas transmission entities should be completed by 2015-16.
Subsequently, Board would consider declaring a time-line for ownership/management control unbundling, it said.
The regulator said the PNGRB Act provides for separating “the activities of marketing of natural gas and the transportation including ownership of the pipeline within such period as may be allowed by the Board and only within the said period, such entity shall have right of first use”.
It said any firm applying to building and operating a gas pipeline would have to give an undertaking on its business interests in related areas of gas marketing or city or local gas distribution network.

PNGRB cuts GSPL rate for Gas Grid by 40%

PNGRB also directed GSPL to return the cost of entire system use gas including unaccounted gas to the shippers/consumers from November 20, 2008 onwards

The Petroleum and Natural Gas Regulatory Board (PNGRB) has slashed the rate charged by Gujarat State Petronet Ltd (GSPL) for its 2,239-km Gujarat Gas Grid by about 40 per cent, saying the company was charging “discriminatory” rate from different customers.
Against Rs 39.6 per million British thermal unit (mmBtu) rate submitted by GSPL, the PNGRB in its 30-page order fixed the rate at Rs 23.9 per mmBtu.

The approved rate would be effective November 20, 2008, PNGRB said, adding the difference between the tariff charged and that approved by the board shall be adjusted with customers in future billings.
PNGRB also directed GSPL to return the cost of entire system use gas (SUG), including unaccounted gas to the shippers/consumers from November 20, 2008 onwards and withdraw separate recovery either in cash or in kind with immediate effect.
The board had in June decided to grant authorisation to GSPL’s 2,239 km of Gujarat Gas Grid with a capacity to carry 30.46 million standard cubic meters of gas daily.
“Consequently, board has recognised only 2,239 km’s of high pressure Gujarat Gas Grid of GSPL as against 2,890.13 km of network configuration submitted by them in their tariff filings,” it said.
“Based on the details submitted by GSPL on the tariff during the pre-regulatory regime, it was found that currently GSPL is charging discriminatory tariffs from different customers which range from Rs 2.54 per mmBtu to Rs 43.93 per mmBtu on GCV basis.
“In addition to the tariff, GSPL is also recovering system use gas including unaccounted gas from their customers in kind,” the order said.

GAIL moves SC against PNGRB's decision to allow GSPL led consortium in pipeline tender

GAIL India has moved the Supreme Court against the decision of PNGRB to allow the Gujarat State Petronet (GSPL) led consortium to bid for Rs 5,000 crore Mallavaram-Bhopal-Bhilwara-Vijaipur gas pipeline project. GSPL led consortium has emerged as the lowest bidder for the project, ousting GAIL India.

The state-run gas utility has alleged that PNGRB accepted the technical bids of the consortium despite the bid not being in conformity with the tender conditions. The company argued that the board could not revise the tender, after bids were submitted by the aspirants, under the guise of introducing post-bid clarifications.

"The tender floated was a zero deviation tender and no condition in variance of the terms of the tender could be added any by any bidders. Therefore, the tribunal erred in upholding the decision of the board of accepting the technical bid of the consortium despite material deviation from tender terms," said GAIL in its petition.

Adani Gas questions Ahmedabad Municipal Corporation tax on pipeline

The Gujarat high court on Friday issued a notice to the Ahmedabad Municipal Corporation and the state's advocate general after Adani Gas Ltd questioned the levy of property tax on its pipelines meant for gas distribution in the city.
According to case details, the civic body raised a bill of Rs 5.53 crore towards property tax on its gas pipelines laid underground across the city. The tax has been calculated from 2005.

The company paid the amount in March this year, but questioned the validity of the levy. When things could not be solved, the company moved the high court challenging the legality of such taxation. Before the court, the company has contended that the pipelines have been laid underground and serve the public. On a property that is not in the form of a building or construction above the ground or on land, property tax cannot be levied, the company's counsel submitted.
Besides, the company also questioned the provisions under which the AMC levied property tax - section 141(B) of the Bombay Provincial Municipal Corporation (BPMC) Act. It was submitted that the provision speaks of levying tax on buildings in the corporation area, but is silent on the limit on land tax. And this is ultra vires to Article 243 of the Constitution.
After the hearing, a bench of Chief Justice Bhaskar Bhattacharya and Justice J B Pardiwala sought an explanation in this regard from AMC as well as from the state's highest legal officer. Further hearing has been scheduled three weeks later.

Poor to get LPG cylinders

Aiming to make the city pollution free, the government on Tuesday launched its ambitious ‘kerosene free Dilli’ scheme that will provide LPG gas cylinders and gas stoves to over 3.5 lakh poor people who have Antyodaya Anna Yojana, below poverty line and jhuggi ration cards.

It will provide relief to those who find it difficult to procure kerosene oil for cooking.
Chief minister Sheila Dikshit inaugurated the scheme by handing over gas connection papers and burners to 20 beneficiaries at a function organised at Delhi secretariat. A total of 200 gas connections were distributed on Tuesday.

The CM said all beneficiaries will get their LPG connections and filled-up gas cylinders by December.

Dikshit added that it is an unique effort by the government which will go a long way in overcoming the siphoning of kerosene under public distribution system by some dealers. It will also check the black marketing of kerosene, she added.

“We had been receiving complaints that people were not getting their prescribed quota of kerosene from the dealer. As a result, they had to buy it from the open market
at exorbitant rate,” said Dikshit.

“Cooking on a kerosene stoves was also affecting the eyes and lungs of women. Our kerosene-free scheme will overcome all difficulties and ensure a clean environment for women working in the kitchen,” Dikshit added.

The CM said the total cost of the programme is Rs 108.66 crore, of which Rs 22.75 crore is to be borne by the union government and Rs 85.91 crore by the city government.

Under the scheme, the city government is presenting a filled-up LPG cylinder, regulator, gas stove, suraksha tube and  LPG connection papers to the senior most female member of the family, having a BPL card.
Dikshit said the city government will spend Rs 3,049 per beneficiary. The beneficiaries were advised to make rational use of cooking gas and to get their cylinder filled by themselves.

Kerosene oil users having a ration card receive 12.5 litre oil every month at Rs 14.83 per litre. Food and supplies minister Haroon Yusuf told them to contact the nearest office of the food department to procure LPG connections.

Chief secretary P K Tripathi said the city government has meticulously planned the scheme and has ensured an effective implementation through proper coordination with all stake holders.

Natural gas prices dip up to 20 per cent on supply glut

Natural gas prices have dropped by up to 20 per cent in the spot market, bringing relief to Indian refiners, power and fertiliser producers, which are now dependent on imports for most of their requirement.
Industry experts say prices of liquefied natural gas (LNG) have been on a slide for the past four months because of increased supplies from some producers like Australia and Nigeria, and sluggish demand from major consumers like the US and Japan.

"LNG prices have come down considerably in the past quarter," said DM Desai, chief executive at Ahmedabad-based consulting firm Ethical Energy-Petrochem Strategies. "It is because of softening oil prices while the demand from the major gas consuming nations like Japan and US has remained stable."
Gail, the country's largest state-owned gas processing and distribution company, recently booked an LNG cargo at $13.50 per million metric British thermal units (mmBtu), against $17 per mmBtu it paid for the previous cargo. Similarly, Gujarat State Petroleum Corporation, the country's largest LNG trader, booked a cargo for delivery in October at $12 per mmbtu compared to $16 it paid for a cargo in June.
LNG accounts for close to a fourth of India's total natural gas consumption. The country imported close to 55 mmscmd of LNG in 2011-12. Experts say the drop in natural gas prices has come as a relief for Indian consumers, who have been paying more for the gas because of depleting production at home and a depreciating rupee. The price of compressed natural gas recently touched an all-time high of Rs 53 per kg in Gujarat, which accounts for a third of the country's total natural gas consumption. In Delhi and neighbouring cities, CNG prices have increased 25 per cent in just one year. While CNG now costs Rs 38.35 per kg in Delhi, it is priced at Rs 43.10 per kg in Noida, Greater Noida and Ghaziabad.
With supplies dwindling from Reliance Industries' KG-D6 basin on the east coast, most of the country's big oil refiners have become increasingly dependent on imported gas. RIL and Essar are now banking on spot LNG cargos to feed their refineries and power plants. Falling output from D6 has also affected city gas distribution companies, which have not received gas under the administered price mechanism from D6 for almost a year now. These companies are now rejoicing at cheaper imports.

Gas Natural Fenosa, GAIL Sign LNG Supply Deal, India

GAS NATURAL FENOSA of Spain said it has signed a deal to supply approximately 3 bcm of liquefied natural gas for three years to GAIL of India, equivalent to 10% of annual consumption in Spain.
The supply will begin next January.
The contract with Gail strengthens the position that GAS NATURAL FENOSA has in gas sales and marketing in the Pacific and is a significant step in the company’s strategy for growth and diversification in new markets with great potential. The LNG market in India is one of those with the best perspectives for development in the whole world in the coming years due to the growing energy needs of the Asian giant.
In addition to the supply agreement, the two companies have signed an industrial cooperation agreement in order to explore joint development of energy projects in India. GAS NATURAL FENOSA and Gail and will analyse opportunities for collaboration in gas distribution, wholesale and retail marketing and infrastructures, as well as projects abroad.
The Spanish multinational, thanks to this agreement, will be able to establish a framework for cooperation with the leading gas operator in India and to consolidate its presence in the final markets.
The agreement with Gail is another step in the growing internationalisation of the company. In the first half of 2012, the international activities of GAS NATURAL FENOSA represented 42.2% of EBITDA, compared to 34.4% in the same period of 2011.
A Multinational Leader in the Energy Sector
GAS NATURAL FENOSA is one of the leading multinational companies in the gas and electricity sector; it operates in 25 countries and has around 20 million customers and a 15.4 gigawatt power generation capacity.
It is the largest integrated gas and electricity company in Spain and Latin America, the leader in natural gas sales in the Iberian Peninsula and the biggest natural gas distributor in Latin America. With a fleet of 11 methane tankers, it is one of the largest operators of liquefied natural gas in the world and a company of reference in the Atlantic and Mediterranean basins, where it operates 30 bcm.
Gail, Reference Operator in India
In order to meet the growing appétite of Indian market, GAIL has been expanding its global presence to secure long term gas supplies. GAIL earlier signed a 20 year Sales and Purchase Agreement with Sabine Pass Liquefaction LLC, a unit of Cheniere Energy Partners, USA for supply of 3.5 million tonnes per year of LNG. GAIL has also executed the Gas Sales Purchase Agreement with Turkmengaz for 38 MMSCMD for 30 year supply through the TAPI pipeline.
Besides, GAIL has also set up a wholly- owned subsidiary company GAIL Global (Singapore) Pte. Ltd. in Singapore for sourcing LNG, and petrochemicals. GAIL has acquired 20% interest in Carrizo’s Eagle Ford Shale acreage position in USA.
GAIL owns and operates over 9500 Km of high pressure cross country natural gas pipeline network and is in the process of significantly increasing its pipeline network to reach every part of India. Within the next two to three years, GAIL will have a pan-India pipeline infrastructure spanning over 14,500 km.
GAIL (India) Ltd., is India’s principal Natural Gas Company with activities ranging from Gas Transmission and Marketing to Processing (for fractionating LPG, Propane, SBP Solvent and Pentane); transmission of Liquefied Petroleum Gas (LPG); production and marketing of Petrochemicals like HDPE and LLDPE and leasing bandwidth in Telecom sector. GAIL has extended its presence in Power, Liquefied Natural Gas (LNG) re-gasification, City Gas Distribution and Exploration & Production areas through equity and joint venture participations. GAIL registered a turnover of US$7.9 billion and profit after tax of US$708 million for the year 2011-12.

Govt may take action against Mukesh Ambani's Reliance Gas Transportation Infrastructure

The government is considering taking "appropriate administrative action" against billionaire Mukesh Ambani's privately owned RGTIL for delay in building four natural gas pipelines, Minister of State for Petroleum and Natural Gas R P N Singh said today.
Relogistics Infrastructure Ltd (Relog), a unit of Reliance Gas Transportation Infrastructure Ltd (RGTIL), had in 2007-08 won government authorisation to lay Kakinada-Basudebpur-Howrah pipeline, Kakinada-Chennai line, Chennai-Bangalore-Mangalore pipeline and Chennai-Tuticorin pipeline but physical work on these haven't started yet.
Relog cited uncertainty about availability of gas for not building the lines in the stipulated three years.
"Appropriate administrative action in respect of the gas pipelines of RGTIL is under consideration for non-submission of bank guarantee and non-completion of pipeline projects within the stipulated period," Singh said in a written reply to a question in the Lok Sabha here today.
Bank guarantees of RGTIL and its subsidiaries submitted at the time of winning authorisation for laying the pipelines have all expired and have not been renewed.
Singh, however, did not state what action the government could take.

Kochi getting ready for Natural Gas distribution

The first phase of the Regasified Liquified Natural Gas (RLNG) distribution network, the dream project of Kochi, will be dedicated to the Nation on September 10.
The 43-km pipeline network, built by GAIL India Ltd, stretches from Petronet RLNG's five million metric tonne LNG Terminal to the main industrial centres in the city, a press release here said.
Companies like FACT, BSES, TCC, Nitta Gelattin, HOCL and BPCL can now receive RLNG through pipelines and use it to reduce costs, becoming environment friendly, the release said.
In the next phase, the gas distribution project can cover city households ensuring year long cooking gas supply without disruption. The government would also be able to save a major part of the subsidy they give out on LPG cooking gas and utilize it for other productive purposes, it said.
Laying of the pipeline from Puthuvypin to Udyogamandal and from Udyogamandal to Ambalamugal has been completed.
GAIL successfully acquired land from the public to lay the pipeline for about six km in the first phase, it said.
The remaining land in the 43 km stretch was made available by different institutions or companies like Cochin Port Trust, International Container Transhipment Terminal, Indian Navy, Kerala State Electricity Board, Co-Operative Medical College Kalamassery, HMT, FACT, CCK-ROU, Kalamassery Municipality, Kinfra, Cochin Corporation and Smart City.
Work on the 505 km pipeline from Kochi to Mangalore will start soon and when completed, would benefit seven districts from Ernakulam to Kasargod. GAIL would start 26 SV stations (in 50 cent each) and five IP stations (in 1.25 acre each). This trunk Pipeline will facilitate city gas distribution in Kochi, Thrissur, Malappuram, Kozhikode, Kannur, the release said.
RLNG would be made available to NTPC project at Kayamkulam through pipelines along the seabed. The agreement with KSEB on this will be signed soon. Brahmapuram, Cheemeni projects can also look forward to using RLNG as fuel.
The project will lead to major economic growth of the state by creating new jobs and generating Rs 1,000 crore revenue to the state exchequer, the release said.

Charotar Gas gets conditional approval to continue operations

India’s first and only city gas distribution firm run on the lines of a cooperative has received conditional approval from the Petroleum and Natural Gas Regulatory Board (PGNRB) to continue operations, winning a reprieve two years after it was told to convert into a company or face closure.
Charotar Gas Sahakari Mandali Ltd (CGSML), a 13-year-old gas distributor based in the district of Anand known for the “white revolution” that turned India into the world’s largest milk producer, was founded in 1999 as a cooperative. In June 2010, CGSML was told by the regulator to seek registration under the Companies Act.
“CGSML had requested PNGRB for exemption from registering under the Companies Act. We have accepted their request and have issued terms and conditions in a letter dated 22 June for grant of authorization,” said an official at PNGRB, formed in 2007, who didn’t want to be named.
To promote transparency and accountability, PNGRB had told all city gas distribution companies to incorporate themselves as companies or face closure.
Getting registered as a company was almost an impossible task for Charotar Gas because it would have first had to wind up operations under the Gujarat Cooperative Societies Act, 1961, said an official at the cooperative who didn’t want to be named.
“This is very time consuming and complicated to implement for a functioning cooperative. We did try to go through this exercise but gave up as it was not a practical move,” he said.
The terms and conditions weren’t disclosed by the PNGRB official.
“The move to consider our case as special was expected and we welcome it. But we are reluctant about one or two conditions they have laid and would like them to reconsider. For instance, they want a credit letter of Rs.3 crore,” said CGSML managing director Yashvantbhai Patel. The matter will be presented before the cooperative’s board later this month.
The idea of a gas distribution run as a cooperative was born in 1998 when Mumbai-based businessman Sanjeev Nair, chairman of Interlink Petroleum Ltd, a BSE-listed oil and gas company, sought a Rs.15 crore loan from Charotar Cooperative Bank to build a gas pipeline from Bavla to Ahmedabad.
The gas for the project was to be sourced from a nearby Oil and Natural Gas Corp. Ltd (ONGC) field as per the project proposal.
The bank’s then chairman Chimanbhai Patel was excited by the idea. He wanted to extend the pipeline to Anand and floated the idea of forming a cooperative for distributing gas in Anand with the involvement of locals, said Yashvantbhai Patel, managing director of Charotar Gas.
The company’s revenue in the last fiscal was close to Rs.75 crore. Its single largest customer is Gujarat Cooperative Milk Marketing Federation, which markets dairy products under the brand Amul. It also supplies gas to households in a dozen villages—mainly the families of low-income agricultural workers toiling in tobacco and paddy fields—and small scale industries and institutions in Anand and Kheda districts.
“We make as little as 28 paise profit per cubic metre (of gas) for household customers,” said Yashvantbhai Patel.
The focus is on volumes. It adds at least 250 customers every month.
“Charotar Gas’ success story has been scripted by using costly imported LNG and still managing to rake in handsome money. Other CGDs (city gas distributors) in the country should try and follow its success formula,” said L. Mansingh, the first chairman of PNGRB, whose term ended in October 2011.
About 40km from Anand is another unique CGD in the city of Vadodara. It is the oldest CGD running on natural gas for over 40 years now and covers 72,000 city households.
The venture, Vadodara City Gas Distribution Project, run by the local civic body, also sought exemption from having to register as a company, but its request hasn’t been accepted, said a government official close to the development who didn’t want to be named.
GAIL (India) Ltd had received central government approval for city gas distribution in Vadodara prior to the PGNRB coming to existence. The Vadodara civic body and GAIL are in the process of tying up to start a new city gas distribution firm.
“The civic body venture will be merged into the new entity and it will hold 24% stake and GAIL will have 26%, said S.K. Naik, project engineer (Gas), Vadodara Municipal Corporation. The balance will go to financial institutions.
The new joint venture (JV) plans to cover 450,000 households in Vadodara and 2,000 commercial customers by investing Rs.400 crore to strengthen and expand the existing CGD network and create additional infrastructure.
“Once they submit the details of the JV after its incorporation, the case will be further processed,” said the same PNGRB official quoted above.

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.

Gas regulator may scrap 3rd round of distribution auction

The Petroleum and Natural Gas Regulatory Board (PNGRB) may cancel the third round of auctioning of city gas distribution rights due to the irrational bids it received. Last year, the board had scrapped the fourth round soon after the announcement citing a similar reason.
The third round of bidding, held in July 2010, had attracted 51 bids from 26 companies, including the Indian Oil Corporation (IOC), Adani Energy, Gujarat State Petroleum Corp, Engineers India and GAIL Gas.
“Last year, IOC, GAIL and IGL had alleged that some companies had deliberately suppressed key input costs to keep their overall capital costs competitive. PNGRB is acting on it,” said a company executive of one of the bidders on condition of anonymity.
The areas included in the third round are Asansol-Durgapur, Gujrat's Bhavnagar and Jamnagar districts, Kutch (east and west), Ludhiana and Jalandhar (Punjab).
Ludhiana had received the largest number of bids at 16, followed by Jalandhar at 12. While Kutch (east) had received eight bids, Asansol-Durgapur received seven. Kutch (west) and Jamnagar district had received four and two bids, respectively.
The fourth round of bidding was initiated in October 2010 in which eight cities had been offered. However, the regulator cancelled this round last November on allegations of irregularities. A senior PNGRB official said, "The board is looking at all options and will take a view on it soon. We are contemplating on what to do with it as it is not giving us the kind of result which appears realistic.”
In an attempt to score more in the bidding process, bidders had indicated low figures towards network rates and compression charge. There are four bidding elements — network rate, inch kilometres of steel pipelines, number of domestic connections in the first five years and compression charges from six to 25 years. According to the parameters, the maximum score for network rate is 40, 10 for compression charge, 30 for numbers of domestic connection and 20 for inch kilometre of steel pipelines.
“The tariff projected by some of the bidders in the third round is too negligible; one paisa per million British thermal unit to recover the cost of laying the network. This is a violation of the PNGRB Act, 2006,” a bidder told Business Standard.
Also, bidders are said to have distorted the compression charge upward in some years of the project life. For this, there may not be any takers according the current market realities.
N Ravichandran, senior vice-president of ICRA Ltd said, “If the third round is scrapped, it will be good for the industry as several companies had, due to the competition, submitted aggressive bids. This would not be sustainable for the companies once they start the projects and would end up making losses. Also, in the long run, the customers would suffer.”
He said PNGRB, in consultation with the industry, will be coming up with new bidding parameters for next city gas distribution rounds.
Under the new bidding parameters, the board, say sources, would prepare its own detailed feasibility report for the town on offer. Earlier, each company participating in the bidding prepared its own report.

ONGC to enter LPG gas distribution business

In an attempt to de-risk its exploration business, state-owned Oil and Natural Gas Corp (ONGC) plans to foray into gas retailing business through a new subsidiary -- ONGC Gas Ltd, reports PTI.
ONGC would use the new subsidiary for its foray into city gas distribution business and sale of imported liquefied natural gas (LNG), company officials said here.

The new unit may be aimed at making amends to the company letting go lucrative opportunities to enter gas business. Though being the country's largest natural gas producer at around 55 million cubic meters per day, ONGC has virtually no presence in marketing of the environment friendly fuel.
All of its gas is marketed by state-owned GAIL India Ltd. It had let go marketing rights on gas from even newer fields as also of LNG imported by Petronet LNG Ltd.
ONGC holds 12.5% stake in Petronet LNG, the nation's largest liquefied natural gas importer. This is the same as the stake held by GAIL and refiners Indian Oil Corp and Bharat Petroleum Corp. 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 were shelved. But under Sudhir Vasudeva, ONGC is renewing its focus on natural gas, whose share in India's primary energy basket will almost double to 20% by 2025.
ONGC is part of a consortium that is vying for British energy group BG's stake in Gujarat Gas, which retails CNG to automobiles and piped cooking gas to households in cities like Ahmedabad and Surat in Gujarat.
Officials said ONGC Gas would bid for city gas distribution (CGD) licences and explore possibility of setting up a LNG import facility. Also, it may import LNG at one of the terminals in the country and market the fuel to consumers directly.
ONGC believes that the nation's dependency on imported LNG, now estimated at 30%, would rise as production of older domestic fields falls.
ONGC had few months back appointed AT Kearney to chart out its city gas foray. AT Kearney suggested setting up of ONGC Gas for bidding for licence to retail CNG to automobiles and piped cooking gas to households, they said.
Gas business would help the firm de-risk its exploration business with oil and gas output from majority of its old and ageing existing field slated to hit a decline soon.

OIL in talks to buy 51 pc stake in Reliance Gas Transportation

State-owned Oil India Ltd today said it is in talks to buy 51 per cent in billionaire Mukesh Ambani's privately owned firm Reliance Gas Transportation Infrastructure Ltd (RGTIL).

"We have expressed interest for buying 51 per cent stake in RGTIL," Oil India Ltd (OIL) Director (Finance) T K Ananth Kumar told reporters here.

OIL is one of the 11 firms -- five Indian and six foreign -- that have expressed interest to buy stake in RGTIL.

State-owned GAIL India Ltd and NYSE-listed energy major Enbridge are among the firms interested in buying stake.

"We have submitted a separate EoI," he said. The stake sale is being managed by JPMorgan, Citi and SBI Caps.

Stating that OIL has ambitions to diversify into gas sector, he said the a financial bid would be made only after proper due diligence.

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 Mukesh Ambani, chairman of RIL.

It was said at that time that 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.

RGTIL today operates a 1,396-km East-West gas pipeline. The 80 million standard cubic meters per day capacity, 48-inch pipeline from Kakinada in Andhra Pradesh to Bharuch in Gujarat ferries natural gas from KG-D6 fields.

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.

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.

Ananth Kumar said OIL was also in talks to buy a stake in Chesapeake Energy Corp's Mississippi Lime unconventional oil assets in Oklahoma, US.

The Mississippi Lime play in northern Oklahoma is a conventional -- if somewhat complex -- carbonate reservoir that is rich in oil and natural gas liquids (NGL) like butane.

Chesapeake Energy is looking at stake sale in its unconventional liquid-rich Mississippi Lime play covering 2 million acres.