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.

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.

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.

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.

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.

 

Three Reliance Industries promoter group companies RPTL, RGTIL, RUPPL merged with holding firm RIHPL

In a complex restructuring move, three entities owned by the promoter group of Reliance Industries have been merged with another group affiliate in an exercise that resulted in recognizing an impairment of about Rs 15,800 crore.
The three entities - Reliance Ports and Terminals ( RPTL), Reliance Gas Transportation Infrastructure (RGTIL) and Reliance Utilities and Power (RUPPL) - will be merged with Reliance Industries Holding ( RIHPL), a company that is, in turn, owned by the promoters of RIL, Crisil said in a statement reaffirming the credit rating.
ET NOW, this newspaper's sister concern, had first reported the restructuring plan on March 21, this year. The restructuring involves demerger of investments (including impaired investments) to reduce cross holdings and loans and advances among group companies, transfer of businesses, and changes in redemption terms of some preference shares.
All three companies will now have a common owner. The standalone net worth of the demerging companies are expected to decline. However, the aggregate external debt and cash flows for the three companies will not change materially as a result of the restructuring, Crisil said.
RIHPL's 100% ownership in PTL, RUPPL and RGTIL is in addition to the economic interest it holds in nearly 370 million RIL shares, either directly or indirectly.

A R 65 nightmare: CNG to kiss petrol prices soon?

Here's some more bad news in store for gas consumers. CNG prices in Ahmedabad, which crossed Rs50 per kg recently, are projected to rise sharply and touch Rs60 - Rs65 a kg by March next year. The prices of piped natural gas can also be expected to go northwards over the coming months.
Petronet LNG Limited (PLL), the country's biggest gas importer, has projected a 26% rise in the price at which it supplies gas to Gujarat State Petroleum Corporation from April 2012 to March 2013.

"PLL's projections show an increase of around two per cent every month in the gas supply price," said a senior official.

From Rs40 per kg in June 2011, CNG price in Ahmedabad touched Rs45 per kg in November, and crossed Rs50 a kg in April 2012.

DNA was the first to write in June 2011 that CNG price could touch Rs50 in a year. The price was almost unthinkable at the time, and even industry experts were surprised by the manner in which prices had gone up.

Interestingly, PLL had projected 22% increase in gas price for GSPC in 2011-12, while the actual increase was 27%.

And if PLL's price projections for the current year are anything to go by, CNG could cross Rs60 and even touch Rs65 per kg over a year or so.

"CNG price of Rs60 or even higher is a very distinct possibility. These are testing times, and no company can absorb this kind of hike. The only option is to pass on the hike to consumers," said an official of a city gas distribution company. However, officials warn that the rise could be even steeper if the rupee depreciated further vis-à-vis the US dollar from current levels and/or if gas prices went up. "These are factors beyond our control. All we can do is hope that gas prices cool down in international markets," the official said.

State energy minister Saurabh Patel blamed Centre's faulty policies for the spike in gas prices in Gujarat.

"This is a glaring example of Centre's discriminatory attitude towards Gujarat. Both Delhi and Mumbai get cheaper domestic gas, while Gujarat is entirely dependent on expensive R-LNG (re-gasified liquefied natural gas). The result is that Gujaratis have to pay much more for CNG than consumers in Delhi and Mumbai," Patel said. Spot LNG prices are currently in the region of $16 — 18 per Million Metric British Thermal Units (MMBTU) as against domestic gas which is priced at $4.20 — 5.75 per MMBTU. The minister claimed that CNG prices in Gujarat could come down by as much as 20 - 30% if the state was allotted domestic gas.

A CGD operator echoed the minister's view, but also pointed out the high rate of VAT on CNG in Gujarat. "Gujarat government levies 15% VAT on CNG, which is the highest in the country. CNG prices in the state can fall sharply if the tax is cut," he said.

The CNG selling price of Adani Gas, which also depends on GSPC for its gas requirements, is also seen in the range of Rs60 - 65 a kg in a year.

PNGRB slashes network tariff on piped cooking gas, CNG charged by IGL

NEW DELHI: Oil regulator PNGRB has slashed the network tariff and CNG compression charge IGL billed on sale of piped cooking gas to households and CNG to automobiles in the national capital, by over 60 per cent and asked the firm to refund to consumers the excess amount charged since 2008.
The Petroleum and Natural Gas Regulatory Board (PNGRB) in an April 9 order fixed IGL's pipeline network tariff at Rs 38.58 per million British thermal unit as against Rs 104.05 per mmBtu proposed by the company.

It also cut compression charge for CNG to Rs 2.75 per kg from Rs 6.66 per kg submitted by IGL.
PNGRB said the new charges would be applicable from April 1, 2008.
"The Network Tariff and the Compression Charge for CNG in respect of the Delhi city gas distribution network of IGL shall be Rs 38.58 per mmBtu and Rs 2.75 per kg respectively with effect from April 1, 2008," it said.
IGL, it said, shall recover the Network Tariff and Compression Charge for CNG separately through an invoice without any premium or discount on a non-discriminatory basis.
"... the difference between the Network Tariff and Compression Charge for CNG submitted by IGL and that determined by the Board ... would be reflected through appropriate reduction in selling prices from the date of issuance of this order (April 9)," PNGRB said.
The Board said the modalities and timeframe for refund of differential Network Tariff and the Compression Charge for CNG for the period from April 1, 2008, till the date of issuance of the order shall be decided and advised subsequently.

Bhagyanagar gears up for tariff order

Bhagyanagar Gas Limited (BGL), which is developing CNG and city gas distribution network for Hyderabad and Vijayawada, is expecting tariff order from the Petroleum and Natural Gas Regulatory Board (PNGRB) soon.
“We expect the tariff order to come shortly as the PNGRB had kickstarted the process of fixing tariff for city gas and CNG with Delhi’s Indraprastha Gas yesterday,” a senior official of BGL told Business Standard.
BGL is a joint venture between Hindustan Petroleum Corporation Limited (HPCL) and GAIL India Limited. Andhra Pradesh Industrial Infrastructure Corporation (APIIC) also holds 5 per cent equity in the company for it has provided land to develop the infrastructure.
Set up in the year 2003, BGL first commenced CNG distribution operations on a small scale in 2005 from Vijayawada and later expanded the same to Hyderabad.
The regulator has to fix the tariff as the company had got permission for supply and distribution of CNG and piped gas for both the cities before the PNGRB was constituted. In the case of Kakinada, the company won the city gas distribution project, where the tariff was decided at the time of awarding it.
The company is receiving about 0.045 mmscmd of natural gas from Reliance Industries Limited (RIL), and this is mostly used for CNG requirements of road transport corporation buses and other private vehicles. It recently launched piped gas distribution on a pilot scale to a colony in Hyderabad.
The company estimates a potential demand for 1 mmscmd of natural gas to meet the CNG needs of vehicles and buses in Hyderabad apart from 0.125 mmscmd for domestic gas in the initial phase.
On the possibility of any sharp cut in the rates proposed by BGL, the official, who did not want to be named, said he did not expect such a thing as what they had asked for or currently were being charged was very reasonable compared with that of Indraprastha. The company had submitted its proposals to PNGRB almost one-and-a-half years ago followed by several rounds of negotiations with the regulator, according to the official.
BGL had drawn up the CNG and piped gas distribution network project at an estimated cost of Rs 4,000 crore covering Hyderabad, Vijayawada and Kakinada cities. Of this, close to 90 per cent of the investment is expected to be required for developing the network in the state capital. However, the financial closure for the project is still pending. In addition to the tariff order, the regulator also prescribes a 5-year time line to complete the entire project.
“We hope to conclude the financial closure in the next four months. Discussions with bankers are on,” said the official. Though there was a proposal to rope in private players into the project, a final decision had not been yet taken, sources said. The company is in the process of finalising the contracts for laying the gas distribution network in Hyderabad.
BGL was also planning to bid for city gas distribution projects for districts of Rangareddy, Medak, Khammam and Nalgonda. However, the regulator had cancelled the process ahead of its commencement as it wanted to take a re-look at the framework for awarding projects in the country.

GSPC Gas hikes CNG, PNG prices

There is no end to bad news for consumers. A day after milk prices went up by up to Rs2 a litre, the GSPC Gas on Tuesday announced a sharp hike of almost Rs5 per kg in CNG prices. This comes just ten days after Adani Gas too had hiked CNG prices.
Officials said that GSPC Gas revised CNG prices from the current Rs45.25 per kg to Rs50.20, i.e. by Rs4.95 per kg, an increase of almost 11%.
The GSPC subsidiary also hiked PNG prices for domestic consumers from Rs16.90 per standard cubic metre (scm) to Rs20.91 per scm. The prices are inclusive of all taxes and duties. The hike would come into effect from April 11.
Adani Gas had revised CNG prices from Rs45.50 per kg to Rs50.20 with effect from April 1, and it was just a matter of time before GSPC Gas too followed suit.
GSPC Gas cited its dependence entirely on imported gas in view of non-allocation of cheaper domestic gas by the Central government as the reason for the price hike. The company said that the situation had further compounded of late, due to increase in spot LNG prices in international markets and due to depreciation of the rupee vis-à-vis the US dollar.
"The hike was necessitated to cover the mounting losses," GSPC Gas said.
Following the revision, both Adani Gas and GSPC Gas now sell CNG at Rs50.20 per kg.However, GSPC Gas' domestic PNG is priced significantly lower than that of Adani Gas. Adani Gas sells domestic PNG at Rs24.50 per scm excluding of VAT, while GSPC Gas has revised PNG price to Rs20.91, which includes VAT and other levies.
Interestingly, Gujarat Gas Company, which operates city gas distribution network in south Gujarat, sells CNG at Rs44.95 per kg, and PNG at around Rs19 per scm.

5 reasons why IGL shares tanked 40%

Shares in gas utilities firm Indraprastha Gas (IGL) plunged 33.7% to end at Rs 229.80 on the Bombay Stock Exchange. In contrast, the Sensex gained 22 points to 17,244. IGL stocks closed off the day's low. In early trade, shares of the company had touched a low of Rs 170.

The sharp fall was over a government regulator's directive to cut gas tariffs retrospectively from April 2008. IGL has approached the Delhi High Court against the regulator’s order, the company confirmed.

"IGL has approached today Delhi high court, where we have challenged the constitutionality and legality of the powers of the PNGRB (Petroleum and Natural Gas Regulatory Board) to fix the tariff," Managing Director M Ravindran said.

Here are five reasons why the stock tanked.


1) Government regulator Petroleum and Natural Gas Regulatory Board has ordered Indraprastha Gas Ltd (IGL) to cut tariff by around 60%. The new tariff will be applicable on retrospective basis from April 2008. This is the first time the regulator has determined tariff for any City Gas Distribution player.

"It is not a retrospective order. This was on the cards from the beginning. The tariff determination for the network is the statutory responsibility of the regulator for which the regulator has notified the regulations in March 2008. So from that day, the tariff determination as provided in the regulation takes hold," L Mansingh, ex-chairman of PNGRB told NDTV Profit.

 2) Impact on financials: The total refund on account of the retrospective nature of the order could be Rs 900-1,200 crore, which is 20-25% of current market capitalization, Citigroup said. The potential downside is to the tune of 45-65% to earnings before interest, tax, depreciation and amortization. IGL will struggle to make even normative returns on the capital, Citi noted.

3) The regulator wants IGL to return the excess tariff charged till now. However, it has not yet provided a framework to return the excess tariff charged.
"This entire business of CNG and PNG is a retail business, which is a cash and carry business. There are no identifiable customers so retrospective refund is not possible. This the basis on which IGL has gone to High court," Ravindran said.



4) Tariff order also requires selling prices to be reduced immediately.

5) The selling price for gas includes cost of gas, network tariff, compression charge and marketing margin. The regulator has determined the 'network tariff' & 'compression charge.' For now, marketing margins remains a key variable for earnings as margins are not regulated currently. So, IGL has the option to increase marketing margins.

HSBC has downgraded the stock to ‘underweight’ and cut the target price to Rs 150 per share from Rs 366 per share. The company can make up for lower tariff by higher marketing margin, but it may be short-lived.

"Investors across the globe find it difficult to predict at what time government will come into the picture in state run companies...  How do you believe in India if they keep on doing such things from retrospective effect," Deven Choksey, MD, KR Choksey told NDTV Profit.

Other government firms that have significant stake in IGL also saw selling pressure. Oil marketing firm BPCL, which owns 22.5% stake in IGL, declined 2%. Another gas distributor GAIL India Limited that owns 22.5% stake in IGL ended 1.8% lower.

"Such a drastic reduction in tariffs for IGL, apart from raising concerns for the company, will also likely raise concerns for possible tariff cuts for networks where tariffs are not yet determined," Nomura said in a note to clients.

Pipeline firm Gujarat State Petronet and gas distribution firm Gujarat Gas Company may soon get tariff revision orders from the regulator, sources told NDTV Profit. Natural gas importer Petronet LNG may also come under the purview of the gas regulator.

The regulator will also decide on the marketing margin that can be charged by any gas marketing entity. Until now, the margins have been agreed on between the buyers and the sellers.

Sources said that the regulator has asked for data regarding marketing margins from all companies though it is yet to decide on a cap on marketing margins.

Odisha, GAIL to sign pact for Rs 5,000-cr pipeline soon

he joint venture (JV) agreement to be signed between the Odisha government and GAIL India Ltd for a Rs 5,000-crore natural gas pipeline is set to be finalized soon. The pipeline that will stretch from Surat (Gujarat) to Paradip will pass through two other non-major ports-Dhamara and Gopalpur and also some major towns like Angul and Sambalpur.
“We have sought the views of relevant departments and state agencies like Industrial Infrastructure Development Corporation of Orissa (Idco) and Industrial Promotion and Investment Corporation of Orissa Ltd (Ipicol) on the draft JV agreement submitted by GAIL. The state government has requested GAIL to make some changes in alignment to ensure that the pipeline passes through the KBK (Kalahandi, Bolangir and Koraput) region,” said an industry department source.
“GAIL has got the approval of gas regulator Petroleum & Natural Gas Regulatory Board (PGNRB) for the Surat-Paradip pipeline. GAIL was looking to have right of way for the pipeline but we have suggested it to acquire land for the purpose. The estimates for land acquisition are yet to be made,” the official added.
The Surat-Paradip pipeline will cover a distance of 400 km in Orissa. In addition to this pipeline, the 1,100-km Kakinada-Howrah pipeline which is under construction, is set to cover 434 km in the state.
GAIL has evinced interest in setting up city gas distribution (CGD) network in Odisha. Nine urban centres- Bhubaneswar, Khurda, Balasore, Kamakhyanagar, Rourkela, Anandpur, Jajpur, Bhadrak and Baripada have been identified for building CGD network in the state.
PNGRB which had earlier given a detailed presentation on potential for development of CGD infrastructure in Odisha had urged the state government to map geographical areas for developing such infrastructure. It had also called upon the state government to mandate use of compressed natural gas (CNG) in all commercial vehicles after setting up of CNG stations. Besides, the regulator had also asked the state government to waive sales tax on CNG.
The regulator expected the city gas distribution network to be a reality in the state by 2014. Meanwhile, GAIL is also interested to build an LNG (liquefied natural gas) terminal in the state at an investment of Rs 4,500 crore. The company had identified the ports of Paradip, Dhamara and Gopalpur as potential locations for establishment of the terminal. Indian Oil Corporation Ltd (IOCL) had recently inked a Memorandum of Understanding (MoU) with Dhamara Port Company Ltd (DPCL) for developing an LNG terminal inside the port area at a cost of Rs 10,000 crore. The terminal willhave a total capacity of 15 million tonnes per annum.