Friday, December 30, 2011

Important Initiatives in Oil and Gas Sector

 Important Initiatives in Oil and Gas Sector

Year End Review - 2011

           


 
The Year 2011 has been marked by significant developments in the Oil and Gas sector as the Ministry of Petroleum and Natural Gas took several important initiatives for the growth of the sector. Some of these include approvals for induction of new partners in upstream-projects, commissioning Bina Refinery, bidding for NELP-IX blocks and acquisition of 25% equity stake by OVL in Satpayev block in Kazakhstan.  The prices of sensitive petroleum products i.e. Diesel, domestic LPG and PDS Kerosene were maintained at affordable levels by substantial duty cuts,  Government’s cash assistance   to OMCs and contribution of upstream PSUs.

Exploration and production

To give a boost to domestic exploration & production efforts, bidding process for exploration blocks under Ninth Round of New exploration Licensing Policy (NELP-IX) was completed with a number of Indian and Foreign oil companies bidding for these blocks. The decision on award of blocks would be taken soon.  The government also approved the induction of BP  as RIL’s partner in their fields and the strategic sale by Cairn PLC, UK of its stakes in Cairn India Ltd to Vedanta Resources PLC. These measures are expected to accelerate the E& P activities  in the country.

Augmenting supply of natural gas

Besides efforts to increase domestic gas production, discussions were further held in the direction to implement proposed cross border Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline project.  The Iran-Pakistan-India (IPI) pipeline project is also under consideration/discussion for sourcing natural gas. Liquefied Natural Gas(LNG) imports have picked up to meet domestic needs. Along with other projects, LNG import terminal is being built at Kochi which is progressing well. India is increasing its current RLNG regasification capacity from the current 13 million tons per annum to well over 30 million tons, by 2015. The Government is also endeavouring to increase the pipeline infrastructure in the country especially in southern and eastern regions of the country. To carry gas across the length and breadth of India, 8,000 kms of gas pipelines are being laid while another 5,000 kms are under the bidding process. The City Gas Distribution projects to supply Piped Natural Gas (PNG) and Compressed Natural Gas (CNG) are also being encouraged to expand availability of cleaner fuels.

Oil diplomacy in higher gear

In order to achieve the objective of oil security, the Ministry of Petroleum and Natural Gas engaged several countries/for a in bilateral/multi-lateral talks.  These include attending/holding international meets like International Energy Forum meet at Riyadh, ASEAN Energy Ministers Summit at Brunei, WPC at Doha,  India-Africa Hydrocarbon  Conference in Delhi and 4th Asian Energy Ministerial Roundtable at Kuwait. Indian delegations also had bilateral talks with various oil rich countries including   Saudi Arabia, Canada, Iran, Qatar, UAE, Nigeria, Oman, Kazakhstan, Bahrain, Turkmenistan, Indonesia, etc. to enhance cooperation in hydrocarbon sector. These engagements create conducive environment and lead specific projects and activities for mutual benefits.

Among major successes in the oil diplomacy during the year include signing of an agreement between national oil company of Kazakhstan   and ONGC Videsh Ltd. (OVL), for 25% participating interest in  Satpayev field. The Indian proposal for formulating a joint strategy to maintain stability in global oil prices  endorsed by 60 odd countries at the International Energy Forum (IEF) meet in Mexico, was re-enforced at the Extra-ordinary Ministerial IEF meeting at Riyadh.

Augmenting Surplus refining capacity for value addition

The refining capacity in the country has been augmented to about 194 Million Metric Tonnes Per Annum (MMTPA), with the completion of commissioning of  the refinery project at Bina, (6 MMPPA). The refining capacity is well above the annual demand of about 142MMTPA. This is significant for a heavily import-dependent country like India as domestic value addition helps earn foreign exchange by way of exports. Oil sector maintained its status of the highest export revenue earner amongst mercantile products with the country exporting about 59 MMTPA finished petroleum products valued at US$ 43 billion during 2010-11. The momentum has been sustained during current fiscal with an exports of about 42 MMT in the period April-November 2011 valued at US $ 38 billion. Further,  other refinery projects both grass-root and expansion are underway so as to increase the refining capacity to 238MMTPA by 2013.

Expanding infrastructure for LPG to rural households

To provide clean cooking fuel in rural areas and to achieve 75% population coverage with domestic LPG a number of LPG distributorships are being set up transparently under Rajeev Gandhi Grameen LPG Vitrak Yojna (RGGLVY). Launched in March 2010,  Oil Marketing Companies (OMCs)  have so far advertised over 3700 locations in rural areas to open LPG agencies under this scheme.  Nearly, 800  RGGLVs have already been commissioned.  This measure will greatly improve the cooking conditions in the kitchens of rural house-holds.  The scheme also provides new employment opportunities for the rural population leading to overall economic prosperity.  Youth in the age group of 21-45 years are being appointed as distributors under the scheme.

Equitable burden-sharing marks pricing reforms

As part of major pricing reforms, prices of Petrol  were reduced twice by OMCs in the second half of the year. The OMCs are revising petrol prices since its deregulation on 26.6.2010. The Government effected significant central duty reductions on diesel, crude oil and petrol products in June in order to keep prices at affordable level in case of diesel, domestic LPG and PDS Kerosene. Despite this,  OMCs are expected to incur under-recoveries of over 1,30,000 crore during the current fiscal year. Thus consumers have been greatly insulated from the impact of high global oil prices which have ruled at about US $ 110/bbl this fiscal against US$ 84.09/bbl in 2010-11.

Promoting Ethanol blending with petrol

Petroleum Ministry continued to pursue implementation by the Ethanol Blended Petrol (EBP) programme during the year. Though faced with shortage of supply by ethanol manufacturers, the OMCs still managed to procure 36.19crore litres of ethanol during the supply cycle October, 2010 to September 2011 for blending with petrol at the level of 5 % against 55.87 crore litres committed by them. Besides non-supply of sufficient quantity  by ethanol manufacturers, the programme also faced the challenge of state specific issues in some states. The OMCs further issued tender notice to seek supply of 101 crore litres   of ethanol in the annual season commencing October 2011. However, the response by the ethanol manufacturers accounts for only about 60% ethanol needed for 5%  EBP in the notified States/UTs.

Anti - Adulteration Drive intensified

The drive to check adulteration of petroleum products and prevent its misuse, the Ministry directed OMCs to intensify their drive against the malpractices in  distribution. The support of OMCs was offered to State Governments to introduce vehicles tracking system for transportation of PDS Kerosene by the state Government administration. OMCs also introduced transparency portal carrying information about PDS Kerosene dispatches from OMC depots and about the domestic LPG Cylinders supplied by distributors. These information now available in public domain could help the consumers and the discerning public so that any misuse is reported to appropriate authorities for strict action. The OMC have carried out intensive inspections across their distribution networks to ensure better products/services to the consumers.

         The year 2011 has thus been very significant in terms of taking the sector ahead in exploration and production, effective harnessing of oil diplomacy for oil security, increasing refining capacity, ensuring affordable prices of sensitive petroleum products, intensive drive to ensure availability of better products & services.

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