RIL RNRL Gas Dispute

PMS Prasad: we'll make an effort to reach out to RNRL

2010-05-21T01:25:00.000-07:00

RIL executive director PMS Prasad, a long-serving hand since the late 1980s, has been the company’s public face all through the gas battle — whether at Court Room No 1 at the Supreme Court, or the corridors of Shastri Bhavan that houses the petroleum ministry. Prasad was present on Friday too as the drama was about to be capped in the Supreme Court. ET caught up with him immediately after the judgement

What is it that came to your mind when the judgement was announced?

Relief! That it’s all over.

Who was the first to congratulate you after the judgement?

My boss Mukesh Ambani. He said it was a good job done and we need to get back to work. I also got a call from Mrs Ambani, who said we have to move on to the next generation of value creation.

How is Monday 9 am going to be different?

It’s going to be a different day. We are relieved of the tension. We have to get down to business and begin negotiations with RNRL.

Is this the best judgement?

Under the given circumstances, one could not hope for a better judgement.

How do you plan to go about negotiating the agreement with RNRL?

We have to negotiate a fresh gas sale and purchase agreement, which has to be bound by the broad parameters laid down by the court. Any fresh gas sales purchase agreement will have to uphold the price approved by the government, honour the utilisation policy of the government and various empowered Group of Ministers’ (eGoM) decisions with regard to utilisation.

What are the parameters that you will need to thrash out with RNRL?

The issues will include other parameters of GSPA like liability, penalty, alternative arrangements for fuel, the quantity of gas, quality of gas, etc. We have already concluded GSPA with several consumers and this GSPA will have to be similar to those.

Did the court mention the family MoU?

Yes. Although the court held the production-sharing contract was supreme, it directed RIL & RNRL to renegotiate in the context of the existing MoU; more like the MoU being a backgrounder under which we could renegotiate. But at all times, it is the supremacy of the PSC and the government decision that have to be kept in mind.

How long will you have to reach that agreement — do you have a timeframe?

We have to go back to the Mumbai HC within six weeks and then if we can mutually agree to a GSPA, it will need to be verified and approved by the government.

Are you saying RNRL & RIL can possibly be business partners where RIL is the gas seller and RNRL the buyer?

Yes! There is every possibility that we will work as partners and we will make a genuine effort to reach out and settle this GSPA in accordance with the court order and government law.

So, what is clear is that you are willing to provide gas at $4.2 mmBtu if the government approves the contract.
Yes, that is the price we will start negotiations at.

What are the key takeaways of today’s verdict?

It is clear that we have to follow all government policies and eGoM decisions and the PSC is the basis for all contracts. Secondly, the court order has also made it clear that the government has the right to determine prices and allocate the gas as per national interests. It has in a way only reaffirmed what the government has been saying. Thirdly, by directing us to renegotiate, but referring to the family MoU, the court has asked both RIL and RNRL to initiate talks and take action within six weeks.

How do you think this order will be received by investors, particularly global oil majors?

We expect the government to come out with a clear policy, which will state all that the verdict has said so that investors have complete confidence in consistency of policies. If companies like Exxon, Chevron and Shell can go to countries like Nigeria or Venezuela where there is so much political uncertainty, there is no reason why investors should not come to India.

Any regrets?

Yes. Too much time was wasted. There is not a single decision that the government has taken in the last seven months. And institutions like the Director General of Hydrocarbons, the petroleum ministry and even the CAG have suffered a huge reputation damage. And as for the advertisements in the newspapers where it was said that the petroleum minister was in RIL pockets.(laughs) I constantly looked for him but didn’t find him. We need to get back to business, value creation and positive thinking.

Source:http://news-views.in/pms-prasad-well-make-an-effort-to-reach-out-to-rnrl/

Ambani Gas Row: Government emerges triumphant!

2010-05-07T06:56:00.002-07:00

Two judges of a three-member bench delivered separate verdicts on the ongoing Ambani gas row between Mukesh Ambani's Reliance Industries and younger brother Anil's Reliance Natural Resources. The case involves terms of a deal under which Reliance Industries was to supply Anil Ambani's Reliance Natural with 28 million standard cubic metres a day (mmscmd) of gas for 17 years at a rate below the government price.

Reliance Industries CMD, Mukesh Ambani had argued the private deal cannot take precedence over government policy, which determines who can receive gas and at what price.

RNRL’s Anil Ambani, who claimed otherwise, rolled out a series of front-page advertisements in major newspapers accusing the government of taking the side of Reliance Industries.

Agreeing with RIL’s argument, the Chief Justice of India issued a final verdict that said a memorandum of understanding between the two brothers signed in 2005 is not binding on RIL, a government contract over-rides all private agreements. SC has asked both brothers to sit down and re-negotiate the gas supply master agreement (GSMA) and then come back to the Court in 6 weeks. The verdict further said that gas is a national asset and belongs to the government till delivered to the consumer. The court said it will give its direction in 8 weeks.

The verdict means that the re-negotiation has to take place within the ambit of the government’s policy. Further the judgement adds that the government regulation must dictate the renegotiation plan and RIL and RNRL should renegotiate under government rules.

Minutes after the Supreme Court declared the verdict in favour of RIL, in the Ambani Gas Row, Oil Minister Murli Deora welcomed the move and called it a vindication of the Govt's stand. "The Govt is satisfied with the verdict. The Govt has the power to decide the price of gas and the power to allocate."

Oil Secy S Sundareshan added, "Right from the beginning, the Ministry has been saying that gas is the property of the nation, and we believe the court has upheld the terms of the Production Sharing Contract."

"Now there is complete clarity on gas policy and the decision of the Bombay High Court has been quashed. We will continue to regulate gas pricing and policy in future." However, he also said that he was unaware of what has to be renegotiated in the case.

Source:http://reliance-news.blogspot.com/2010/05/ambani-gas-row-government-emerges.html

Mukesh Ambani’s points were in line with Supreme Court verdict

2010-05-07T06:56:00.001-07:00

India's top court has given a unanimous verdict today on the Ambani gas row upholding the government’s right to determine gas-pricing. The Supreme Court had finally given a judgment on the gas-pricing dispute between the Ambani brothers that has raised concerns over the government policy on gas pricing for India’s upcoming energy based economy and rattled investors.

The verdict delivered by Judge Sathasivan and supported by all others with Reddy disagreeing only on one minor point. The case in the Supreme Court was heard by a three-judge bench. Two of the judges have delivered separate verdicts and majority opinion prevailed. This judgment is based on the basic fact the gas is a public good and belongs to the government and its people.

Mukesh Amabani’s point that he could not go against the government’s Production Sharing Contract has been re-iterated by the government. As an extension of the judgment Anil and Mukesh Ambani have been given six weeks to renegotiate the contract that forces RIL to sell gas to RNRL. The judge said that a government contract over-rides all private agreements and the memorandum of understanding between the two brohers signed in 2005 does not stand.

The Chief Justice has signed the verdict on the RIL RNRL gas row delivered by Justice Sathasivan. The verdict says that both brothers must sit down and re-negotiate the gas supply master agreement (GSMA) and then come back to the Court in 6 weeks. The verdict further said that gas is a national asset and belongs to the government till delivered to the consumer. The court said it will give its direction in 8 weeks.

The previous MoU has stood to be in contradiction with the government policy as well as the Production Sharing Contract. The re-negotiated agreement between RIL and RNRL will have to be reworked within the ambit of the government’s gad pricing policy. Further the judgment adds that the government regulation must dictate the renegotiation plan and RIL and RNRL should renegotiate under government rules.

Source:http://www.reliance-news.com/mukesh-ambani/mukesh-ambani%E2%80%99s-points-were-in-line-with-supreme-court-verdict/

Three times more Reliance Gas to NTPC

2010-03-12T05:53:00.000-08:00

State-owned power utility NTPC Ltd has tripled the volume of natural gas it buys from Reliance Industries at the government-approved price of USD 4.2 per mmBtu, to 1.81 million standard cubic meters a day.

NTPC, which till last month was taking 0.61 mmscmd from RIL's eastern offshore KG-D6 field, has begun drawing an additional 1.2 mmscmd of gas to boost power generation, sources in know said.

In October, the government had allocated an additional 3.85 mmscmd gas to NTPC. Since NTPC did not want to use the KG-D6 gas at its Kawas and Gandhar power plants in Gujarat that are connected with pipelines ferrying KG-D6 gas from the Andhra coast, a complex swap arrangement was worked out with state-owned gas utility GAIL India.

Under this arrangement, GAIL diverted gas from other sources to NTPC plants and supplied RIL gas to its existing customers.

Source:http://reliance-news.blogspot.com/2010/03/ntpc-trebles-natural-gas-procurement.html

Mukesh Ambani led Reliance Industries leases storage in the Carribean

2010-01-29T20:18:00.000-08:00

Reliance Industries, owner of the world's largest oil refining complex, has leased storage to store gasoline at the Borco oil terminal in the Caribbean, industry sources said on Thursday.

The deal on the 500,000 barrels storage facility was secured sometime towards the end of last year, traders said. "We know they have their eyes on the domestic US market, that is no secret, but it is going to be a while before we see demand there pick-up to pre (financial) crisis levels," a Singapore based trader said. "So now Reliance is also looking at other long markets further South," a Singapore based gasoline trader said.

Reliance, which operates two mega-refineries in the West Coast of India that has a combined crude processing capacity of 1.24 million barrels per day (bpd), has over the past few years embarked on a robust marketing campaign for their products in Europe, Latin Ameica, East Africa and the United States.

Source: http://economictimes.indiatimes.com/news/news-by-industry/energy/oil-gas/Reliance-leases-storage-in-the-Caribbean/articleshow/5509090.cms

Reliance leases storage in the Carribean

2010-01-29T05:49:00.000-08:00

Reliance Industries, owner of the world's largest oil refining complex, has leased storage to store gasoline at the Borco oil terminal in the Caribbean, industry sources said on Thursday.

Source:http://economictimes.indiatimes.com/news/news-by-industry/energy/oil-gas/Reliance-leases-storage-in-the-Caribbean/articleshow/5509090.cms

Reliance Increases Fuel Sales in India to Meet Rising Demand

2010-01-25T06:36:00.000-08:00

Reliance Industries Ltd., operator of the world’s largest refining complex, increased its share of sales in India to meet growing demand for fuels.

The Mumbai-based energy explorer and refiner sold 20.65 million metric tons of fuels in the South Asian nation in the nine months ended Dec. 31 compared with 8.01 million tons a year earlier, according to Bloomberg calculations based on export figures released by the company today. The numbers were confirmed by a Reliance spokesman, who declined to be identified in line with company policy.

Reliance, which can process 1.24 million barrels of oil a day, increased its share of fuel sales in India as the global recession cut demand for gasoline and diesel in the U.S. and Europe. The company gave up the export-only status of its first refinery in April after completing in December 2008 a 580,000 barrel-a-day refinery that caters to overseas customers.

Domestic sales as a share of output rose to 47 percent in the nine months ended Dec. 31, compared with 33 percent a year earlier, according to data released by the company. Customers include Indian Oil Corp., the largest state-run refiner, which started purchasing diesel and gasoline from Reliance in April.

“Buying fuels from Reliance reduces our costs,” Gyan Chand Daga, marketing director at Indian Oil, said by telephone from Mumbai today. “Demand for fuels is growing and we need to meet that gap.”

India’s oil product sales grew 3.2 percent in November from a year earlier, compared with a 2.7 percent contraction in demand in major industrialized economies, the International Energy Agency said in its latest monthly report.

Retail Outlets

Reliance has reopened more than 600 retail fuel outlets in India, according to today’s statement. The company mothballed its 1,433 gas stations nationwide as crude soared to a record in 2008, unable to compete with state-owned refiners that sold motor fuels below cost.

The revenue loss for state refiners on sales of motor fuels declined after crude fell from a record in July 2008. Indian Oil said in August it lost 2.30 rupees on every liter of diesel sold compared with a shortfall of 13 rupees a liter in September 2008.

The government partly compensates state refiners for selling fuels below cost without extending the benefit to private refiners, including Reliance and Essar Oil Ltd.

Source:http://www.bloomberg.com/apps/news?pid=20601091&sid=auw0zfU5yliU

Reliance becomes first Indian company to produce Euro IV compliant diesel

2010-01-25T06:33:00.000-08:00

Unlike 2005, when the country’s private refiners were late in producing Euro-III compliant fuel, this time the private sector has taken a lead, with Reliance Industries Ltd (RIL) becoming the first Indian refinery to produce Euro-IV compliant diesel.

The first cargo of 25,000 tonnes of Euro-IV grade diesel from RIL’s refinery at Jamnagar was shipped by Hindustan Petroleum Corporation Ltd (HPCL) on Friday, said an informed source. This is also the first coastal supply of Euro-IV diesel for the Indian market.

Sources said RIL was also gearing up to produce the higher grade of petrol. With the private refiner now ready to produce the higher grade, it will be easier for oil marketing companies to ensure the availability of Euro-IV diesel at the retail outlets of all 13 major cities of India by April 1, the target date.

An RIL spokesperson confirmed the sale of diesel. He did not give details on total production, citing trade confidentiality reasons.

Indian Oil Corporation, the biggest oil marketer, and Bharat Petroleum Corporation Ltd have recently floated tenders to import 120,000 tonnes and 60,000 tonnes of Euro-IV diesel, respectively.

Government policy calls for petrol and diesel meeting Euro-IV standards are to be supplied in 13 cities, including Delhi, Mumbai, Chennai, Kolkata, Bangalore, Hyderabad and Ahmadabad, from April 1. Euro-III grade fuel is to be supplied across the rest of the country from the same day. The former deadline will be met. Sales of Euro-III will begin in a phased manner between April 1 and October 1.

Source:http://www.business-standard.com/india/news/ril-refinery-first-to-produce-euro-iv-auto-fuel/383580/

Reliance Solar Group Middle East and Africa Exclusive Distributors is PTL Solar

2010-01-25T06:32:00.000-08:00

Dr. Farooq Abdullah, Minister for New and Renewable Energy, Government of India, inaugurated the first exclusive international Reliance Showroom at the Dubai Creek Towers in Deira. Rabindra Satpathy, President of Reliance Solar Group was also at inauguration ceremony and informed that PTL solar is appointed as exclusive distributors for the Middle East and Africa region for Reliance Solar Group which is a part of Reliance Industries Ltd.

PTL Solar, experts in solar street lighting solutions and part of Green Energy, has become the exclusive distributor in the Middle East and Africa for Reliance Solar Group, part of Reliance Industries, one of India’s largest private sector enterprises. PTL Solar is highly commended and appreciated at the Power Generation and Water Solutions Middle East Awards 2009 for ”ENERGY EFFICIENCY” AND “POWER GENERATION AND WATER SOLUTIONS INNOVATION OF THE YEAR AWARD 2009“:. The company is also expert in solar street lighting solutions and part of Green Energy LLC.
Business partners, suppliers, and customers of PTL Solar, as well as a few members of a delegation from the Confederation of Indian Industry (CII) also attended the event. Prabissh Thomas, Managing Director of PTL Solar, briefed guests about the offerings of the showroom and the details of the distributorship agreement with Reliance Solar Group.

Reliance Solar Group specialises in solutions ranging from solar lanterns, home lighting and street lighting to water purification, refrigeration and solar air conditioners — all based on solar energy.

As part of its campaign to transform the existing lighting system into solar-based applications, PTL Solar has supplied its solar energy outdoor lighting units GRENlite to Dubai Electricity and Water Authority (DEWA) as well as Tecom Investments’ Dubai Outsource Zone and Dubai Internet City.

In addition, the company has installed solar car park lights for Nakheel in the Waterfront project, as well as illuminated the first automotive factory in the UAE for heavy vehicles assembled by Scania.

India’s crude output to rise as Reliance’s KG D6 expects an increase in production

2010-01-21T06:14:00.000-08:00

Reliance Group and Cairn India will help increase nation's crude oil output by 11 per cent and natural gas production by 53 per cent in 2009-10, oil regulator Directorate General Hydrocarbons (DGH) said today.

Speaking at an Assocham conference, DGH Director General S K Srivastava said the country's gas production would double next year when RIL's KG-D6 fields' reach peak output.

KG-D6 field is expected to reach peak output of 80 million standard cubic meters per day by mid-2010.
Srivastava, according to an Assocham statement, said oil production from Cairn's Barmer basin field in Rajasthan is expected to contribute about 18 per cent of the country’s total oil production in near future.

India's crude oil production has been stagnant around 32 million tons for past few years and output from Barmer and KG-D6 fields would raise nation's oil production.

"...After stagnant production for over a decade, in 2009 -10 crude oil production is likely to increase by 11 per cent and natural gas by 53 per cent over previous year," he said.

Cairn's Rajasthan field is currently producing about 20,000 barrels per day while Reliance Industries is pumping out 10,000 bpd from KG-D6.

On the new discoveries, he said increased exploration would result in new discoveries by 2015-16 which would require investment to an extent of USD 25 billion.

He also said that besides conventional oil and gas, the government is actively pursuing other fossil fuel alternatives such as gas hydrates, coal bed methane (CBM) and oil shale.

"The DGH is in the select League of Nations pursuing hard to commercialise gas production from gas Hydrates. Oil share resources are currently under evaluation," Srivastava added.

He, however, regretted that in 8th round of NELP, the Petroleum Ministry could award only 36 oil and gas blocks out of identified 70 blocks due to adversaries of global turmoil.

"Unfortunately, the Ministry will not be able to offer the unbid 34 blocks to prospective investors in the current fiscal as it requires several inter-governmental approvals which take a good deal of time," Srivastava said.

He remained non-committal by what time the unbid blocks will be awarded for oil & gas production.

Speaking on the occasion, D M Kale, Director General, ONGC Energy Centre said that his Corporation is spending Rs 10,000 crore annually to arrest 2 per cent decline in crude oil production.

Source:http://oilandgasindia.blogspot.com/2010/01/crude-oil-production-to-go-up-11pc.html

Reliance to drill six new wells in KG

2010-01-07T05:09:00.000-08:00

Reliance Group intends to drill six additional exploration/appraisal wells in the KG-D6 block in 2010. It has proposed to invest $1.5 billion (approx Rs 6,975 crore) more in the proposed block in developing satellite gas finds.
"Six additional exploration/appraisal wells will be drilled this year," said Niko Resources, the
junior partner in RIL-operated KG-D6 block.

Reliance Industries has till date made 19 discoveries-- 18 gas and one oil--in deep-sea block KG-DWN-98/3 or KG-D6. Of these, it developed Dhirubhai-1 and 3 gas fields in the first phase at an investment of USD 8.836 billion.

It has now proposed to invest another USD 1.5 billion in bringing to production four satellite finds in the block.

Dhirubhai-1 and 3 fields, which began gas production in April last year, hold 10.03 Tcf of reserves and are currently producing about 60 million standard cubic meters per day. The peak output of 80 mmscmd likely this year, would double gas availability in the country.

The Mumbai-based firm had in July 2008 proposed to develop 9 discoveries adjoining these two giants at a cost of USD 5.91 billion. But after more techno-commercial viability studies, it decided to narrow down to four finds that can be put to production in next 4-5 years.

Reliance has already submitted a field development plan to the Directorate General of Hydrocarbons for the four discoveries that it estimates hold 0.6 tcf of recoverable reserves.
RIL holds 90 per cent interest in the block and the remaining 10 per cent is with its other partner Niko Resources.
Source:http://www.thehindubusinessline.com/blnus/02061932.htm

Reliance to invest $1.5 bn more in KG-D6

2010-01-05T06:21:00.000-08:00

RIL has proposed to invest an additional $1.5 billion in bringing to production four gas discoveries adjoining its prolific gas fields in Krishna-Godavari basin in the country's east coast.

Reliance Group had in July 2008 proposed to develop nine satellite discoveries in the Krishna Godavari basin block at a cost of $5.91 billion, but later narrowed it down to four finds that can be put to production in the next 4-5 years.

The company last week submitted a field development plan (FDP) to the Directorate General of Hydrocarbons (DGH) for the four discoveries that it estimates hold 0.6 trillion cubic feet of recoverable reserves, government sources said.

The sources said, plans to produce 10 million standard cubic meters per day of gas from the four fields for 6 years.

Reliance has till date made 19 discoveries in deep-sea block KG-DWN-98/3 or KG-D6 -- 18 gas and one oil. Of these, it developed Dhirubhai-1 and 3 fields in the first phase. The two fields, which began gas production in April last year, hold 10.03 Tcf of reserves.

Reliance Industries has so far invested $5.8 billion out of the estimated $8.836 billion cost of developing D1 and D3 fields over their entire life. The fields are currently producing around 60 mmscmd of gas and envisage a peak output of 80 mmscmd in 2010.

Reliance Industries has invested $2.234 billion in developing the MA oil field in the block that is currently producing about 10,000 barrels of crude oil per day.

Source:http://www.business-standard.com/india/news/reliance-proposes-15-bn-more-investment-in-kg-d6/82191/on

Reliance’s third successive gas discovery in KG Basin

2009-12-22T04:46:00.000-08:00

Reliance Group of Industries (RIL), the country’s largest private sector company, has announced its third successive gas discovery in the exploration block KG-DWN-2003/1 (KG-V-D3), of NELP-V. The deepwater block KG-DWN-2003/1 is located in the Krishna basin, about 45 kilometers off the coast in the Bay of Bengal. The block covers an area of 3288 square kilometres. RIL holds a 90 per cent participating interest (PI) and Hardy Exploration and Production India Inc holds the rest.

The well KGV-D3-R1, the third in this block was drilled at a water depth of 1982 m and to a total measured depth of 4113 m. The objective was to explore the Miocene deep water lobe and onlapping wedges play fairway. Three reservoir zones were encountered at Miocene Level having gross thickness of 4, 23 and 16 metres. The potential of these were evaluated through a wire-line based technology called Reservoir Characterization Imager (RCI).

The discovery namely “Dhirubhai - 44” has been notified to the government of India and the Directorate General of Hydrocarbons. The potential commerciality of the discovery is being ascertained through more data gathering and analysis.

The discovery supplements RIL’s understanding, of the petroleum systems within the block. 3D seismic has been acquired over the entire block area. Besides the above discoveries, several prospects have been mapped at different stratigraphic levels to fulfill the balance minimum work commitment of three wells.

Reliance is likely to drill three additional exploration wells on the block before the end of 2010. In August 2005, Reliance and HEPI were awarded D3 block under NELP-V. Reliance is the operator of the block.
Exploration drilling commenced on this block in 2008.

Source:http://ril.com/downloads/pdf/PR22122009.pdf

Ambani Gas Row – Government has every right to regulate gas price: RIL

2009-12-17T23:22:00.000-08:00

RIL counsel Harish Salve made this assertion before the three-member bench of Chief Justice K.G. Balakrishnan, in his counter-arguments in the legal battle with Reliance Natural Resources Ltd (RNRL) over gas supplies from the Krishna-Godavari basin.

"If I challenge the gas utilization policy and the court says 'sorry, you do not have the power', the government will discover the power elsewhere," Salve told the bench, which includes Justice B. Sudershan Reddy and Justice P. Sathasivam.

"The government is opening various sectors to private players. If we do not behave responsibly, we may earn profit for 15 days, but will eventually be out of business."

"The only suitable agreement for supply of gas to the REL's Dadri power plant is supply of gas under the gas utilization policy and at the price arrived at as per the formula approved by the empowered group of ministers," he said.

This decision by the ministerial group is applicable to all the gas produced by RIL, Salve said, adding this compelled his client to supply gas to specific customers, in defined quantities and at the notified price.

The government has also specified that a firm commitment on gas supplies can be made only for five years, based on the ministerial panel's recommendations, he said.

Source:http://economictimes.indiatimes.com/news/news-by-industry/energy/oil-gas/Government-has-every-right-to-regulate-gas-price-RIL/articleshow/5348440.cms

Reliance pumping out over 50 mmscmd gas from KG Basin: Government

2009-12-11T02:21:00.000-08:00

Reliance Industries (RIL) is currently producing over 50 million standard cubic meters per day (mmscmd) of natural gas from the KG Basin D-6 fields, the government said.

"The current gas production from the D-1 and D-3 gas fields is about 48 mmscmd and from MA (oil) field is about 2.3 mmscmd in the KG-D-6 Block," Minister of State for Petroleum and Natural Gas Jitin Prasada told the Lok Sabha in a written reply.

The gas produced from the KG-D6 Block is being allocated and sold as per the directives of the Empowered Group of Ministers, he said, adding the peak gas production of about 80 mmscmd from the field is likely to be achieved by the middle of next year.

"The government has not, till date, fixed or approved the quantum of marketing margins for sale of natural gas by any contractor," he said, adding "the issue is discussed and decided between the seller and the buyer, as a part of the settlement of the terms and conditions of the gas sales and purchase agreement (GSPA)."

Source:http://www.business-standard.com/india/news/ril-pumping-out-over-50-mmscmd-gaskg-basin-govt/80500/on

Reliance Gas from KG adding value to India’s GDP

2009-12-10T01:34:00.000-08:00

The recent CSO estimate of India’s GDP for the second quarter of 2009-10 came like a whiff of fresh air amidst the gloomy scenario that was painted last week by the Dubai debt crisis. GDP growth has received its surprising but much-needed impetus from a booming mining and quarrying sector, which grew by 9.5% in the second quarter of 2009-10 as compared to 3.7% recorded during the second quarter in 2008-09. This has largely been attributed to a bolstering growth in output from Reliance Group’ Krishna Godavari (KG) basin, whose gas output alone is expected to shore up India’s GDP by nearly 0.3% every year.

India’s natural gas output from domestic fields has now reportedly exceeded the threshold figure of 100 million cubic metres per day (mmcmd) of output as KG D6 has started operating in full swing. The upstream natural gas sector in India is a classic example of duopoly and comprises two major players, namely RIL and ONGC. Despite holding a couple of big road shows within and outside the country, the much-hyped latest round of NELP could hardly make any perceptible difference in terms of increasing the number of players in the upstream sector. Interestingly,RIL’s latest reported output of 50.15 mmcmd from KG-D6 fields in the KG basin surpassed 49.6 mmcmd of natural gas output reported by ONGC, thus making Reliance Industries effectively the largest player in the natural gas upstream sector. The lion’s share of ONGC’s gas output comes from its Bassein and Mumbai High fields, which reportedly account for 42 mmcmd of natural gas output. A relatively meagre 16 mmcmd of output has been reported from Panna/Mukta and Tapti fields of BG India, which again is a joint-venture between the BG Group, RIL and ONGC. The residual amount comes primarily from the Rawa field, where stakeholders include Cairn Energy and ONGC.

RIL’s natural gas generated from KG basin in Bay of Bengal has heralded almost a new era inIndia’s energy sector with far-reaching implications for India’s ‘clean energy’ security, especially in view of the heightened concern for climate change. RIL has already developed the D-1 and D-3 fields in KG basin and is pursuing a new integrated development plan for its R-series of natural gas finds and nine other satellite discoveries in the D6 block. The combined potential for these gas finds and satellite discoveries has reportedly been estimated as lying between 2-3 trillion cubic feet. Until the middle of this year, ONGC and its western assets in the Mumbai offshore area have dominated India’s oil and gas industry. However, ONGC is now resorting to a look-east policy as the production of Mumbai has started deteriorating and it is planning to recoup its losses by developing its eastern assets (oil and gas discoveries in the KG basin off the east coast). Moreover, RIL’s D6 block development in record time has also posed a serious challenge for the public player.

Meanwhile, ONGC has also stated on its Web site that a draft proposal on revision of Administered Price Mechanism (APM) gas produced by national oil companies has reportedly been circulated by MoPNG on the basis of recommendation of Tariff Commission (TC) for consideration and approval by the Cabinet Committee on Economic Affairs. The TC essentially wants to bring parity between the APM price and the price of the gas produced from KG basin by 2013 in a phased manner. The price of natural gas, which is produced by public players like ONGC from government nominated blocks, is governed by APM and lies well below the free market price of natural gas. This leads to a substantial loss for them. The loss in the last financial year itself has been reported at Rs 47 billion. Thus, ONGC is expected to benefit considerably if the proposal gets finally approved. Under the proposal, ONGC’s APM gas price would be Rs 4,142 per thousand standard cubic metres (mscm) {$2.32 per million British thermal units (mmbtu)}, up from Rs 3,200 mscm ($1.79 mmbtu). This is indeed a welcome proposition and would provide a big push to the public sector gas producer. However, MoPNG should also get back to its agenda of complete deregulation of prices of refined petroleum products, especially auto-fuels like petrol and diesel; otherwise after revision of APM gas price, CNG might just lose out on its competitive edge as a cleaner and cheaper automobile fuel in the cities that are currently receiving it.

The development of indigenous source of cleaner and cheaper fuel like natural gas would serve the dual purpose of reducing our unhealthy dependence on imported oil and enhance our ‘clean energy’ security, besides boosting our GDP. Furthermore, the International Energy Agency also recently reckoned that there would be a continued glut in the natural gas market, which would depress the gas price in the near and medium term.

Thus, the international liquefied natural gas producers are expected to look eastwards, especially towards India and China as first ports of call. This would provide a great opportunity to India in reducing its dependence on highly priced imported oil and shift to an environmentally benign fuel, and thus, save largely on its precious foreign exchange.

Source:http://oilandgasindia.blogspot.com/2009/12/rils-kgd6-adding-contribution-to-indias.html"

Controversies have surrounded KG D6 gas, but RIL downplayed all

2009-12-04T05:02:00.000-08:00

Reliance Industries operated KG-DWN-98/3 gas field, also known as KG D6 has run into controversies immediately after the major gas find in 2002. Whether it is the quantum of the discovery, capital expenditure for the development, legal tussle with NTPC over the contractual obligation or the Memorandum of Understanding (MOU) signed with Reliance Natural Resources (RNRL) for supplying 28 mmscmd gas, Reliance has witnessed numerous allegations.

Reliance Group, however, has proven these accusations erroneous time and again. RIL had estimated the reserves of KG D6 block to the tune of 14 trillion cubic feet (tcf), which was downplayed by many to the maximum of 5-6 tcf. Today, with limited number of wells drilled, the commercially recoverable reserves are approved at 11.3 tcf by the Government. The in-place reserves are estimated to the extent of 40 tcf by various analysts. Similarly, the capital expenditure of $8.8 billion was said to be escalated. The Government, however, itself came forward in defense of the accusation arguing that the reserve estimates along with peak production level has doubled since the initial development plan resulting in increased capital cost due to three-fold rise in commodity prices, equipment prices, rig charges and engineering cost.

As far as NTPC issue is concern, RIL has made it clear that disagreement with NTPC is not on the price of $2.34 per mmbtu but on unlimited liability clause which coerces the RIL to pay for entire cost of substitute fuel in case of gas supply failure even in case of force-majeure by the company. RIL only wants the penalty charges to be capped that too as low as half of what is applicable for NTPC in case of its inability to off-take the gas, which may force the RIL to flare a sizable amount of precious gas.

Even in case of RNRL, Reliance agrees to supply the said quantity of gas at agreed price provided the Government consents on price and marketing freedom. In fact, RIL tried to get the Government certification for price of gas to be supplied to RNRL, however, the latter rejected the same, stating that the price did not match the arms-length criteria of pricing as per the Production Sharing Contract (PSC).

Source:http://oilandgasindia.blogspot.com/2009/12/where-does-gas-price-of-42-per-mmbtu.html

Reliance ropes in Colombia’s Ecopetrol for Exploration

2009-12-04T03:32:00.000-08:00

Indian energy major Reliance Group has signed a deal with Colombian state oil firm Ecopetrol for two deepwater blocks in Colombia.

Reliance said Exploration and Production DMCC (REP) has signed an agreement with Ecopetrol under which the Colombian firm would take a 20 per cent stake in the two deepwater blocks -- Borojo North Block 42 and the Borojo South Block 43.

The two blocks cover an area of 8,000 sq km. In water depths ranging from 60-1500 metres, the company said.

REP would hold the remaining stake in the two blocks and the deal is subject to approval of the Columbia's upstream regulator, company said.

Source:http://www.business-standard.com/india/news/ril-ecopetrol-ink-pact-for-deep-water-blocks/80002/on

Reliance Gas from KG adding value to India’s GDP

2009-12-04T01:34:00.000-08:00

The recent CSO estimate of India’s GDP for the second quarter of 2009-10 came like a whiff of fresh air amidst the gloomy scenario that was painted last week by the Dubai debt crisis. GDP growth has received its surprising but much-needed impetus from a booming mining and quarrying sector, which grew by 9.5% in the second quarter of 2009-10 as compared to 3.7% recorded during the second quarter in 2008-09. This has largely been attributed to a bolstering growth in output from Reliance Industries’ Krishna Godavari (KG) basin, whose gas output alone is expected to shore up India’s GDP by nearly 0.3% every year.

India’s natural gas output from domestic fields has now reportedly exceeded the threshold figure of 100 million cubic metres per day (mmcmd) of output as KG D6 has started operating in full swing. The upstream natural gas sector in India is a classic example of duopoly and comprises two major players, namely RIL and ONGC. Despite holding a couple of big road shows within and outside the country, the much-hyped latest round of NELP could hardly make any perceptible difference in terms of increasing the number of players in the upstream sector. Interestingly,RIL’s latest reported output of 50.15 mmcmd from KG-D6 fields in the KG basin surpassed 49.6 mmcmd of natural gas output reported by ONGC, thus making Reliance Group effectively the largest player in the natural gas upstream sector. The lion’s share of ONGC’s gas output comes from its Bassein and Mumbai High fields, which reportedly account for 42 mmcmd of natural gas output. A relatively meagre 16 mmcmd of output has been reported from Panna/Mukta and Tapti fields of BG India, which again is a joint-venture between the BG Group, Reliance Industries and ONGC. The residual amount comes primarily from the Rawa field, where stakeholders include Cairn Energy and ONGC.

RIL’s natural gas generated from KG basin in Bay of Bengal has heralded almost a new era inIndia’s energy sector with far-reaching implications for India’s ‘clean energy’ security, especially in view of the heightened concern for climate change. RIL has already developed the D-1 and D-3 fields in KG basin and is pursuing a new integrated development plan for its R-series of natural gas finds and nine other satellite discoveries in the D6 block. The combined potential for these gas finds and satellite discoveries has reportedly been estimated as lying between 2-3 trillion cubic feet. Until the middle of this year, ONGC and its western assets in the Mumbai offshore area have dominated India’s oil and gas industry. However, ONGC is now resorting to a look-east policy as the production of Mumbai has started deteriorating and it is planning to recoup its losses by developing its eastern assets (oil and gas discoveries in the KG basin off the east coast). Moreover, RIL’s D6 block development in record time has also posed a serious challenge for the public player.

Meanwhile, ONGC has also stated on its Web site that a draft proposal on revision of Administered Price Mechanism (APM) gas produced by national oil companies has reportedly been circulated by MoPNG on the basis of recommendation of Tariff Commission (TC) for consideration and approval by the Cabinet Committee on Economic Affairs. The TC essentially wants to bring parity between the APM price and the price of the gas produced from KG basin by 2013 in a phased manner. The price of natural gas, which is produced by public players like ONGC from government nominated blocks, is governed by APM and lies well below the free market price of natural gas. This leads to a substantial loss for them. The loss in the last financial year itself has been reported at Rs 47 billion. Thus, ONGC is expected to benefit considerably if the proposal gets finally approved. Under the proposal, ONGC’s APM gas price would be Rs 4,142 per thousand standard cubic metres (mscm) {$2.32 per million British thermal units (mmbtu)}, up from Rs 3,200 mscm ($1.79 mmbtu). This is indeed a welcome proposition and would provide a big push to the public sector gas producer. However, MoPNG should also get back to its agenda of complete deregulation of prices of refined petroleum products, especially auto-fuels like petrol and diesel; otherwise after revision of APM gas price, CNG might just lose out on its competitive edge as a cleaner and cheaper automobile fuel in the cities that are currently receiving it.

The development of indigenous source of cleaner and cheaper fuel like natural gas would serve the dual purpose of reducing our unhealthy dependence on imported oil and enhance our ‘clean energy’ security, besides boosting our GDP. Furthermore, the International Energy Agency also recently reckoned that there would be a continued glut in the natural gas market, which would depress the gas price in the near and medium term.

Thus, the international liquefied natural gas producers are expected to look eastwards, especially towards India and China as first ports of call. This would provide a great opportunity to India in reducing its dependence on highly priced imported oil and shift to an environmentally benign fuel, and thus, save largely on its precious foreign exchange.

Source:http://oilandgasindia.blogspot.com/2009/12/rils-kgd6-adding-contribution-to-indias.html

KG Gas Pricing – An Analysis

2009-12-03T02:29:00.000-08:00

KG D6 gas price alleged to be unrealistic and too high to get buyers:

RNRL, annoyed with the Government decision, moved to court and made several allegations against Reliance Group. The company also published all its allegations in the form of advertisement in almost all national news dailies for several days. Among others, one of the main accusation was that RIL was to making super normal profit by selling gas at $4.2 per mmbtu and that the price does not stand relevant at the time when gas prices has crashed by as much as 80% in international market. The Anil Ambani led company also claimed that Reliance Industries is unable to find customers at this price as the price is too high for the Indian market.

Is $4.2 per mmbtu a realistic price? Where does it stand in the market?

In view of this, it becomes pertinent to investigate where the gas price of $4.2 per mmbtu stands in Indian and global market. Though, Anil Ambani group refers to sharp fall in international gas price, which is factually incorrect, as KG D-6 gas price is for long-term and does not get impacted significantly due to market forces.

Price of $4.2 per mmbtu cheaper than nearly all the domestic gas prices except for APM gas:

For a fair assessment, the price of $4.2 per mmbtu needs to be compared with prices of domestic gas from various fields. In the country, price of gas is lowest at $1.8 per mmbtu for APM fields operated by state-run ONGC and OIL. The Government is providing subsidized gas to fertilizer, power and City Gas Distribution sectors. Lately, ONGC and OIL has demanded the APM gas prices to be raised to $4.2 per mmbtu.

However, media report indicates that Government has agreed to a price hike of 44% or $2.6 per mmbtu. The second lowest gas price of $3.5 per mmbtu is for Ravva field operated by Cairn, which is up for revision from December, 2008. Bearing in mind the demand of gas in the country and market trend, revised gas price for Ravva field would not less than $5 per mmbtu, higher than KG D6 price.

Gas price for another Cairn operated field Ravva Satellite is already higher than KG D6 gas at $4.5 per mmbtu and is set for review along with Ravva. If media reports are to be believed, GAIL, the marketer of Ravva Satellite gas, had offered the price of $5.73 per mmbtu as soon as the price became due for revision, only to be rejected by the operator. Latest media reports suggest that Cairn has demanded the price of $6.75 per mmbtu from GAIL based on the price offered from an industrial unit. The demanded price is over 60% higher compared to KG D6 price.

Gas derived from Lakshmi field is priced at $4.75 per mmbtu whereas for Bheema and several fields operated by GSPC is set at $5 per mmbtu, well over $5 per mmbtu. Price for gas from Panna-Mukta and Tapti fields is highest in the country at present and is sold at $5.70 per mmbtu for quite some long now. This price is 35% more than the price for KG D-6 gas.

As far price of PLL’s long-term LNG, priced at $6.84 per mmbtu after the recent revision, is concerned, it is nealy 63% costlier than KG D6 gas price of $4.2 per mmbtu. From the evaluation of all the gas prices, present and near future, from various sources, in the domestic market, it is unambiguous that the gas price of $4.2 per mmbtu for KG D6 gas is cheapest gas available in the country, keeping aside the gas from APM fields. However, comparison with gas prices in the world market may provide a better idea of the relevance of $4.2 per mmbtu gas price.

Henry Hub gas price ranged between $5-8 per mmbtu during last five years, which is considerably above the $4.2 per mmbtu price:

Globally, gas prices at Henry Hub in Louisiana are considered as the benchmark. Price trend for past five years (from 2004 to 2009) at Henry Hub indicates that gas prices have broadly ranged between $5 per mmbtu to $8 per mmbtu during 2004-09. Gas prices shot up sharply above $13 per mmbtu in 2005 but eventually settled in the range of $5-8 per mmbtu. Gas prices at Henry Hub again surged to nearly $15 per mmbtu in 2008 on account of spiraling oil prices and huge gas demand, but crashed below $5 per mmbtu in 2009 due to unprecedented recession in US market that resulted in gas prices declining well below $5 per mmbtu. As the US was in recession and anticipated to come out of the same, the energy demand ultimately will also find the lost northward trend. The will in due course bring the gas prices back to the range $5-8 per mmbtu. Compared to the Henry Hub price range of $5-8 per mmbtu, KG D6 price of $4.2 per mmbtu for five years seems very competitive and indeed substantially lower. Hence, the $4.2 per mmbtu gas price stands relevant even by global standards.

Coming back to the domestic market, various fuels like Petrol, Diesel, LPG, Kerosene, Naphtha, Fuel Oil and Coal are being used for different purposes in households, automotives and industries.

All alternative fuel prices multiple times higher than that of $4.2 per mmbtu barring domestic coal:

Prices of four major petroleum products namely Petrol, Diesel, Kerosene and Domestic LPG is regulated by the Government and changed in larger public interest. Retail price of Rs. 48.76 per litre of Petrol in Mumbai (Rs. 4.69 per litre cheaper than the actual price) corresponds to $23.27 per mmbtu considering the calorific value of Petrol at 11,000 kcal per litre.

Addition of Rs. 4.69 per litre subsidy provided by the Government increases it to $25.51 per litre. Similarly, diesel price of Rs. 36.7 per litre (Rs. 3.09 cheaper than the actual price) with calorific value of 9800 kcal per litre translates to $19.66 per mmbtu. If the subsidy of Rs. 3.09 per litre is added into this, the price in energy terms increases to $21.32 per mmbtu.

Likewise, the highly subsidy Kerosene sold under Public Distribution System costs Rs. 9.01 per litre whereas the same for commercial purposes is priced at Rs. 25,280 per KL or Rs. 25.28 per litre in Mumbai. With energy content of 9500 kcal per litre, the price works out to $4.98 and $13.97 per mmbtu respectively. Similarly, the price of 14.2 kg Domestic LPG cylinder of Rs. 312.76 per kg, with calorific value of 11,200 kcal/kg, corresponds to $9.88 per mmbtu, which with the addition of Rs 158.55 subsidy becomes $14.89 per mmbtu. Price of 19.2 kg commercial LPG cylinder of Rs. 695.7 or Rs. 36.23 per kg, works out to $16.26 per mmbtu.

Market prices of Fuel Oil and Naphtha at Rs. 24,910 per tonne or Rs. 24.91 per kg and Rs. 35,920 or Rs. 35.92 per kg, with calorific value of 10,440 and 11,200 per kg respectively, works out to price of $12.53 and 16.84 per mmbtu respectively.

Prices of all these petroleum products, with or without Government subsidies, are beyond the KG D6 gas price of $4.2 per mmbtu. Nearest among all, is the subsidized price of Kerosene at $4.98 per mmbtu which is well over $4.2 per mmbtu price. Exclusion of subsidy from the Kerosene price makes it over three times than that of KG D6 gas price. Similarly, swelling subsidy on domestic LPG also couldn’t bring the prices more than double compared to KG D-6 gas price. Commercial price of LPG, in fact, is several times more than Kg D-6 gas price of $4.2 per mmbtu. However, price of domestic as well as imported coal, with calorific value of 3500 and 5800 kcal per kg respectively, at Rs. 1,200 per tonne or Rs. 1.2 per kg and Rs. 4080 or Rs. 4.08 per kg, translates to $1.8 and 3.69 per mmbtu respectively, which are significantly lower than $4.2 price of gas. Nonetheless, the adverse environmental effects of coal makes KG D-6 gas a better choice.

KG D-6 Gas – Most Realistic and Competitive fuel price in the market:

Finally, the gas price of $4.2 per mmbtu appear not only highly competitive and comparable to domestic gas prices and RLNG, but also lower than average price of gas in international market. The price is also considerably lower than other substitute fuels in the domestic market. Undoubtedly, the Empowered Group of Ministers seems to have worked thoroughly to make the KG D6 price realistic and acceptable. Therefore, the seeds of doubts being raised by Anil Ambani company about the KG D6 gas price appear irrelevant and have grown from personal animosity.

Source:http://oilandgasindia.blogspot.com/2009/12/where-does-gas-price-of-42-per-mmbtu.html

Reliance beats ONGC, becomes country's largest gas producer

2009-12-01T04:47:00.000-08:00

Reliance Industries has become the largest natural gas producer in the country with its over 50 million standard cubic meters per day (mscmd).

This is the first time it has surpassed ONGC’s 49.6 mscmd output.

Reliance Group gas production from its D6 fields in the Krishna Godavari basin has reached to 50.15 mscmd according to the regular output report Reliance sent to the oil ministry.

India’s gas output also exceeded 100 mmcmd with the contribution from KG D6. The world’s second most populous nation also draws 16 mmcmd from BG India’s Panna/Mukta and Tapti fields.

The ministry official said 22.84 mmscmd of D6 gas is sold to power companies, 15.19 mscmd to fertiliser units and 5.05 mmscmd to steel manufacturers. Refineries, including those of RIL, recently named as additional customers, are drawing about 5 mmscmd.

KG D6 is expected to increase its gas flow to 60 mmcmd by end of December and 65 mmcmd in January.
The project will reach highest peak production of 80 mmcmd in the second half of 2010.

Source:http://www.business-standard.com/india/news/ril-topples-ongc-as-largest-gas-producer/378206/

Reliance's D6 gas lights up idle capacity

2009-11-30T04:48:00.000-08:00

With the Reliance Group operated KG-basin D6 block gas flowing in, the gas-based power generation across the country has registered a healthy turnaround. In October, a total of 15 gas-based stations recorded a plant load factor (PLF) of over 80 per cent due to improved fuel availability, as against around just 50 per cent last year.

The spurt in gas-based production has more or less compensated for a dip in hydro generation in the northern and eastern regions, where reservoir storage was 35 per cent and 33 per cent respectively below last year's levels.

Increased generation by gas stations, especially those in the south, have also come at a time when coal-based generation at a number of stations, including key NTPC ones, have faltered due to a botched-up coal tender. Domestic natural gas production in April-October period was up 31 per cent at 25.389 bcm (billion cubic metres). Reflecting the jump in gas production, generation in gas-based plants shot up 34 per cent during April-October. “Surplus is also available due to low offtake by other sectors. The utilisation of the surplus gas has resulted in better utilisation of idle capacity,” an official with the Central Electricity Authority said.

Source:http://www.thehindubusinessline.com/2009/11/30/stories/2009113051160100.htm

RIL refineries to get one-fifth of gas from KG-D6

2009-11-26T04:58:00.000-08:00

RIL has been allocated 2.34 mmscmd of gas from its KG D-6 fields to meet just about one-fifth of the gas requirement at its twin refineries at Jamnagar in Gujarat.

Reliance Industries had sought 11.80 million standard cubic meters per day of KG D-6 gas to meet feedstock requirement at its twin refineries but it got only 2.34 mmscmd.

An Empowered Group of Ministers (EGoM) had on October 27 allocated one-fourth of the additional 20 mmscmd gas that RIL is ready to produce from KG-D6 to refineries.

"Refineries had projected a demand of 25.20 mmscmd but since the EGoM allocated only 5 mmscmd, the same has been allocated on pro-rata basis," an oil ministry official said.

State-run Indian Oil got 1.6 mmscmd while HPCL and BPCL have been allocated 0.26 and 0.20 mmscmd respectively. Private sector Essar Oil would get 0.60 mmscmd against a demand of 3 mmscmd for use at its Vadinar unit in Gujarat.

Reliance Group, which had so far not been allocated any gas from KG D-6, is currently buying imported liquefied natural gas at 60 per cent premium to the price of gas from its own block in the Krishna-Godavari Basin.

Of the 20 mmscmd, 12.9 mmscmd has gone to power plants, the official said, adding the new customers notified to RIL include state-run NTPC who has been given 2.71 mmscmd.

The government had previously fixed users for the first 40 mmscmd output from KG-D6 fields which has transformed the electricity scenario and boosted growth. Of the initial output, 18 mmscmd had gone to power plants.

The official said out of the additional allocation made on firm basis, NTPC will get 2.71 mmscmd, Lanco's Kondapalli plant (1.46 mmscmd), GMR Energy's Tanir Bavi (0.88 mmscmd - both in Andhra Pradesh), Rithala (0.40 mmscmd), Bawana plants (0.93 mmscmd - both in Delhi) and Gujarat's Uran plant (1.40 mmscmd).

The government had previously fixed users for the first 40 mmscmd output from KG-D6 fields which has transformed the electricity scenario and boosted growth. Of the initial output, 18 mmscmd had gone to power plants.

Source:http://business.rediff.com/report/2009/nov/25/reliance-ril-refineries-to-get-one-fifth-of-gas-from-kg-d6.htm

Crisil on Reliance’s Lyondell Acquisition

2009-11-25T00:00:00.001-08:00

Reliance Industries plans to fund its acquisition of the LyondellBasell Industries (LBI) by selling treasury stock and dipping into its cash reserves without taking any additional debt on its balance sheet, rating agency Crisil said on Tuesday while re-affirming its ‘stable’ rating on RIL’s debt.

Crisil said that Mukesh Ambani led firm had told it that, post-acquisition, LBI would have a conservative capital structure, with gross debt-to-equity ratio not exceeding 0.75 times. No additional support would be required from RIL, Crisil said.

The rating agency said its description of Reliance’s plans to finance the acquisition of LBI and the foreign company’s post-acquisition debt structure was based on its discussions with the management of India’s largest private sector company.

When contacted, RIL’s external spokesperson said the company had nothing more to add to its Saturday statement which said that it had submitted a non-binding all-cash preliminary offer to buy a controlling stake in LBI.

Source:http://www.indianoilandgas.com/viewnews.php?id=7752

RIL hunts for shale gas

2009-11-17T05:22:00.000-08:00

Reliance Group (RIL), which has executed the world’s single largest refinery complex at one place, and one of the most complex gas projects in the depth of the Bay of Bengal on the East coast of India, may join global oil majors in search of shale gas.

RIL has been studying the breakthroughs and the new technologies that are being used in producing shale gas that is now a huge rage in the US. “We are studying the prospects and we will take a decision on the investment in the next six months. RIL is looking at the overseas markets and it plans to go big in new technology. We now have the balance sheet to support such a move,” a senior RIL executive, who did not wish to be named, told ET.

Shale gas is natural gas produced from shale — a fine grained sedimentary rock composed of flakes of clay and minerals like quartz and calcite. “The future of energy is a low-carbon regime. Shale gas is one such example. It is somewhat like coal-bed methane and is on land. The US has made major strides in the technology in shale gas that has made it now a commercial proposition,” the executive in the know said.

According to Vijay Kelkar, former petroleum secretary and chairman of the 13th finance commission, it’s innovative technology using horizontal drilling (allowing the gas to be brought out easily) that made this fuel a commercial possibility. Mr Kelkar had floated a paper on how such non-conventional possibilities existed in gas hydrates — deposits in sea — near the Andaman and Nicobar Islands.

Reliance, which has used advanced technology in its exploration projects in the Krishna-Godavari basin, is betting on its expertise in technology to tap unconventional energy sources in the energy value chain. The company has been eyeing unconventional energy sources, such as solar, for some time now. But industry analysts are of the view that a fuel like shale gas is perhaps the best bet as it has already been proved as a commercial proposition.

Source:http://rilrnrlgasdispute.wordpress.com/2009/11/17/ril-hunts-for-shale-gas/

RIL RNRL Gas Dispute: Not Yet Over

2009-10-15T06:45:00.000-07:00

Anil Ambani has slugged it out with his older brother, Mukesh Ambani for four years and on 11^th October 2009, apparently set the tone for reconciliation, expressing hope that all disputes with Mukesh could be discussed and resolved in a matter of weeks. But Mukesh Ambani’s Reliance Industries Ltd (RIL) said the dispute was not really a family matter, but one that can be decisively resolved only by the Supreme Court.

At the heart of the fight between the two brothers is Anil Ambani’s demand that RIL supply gas to his company Reliance Natural Resources Ltd (RNRL) at $2.34 per mmbtu. The Bombay High Court decided in RNRL’s favour, but RIL moved the Supreme Court on July 4 challenging this decision.

For last many years, Anil Ambani has indulged in many a malicious campaign against RIL and its chairman. These campaigns reached their nadir in recent months through a vicious series of advertisements, unprecedented in India’s corporate history. This was followed by Anil Ambani’s endeavor to rope in NTPC in Reliance’s gas dispute. Over the last few months many in the government, including the Prime Minister and the Finance Minister, have said the brothers must put an end to such acrimony.

The picture began looking grim for RNRL with the decision of the eGoM to ensure that the country’s gas prices are in line with the market prices by approving a formula — which yields a price of $4.20 per million British thermal unit (mBtu) for the next 5 years. Anil having had to agree with the approved rate of $4.20 per mBtu soon also agreed to pay the disputed marketing margin to Reliance Industries under protest and sought natural gas to its power plant when it resumes operations after a maintenance shutdown.

Despite these past events, Reliance in its statement to the press said that, it welcomes Anil Ambani’s statement of reconciliation, and hopes that it is a positive change in the negative, calumnious and malafide campaign launched by R-ADAG against RIL. Mukesh Ambani said that this issue can be easily resolved, provided the proposal for reconciliation is anchored in good and honest intentions. According to RIL’s statement, the dispute under litigation is not merely a family matter, as Anil Ambani’s statement tries to make out to be. Another point that evokes a question is that, Anil Ambani, has yet again sought to communicate to RIL and its Chairman through the public domain, whereas he could have easily contacted his elder brother directly.

RIL in its statement indicated that, since national interests in terms of securing government’s revenue from the natural gas, the interests of RIL’s shareholders etc. are at stake transcend any private differences between two brothers or two corporate entities, can now only be decisively resolved by the decision of the Supreme Court of India. 20^th October is the date towards looking for a conclusion to this issue.

ADAG will pay marketing margin to RIL

2009-10-09T07:19:00.000-07:00

Less than a month after it stopped paying marketing margin to Reliance Industries, Anil Ambani Group firm Reliance Infrastructure has agreed to pay the levy, although under protest, and has asked the Mukesh Ambani firm to resume natural gas supplies to its power plant.

R-Infra on October 7 wrote to Reliance saying it was instructing its "bank to effect full payment of the invoice (raised by RIL for supply of KG-D6 field gas to its Samalkot power plant) including the marketing margin element."

The company, which had paid $0.135 per million British thermal unit in marketing cost to RIL for over four months without protest, had on September 15 written to the Mukesh Ambani-firm saying it will no longer pay the "unauthorised and illegal" levy.

R-Infra defaulted on payment of Rs 12 lakh in marketing margin on the 0.56 mmscmd gas supplied to Samalot in the first half of September, leading to RIL sending a notice of suspension of supplies.

"We request you to withdraw the suspension notice dated September 28 and confirm immediate resumption of the supply of gas," R-Infra Vice-President Kamal Kant wrote to Reliance Group.

On the same day, the Anil Ambani Group firm also wrote to ministries of power and petroleum informing of the decision and reiterating its position that the levy was "unauthorized and nothing but abuse of its (RIL's) monopolistic position."

An ADAG group spokesperson did not immediately offer any comments on the issue.

Source: Reliance

Reliance's KG-D6 Gas comes to rescue

2009-10-07T07:23:00.000-07:00

India’s largest private sector company Reliance Industries Ltd. (RIL) has come to the aid of drought affected northern states, and is helping them meet their electricity deficit.

Petroleum Ministry allocated additional natural gas from Reliance Group’s eastern offshore gas fields. Oil Minister Murli Deora had approved a temporary allocation of about 3.7 million standard cubic meters per day of KG-D6 gas to Lanco’s Kondapalli power plant in Andhra Pradesh, Utran plant in Gujarat and Pragati Power in Delhi.

The gas is helping generate about 800 MW of additional electricity and also help bridge the shortfall in hydro power generation due to sporadic rains.

H S Brahma, power secretary, said that all 10 mmscmd of gas is needed at power plants operating below capacity or about to be commissioned, and of this 3.7 mmscmd has been allocated.

KG-D6 gas is also helping the Power Ministry meet its 100-day agenda of adding 5,200 MW generations.

Dabhol starts drawing Reliance gas

2009-10-05T07:25:00.000-07:00

The Dabhol power plant today started buying natural gas from Reliance Industries to cut electricity generation cost at the country's largest gas-fired unit.

"We started drawing (RIL's) KG-D6 gas from today. The volumes were around 4.5 million standard cubic meters per day," said A K Ahuja, Managing Director of Ratnagiri Gas and Power Pvt Ltd, the company that runs the 2,150 MW power plant and adjoining LNG receipt facility in Maharasthra.

The government had this month more than doubled RGPPL's allocation from KG-D6 to 5.67 million standard cubic meters per day that will help generate about 1,000 MW of electricity.

"We are currently operating three gas turbines producing 920-930 megawatt of electricity. We will add another 320 MW turbine by November-end, when the drawal would increase to 5.6 mmscmd," he said.

RGPPL was initially allocated 2.7 mmscmd of gas for the period between April and September but the company had not drawn even a single unit as it had a running contract with Petronet LNG Ltd to buy imported liquefied natural gas.

It paid a burner-tip price of $7.8 per million British thermal unit for the regassified-LNG sourced from Petronet.

"The delivered price of KG-D6 gas would be $6.2 per mmBtu," Ahuja said adding the cost of electricity generation will come down to about Rs 4 per unit from Rs 4.70 earlier.

Ahuja said RGPPL would add one more turbine by end December or early January and the last one by end March, when the drawals from KG-D6 would rise to 8.4 mmscmd.

RGPPL was currently generating electricity from three units and by the year end two more units would be made operational that would require an additional 1.6 mmscmd of gas from Reliance Group's KG-D6 fields.

"By March we expect all the units to be operational and that is when we would be able to start drawing our full entitlement of 8.4 mmscmd KG-D6 gas," he said.

RGPPL —- co-owned by state power utility NTPC and gas firm GAIL India — was among the three firms which were yet to draw on even a single unit of KG-D6 gas allocation.

The others are NTPC, which recently signed a Gas Sales Purchase Agreement for less than one-fourth of its entitlement of 2.67 mmscmd, And Essar Power that is negotiating a transportation agreement.

RGPPL did not take KG-D6 gas previously as it had a 'take-or-pay' contract with Petronet for supply of gas.

Reliance can produce 60 mmscmd of gas from KG-D6 fields but is restricting output to around 40 mmscmd in absence of offtake from existing customers like NTPC and failure of the government to name consumers beyond the initial 40 mmscmd.

Natural Gas: An Alternative for Diesel in Power Generation

2009-10-01T08:10:00.000-07:00

Source>>> Reliance News

Power sector has received much attention in recent times due to India’s rapid economic growth, which in turn requires infrastructure to support the high growth rate. As power is a vital infrastructure for the growth of any economy, demand from across the sectors has grown exponentially resulting in demand-supply imbalance.

At present, India has a total of 1,46,750 MW of power generation installed capacity. During 2007-08, the total energy supply was 664.6 billion units (BU) against the demand of 737 BU, resulting in 10% deficit in total demand-supply of energy in the country. Peak hour energy shortages amounted as high as 14% during the year.

As a result of increasing power shortages, consumers are forced to generate their energy requirements on their own. Diesel based power generators have been the most preferred mode of electricity generation over the years. Currently, the total installed capacity of diesel-fired generators used by residential and commercial sector is estimated to be around 15,000 MW, which is nearly 10% of the total installed capacity of the country. Exhaustive use of diesel for power generation has pushed the demand for diesel in recent times. During the first quarter of FY2008-09, power sector has witnessed increase of 152% in the demand of diesel, to a total requirement of nearly 53,000 tonnes. However, limited domestic availability of oil coupled with growing environmental concerns and rising petroleum product prices have forced the consumers to look for alternative for diesel.

With the initiation of gas market and expansion of gas distribution infrastructure in the country, natural gas has the potential to change the way consumers generate electricity during peak hours. Consumers also have an alternative fuel for electricity generation, which is much cheaper as compared to diesel. According to CRISIL Research Power Annual Review, the cost of electricity generation for 1 MW or above capacity units, natural gas is almost 57% cheaper and it costs Rs 2.1 per unit as compared to Rs 4.9 per unit from diesel.

The total capacity of bigger diesel-fired units, (i.e. 1 MW or above) amounts to 12,000 MW in the country. Assuming that these units are operational at 50% plant-load factor, the total energy generation would be over 52 BU with aggregate cost of around 25,750 crore. If the same amount of electricity is being generated from natural, the total cost of generation would be around Rs 11,000 crore, resulting in savings of Rs 14,750 crore thus making natural gas an undisputed choice over diesel.

Even for less than 1 MW diesel-fired units, which are mainly used by households, offices and malls, the cost of power generation from natural gas would be 75 % cheaper (Rs 2.5-3 per unit) as compared to Rs 11-12 per unit from diesel presently. Assuming that this capacity operates at 10% plant load factor to supply the peak demand, the total energy generation would be around 2.6 BU with the total cost of Rs 2,890 crore, whereas, same amount of electricity generation would cost around 657 crore from natural gas at Rs 2.5-3 per unit. Thus, use of natural gas will save as much as Rs 2,233 crore. The total savings on account of substitution of diesel with natural gas for power generation would be around Rs 17,000 crore.

Moreover, replacement of diesel with natural gas for electricity generation also becomes imperative in the wake of burgeoning losses on sale of diesel every year. The total under-recovery on the sale of diesel during 2007-08 amounted to Rs 35,000 crores while during FY2008-09 diesel subsidies is estimated to be around 95,000 crore. Considering the fact that almost 15% of diesel is being used for power generation out of the total diesel consumed in the country, substitution of diesel with natural gas can save another Rs 14,250 crore approximately from the outgoing subsidy. Cumulatively, the total savings by utilizing natural gas instead of diesel can amount to Rs 31,250 crore, which can be utilized for adding another 9,000 MW gas based power generation capacity or two ultra-mega power projects with a total capacity of 8,000 MW.

Apart from cost benefits, natural gas can be easily transported to the point of consumption whether houses or small industries through pipes and does not need to be stored. Unlike liquid fuels, natural gas is environment friendly product and does not either affects the health or creates damage to house or equipments. Natural gas is already powering gas-fired turbines in the country for large scale generation and posses the potential to replace the diesel for peak hour energy demand in distributed power system through micro gas turbines.

Currently, the country produces 88 MMSCMD of gas domestically. Gas supply scenario is likely to change dramatically with the commencement of production of gas from Reliance Industries Ltd. KG Basin. The gigantic field of RIL is likely to produce 40 million standard cubic metre of gas every day (MMSCMD) initially, which is expected to jump to 80 MMSCMD during the peak production. Additionally, major discoveries by GSPC and ONGC have also boosted the domestic supply prospects of natural gas. In addition to this, the LNG liquefication capacity in the country, which stands at 7.5 MMTPA right now, is likely to jump to 27.5 MMTPA (equivalent to 110 million standard cubic metres per day) during next five years. Supply from both the source can fuel the gas requirement for substituting diesel for power generation.

The use of natural gas, in place of diesel can positive environmental effects. Apart from that, it can have large monetary advantages. The money this saved could be further used for adding extra base load capacities, which can help the country bridge the demand-supply mismatch to some extent.

Gas Pricing: RIL and RNRL

2009-09-30T07:48:00.000-07:00

Source: RIL RNRL Gas Dispute

Closer look at gas-pricing dispute

Since there are no well-defined benchmarks for assessing the market prices for oil and gas, there is a lot of judgment involved, which requires considerable experience in international oil and gas trade.

In the ongoing gas-pricing dispute, is the Government partial to either of the Ambani brothers, as claimed? No, it is not, avers Bhamy Shenoy, a senior advisor to the Center for Energy Economics at University of Texas, Austin.

“It is the bounden duty of the Government to safeguard the interests of the taxpayers. Billions of dollars are involved in this deal and the Government cannot be a mute spectator,” he adds, during a quick email interaction with Business Line.

Shenoy argues that the Indian Government should legally resolve the violation of basic terms of production sharing contract (PSC) — that is, not trying to get the arm’s length market price — and try to make null and void the original contract itself to safeguard the national interest. “Even otherwise, the Government is likely to have the legal rights to refuse a lower gas price allegedly negotiated between the brothers based on the PSC. If the brothers were on good terms, no one would have found out about this deal.”

Excerpts from the interview:

What is the dispute between the bhais about?

When the partition took place between the Ambani brothers, Mukesh and Anil, the settlement involved Krishna Godavari (KG) basin D6 block gas reserves. Discovery took place in 2002; reserve estimate is as much as 30 trillion cubic feet (TCF) of gas and 14 TCF has already been proven. Oil reserve proven is 140 million barrels. Peak gas production is 80 million cubic meters per day.

The alleged settlement was for Mueksh Ambani’s RIL (Reliance Industries Ltd) to supply 20 million cubic metres per day for 17 years as per the High Court, at $2.34 per million Btu (British thermal unit) to Anil Ambani’s RNRL (Reliance Natural Resources Ltd). The High Court might have found that RIL needs to supply gas as per the private settlement between the brothers.

Since PSC is an overriding contract, which controls the sharing of gas reserves between the investor (RIL) and the Government, RIL is bound by the terms of the contract terms. Once RIL gets its share it can decide how to share with RNRL. But the total pie of gas revenues and how it is shared between the Government and RIL have to be as per the PSC.

Isn’t it normal that the gas can be sold to any one?

PSC usually does give the right to sell gas to any one. But it is not clear if this particular PSC has that clause or not. But PSC definitely will have the clause of selling gas at arm’s length and be market-based.

A price agreed by brothers cannot be considered to be arm’s length. Even if RIL agrees to sell gas at a lower price, the Government is not bound by such a clause since the Government owns all gas reserves, and PSC gives the right to take some portion of those revenues.

For starters, can you explain what a PSC is?

It is the PSC which provides the legal framework for exploration, development and production of gas reserves. PSC was used for the first time by Indonesia. It is a legal framework used by several countries today for oil and gas exploration.

If properly administered, PSCs are most suited for profit-sharing when crude oil price can swing widely. When prices go high, as it happened in 2008, it can force the Government to take recourse to windfall profit taxes. PSCs will anticipate such problems.

While PSC thus gives a stable tax regime for investors, the Government gets a bigger share of the profits when the investment generates ‘windfall’ profits if the PSC terms are structured properly. However, it needs considerable expertise on the part of the Government to implement a PSC.

PSC also gives considerable scope for ‘rent seeking’ officers and ministers since it is not easy for outsiders to detect possible sweetheart deals. It is for these reasons that some countries adopt the simple ‘concession’ type of contracts.

A well-negotiated PSC provides protection against the oil companies from gold-plating the investment. It can also prevent excessive operating costs. PSC provides for a coordination committee consisting of representatives from the Government and investors to approve all major decisions.

PSC can provide checks, as follows, against selling oil and gas below the ‘market prices’: the title of hydrocarbons stays with the Government; the state maintains the management control, and the contractor is responsible for the execution of petroleum operations; the contractor is required to submit annual work programmes and budgets for the scrutiny and approval of a state institution, usually the national company; the contract is based on product-sharing, not profit-sharing; the contractor provides all the financing and technology required for the operations and bears the risks; during the contract term, after allowance for up to a specified percentage of annual production for the recovery of costs, the remaining production is split between the contractor and the state; and the equipment purchased and imported by the contractor becomes the property of the state. Service company equipment and leased equipment are exempt.

Is gas pricing critical to the current dispute?

Once the investments of the investors are recovered and also when their return exceeds some benchmarks, the Government gets a bigger share of the so-called ‘profit oil and gas.’ The most important factor to be monitored for ensuring proper share of the profits generated in any PSC is the price for oil and gas.

Since there are no well-defined benchmarks for assessing the market prices for oil and gas, there is a lot of judgment involved to assess the correct prices, requiring considerable experience in international oil and gas trade. This is precisely where the Ambani brothers’ dispute can result in huge losses to the nation if the Government does not act diligently.

On the market price or the right price for gas.

Depending upon what the crude oil prices would be in the next 20 years and also the relationship between crude oil and gas (it could get a premium or be discounted as much as 30 per cent with respect to crude oil equivalent price), total profits generated over a period of 20 years could be between $156 billion and $48 billion. Usually, the Government’s share of these profits is about 70 per cent and thus it can vary between $109 billion and $34 billion from the KG reserves.

For example, if the average crude oil price were about $100/b (per barrel), then crude oil equivalent gas price would be $16.7 per mmbtu (million BTU). On the other hand, if oil prices were $50/b, and gas prices are discounted as much as 30 per cent in relation to oil prices, then the gas prices could be $5.83. When the gas prices can vary over such a wide range (perhaps even more) it is not prudent to sign a fixed price contract.

What is now at stake, therefore?

If the Government were ‘forced’ to accept a lower price that RNRL is demanding, then profits would be just $13 billion.

Thus, what is at stake are billions of dollars depending upon how PSC terms are implemented. I am presuming that the PSC is negotiated for the Government by experts in accordance with the international best practices without hiding any sweetheart deals. This is a big assumption. Since PSCs have commercially-sensitive terms, the public do not have access to them even under the RTI (Right to Information) Act.

Your views on the gas market in the country.

The total control of the gas market today in India by the Government is a problem. Despite the recommendations of many high-powered committees, the Government has not liberalised the gas market.

Gas prices are fixed on an arbitrary basis by the bureaucrats in the petroleum ministry without allowing the market to decide. Even when India was paying international price to import LNG (liquefied natural gas) at as high as $12/million British thermal unit (mmbtu) in 2008, the Government-owned gas production was sold at a throwaway price of less than $2/mmbtu.

Two important lessons that have been learnt by oil companies are: Never sell gas at fixed prices on a long-term basis, and gas prices move in sympathy with oil prices.

Anyone who gets access to cheaper gas can monetise it by making use of it in industries where the final market prices are not controlled by the Government. There is ample scope for such diversion. It is very unfortunate that the Government has not liberalised the gas market knowing fully well that some are making money by diverting cheaper gas to industry where they get higher netbacks.