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
Tuesday, December 22, 2009
Thursday, December 17, 2009
Ambani Gas Row – Government has every right to regulate gas price: RIL
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
"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
Friday, December 11, 2009
Reliance pumping out over 50 mmscmd gas from KG Basin: Government
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
"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
Thursday, December 10, 2009
Reliance Gas from KG adding value to India’s GDP
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"
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"
Friday, December 4, 2009
Controversies have surrounded KG D6 gas, but RIL downplayed all
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 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
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 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
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
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
Thursday, December 3, 2009
KG Gas Pricing – An Analysis
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 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:
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
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.
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
Tuesday, December 1, 2009
Reliance beats ONGC, becomes country's largest gas producer
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/
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/
Subscribe to:
Comments (Atom)