25 Jan 2014

Petroleum Ministry Unleashes a Number of Initiatives to Accelate Exploration & Production Activities Major Successes in Securing Oil Equity Abroad

The Year 2013 gone by has been a watershed year for the Ministry of Petroleum of Natural Gas as it was marked by a number of initiatives to accelerate exploration & production work in the country.  A number of clearances including defence other clearances were granted to exploration blocks which were struck for quite some time. Important stakes were acquired in oil & gas assets abroad. The launch of Direct Benefit Transfer for LPG (DBTL) Scheme   on 1.6.2013 began a new saga of providing subsidy directly to the consumers.  Increasing number of subsidised LPG cylinders for domestic consumers, completing Dabhol- Bangluru natural gas pipeline project, laying foundation stone of 9 MMTPA Rajasthan Refinery project, making substantial progress on the projects under implementation, introducing transparency and consumer friendly measures like LPG connection portability, commencing sale of 5kg LPG cylinders from retail outlets, are some of highlights of the important decisions and achievements during the year.

Exploration & Production
  In the area of exploration & production (E&P), the government cleared 31 exploration blocks from defence & other angles to pave way for the exploration work in those blocks.  A high powered fast track mechanism created at the level of Cabinet Committee on Investment (CCI) facilitated the decision. The government also cleared pending 95 resolutions of Management Committees of exploration blocks to expedite the E&P activities.  Similarly further exploration was allowed in the mining lease areas of exploration blocks where discoveries had been made. This increased possibility of making more discoveries and one discovery in KG basin and one in Rajasthan were made during the year itself.  In addition, Shale Gas policy and CBM policy were approved during the year to enhance utilization of new sources of hydrocarbon. New Shale Gas Policy opens up exploration by national oil companies and amended in amendments CBM Policy allow Coal India LTD (CIL) and its subsidiaries, to undertake exploration & exploitation of CBM gas in areas allotted to them under mining lease.
Government also formulated Draft Uniform Licensing Policy for award of acreages for hydrocarbon exploration and production in future covering all categories of hydrocarbons.  This will overcome the bottlenecks caused by different kinds hydrocarbon found in same area, and thus increase in smooth operation for enhancing oil& gas production.

In order to enable early monetization of discoveries, a policy was formulated in October 2013 enabling operators to submit integrated development plan (IDP) consisting of multiple discoveries, and permitting them to sell petroleum produced from such discoveries pending final approval of IDP. 

            A committee was constituted in December 2013 to codify Good International Petroleum   Industry Practices (GPIP) for E&P sector so that faster decision making is facilitated. Codification of these standards will provide objectivity to the decisions of regulator/operators and other stake holders.

Significant successes in securing oil & gas equity abroad:
To strengthen the country’s energy security, by aggressively pursuing equity oil and gas opportunities overseas, today, Indian oil companies are new present in 25 countries. As part of these efforts, ONGC Videsh Ltd (OVL) acquired 2.72% stake in ACG field and 2.36% stake in BTC Pipeline in Azerbaijan during March 2013 at a consideration of about USD 1 billion. ACG field is one of the biggest producing offshore fields globally. OVL also acquired 12% additional stake in Block BC-10, Brazil in December 2013 at a consideration of USD 561 million. Further, OVL along with Oil India Limited (OIL) acquired 10% stake in Area-1, Mozambique at a consideration of USD 2.48 billion. Further OVL finalized agreement to acquire 10% stake in the same Area-1, Mozambique from a US listed company at a consideration of USD 2.64 billion. Area-1, Mozambique is one of the biggest gas finds of the recent times with estimated reserves (2C) of 45 trillion cubic feet. OVL also acquired two exploration blocks each in Colombia, Myanmar (B2 & EP-3) and Bangladesh (SS-04 & SS-09) during 2012-13. Significant jump in the efforts for overseas acquisition can be seen from, the sharp increase of 46.3% in  Revised Estimates of plan expenditure of ONGC Videsh  during 2013-14 to Rs.36,117 Crore, whereas the cumulative plan expenditure of the company since inception in 1965 till  2012-13 was Rs. 77,999 Crore.

Further, GAIL signed a Terminal Service Agreement (TSA) with Dominion Cove Point LNG, LP  in April 2013 for booking 2.3 MMTPA liquefaction capacity in the Cove Point LNG liquefaction terminal project located at Lusby in Maryland, US. The US Department of Energy
(DOE)  recently approved Dominion Cove Point LNG LP’s application to export LNG from its terminal to countries that do not have a free-trade agreement with the US. This is in addition to the off take agreement signed by GAIL with Sabine Pass Liquefaction LLC for supply of 3.5 MMTPA LNG from Sabine Pass Terminal in December 2011. This is the first LNG project in USA with Non- FTA authorization.

Augmenting Gas Supply & Expending Supply Infrastructure
 In order to encoverage greater investment in exploration and to pay reasonable prices to the producers, government approved uniform gas pricing policy for domestic production of natural gas.  The decision based on Dr. Rangarajan committee’s recommendations was duly calibrated to protect government’s interest in the case of production shortfall in KG D-6 gas field by providing for the need of bank guarantee by the contactor.

Further progress was also towards natural gas imports from Turkmenistan through Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline project Government approved  GAIL India Ltd to be consortium partner from Indian side for TAPI project.

Dabhol –Bengaluru gas pipeline of GAIL dedicated to nation
 The 1400 Km long Dabhol-Bengaluru pipeline built at a cost of Rs.5000 crore was dedicated to the nation by the Prime Minister on 03.12.2013.  This pipeline will enable supply of
imported natural gas from Dabhol LNG terminal to Southern part of the country. Connecting the several consumers in the three states of Maharashtra, Goa and Karnataka for supply of imported Liquefied Natural Gas (LNG) to them.
Commissioning of Kochi LNG Terminal
 Kochi LNG Terminal built by Petronet LNG Ltd. (PLL) at a cost of about Rs.4500 crore was commissioned in the year 2013 and was dedicated to nation by the Prime Minister on 4.1.2014. This terminal has capacity to import and regasify LNG upto 5 Million Tonnes per Annum (MMTPA) making natural gas available to large number of industries in Southern India including Kerala, Tamil Nadu, Karnataka, Andhra Pradesh and Maharashtra.  The total capacity of the country to import and regasify LNG this increased to 22 MMTPA.

Guidelines for clubbing and diversion to improve PLF of gas based power plants issued
In order to improve the Plant Load factor (PLF) of gas based power plants leading to increase in generation of electricity, Petroleum Ministry issued guidelines for clubbing/diversion of natural gas on 01.1.2013.  An entity (owner of two or more power plants) may club its gas allocation/supply of two or more of its power plants and utilize it in a more effective manner.

Revised Guidelines for allocation of domestic gas of small and isolated fields issued on
 To enable early monetization of gas produced from small and isolated fields of National Oil Companies, (NOCs) Petroleum Ministry revised the guidelines on 08.7.2013 doing away with sectoral priority and introducing price bidding for selecting the customer. Further, the limit of peak production was raised from 0.1 MMSCMD to 0.2 MMSCMD for qualifying as small and isolated field. This is expected to lead to faster monetization with higher returns for NoCs and encourage investment in exploration.

EGoM brings succour to power sector
 The Empowered Group of Ministers (EGoM) on Gas Pricing and Commercial Utilization of gas in the meeting held on 23.8.2013 decided that the entire additional NELP gas production available during the years 2013-14, 2014-15 and 2015-16, after  meeting the supply level of 31.5 MMSCMD to the Fertilizer sector, be supplied to the Power sector.

Guidelines for allocation and supply of domestic gas to CNG (transport) and PNG (domestic) segment issued-Petroleum Ministry issued guidelines, on 14th November, 2013 regarding allocation/supply of domestic natural gas to City Gas Distribution (CGD) entities for CNG (Transport) and PNG (Domestic). These guidelines have brought all CGD entities at par, across the nation, with regard to supply of domestic natural gas for CNG (Transport) and PNG (Domestic).  Further, recognizing the importance of natural gas in transport and domestic sector as fuel, the Ministry has increased the supply of domestic gas to transport and domestic sector by about 12%.  The guidelines have had positive impact in several cities/towns.  The prices of CNG (Transport) and PNG (Domestic) have come down in many cities/towns.

Expanding Refining capacity and downstream projects:

i).         Laying of Foundation stone for 9 MMTPA Green Field Refinery-cum-Petrochemical Complex at Barmer, Rajasthan
Smt. Sonia Gandhi, Chairperson, UPA laid the foundation stone for setting up of 9 MMTPA Green Field Refinery-cum-Petrochemical Complex at Pachpadra, Distt. Barmer, Rajasthan on 22.09.2013.  A joint venture of Hindustan Petroleum Corporation Ltd. (HPCL) and Govt. of Rajasthan (GoR)  the proposed refinery  project is estimated to cost over Rs.37,230 crore. Sscheduled to be completed by 31.12.2017, the project will have a direct, indirect and induced economic impact on the economy of Rajasthan, which shall, besides industrialization; result in substantial increase in income, output, employment and Tax earnings in the State.

ii).        Laying of Foundation Stone of Integrated Refinery Expansion Project (IREP) of BPCL’s Kochi Refinery
Prime Minister laid foundation stone of Integrated Refinery Expansion Project (IREP) of Bharat Petroleum Corporation Ltd.’s Kochi Refinery on 07.01.2013.  Under the project, refining capacity of Kochi Refinery will be enhanced from 9.5 MMTPA to 15.5 MMTPA with an investment of Rs.20,000 crore.   The project envisages modernization of refinery to produce Auto Fuels complying with BS-IV and BS-V specifications, and niche petrochemicals. 

iii).       Paradip Refinery Project, (Odisha) achieves substantial progress
The 15 MMTPA Greenfield Refineries at Paradip in Odisha at a cost of Rs. 29,777 crore by IOCL. has achieved about 95% of overall physical progress  of November, 2013.  The project is anticipated to be ready for Start-up by March, 2014.   The Refinery is being built with State-of-the-art-technologies obtained to enable it to successfully process broad basket of crude including High Sulphur Heavy Crudes and produce premium grade fuels of Euro-IV quality.  The distillate yield, from the refinery, of 81.1% is expected to be best in class without any production of Black Oil.

iv)        Inauguration of Styrene Butadiene Rubber Plant at Panipat Refinery 
 Petroleum Minister Dr. M. Veerappa Moily, dedicated to the nation Styrene Butadiene Rubber (SBR) Plant at Panipat Refinery of Indian Oil on 29.11.2013.  This SBR plant, first such plant in India was  setup at cost of  Rs.9,50 crore. This will help to meet the demand for tyre, conveyor belt, hose, shoe sole and other industrial applications and substantial foreign exchange savings through import substitution. 

Domestic Refining boosts Foreign Exchange Earnings: Oil sector retains position of number one exporting sector of India:
 The sustained increase is refining capacity has helped India to earn valuable foreign exchange through indigenous value addition. The refining sector continues to be the biggest foreign exchange earner of India with the exports of petroleum products worth Rs.3, 20,042 crore during 2012-13 against exports of Rs. 2, 84,643 crore in 2011-12.  During first eight months (April-November2013) of this fiscal itself the exports have already touched Rs. 2, 47,696 crore. It may be noted that these products (petrol, diesel, ATF, Naphtha etc) are being exported to various competitive markets of the world.

Diesel prices partially deregulated, Cap on subsidised LPG cylinders raised to 9 from 6
 To maintain health of public sector oil marketing companies (OMCs) and to regular ensure supply, Government initiated diesel pricing reforms, balancing this with the minimum impact on common man. OMCs in Jan 2013 were allowed to undertake monthly increase in diesel price of about 40-50 paise/litre as under-recovery on diesel had reached unsuitable level.  The common were provided a relief by increasing the number of subsidized LPG cylinders from 6 to 9 per annum.  Despite huge burden on the Union Government and its oil PSUs, the prices of poor men’s fuel PDS Kerosene were not touched.  Also the prices of subsidised LPG were kept largely unchanged though the under recovery plus subsidy on every 14.2 Kg cylinder galloped all time high of about  Rs 785 per cylinder by the close of the year (December 2013).  The Union Government and Oil PSUs are also shouldering a burden of under-recoveries of Rs.38.15 per litre on PDS Kerosene and on diesel Rs. 9.24/Litre at the end of the year.

DBTL launched to place LPG subsidy directly in the Hands of Consumers 
With the launch of Phase-VI on 1.1.14, Direct Benefit Transfer to LPG consumer (DBTL) scheme launched on 1.6.2013 covered over half of the LPG consumers in the country.  DBTL Scheme new covers a total of 9.5 crore LPG consumers in 291 districts out of the approximate 15 crore LPG consumers in the country. It has been a highly successful Scheme so far with more than 15 million LPG consumers enjoying the transfer of over Rs.2, 000 crore into the Aadhaar linked Bank accounts of LPG consumers.

          It is pertinent to mention that the subsidy burden due to set of domestic LPG was about Rs. 40,000 crore in 2012-13.  Aadhaar based DBTL scheme is an efficacious mechanism to prevent fake/ghost connections and consequent diversion of subsidized LPG cylinders.  This system also permits any citizen not willing to avail subsidy to remain out of its ambit, thereby allowing for self-selection to some extent.

Massive de-duplication of LPG connections saves enormous amount of Public Money
 Oil Marketing Companies conducted a de-duplication drive prior to launch of DBTL.  They had blocked over 80 lakh LPG connections based on the result of de-duplication which has lead to a saving in LPG subsidy of around Rs. 4000  crore per annum.   Further Aadhaar based de-duplication has made possible the detection of such multiple connections which may have remained undetected.

LPG Connection Portability across oil companies introduced
 Portability as a pilot project was launched in Chandigarh on 11.1.2013 on intra company basis.  Subsequently, the scheme was extended in 24 cities on 5.10.2013 on intercompany basis.  Under this scheme LPG consumers have choice to switchover from their initial distributor to any other distributor of his choice within the same cluster.  Portability scheme would result in better customer services as the distributor losing customer will always look forward to woo existing customers with improved services.  This will also generate competition among the LPG distributors leading to improve customer services.

3 States indicate 7 districts for Direct Transfer of Cash Subsidy on PDS Kerosene (DTCK)
In line with announcement of one time grant of Rs 100 crore to each State joining the Petroleum Ministry’s Direct Transfer of Cash Subsidy on PDS Kerosene (DTCK) Scheme, 3 States- Rajasthan, Maharashtra & Goa came forward during the year.  They indicated 7 districts for implementation of the scheme in 2013-14.  The scheme will help curb diversion of Kerosene and save public money from going into wrong   hands. As show in by a Pilot Project for DTCK in the Block Kotkasim, District Alwar (Rajasthan) in December 2011 by MoPNG.  Only 40% of earlier allocation was found to be the actual demand of Block Kotkasim, District Alwar.

Fast racking Project implementation in P&NG Sector
 During January, 2013 to November, 14 Infrastructure projects costing Rs.150 crore and above were completed and another 85 projects are being implemented at present.  Petroleum Ministry took effective measures for fast tracking of Petroleum & NG sector projects. Quarterly Performance Review meetings all Public Sector Undertakings (PSUs) under the Ministry and periodical detailed review meetings are also taken from time to time. For delays in particular projects, the concerned proponents are advised to draw catch-up plans. Close monitoring of such projects is maintained at the highest levels by the project implementing agencies.

Foreign Direct Investment (FDI) Policy Liberalised for Oil & Gas Sector
In order to attract Foreign Direct Investment (FDI) in the sector, the FDI policy was further liberalized in refining during the year as per circular dated 22.08.2013.  This is expected to facilitate more projects, strengthen domestic value addition and establish India as refinery hub.  Now joint venture refineries with PSUs can be set up with FDI through automatic route upto 49%.  This stipulation was limited to 20% earlier. It may be noted for other areas including other petroleum refining projects, FDI up to 100% is allowed.   

RGIPT Making Steady Progress
Rajiv Gandhi Institute of Petroleum Technology (RGIPT) set up by Government of India under the aegis of the Ministry of Petroleum & Natural Gas (MOP&NG), and accorded the eminence of an “Institute of National Importance” along the lines of IITs has set its vision to serve as the fountain-head for nurturing of world class human capital in the broad fields of Petroleum Technology and Engineering along entire hydrocarbon value chain. Offering B. Tech in Petroleum Upstream & Downstream and MBA in Petroleum and Energy Management from August 2008 onwards, the institute has also started M.Tech and Doctoral programs. RGIPT has now entered in to the 6th year of functioning. Today RGIPT has an overall strength of 370 Students in Rae Bareli / Noida campus.

Currently two campus development projects are in progress at Jais (District – Amethi, UP) and sirsagar (Assam). And RGIPT is scouting For Establishment of Centre in South India (Bangalore) as well.

Implementing Ethanol Blended Petrol Programme to enhance oil security
 To achieve the objective of the utilizing domestic ethanol for supplementing fuel availability under Ethanol Blended Petrol (EBP) Programme, Cabinet Committee on Economic Affairs on 03.07.2013, decided that ethanol would be procured only from domestic sources to achieve the mandatory requirement of blending 5% ethanol with Petrol across the country (except North-eastern States, J&K, Andaman and Lakshadweep) by October, 2013.  Govt. also decided that OMCs and Sugar Industry Associations may interact with each other on a regular basis to achieve the target.  Another important aspect of the decision is implementation of EBP programme by OMCs as per ethanol quantity becoming available to achieve the mandatory level.  Pursuant to this, OMCs are implementation the Programme in notified 20 States and 4 UTs as per the availability of ethanol.

Mega Campaign for Conservation of Fuel
 In a view of growing demands for petroleum products in the country and our dependence on imported crude oil, Petroleum Ministry launched a ‘Nationwide Mega Campaign’ on 1st October 2013 in association with Petroleum Conservation Research Association (PCRA) and Oil Marketing Companies (OMCs) to generate awareness amongst the consumers for making efforts to conserve precious petroleum products, with special focus on transport sector.  The objective is to motivate the consumers in cities and towns to minimize their fuel bills so as to help the Nation in reducing oil imports.  Further, the Petroleum Ministry started observing ‘Bus Day’ on every Wednesday since 9.10.2013 in the Ministry and Oil PSUs.  All the officers and staff members in the Ministry and Oil PSUs use only public transport to commute to office and back home on this day. On the appeal of Petroleum Minister State Government of Karnataka also issued direction for use of Public Transport.

Building strategic crude oil Reserves, 3 locations near completion:
Country’s aspiration of having Strategic Crude Oil Reserves reached closure to realization during the year.  The 3 locations Vishakhapatnam (1.33 MMT), Mangalore (1.MMT) and Padur (2.55 MMT) achieved physical progress between 88-96%.  Highly complex & technologically challenging, completion of these storages will ensure putting in place an emergency response capability of the country, to meet unforeseen crude oil supply disruptions. This facility is being set up an investment of about Rs.4000 crore. 

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