The trio operating the once-prolific KG-D6 block would collectively defer their massive investment plans in the asset over the indecision on gas price revision, Canadian firm Niko Resources, partner of Reliance Industries and BP for the block, has confirmed.
“If the expected new price for natural gas sales from the D6 block in India is not notified by the government, then a significant portion of the contractor group’s planned investments in the block are expected to be deferred,” Niko said in its annual statement.
Although it was widely expected that any delay in implementing a new, remunerative gas price would foil investment plans of producers in the country including public sector ONGC, this is for the first time an operator is stating this on record.
Last week, the government decided to continue with the current gas price of $4.2 per million British thermal units (mmBtu) till September 30, before which it would hold extensive consultations on the issue of revising gas prices. The UPA government had in January 2014 notified new gas pricing guidelines as per the Rangarajan formula, the implementation of which would have hiked the price substantially from April 1, 2014. The implementation was later put in abeyance due to an Election Commission fiat. >> Read More
The government is likely to hike natural gas rates from July 1 after a new price formulation is approved by the Cabinet, a top Oil Ministry source said today.
The first increase in natural gas prices, based on a formula suggested by a panel headed by C Rangarajan, was to be originally effective from April 1.
However, before a new rate could be unveiled, general elections were announced and its implementation got deferred.
“It (gas price revision) is an issue which needs attention. Decision needs to be taken before July 1,” the source said.
The ministry had on April 21 told Reliance Industries, who was made to sell natural gas from its eastern offshore KG-D6 fields at the old rate of $4.2 per million British thermal unit even after its term had expired, that a new rate would be announced by July 1.
“We had told RIL that the earliest possible date for applying the revised price is July 1 and so we have to announce a new price before that,” he said. >> Read More
The new government is looking at all aspects of the gas price controversy, including a relook at the price formula, to resolve the long standing conflict that continues to dampen investor sentiment.
Petroleum minister Dharmendra Pradhan, who was recently briefed on the pricing issue by the senior officials of the ministry, has asked them to come up with all the perspectives on the issue.
“The minister has asked the officials to make presentation on different aspects of the issue, pending cases, including the arbitration notice issued by Reliance Industries, and issues concerning the Rangarajan formula,” officials said. >> Read More
Forced to sell natural gas at a price that has long expired, Reliance Industries (RIL) categorically told buyers of its KG-D6 gas that new rates as and when approved, will apply from April 1.
In a terse one-page letter to urea manufacturing plants, Reliance Industries said it was supplying about 12.5 million standard cubic meters per day of gas since April 1 at provisional price of USD 4.205 per million British thermal unit, and will charge them the difference between this and the new rate as and when it is approved by the government.
The government had in 2007 fixed a price of USD 4.205 per mmBtu for gas from KG-D6 block in Bay of Bengal for first five years of production. Dhirubhai-1 and 3 and MA fields in the KG-D6 began production in April 2009 and the rate approved expired on March 31, 2014.
The Cabinet had last year approved a new formula for pricing of all domestically produced gas from April 1. >> Read More
Reliance Industries has made drastic changes in gas supply contracts that will jack up its KG-D6 gas price by 10 per cent over and above the new rate of $8.3 coming into effect from next month.
RIL has circulated a new Gas Sale and Purchase Agreement (GSPA) to urea manufacturing fertiliser units for supply of natural gas from its eastern offshore KG-D6 fields from April 1 upon expiry of current 5-year supply contract at month end.
In the new GSPA, RIL has proposed to charge government- fixed rate for natural gas on Gross Calorific Value (GCV) basis instead of current practice of billing USD 4.205 per million British thermal unit on Net Calorific Value (NCV) basis, sources privy to the development said.
The heat produced from natural gas is measured in calorific value. The heat rate is measured in gross (GCV) or net (NCV) basis. One GCV equals to 0.9 NCV and so on a like to like basis billing urea plants the new price of $8.3 per mmBtu on GCV would mean an actual rate of $9.13 on NCV basis. >> Read More
Moody’s Investors Service, (“Moody’s”) today assigned a first-time Baa3 Corporate Family Rating (CFR) to Petronet LNG Limited (“PLL”). The outlook on the rating is stable.
“PLL’s Baa3 CFR reflects its dominant position in a growing industry, as the first and largest LNG terminal operator in India, accounting for about 76% of total installed regasification facilities in India”, says Vikas Halan, a Moody’s Vice President.
The rating also benefits from company’s large proportion of cash flows from long term gas purchase and sale agreements with high quality counterparties, its experienced management team committed to a conservative financial policy, and its strong credit metrics with robust liquidity.
“PLL’s rating is, however, constrained by its small scale, its lack of business diversification, and the execution risk from its large capital expenditure over the medium term, which will result in deterioration of credit metrics over the construction period,” adds Halan, who is Lead Analyst for PLL.
“The stable outlook reflects PLL’s large headroom in its current rating category and our expectation that PLL’s credit metrics will stay appropriate for its ratings over the next 12-24 months, despite execution of largely debt funded expansion plans. It further reflects our expectation that given PLL’s track record and an experienced management team, PLL will execute efficiently its expansion plans and continue to maintain high utilization level at its Dahej terminal and improve utilization at Kochi terminal steadily to at least 50% over next 3 years,” adds Halan. >> Read More
22 February 2014 - 10:23 am
Despite stockpiles imploding and prices exploding in the short-term, The U.S. Energy Information Administration (EIA) has predicted that natural gas production in the US will continue to grow at an impressive pace. Right now output is close to 70 billion cubic feet a day and is expected to reach over 100 billion cubic feet per day by 2040. The trend is likely to continue without hitting a geologic “peak”, and along with this trend will come new marketing opportunities for America. The following exclusive interview with OilPrice.com answsers some of the bigger questions…
In an exclusive interview with Oilprice.com, EIA Administrator Adam Sieminski discusses:
• What’s at stake in lifting the US crude export ban
• Whether lifting the ban is inevitable
• Why energy-related CO2 emissions will likely climb this year
• What we can expect from US coal output through 2014
• Why US natural gas production will continue to grow strongly
• Where we can expect (unexpectedly) new production to come from
• Why Alaska just might surprise us
• Where the biggest new shale opportunities lie
• How production increases might come from ‘non-shale’ formations
• The potential for Colombian shale
• What to expect from Mexico’s reforms
• What the Panama Canal expansion really means
• Why we will see new marketing opportunities for the US
Interview by James Stafford of Oilprice.com >> Read More
12 February 2014 - 7:12 am
The FIR ordered by the Delhi government against two petroleum ministers Murli Deora and Veerappa Moily and Reliance Industries for a future spike in natural gas seems oblivious to the role of former minister Jaipal Reddy in seeking expert advice to shore up India’s energy security, and that of C Rangarajan, head of the PM’s Economic Advisory Council, who came up with the pricing formula to energise the hunt for domestic oil and gas.
Rangarajan, appointed by the Prime Minister in April 2012 on Reddy’s request for a re-look at exploration contracts and suggest alternative models, opted for shifting to revenue sharing from the current cost-recovery fiscal regime.
And for that shift, it recommended linking the price of domestically-produced gas to an average of international benchmarks such as US Henry Hub and the average well-head price at which India imports gas.
Rangarajan explained his approach to CPI MP Gurudas Dasgupta — his petition on the subject is in the Supreme Court — who had alleged that the expert panel recommended doubling of price to $8.4 per million British thermal units even though the actual cost of production in 2011-12 was $2.74 per mBtu.
In his rebuttal to Dasgupta’s letter last August, Rangarajan wrote that the prime concern was shoring up India’s oil and gas output which required moving to the revenue-sharing regime.
“A cost-based pricing of gas would be inconsistent with the new investment regime recommended for new production sharing contracts by the committee. A cost-based regime also gives no incentives for effecting improvements in efficiency for cost-reduction,” says the rebuttal from the Prime Minister’s Office.
It argued that the cost-plus method, as suggested by Dasgupta, was not provided for even under the current contracts which permitted an arm’s length pricing. Secondly, such a system was prone to goldplating of costs that led to disputes and delays and made the investment climate “less attractive”. >> Read More
13 January 2014 - 18:26 pm
Close on the heels of the biggest-ever increase of Rs 4.50 per kg, the cost of CNG may go up by a steep Rs 8 per kg from April 1 when natural gas prices will almost double.
The government on Friday notified the pricing of all domestically produced natural gas at an average of global gas trading hub rates and the cost of imported LNG. Accordingly, the price of gas is expected to be in the range of USD 8.2 to 8.4 per million British thermal units (mBtu) in April as against the current USD 4.2.
Oil Ministry officials said a USD 1 per mBtu increase in the price of domestic gas would result in a hike of Rs 2.93 per kg of CNG in cities that are entirely dependent on domestic gas.
While Indraprastha Gas Ltd, the supplier of compressed natural gas (CNG) in New Delhi, procures 72 per cent of its needs from domestic fields, Mahanagar Gas Ltd in Mumbai buys almost all of its gas from domestic producers. CNG retailers in Gurgaon and Faridabad get almost all of their gas locally.
For cities such as Mumbai, the USD 4 per mBtu hike in natural gas price will translate into an increase of Rs 11.72 per kg, while in Delhi the rate may go up by Rs 8.2 per kg, they said. >> Read More