Govt to announce premium pricing for difficult fields
In an attempt to incentivize hydrocarbon exploration, the government will soon announce premium pricing on new discoveries in difficult areas. This will allow explorers such as Oil and Natural Gas Corp. Ltd (ONGC) andReliance Industries Ltd (RIL) to charge a premium over and above the price formula approved by the government in October last year.
The ministries of finance and petroleum and natural gas have agreed to the proposal, with an announcement expected shortly. Petroleum minister Dharmendra Pradhantold reporters on Monday that the issue has been resolved. This comes against the backdrop of waning investor interest in the Indian hydrocarbon sector, with around 70% of Indian basins remaining largely under-explored.
In October, the National Democratic Alliance government announced a new gas-pricing formula. According to the formula approved by the Cabinet Committee on Economic Affairs (CCEA), on a net calorific value (NCV) basis, the price applicable from 1 April to 30 September is $5.18 per million British thermal unit (mmBtu).
Calorific value is the heat obtained from one volume unit of gas. While NCV doesn’t take into account the latent heat of vaporization, gross calorific value (GCV) includes all the heat released by the fuel.
“For all discoveries after this decision, in ultra deep-water areas, deep-water areas and high pressure-high temperature areas, a premium will be given on the gas price to be determined as per the prescribed procedure,” the government had said in an 18 October 2014 statement.
While an RIL spokesperson declined comment, D.K. Sarraf, chairman and managing director of ONGC, did not immediately respond to phone calls.
India approved the New Exploration Licensing Policy (Nelp) in 1997—it took effect in January 1999—to boost hydrocarbon exploration. Under Nelp, the government allocates rights to explore hydrocarbon blocks through a bidding process and has done this in nine phases so far for 360 blocks, with an investment of around $21.3 billion. Hydrocarbon explorers in India have made a total payment of $15.41 billion to the Union government as royalties and cess, and $1.93 billion to state governments since 1994.
TAPI pipeline
On the $13 billion Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline project, Pradhan said TurkmenGaz will lead the multinational consortium and invest more than 51% equity in the project.
Consortium representatives from partner countries are to meet in Dubai on 18 and 19 August to hold technical and price discussions.
The project is expected to have an equity-debt ratio of 40:60, with the techno-economic report on the project expected by August-end. The project is expected to take around three years to construct, with the foundation stone to be laid in December this year.
The project has been hanging fire in the absence of an anchor investor for the project, dubbed the peace pipeline for bringing together nations that share complex and difficult relationships with each other.
The Asian Development Bank is the lead partner in the 1,814km pipeline, which is expected to have a capacity of 90 million standard cubic metres per day (mscmd) of gas from Turkmenistan’s Gunorta Yoloten-Osman fields. Of this, 38 mscmd is planned for supply to India.
“The prices will be according to the international market,” Pradhan said.
The development assumes significance given India’s rising demand for energy. India, the world’s fourth largest energy consumer, imports 80% of its crude oil and 25% of its natural gas requirements. Petroleum product consumption in India grew 3.14% to around 163.17 million tonnes in 2014-15.
LNG carriers
GAIL (India) Ltd will reinvite bids for the construction of liquefied natural gas (LNG) carriers this month, easing certain conditions for bidders after India’s largest gas transporter had to scrap a previous tender because of lack of interest from shipbuilders.
Pradhan said the project will be carried out in national mission mode. This comes against the backdrop of Prime Minister Narendra Modi’s “Make in India” programme.
The tender, which was earlier floated on 1 August 2014, was aimed at hiring nine LNG carriers, with the condition that three of them be made in India. However, there were no takers for the tender, since local yards, inexperienced in building such ships, failed to get expert LNG shipbuilders to share technology for the same.
With the technology for building LNG ships currently available with Japanese and South Korean shipyards, Indian shipbuilders—Larsen and Toubro Ltd (L&T), Cochin Shipyard Ltd and Pipavav Defence and Offshore Engineering Co. Ltd—have tied up with Hyundai Heavy Industries, Samsung and Daewoo Shipbuilding and Marine Engineering Co. Ltd, respectively.
GAIL needs the carriers for a period of 20 years to transport LNG from the US to India. Natural gas is shipped as a liquid and is reconverted at LNG terminals.
Already, with a gas consumption of 51 billion cubic metres (bcm), India is the world’s 15th largest consumer and the fourth largest importer of LNG, sourcing 18 bcm.