Professional Documents
Culture Documents
Reliance awards $25 million services contract to Norwegian firm in D-6 block
Nov 22: Reliance Industries Ltd (RIL) has awarded a major services contract for the MA
field development, located in its Krishna Godavari producing block KG-DWN-98/3, to the
Norwegian services provider Aker Solutions. Talking exclusively to Indian Petro News on
Friday (November 20, 2009) reliable company sources, based in Mumbai, revealed that
the $25 million contract was awarded to Aker Solutions of Norway last week after a
comprehensive bid process. The contract includes testing and maintenance of subsea
equipment around the MA crude discovery for a period of three years, sources added.
Aker has previously delivered subsea production systems to Reliance’s fast-track projects
in the KG basin.
Reliance has made a total of 19 discoveries in the deepwater block, out of which three
are under production. The MA oilfield in the block started oil production in September last
year and is currently producing between 10,500 and 11,000 barrels of oil per day from
three wells. By Sadiq Shaban Details
DGH misled country on CAG audit of D-6 development cost: Rajya Sabha MP Tapan
Sen
Nov 22: Communist Party Rajya Sabha MP Tapan Sen has raised the issue of the
Directorate General of Hydrocarbons` (DGH) alleged duplicity in declaring that the
Comptroller and Auditor General (CAG) had completed an audit of the cost expenditure in
Reliance Industries Ltd (RIL) D-6 block in the Krishna-Godavari Basin when, in fact, the
financial watchdog had not. The demand for an audit of D-6 had cropped up at the time
when allegations of "gold-plating" of the cost estimates for the $8.8 billion development
plan in the gas field had first been made by several public personalities, including Sen.
The CAG was engaged by the government to carry out the audit of the books of
accounts for the D-6 project during the years 2006-07 and 2007-08. It subsequently
refuted the DGH`s statement that the audit stood completed.
Sen has indicated that this contradiction was tantamount to misleading the country. He
pointed out that while the ministry did appoint experts for the purpose of examining the D-
6 development cost estimates -- namely Mustang Engineering of the USA and P.
Gopalakrishnan -- there were apprehensions of a conflict of interest, as both of these
parties had collaborated with RIL in formulating the development plan for the D-6 project
as well as earlier E&P projects.
Sen has also pointed out that the Committee of Secretaries that was formed to
examine the issue of KG gas pricing had specifically asked for a cost audit by the CAG
before fixation of the price of D-6 gas by an Empowered Group of Ministers. This was not
complied with and, allegedly for inexplicable reasons, the DGH had gone ahead to
declare that the audit had been carried out by the CAG.
Under these circumstances, Sen has urged Deora to ask the DGH to explain its
statement.
Comment: With the controversial departure of V.K. Sibal, Sen`s demand for a
clarification does carry any meaning.
(Click on Details for more information) Details
Tension between CB-ON/3 partners-I: DGH calls for action on operator for drilling
unauthorised well
Nov 22: The Directorate General of Hydrocarbons (DGH) has asked the government to
formulate a course of action against the operator -- Essar Oil Ltd (EOL) -- of the CB-ON/3
onland pre-NELP block in the Cambay Basin for covertly drilling a well -- dubbed ESU-4 --
in without obtaining prior approval of the operating committee and management
committee of the acreage. Since this is allegedly a gross violation of the Production
Sharing Contract (PSC) for the acreage -- in which Essar has a 70% stake, while the
remaining 30% is held by the licensee, ONGC -- the DGH has asked the ministry to "take
a view on the issue, as deemed fit" .
The controversy has arisen because of serious differences between the partners in the
CB-ON/3 onland oil, gas and CBM field in Gujarat.
Skirmishes between the two over how to run the block had occurred frequently in the
past. Most recently, ONGC refused to consent to an EOL plan for enhancing the
recovery factor in the field on the ground that not enough information was supplied by the
private operator.
Given the impasse over EOL's unilateral field development activities in the block,
ONGC has disallowed drilling of new exploratory locations, permitting only a review of the
exploratory locations approved by both sides at the operating committee level.
ONGC has stonewalled discussions on the well that was covertly drilled. The
development and production budget for 2009-10 stands unapproved following ONGC's
tough stand.
(Click on Details for more information) Details
Tension between CB-ON/3 partners-II: War of words escalates after ONGC served
notice for defaulting on cash calls
Nov 22: ONGC has gotten into a war of words with Essar Oil Ltd (EOL), the operator of
the CB-ON/3 onland block in Gujarat, after being served a default notice for not
contributing towards its share of cash calls during development operations in the acreage.
Readers will note that oil and gas were discovered in this block by ONGC, prior to its
award to Essar under the Pre-NELP licensing regime.
Substantial quantities of coal bed methane gas have also been unearthed, though the
government is still deliberating over granting exploitation rights for this resource within the
same contract area.
Subsequent to the completion of initial exploration in the acreage, ONGC had acquired
a 30% stake in the block in its capacity as licensee, as per the stipulations of the
Production Sharing Contract (PSC), which left Essar with a 70% participating interest.
(Click on Details for more on the face-off between the two partners) Details
NRL Briefs
Nov 22: Numaligarh Refinery Ltd (NRL) has operated its Assam-based refinery without
Loss Time Accident (LTA) since February 18, 2002. As on October 1, 2009, NRL`s
cumulative LTA free manhours reached 13 million.
Rail despatch of petroleum products from NRL`s Siliguri Marketing Terminal has
commenced with effect from June 10, 2009. The construction of the terminal was delayed
as also the product pipeline connected Numaligarh with the terminal because of technical
and contracting problems. At present, both the Numaligarh-Siliguri product pipe line as
well as the marketing terminal are operating smoothly.
The Diesel Quality Upgradation project being implemented at the Numaligarh Refinery
is progressing well and is expected to be completed by April, 2010. As on September 15,
2009, an overall progress of 44% was achieved on the project, as against a schedule of
49%. Further, 57, out of scheduled 59 milestones, have been achieved.
NRL has indicated that continuous follow up with the Assam government for withdrawal
of Entry Tax on crude has not yielded the desired results. On the other hand, the state
government issued an ordinance dated September 12, 2008, inserting a deeming
provision in the 2008 ET Act, making the 2008 ET Act applicable retrospectively from
October 1, 2001. Subsequently, the government issued a notice dated September 16,
2009, to NRL, proposing summary assessment of Entry Tax for the period between
November, 2006, to May, 2008. (Click on Details for more information) Details
Captive allocation of 12.42 MMSCMD gas to RIL-I: Mulayam Singh wants allocation
to be revoked
Nov 22: The Member of Parliament and the Chairman of the Standing Committee on
Energy Mulayam Singh Yadav, has written a letter to the Prime minister Manmohan
Singh seeking cancellation of the captive allocation of 12.42 MMSCMD of gas to Reliance
Industries Ltd (RIL) by the petroleum ministry. He has also sought an explanation from
the ministry for its decision to allocate gas to RIL for captive use in the absence of a
policy for captive consumption by the contractor.
Yadav claims that this allocation is in violation of the terms of the Production Sharing
Contract (PSC) and the monetary benefit of this unjustified allocation to RIL works over
Rs 20,000 crore. It is pertinent to note that, the petroleum ministry, while deciding on the
additional allocation of 50 MMSCMD of KG D-6 gas, on October 27, 2009, granted
around 12.42 MMSCMD gas to various units of RIL including the company's captive
power plants.
The MP pointed out that, as per the PSC between RIL and the government, all sales
are required to be at arms length prices and there cannot be an arms length pricing
possible for captive use by the contractor (RIL itself). Hence any captive consumption by
contractor is in violation of the PSC.
Furthermore, the Gas Utilization Policy (approved by the EGoM) has not framed any
policy for captive consumption by the contractor. In the approved policy, captive power
plants, petrochemicals and refineries figured quite low in the priority list as decided by the
EGoM. In light of this, it was surprising that the petroleum ministry has chosen to allocate
gas to these sectors rather than allocating it to the much needed power and fertilizer
sectors. (Click on Details for more information) Details
Captive allocation of 12.42 MMSCMD gas to RIL-II: Mulayam wants EGoM to fix gas
price at $10/mmBtu for non-priority sectors
Nov 22: The Chairman of the Standing Committee on Energy and MP Mulayam Singh
Yadav in his letter to the Prime Minister has asked him to direct the empowered Group of
Ministers (EGoM) to immediately examine the gas price and valuation for all captive
consumption and non-priority sectors like petrochemicals and refineries and keep it
equivalent to cost of alternate fuels at $10/ mmBtu. This would increase government
revenues by over Rs 10,000 crore -- which was more than what the government was
attempting to raise by divesting shares in Navratna companies such as NTPC and NHPC
-- in next five years from royalty, taxes and profit petroleum.
Yadav argued that, in light of the fact that the EGoM has taken no decision on the sale
price and valuation for captive use by the contractor, selling KG basin gas to these non-
priority sectors at the same price as power sector, that is, $4.2 / mmBtu makes no
economic rationale. He pointed out that it was a long standing policy of the government
that differential gas pricing for priority (power and fertilizer) and non-priority sectors
(petrochemicals, captive power and refineries) would be followed. Currently, domestic gas
prices -- under the APM -- for power and fertilizer consumers are fixed at $2.06 /mmBtu,
while all other sectors pay more than twice that rate.
He further argued that this differential pricing was a sensible decision, which has
survived many years, as it is logical that non-priority sectors should pay gas prices
equivalent to cost of alternate fuel for a resource which is domestically in short supply.
He also raised concern that another adverse impact of this decision would be on the
public sector undertaking, Petronet LNG Ltd (PLL) which would suffer huge losses as RIL
and others would not be using their facilities in future. (Click on Details for more
information) Details
News Briefs
Nov 22: Jindal Drilling gets five-year firm order for charter hire of drilling unit
'Noble Ed-holt' from ONGC: Jindal Drilling & Industries Ltd has been awarded a firm
order for charter hire of a drilling unit -- dubbed Noble Ed-Holt -- from ONGC for a period
of five years. The total estimated value of the contract has been pegged at Rs 635 crore.
This rig is likely to get deployed in the month of December 2009.
--With this, the total number of company's operational rigs will remain at five.
--The number of directional drilling equipment is 22.
--The total order book as on date, stands at Rs 2,850 crore approximately.
SAAG RR allots 48.6 lakh shares to three foreign companies: SAAG RR Infra Ltd,
which is apparently facing a financial crunch, has -- pursuant to the approval of the
shareholders for issue of 4.86 million equity shares of Rs 10 each at a premium of Rs
9.90 per share -- allotted 48.6 lakh equity shares at a price of Rs 19.90 per share to the
following investors on November 16, 2009:
--Lynhurst View Investments Ltd (Foreign company); Equity shares allotted: 16,20,000
--Efficient Premium Investments Ltd (Foreign company); Equity shares allotted: 16,20,000
--Perfect Assets International Ltd (Foreign company); Equity shares allotted: 16,20,000
Aban Offshore: Aban Offshore Ltd -- in respect of issue of equity shares of face value
of Rs 2 each to Qualified Institutional Buyers (QIBs) under Qualified Institutions
Placement -- has decided to close the bid period, and approved the issuance of up to
5,697,135 equity shares at a price of Rs 1224.30 per equity share (including a premium of
Rs 1222.30 per equity share), aggregating to Rs 697 crore.
--Furthermore, the company has informed that the floor price in respect of the aforesaid
Qualified Institutions Placement, based on the pricing formula as prescribed under
Regulation 85 of Chapter VIII of the SEBI ICDR Regulations, is Rs 1224.28 per equity
share. Details
Indo American Synergy seeks 5 MMSCMD of natural gas for its upcoming 1000 MW
power project
Nov 22: Indo American Synergy Limited (IASL), a part of the Densons Group, has sought
an allocation of 5 MMSCMD of gas on a top priority for setting up of a 1000 MW power
project. The company is in the construction and contracting business but is expanding
and diversifying into gas based power
The company plans to setup a natural gas based 1000 MW Open Cycle or Combined
Cycle Power Plant (CCPP) with two Gas Turbine Generators (GTGs) of 500 MW each at
any feasible location in India. The company is planning to set up the power plant at any
suitable location near the trunk-pipelines (24" to 60") so that it is easy to source
uninterrupted supply of natural gas. However, the preferred states are Punjab, Haryana,
Delhi, U P, Rajasthan, M P. Gujarat and Karnataka.
IASL will initially complete a 500 MW unit, It is scheduled to go April 2013. The second
unit for the additional 500 MW is planned for commencement by mid-2014.
The power generated from the plant will be fed into the national grid.
The company has also obtained a letter of comfort from GAIL -- the bulk carrier and
transporter of natural gas -- for supply of natural gas. The company has made similar
requests to Reliance Gas Transportation Infrastructure Ltd(RGTIL) and Gujarat State
Petronet Ltd (GSPL).
(Click on Details for more information) Details
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