Economic Editors’ Conference 19th October, 2011-
Opening remarks by Shri Jaipal Reddy, Minister for Petroleum & Natural Gas
Friends from the Media, Secretary, Shri. G.C. Chaturvedi, other senior officials of the Ministry of Petroleum & Natural Gas and the representatives of the Oil & Gas Public Sector Undertakings. A background note on the achievements of the petroleum and natural gas sector has been circulated. I would like to flag some of the highlights.
Energy security remains a concern for India as the country faces challenges in meeting its energy needs. The country depends on imports to meet around 80% of its hydrocarbon energy requirements. The growth in India’s domestic oil & gas production is not commensurate with the growing consumption of petroleum products in a fast developing economy like India. Access to affordable energy is critical for the economic growth of the nation and enhanced standards of living of its population.
Production of Oil & Gas
I would like to bring to your notice that there would be a marginal increase in crude oil production in the country. In 2010-11, the crude oil production increased to 37.68 MMT from 33.50 MMT in 2009-10. In current year, this is likely to reach 38.19 MMT. The increase has mainly come from Barmer, Rajsthan and KG Basin that contributed to over 6 MMT. The actual production of natural gas is 52.22 BCM in 2010-11 and is expected to be lower in 2011-12. Efforts are being made by ONGC, OIL and Private/Joint Venture companies to further increase the availability of crude oil and natural gas production during the coming years.
NELP and CBM Policy
India is now on the World oil and gas map having balance recoverable reserve of O+OEG is about 2041 Million tonnes. Under the eight rounds of NELP, Production Sharing Contracts have been signed for 235 blocks and an investment of US $15.88 billion has been made by Indian and foreign companies. In addition, 33 contracts have been signed under four rounds of CBM. Commercial production of CBM in India has now become a reality with current CBM gas production of about two lakh cubic meters per day. The ninth round of NELP was launched on 15th October, 2010 to offer bids for 34 oil & gas blocks covering an area of 88,807 sq. kms. and would be awarded shortly.
Acquisition of Assets Abroad
Apart from indigenous sources, ONGC Videsh Limited (OVL) and other Oil Public Sector Undertakings namely OIL, IOCL, BPCL, HPCL and GAIL have acquired overseas exploration acreages. The overseas projects by these companies are held directly/jointly/indirectly through subsidiaries and joint venture companies. OVL has produced an Oil and Oil Equivalent Gas of 9.433 MMT during 2010-11 from its 35 projects in 14 countries.
Prices of Sensitive POL products and Under- recoveries by PSUs
The Government is committed to making available essential fuels, particularly cooking fuels to the common man at affordable prices. However, as a result the OMCs have been incurring huge under-recoveries on sale of diesel, domestic LPG and PDS Kerosene.
In view of the alarming situation arising out of high and volatile global crude prices and the imperative of protecting our consumers, Government was compelled to take the following decisions, despite the concerns on budget deficit:
(i) Elimination of 5% Customs Duty on Crude Oil and reduction of Customs Duty on petroleum products by 5%. This will entail an annual revenue loss of about Rs. 26,000 crore to the Government.
(ii) Reduction in Excise Duty on Diesel from Rs. 4.60 per litre to Rs. 2.00 per litre. This will lead to an annual revenue loss of about Rs. 23,000 crore to the Government. The Excise Duty on Diesel could not be reduced any further as the remaining Duty is earmarked for Central Road Fund and Education Cess.
(iii) Minimal increase in the retail selling prices (RSP) of sensitive petroleum products. The RSP of Diesel was increased by Rs. 3/- per litre, PDS Kerosene by Rs. 2/- per litre and Domestic LPG by Rs. 50/- per cylinder effective 25.6.2011 (excluding State levies).
After the above duty reductions and revision in retail prices, the under-recoveries of the OMCs for the year 2011-12 are now projected to be Rs. 1,21,571 crore, at an average price of the Indian Basket of crude oil at US $110 per barrel during the year. Upstream companies will continue to share the burden of under-recoveries of OMCs.
The oil companies are at present free to take suitable decisions on pricing of petrol on the basis of international oil prices, market conditions and commercial considerations. Price of petrol and crude oil has marginally declined in the recent past in international markets. However, the rupee is simultaneously depreciating against US Dollar since September 2011. Hence the decline in prices of petrol and crude oil in international market is offset with the depreciation of rupee. Even after the implementation of market determined pricing, the public sector OMCs have been making price revisions of Petrol in a guarded manner, absorbing a part of the under-recovery themselves.
However, in order to insulate the common man from the impact of rise in oil prices in the international market and in view of the domestic inflationary conditions, the Government continues to modulate the retail selling prices (RSPs) of Diesel, PDS Kerosene and Domestic LPG and the present RSPs of these petroleum products are below the required market price.
I do hope that these steps would help to contain the under recoveries incurred by the PSU oil companies while providing petroleum products at lower than market rates. This in turn would reduce the burden of subsidies for the Government and facilitate utilization of scarce resources to priority areas.
Rajiv Gandhi Gramin LPG Vitrak Yojana
The Ministry of Petroleum & Natural Gas has formulated a Vision-2015 for the oil sector wherein it is targeted to cover 75% of the population with LPG by the year 2015. The LPG customer base is targeted to increase to 16 crore by the year 2015. OMCs have issued advertisements to set up 3637 LPG distributors in 26 States. Out of this 581 LPG distributors have already been commissioned. Selection for the rest of the locations is in progress as per policy.
Supplies to Far Flung Areas
To meet the increased demand of LPG in the North East region, industry is augmenting the bottling capacities from the present level of 304 TMTPA to about 400 TMTPA. In J&K also bottling capacities are being augmented from current 125 TMTPA to 251 TMTPA to meet the growing LPG demand of the region. To enhance the winter stocking in Leh region, the tankages are being augmented from 1500 MT to 3300 MT. Furthermore, at Leh, bottling manual unit filling machines are being replaced with Carousel to improve filling rate. A&N Island already has a bottling plant at Port Blair with adequate capacity to take care of the demand in the region.
Refining capacity and Energy Conservation
During the current year 2011-12, domestic refining capacity has been augmented to 193.40 MMT per annum at present which is expected to increase further to 232.30 MMT by the end of 2011-12. Major initiatives have been taken by Public Sector Oil Marketing Companies to provide cleaner fuel in the country. The refineries have been upgraded to provide Euro-IV fuel to 13 cities and Euro-III to rest of the country, except some difficult areas. The new refineries at Bhatinda, and Paradip would further augment the domestic refinery capacity making India a major refinery hub in South Asia.
In order to promote conservation of energy, a programme for 5% ethanol blended petrol has been taken up and is running successfully in 13 States and 3 UTs. Requisite action for promoting bio-diesel has also been taken up.
Pipeline and City Gas Distribution Network
The primary transportation of POL products across the country takes place by four transportation modes viz. pipelines, rail, coastal and road and they generally represent the cheapest options, in the same order with pipelines carrying about 46% of POL products. The POL pipelines network in the country comprises 28 product pipelines with a length of 11037 kms. and capacity of 67.2 MMT. In addition there are 17 Crude oil pipelines of 7425 kms. and LPG pipelines of over 2000 kms. The present gas pipeline infrastructure in the country is around 13,000 Kms.
With increased availability of gas in the country the network of city gas distribution has been enlarged to cover CNG in 19 cities supplying gas for domestic consumers, public transport and commercial/industrial entities. In Vision–2015, it is envisaged to provide PNG to more than 200 Cities across the country. CNG has made positive impact on the air quality of two big Metros, Delhi and Mumbai by bringing down the level of pollution substantially thereby improving public health. It is our endeavour to provide the benefit of this clean fuel to the people of the country.
Foreign Direct Investment (FDI) Policy under P&NG Sector
The FDI policy has been further relaxed during the current year to attract foreign investment in the P&NG sector. As per the policy 100% FDI is allowed through automatic route for exploration activities of oil and natural gas fields, infrastructure related to marketing of petroleum products and natural gas, marketing of natural gas and petroleum products, petroleum product pipelines, natural gas/pipelines, LNG Regassification infrastructure, market study and formulation and Petroleum refining in the private sector, subject to the existing sectoral policy and regulatory framework in the oil marketing sector. Under refining projects, FDI up to 49% in case of PSUs can be approved through Foreign Investment Promotion Board (FIPB) and in case of Private Companies FDI up to 100% can be automatically approved, subject to Sectoral Policy.
International Cooperation
In order to enhance energy security, India is engaged in bilateral cooperation with foreign countries as well as interaction at regional and global level. We have been participating in a number of Energy Ministerials held in Riyadh, Kuwait, Turkmenistan, Brunei etc. We have signed a MoU with Indonesia for enhancing cooperation in oil and gas. At the same time, we have been pursuing transnational gas pipelines projects from Turkmenistan and Iran.
Rajiv Gandhi Institute of Petroleum Technology (RGIPT)
In order to meet the shortfall of trained technical manpower in the petroleum sector, the Government has set up the Rajiv Gandhi Institute of Petroleum Technology (RGIPT) as an Institute of National Importance in Rae Bareli district, Uttar Pradesh. The institute has started courses on petroleum technology and management and it is expected that it will become fully functional by 2015-16.
Hon’ble Prime Minister of India has laid the foundation for the Assam Centre of RGIPT at Sibasagar, Assam on 19.02.2011. The primary objective of the Assam Center is to offer programmes of education and training of skilled technical manpower in the petroleum sector at the diploma and advance diploma levels.
Conclusion
Our Ministry will continue to work towards evolving effective policy measures to provide energy security to its people. In this regard, the media has a vital role in informing the public on the challenges faced by the oil and gas sector and measures taken by the Government to ensure growth and stability of the economy.
Opening remarks by Shri Jaipal Reddy, Minister for Petroleum & Natural Gas
Friends from the Media, Secretary, Shri. G.C. Chaturvedi, other senior officials of the Ministry of Petroleum & Natural Gas and the representatives of the Oil & Gas Public Sector Undertakings. A background note on the achievements of the petroleum and natural gas sector has been circulated. I would like to flag some of the highlights.
Energy security remains a concern for India as the country faces challenges in meeting its energy needs. The country depends on imports to meet around 80% of its hydrocarbon energy requirements. The growth in India’s domestic oil & gas production is not commensurate with the growing consumption of petroleum products in a fast developing economy like India. Access to affordable energy is critical for the economic growth of the nation and enhanced standards of living of its population.
Production of Oil & Gas
I would like to bring to your notice that there would be a marginal increase in crude oil production in the country. In 2010-11, the crude oil production increased to 37.68 MMT from 33.50 MMT in 2009-10. In current year, this is likely to reach 38.19 MMT. The increase has mainly come from Barmer, Rajsthan and KG Basin that contributed to over 6 MMT. The actual production of natural gas is 52.22 BCM in 2010-11 and is expected to be lower in 2011-12. Efforts are being made by ONGC, OIL and Private/Joint Venture companies to further increase the availability of crude oil and natural gas production during the coming years.
NELP and CBM Policy
India is now on the World oil and gas map having balance recoverable reserve of O+OEG is about 2041 Million tonnes. Under the eight rounds of NELP, Production Sharing Contracts have been signed for 235 blocks and an investment of US $15.88 billion has been made by Indian and foreign companies. In addition, 33 contracts have been signed under four rounds of CBM. Commercial production of CBM in India has now become a reality with current CBM gas production of about two lakh cubic meters per day. The ninth round of NELP was launched on 15th October, 2010 to offer bids for 34 oil & gas blocks covering an area of 88,807 sq. kms. and would be awarded shortly.
Acquisition of Assets Abroad
Apart from indigenous sources, ONGC Videsh Limited (OVL) and other Oil Public Sector Undertakings namely OIL, IOCL, BPCL, HPCL and GAIL have acquired overseas exploration acreages. The overseas projects by these companies are held directly/jointly/indirectly through subsidiaries and joint venture companies. OVL has produced an Oil and Oil Equivalent Gas of 9.433 MMT during 2010-11 from its 35 projects in 14 countries.
Prices of Sensitive POL products and Under- recoveries by PSUs
The Government is committed to making available essential fuels, particularly cooking fuels to the common man at affordable prices. However, as a result the OMCs have been incurring huge under-recoveries on sale of diesel, domestic LPG and PDS Kerosene.
In view of the alarming situation arising out of high and volatile global crude prices and the imperative of protecting our consumers, Government was compelled to take the following decisions, despite the concerns on budget deficit:
(i) Elimination of 5% Customs Duty on Crude Oil and reduction of Customs Duty on petroleum products by 5%. This will entail an annual revenue loss of about Rs. 26,000 crore to the Government.
(ii) Reduction in Excise Duty on Diesel from Rs. 4.60 per litre to Rs. 2.00 per litre. This will lead to an annual revenue loss of about Rs. 23,000 crore to the Government. The Excise Duty on Diesel could not be reduced any further as the remaining Duty is earmarked for Central Road Fund and Education Cess.
(iii) Minimal increase in the retail selling prices (RSP) of sensitive petroleum products. The RSP of Diesel was increased by Rs. 3/- per litre, PDS Kerosene by Rs. 2/- per litre and Domestic LPG by Rs. 50/- per cylinder effective 25.6.2011 (excluding State levies).
After the above duty reductions and revision in retail prices, the under-recoveries of the OMCs for the year 2011-12 are now projected to be Rs. 1,21,571 crore, at an average price of the Indian Basket of crude oil at US $110 per barrel during the year. Upstream companies will continue to share the burden of under-recoveries of OMCs.
The oil companies are at present free to take suitable decisions on pricing of petrol on the basis of international oil prices, market conditions and commercial considerations. Price of petrol and crude oil has marginally declined in the recent past in international markets. However, the rupee is simultaneously depreciating against US Dollar since September 2011. Hence the decline in prices of petrol and crude oil in international market is offset with the depreciation of rupee. Even after the implementation of market determined pricing, the public sector OMCs have been making price revisions of Petrol in a guarded manner, absorbing a part of the under-recovery themselves.
However, in order to insulate the common man from the impact of rise in oil prices in the international market and in view of the domestic inflationary conditions, the Government continues to modulate the retail selling prices (RSPs) of Diesel, PDS Kerosene and Domestic LPG and the present RSPs of these petroleum products are below the required market price.
I do hope that these steps would help to contain the under recoveries incurred by the PSU oil companies while providing petroleum products at lower than market rates. This in turn would reduce the burden of subsidies for the Government and facilitate utilization of scarce resources to priority areas.
Rajiv Gandhi Gramin LPG Vitrak Yojana
The Ministry of Petroleum & Natural Gas has formulated a Vision-2015 for the oil sector wherein it is targeted to cover 75% of the population with LPG by the year 2015. The LPG customer base is targeted to increase to 16 crore by the year 2015. OMCs have issued advertisements to set up 3637 LPG distributors in 26 States. Out of this 581 LPG distributors have already been commissioned. Selection for the rest of the locations is in progress as per policy.
Supplies to Far Flung Areas
To meet the increased demand of LPG in the North East region, industry is augmenting the bottling capacities from the present level of 304 TMTPA to about 400 TMTPA. In J&K also bottling capacities are being augmented from current 125 TMTPA to 251 TMTPA to meet the growing LPG demand of the region. To enhance the winter stocking in Leh region, the tankages are being augmented from 1500 MT to 3300 MT. Furthermore, at Leh, bottling manual unit filling machines are being replaced with Carousel to improve filling rate. A&N Island already has a bottling plant at Port Blair with adequate capacity to take care of the demand in the region.
Refining capacity and Energy Conservation
During the current year 2011-12, domestic refining capacity has been augmented to 193.40 MMT per annum at present which is expected to increase further to 232.30 MMT by the end of 2011-12. Major initiatives have been taken by Public Sector Oil Marketing Companies to provide cleaner fuel in the country. The refineries have been upgraded to provide Euro-IV fuel to 13 cities and Euro-III to rest of the country, except some difficult areas. The new refineries at Bhatinda, and Paradip would further augment the domestic refinery capacity making India a major refinery hub in South Asia.
In order to promote conservation of energy, a programme for 5% ethanol blended petrol has been taken up and is running successfully in 13 States and 3 UTs. Requisite action for promoting bio-diesel has also been taken up.
Pipeline and City Gas Distribution Network
The primary transportation of POL products across the country takes place by four transportation modes viz. pipelines, rail, coastal and road and they generally represent the cheapest options, in the same order with pipelines carrying about 46% of POL products. The POL pipelines network in the country comprises 28 product pipelines with a length of 11037 kms. and capacity of 67.2 MMT. In addition there are 17 Crude oil pipelines of 7425 kms. and LPG pipelines of over 2000 kms. The present gas pipeline infrastructure in the country is around 13,000 Kms.
With increased availability of gas in the country the network of city gas distribution has been enlarged to cover CNG in 19 cities supplying gas for domestic consumers, public transport and commercial/industrial entities. In Vision–2015, it is envisaged to provide PNG to more than 200 Cities across the country. CNG has made positive impact on the air quality of two big Metros, Delhi and Mumbai by bringing down the level of pollution substantially thereby improving public health. It is our endeavour to provide the benefit of this clean fuel to the people of the country.
Foreign Direct Investment (FDI) Policy under P&NG Sector
The FDI policy has been further relaxed during the current year to attract foreign investment in the P&NG sector. As per the policy 100% FDI is allowed through automatic route for exploration activities of oil and natural gas fields, infrastructure related to marketing of petroleum products and natural gas, marketing of natural gas and petroleum products, petroleum product pipelines, natural gas/pipelines, LNG Regassification infrastructure, market study and formulation and Petroleum refining in the private sector, subject to the existing sectoral policy and regulatory framework in the oil marketing sector. Under refining projects, FDI up to 49% in case of PSUs can be approved through Foreign Investment Promotion Board (FIPB) and in case of Private Companies FDI up to 100% can be automatically approved, subject to Sectoral Policy.
International Cooperation
In order to enhance energy security, India is engaged in bilateral cooperation with foreign countries as well as interaction at regional and global level. We have been participating in a number of Energy Ministerials held in Riyadh, Kuwait, Turkmenistan, Brunei etc. We have signed a MoU with Indonesia for enhancing cooperation in oil and gas. At the same time, we have been pursuing transnational gas pipelines projects from Turkmenistan and Iran.
Rajiv Gandhi Institute of Petroleum Technology (RGIPT)
In order to meet the shortfall of trained technical manpower in the petroleum sector, the Government has set up the Rajiv Gandhi Institute of Petroleum Technology (RGIPT) as an Institute of National Importance in Rae Bareli district, Uttar Pradesh. The institute has started courses on petroleum technology and management and it is expected that it will become fully functional by 2015-16.
Hon’ble Prime Minister of India has laid the foundation for the Assam Centre of RGIPT at Sibasagar, Assam on 19.02.2011. The primary objective of the Assam Center is to offer programmes of education and training of skilled technical manpower in the petroleum sector at the diploma and advance diploma levels.
Conclusion
Our Ministry will continue to work towards evolving effective policy measures to provide energy security to its people. In this regard, the media has a vital role in informing the public on the challenges faced by the oil and gas sector and measures taken by the Government to ensure growth and stability of the economy.
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