Thursday, December 23, 2010

Oil and Gas Sector Scales new heights in 2010
Year End Review - 2010

The Year 2010 has been remarkable for Oil and Gas sector as several important initiatives were taken by the Ministry of Petroleum and Natural Gas for its development, growth and for improving customer services, quality and reach of the petroleum products. Apart from increase in oil and gas production, major steps were taken for accelerating efforts to explore new areas, for maintaining surplus refining capacity, for introducing better grade fuels (Bharat Stage III & IV) petrol and diesel, launching flexi-time LPG cylinder delivery scheme, etc. To tackle the situation arising out of volatile global oil prices, pricing reforms with equitable burden sharing were adopted. Significant successes were achieved on the oil-diplomacy front and the high point was securing interest for Indian consortium led by ONGC Videsh in oil rich Carabobo basin of Venezuela.

Accelerating exploration and production

The year saw consolidation and increase in production of crude oil and natural gas after two major discoveries were put on production last year gas productions KG D-6 field and crude oil production from Barmer field. Crude oil production which was stagnating around 33 Million Metric Tonne (MMT), is expected to be higher by about 10%. The natural gas production, which used to be around 80 Million Metric Standard Cubic Meters Per Day (MMSCMD) has increased to 140 MMSCMD. In order to intensify efforts of exploration of hydrocarbon in the country as many as 31 exploration blocks were awarded under the 8th round of New Exploration Licensing Policy (NELP-VIII) with the signing of Production Sharing Contracts (PSC) on 30.6.2010. Similarly, 7 blocks were awarded for exploitation and production of 7 coal bid methane blocks in July. Buoyed by the success of NELP rounds with 87 discoveries so far, Government has further offered 34 blocks on 15.10.10 under NELP-IX.

Augmenting supply of natural gas

The supply of natural gas a preferred fuel and feedstock for industries has been augmented substantially. Besides domestic production, the options of trans-border imports were pursued. In order to augment long term supply of natural gas in the country an inter-governmental agreement was signed at Ashgabat for implementation of Turkmenistan-Afghanistan-Pakistan-India (TAPI) in the month of December. The Iran-Pakistan-India (IPI) pipeline project is also under consideration/discussion for sourcing natural gas. The Government is also endeavouring to increase the pipeline infrastructure in the country especially in southern and eastern regions of the country. The City Gas Distribution projects to supply Piped Natural Gas (PNG) and Compressed Natural Gas (CNG) are also being encouraged with an aim to extend the coverage to more than 200 cities from current 19 cities.

Oil diplomacy in higher gear

In order to achieve the objective of oil security, the Ministry of Petroleum and Natural Gas engaged several countries/fora in bilateral/multi-lateral talks. These include attending/holding international meets like International Energy Forum meet at Cancun, Mexico in March, 2010, Petro-tech 2010 in Delhi, 4th ASEAN Energy Ministers Summit at Dalat, Vietnam. Indian delegations also had bilateral talks with various other oil rich countries including Angola, Canada Iran, Mexico, Nigeria, Russia, Sudan, Turkmenistan, Venezuela, etc.

Major successes in the oil diplomacy include signing of an agreement between national oil company of Venezuela (PDVSA) and a consortium of Indian oil PSUs comprising ONGC Videsh Ltd. (OVL), IOC and Oil India Ltd. (OIL) ONGC Videsh for development of project 1 in oil rich Carabobo basin in the month of May. The Ministry also signed inter-governmental agreements with US, Russia and Angola for enhancing cooperation in the oil and gas sector. The bilateral/multi-lateral engagement also helped in arriving at specific agreements with the oil companies of various countries. An agreement between ONGC Videsh and Sistema of Russia was signed on 21.12.2010 during the visit of the Russian President for consolidation/expanding exploration activities of OVL in Russia and CIS countries. The Indian proposal for formulating a joint strategy to maintain stability in global oil prices was endorsed by 60 odd countries at the International Energy Forum meet in Mexico.

Introduction of BS-IV/III petrol and diesel

Efforts of the Ministry of Petroleum and Natural Gas to supply environment friendly green fuels crossed a significant milestone with introduction of Bharat Stage-IV (BS-IV) petrol and diesel in 13 major cities and Bharat Stage (BS-III) petrol and diesel in the entire country. Whereas introduction of BS–IV petrol and diesel was completed on single day i.e. on 1st April, 2010, in 13 major cities, the supply of BS-III petrol and diesel was fully implemented by 22nd September, 2010 in the rest of the country ahead of the deadline of 1st October, 2010. All the public sector oil companies invested an amount of about Rs. 32, 000 crore in the fuel upgradation projects to achieve this milestone.

Maintaining surplus refining capacity

The refining capacity in the country has been augmented to 186 Million Metric Tonne Per Annum (MMTPA), which is well above the annual demand of about 138 MMTPA. Oil sector has maintained a status of the highest export revenue earner amongst mercantile products with the country exporting about 51 MMTPA finished petroleum products valued at US$ 31 billion during 2009-10. Whereas the refinery project at Bina, (6 MMPPA) is near commissioning, the Bhatinda refinery project is at advance stage of construction. The Paradeep refinery project has also been progressing well.

LPG to rural households-Dealer selection made transparent

To provide clean cooking fuel in rural areas and to achieve 75% population coverage, with domestic LPG, Rajeev Gandhi Rural LPG Vitrak Yojna was formally launched at Laxmangarh, Rajasthan in March 2010 for setting up small size LPG Distribution agencies in rural areas. To mark transparency in distributor selection, draw of lots held to select the distributors under the scheme. The Oil Marketing Companies (OMCs) plans to open LPG agencies in 2239 locations under this scheme, 49 RGGLVs have already been commissioned. This will greatly improve the cooking conditions in the kitchens of rural house-holds. The scheme will also provide new employment opportunities for the rural population leading to overall economic prosperity. Youth in the age group of 21-45 years are being appointed as distributors under the scheme.

The Ministry of P&NG has also approved a more transparent selection procedure through draw of lots for all the LPG Distributors in the country.

Initiatives for better services & delivery of right quality and quantity

On the occasion of the Oil & Gas Conservation Fortnight, a Check & Fill Campaign has been launched on 26th January, 2010 for ensuring consumer involvement in ensuring pure and full supply of petroleum products. The Government also introduced an innovative scheme for LPG consumers to be able to take delivery of the cylinders as per their desired time. The scheme has been launched in major cities initially including Delhi and surrounding towns and is being expanded to other cities. The Ministry of Petroleum & Natural Gas also signed a Memorandum of Understanding on 30th July with UIDAI with a view to better targeting of subsidized products like LPG and kerosene and avoid diversion of the products as well as improve customer services in the country.

Equitable burden-sharing marks pricing reforms

Major pricing reforms were initiated during the year in the light of highly volatile crude oil prices globally. This was done with a view to both protecting the health of OMCs and keeping prices at affordable levels in respect of sensitive petroleum products – petrol, diesel, LPG-domestic and SKO-PDS. As around 80% of the domestic needs for crude oil is met from imports and keeping in view the recommendations of a High Powered Kirit Parikh Committee, the Empowered Group of Ministers (EGOM) decided to deregulate petrol prices in June 2010. An in-principle decision was taken for de-regulation of diesel prices alongwith marginal hikes in LPG and SKO prices. The Government and PSUs continued to shoulder the major part of the burden of higher under-recoveries during 2010-11, estimated around Rs. 70,000 crore against about Rs. 46,000 crore in 2009-10. The year closes with crude oil prices reaching the highest levels this year prices Indian basket touching US $91.58 on 22.12.2010.

Promoting Ethanol blending with petrol

The Ethanol Blended Petrol (EBP) programme earlier launched by the Government could not sustain owing to non-availability of ethanol in required quantity and other state specific issues. Later, to give fillip to the programme, Government gave fresh relook and decided on 16.8.2010 to implement the EBP programme to the extent of the ethanol made available by the domestic ethanol producers at the ex-factory declared price decided by the Government. As per the Government decision, after ascertaining the actual availability of ethanol in the country, percentage of blend from 0-10% would be recommended area-wise by the working group of officers constituted for the purpose. Government fixed provisional price of ethanol at Rs. 27 per litre. The programme was re-launched in November, 2010 after fresh tenders issued by the OMCs for sourcing ethanol.

Vindication of Government’s decisions on KG D-6 Gas

In a major development during the year the Hon’ble Supreme Court in May, 2010 upheld Government’s decisions and jurisdiction in respect of the pricing and allocation of the natural gas discovered in KG D-6 field. The Supreme Court ruled that PSC is supreme and the natural resources belong to the Government. The decision vindicated the position taken by the government and allocations made by the EGOM constituted by the Government for the purpose.

Encouraging sporting talents – Awards to CWG medal winners

The Ministry encouraged Indian sports persons by giving awards to the medal winners in the Delhi Commonwealth Games held in October 2010. The cash awards were announced by the Petroleum Minister on the eve of the inauguration of CWG 2010 to motivate the sportspersons of the country to give their best during the prestigious event hosted by India. The Ministry also provided oil sector facilities/space at retail outlets for spreading awareness about the CWG 2010 besides.

Maintaining supplies in the wake of Oil spill off Mumbai Port

The oil spill in August, 2010 off-Mumbai coast had caused a petro-product-supply scare in and around Mumbai. Immediate steps were taken under supervision of the Ministry to ensure sufficient maintenance the stocks by oil companies. The supply points were activated in neighbouring states to ensure quick availability of the products in the region. This resulted in maintaining supply-line petro-products.

The year 2010 has been highly successfully in terms of intensifying efforts for domestic exploration and production of hydrocarbons, effective harnessing of oil diplomacy for oil security, augmenting natural gas supplies, introducing better grade fuels and maximizing customers’ satisfaction in oil and gas sector.

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