Ummid Assistant

Applications open for Manmohan scholarship at Cambridge

IIM-Trichy to offer short courses too at Chennai centre

Welcome Guest! You are here: Home » 2012 in Retrospect

India's oil economy saw baby steps in fuel pricing reforms

Tuesday December 25, 2012 12:37:40 PM, Biswajit Choudhury, IANS

2012 in Retrospect

India, Pakistan try to kiss and make up

Sixty-five years after the sub-continent was partioned in 1947, the year 2012 saw New Delhi and Islamabad taking some concrete steps to improve trade and ease travel between them  »

A year of China's transition

Indian sport: Olympic high to suspension low

India-US ties: An affair of the heart set to get deeper

New Delhi: A record hike in retail prices of transport fuels and the decision to slash subsidies on cooking gas were the high points of India's oil economy in 2012, as the sector awaited pricing reforms and a new thrust in the production of hydrocarbons to attain energy security.

While the price hikes bothered consumers of petrol, diesel and cooking gas, the industry awaited government policy reforms aimed at giving a boost to exploration activity and to the search for new fuel sources.

At Rs.5 per litre, the year saw a record hike in diesel prices and a bold reformist step in the first-ever capping of doles on domestic cooking gas, or liquefied petroleum gas, at six cylinders per household per year.

The decision taken by a meeting of the federal cabinet, presided over by Prime Minister Manmohan Singh, in September came as state-run oil retailers had incurred a loss of a whopping Rs.138,541 crore in 2011-12 ($258 billion) by selling the fuel at below cost.

Even after these corrective measures, such losses, called under-recoveries, incurred by the three state-run oil firms -- Indian Oil, Bharat Petroleum and Hindustan Petroleum -- in the current fiscal are projected at around Rs.1,67,415 crore (over $300 billion).
 

Highlights: India's Oil Economy in 2012:

Record hike in diesel price and subsidy cap on LPG
OMC under recoveries amount to Rs.138,541 crore ($258 billion) in 2011-12
Changes to production sharing contract (PSC)
Rangarajan Committee looking into changes in gas pricing
Shortfall in gas production from KG-D6 (Andhra Pradesh) fields
Energy security- state oil companies acquiring assets abroad
Draft policy on shale oil and gas

During the current fiscal, for instance, the government share of subsidy on a cooking gas cylinder is Rs.23 (nearly half US dollar) out of a total subsidy of Rs.504 ($9). The balance is borne by the OMCs.

On the impact of under-recoveries, Indian Oil Corp chairman R.S. Butola told mediapersons just prior to the fuel price increases: "We have a deficit of more than Rs.5,000-6,000 crore ($900 million to $1 billion) every month, depending on oil prices. So, our borrowings will go up."

The last few months of the year also waited for a report of the panel headed by Prime Minister's Economic Advisory Council Chairman C. Rangarajan which is looking at changes in the present regime governing oil and gas exploration contracts as well as gas pricing.

The core of the exploration mechanism is the production sharing contract (PSC) that currently provides for explorers to first recover all of their capital and operating expenditure from oil and gas revenue before sharing profits with the government as per a specific formula.

The existing system was criticised by the national auditor (CAG) as it gave incentives to private producers and minimised the government's profit.

The Rangarajan panel is expected to suggest moving to a production-linked payment regime where explorers may be asked to bid for a percentage of output they would share with the government. The firm offering the maximum would win a block or area.

Between the consumer and explorer, the biggest news in the sector was the decline in gas production from the KG-D6 gas blocks in Andhra Pradesh operated by a consortium led by Reliance Industries Ltd (RIL).

The petroleum ministry reported that natural gas production from fields operated by private companies and joint ventures was around 21.6 billion cubic metres (bcm) in 2011-12 as against 26.7 bcm in the previous fiscal. The main reason cited for the decline was lower production from the Krishna Godavari (KG) basin blocks operated by RIL.

The ministry informed the parliamentary Standing Committee on Petroleum and Natural Gas that RIL have been advised to complete and put on production more gas wells in the area as well as to revive sick wells.

The house panel regretted that the oil ministry had not penalized the operator for shortfall in achieving the Field Development Plan of the KG-D6 block.

RIL has also been wrestling with the oil ministry on the price of gas that will apply when its present $4.2 per million British thermal unit rate for KG-D6 expires in March 2014.

India imports 83 percent of its crude oil needs, and in the search for energy security, state oil companies are pursuing acquisitions in hydro-carbon resources overseas.

"Hydrocarbon sector is the key to ensuring energy security in the country, so it is important that India continues developing its hydrocarbon sector," Petroleum Secretary G.C. Chaturvedi told IANS.

The Oil and Natural Gas Corp Videsh Ltd (OVL), the state explorer's foreign operations arm, produced nearly 9 million metric tones of oil and gas equivalent during the fiscal year ending March from its assets abroad in Sudan, Vietnam, Venezuela, Russia, Syria, Brazil, South Sudan and Colombia.

In its biggest acquisition till date, OVL in November agreed to pay US energy giant ConocoPhillips about $5 billion for the 8.4 percent stake in Kashagan, the biggest oilfield discovery in four decades.

Public sector oil firms have acquired assets in more than 20 countries.

Recently, shale gas has globally emerged as a new and important source of energy. India has several shale gas formations in sedimentary basins and the oil ministry has taken several steps to identify prospective areas for exploration.

In September, the Gas Authority of India Ltd inked a deal to buy 20 percent stake in a shale gas area operated by Carrizo Oil and Gas Inc in the US for $95 million.

The new year holds promise on shale gas. The government has circulated a draft shale oil and shale gas policy and a final document is expected soon.
 



(Biswajit Choudhury can be contacted at biswajit.c@ians.in)



 

  

 



 





 

Home | Top of the Page

Comments

Note: By posting your comments here you agree to the terms and conditions of www.ummid.com

Comments powered by DISQUS

i

I

More Headlines

Faulty genes precipitate bowel cancer risk

White House urged to punish Russians backing US adoption ban

Newsweek publishes its last print issue

CRPF trooper kills four colleagues in Chhattisgarh

Bangalore warms up for India-Pakistan T20 Christmas party

Delhi constable injured during anti-rape protests dies

MIM, Sena councilors clash in Nanded corporation hall over Urdu language

Misuse of social media blamed for communal flare-up in Andhra

Engineering through correspondence soon

Gang-rape protests shift to Jantar Mantar

Stem cell facelift goes awry, woman grows bone in eyes

 

Top Stories

Gang-rape protests shift to Jantar Mantar

Even as Prime Minister Manmohan Singh appealed for calm, hundreds of people, including school children, gathered in the city centre Monday   »

Gang-rape victim's condition worsens, say doctors

PM appeals for calm

Gang-rape protests turn violent, scores injured

 

  Most Read

Newsweek publishes its last print issue

The venerable US weekly news magazine Newsweek released its final print issue Monday, publishing a cover featuring a vintage black and white photograph of the former Newsweek building in Midtown Manhattan contrasted  »

MIM, Sena councilors clash in Nanded corporation hall over Urdu language

The Nanded Municipal Corporation on Monday witnessed pandemonium as Majlis-e-Ittehadul Muslimeen (MIM) and Shiv Sena coucillors exchanged blows over the demand by the MIM councilors to issue municipal general body and other meeting agendas in Urdu language. No one has injured in  »

 

  News Pick

Bangalore warms up for India-Pakistan T20 Christmas party

A defiant India will take on an upbeat Pakistan Christmas night Tuesday in a high-octane T20 tie at the Chinnaswamy stadium in this tech.  »

CRPF trooper kills four colleagues in Chhattisgarh

A CRPF trooper shot dead four fellow personnel and injured another at a camp in Chhattisgarh's Maoist-infested Dantewada district, police said Tuesday. The incident occurred around 1 a.m. at a Central Reserve Police Force  »

Qatar based media firm plans $1 billion movie on Prophet Muhammad's life, teachings

A Doha-based media company has planned to make a one billion dollar epic movie based on the life and teachings of Prophet Muhammad (peace be upon him). Ahmed Al-Hashemi, chairman of Al Noor Holding, said that the movie is endorsed by  »

Egypt's new constitution approved with overwhelming votes

Egypt’s new constitution was approved by 64 percent of voters in a two-round referendum, an official in the Muslim Brotherhood said today citing the group’s unofficial tally, Al Arabiya  »

 

Picture of the Day

Artists performing dance drama based on the ‘Geetgovindam’, by Shri Jayadev, at the inauguration of the 60th Annual Arts Festival, at Kalakshetra, Chennai on December 21, 2012.

 

Recommend the story to your friends

 

 
 
 
 
 
 
 
 

RSS  |  Contact us

 

| Quick links

News

 

Subscribe to

Ummid Assistant

 

National

Science & Technology

RSS

Scholarships

About us

International

Health

Twitter

Government Schemes

Feedback

Regional

History

Facebook

Education

Register

Politics

Opinion

Newsletter

Contact us

Business

The Funny Side

Education & Career

     

 

 

Ummid.com: Disclaimer | Terms of Use | Advertise with us | Link Exchange

Ummid.com is part of the Awaz Multimedia & Publications providing World News, News Analysis and Feature Articles on Education, Health. Politics, Technology, Sports, Entertainment, Industry etc. The articles or the views displayed on this website are for public information and in no way describe the editorial views. The users are entitled to use this site subject to the terms and conditions mentioned.

© 2012 Awaz Multimedia & Publications. All rights reserved.