Sunday, May 01, 2005

India Petroleum Update

Foreign Oil Equity - Interesting Developments

An important aspect of letting the Indian global oil equity warriors take on their foreign counterparts on a more equal footing has been autonomy. The decision making speed of the Indian Cabinet does not lend itself favorably to bring a competitive edge in business - except to the competitors perhaps. That is being further rectified now. Apart from increasing the limit of money (which stands at a measly Rs 300 crores) investment for which they will not need a nod from the bosses in the Cabinet, they will also get substantial decision-making powers that would allow them to float companies abroad (some countries insist on a locally registered entity while bidding). These measures are still in the proposal stage however.

The Indian PSU global oil equity warriors viz ONGC, IOC, OIL, GAIL now have a presence in the hydrocarbon sector in 47 countries worldwide. This includes upstream (E&P), downstream (refining), retail (marketing) and pipelines. Currently proposals are being pursued in 14 countries.

Gas On The Domestic Front

The Tapti gas field, offshore Bombay, will see fresh investements from BG India, ONGC and RIL, the consortium partners. The consortium has been selling gas at market-driven prices from April 1, 2005, which is a first-of-sorts in India.

RILs commercialization of its giant gas find in the Bay of Bengal took one more step towards fruition with a government nod for a plan to begin production of natural gas.

As discussed earlier, Petronet LNG is builing new LNG recieving capacity in Dahej and Kochi. While Qatar has offered to increase production and supply of gas to India, in the absence of a supplying agreement for the additional capacity, Iranian gas (for which a 25-year agreement has already been signed) is being considered too.

Downstream On The Domestic Front

The petroleum refining segment registered a negative growth in March to pull down the overall infrastructure growth index. The Prime Minister seems to think that the coal sector is the root cause of the problem though.

The play for Cairn's crude in Barmer, Rajasthan has taken a new turn with IOC getting nominated to buy it. ONGC had earlier proposed setting up a refinery to process the crude, but IOC believes that since the peak output will last only 4-5 years, a new refinery would not make sense. ONGC is however getting thicker with Cairn in Rajasthan via a 50:50 joint SPV that will be into specialized refining facilities, power generation and petro-product marketing, among other things.

Not all was smooth sailing for ONGC this week though - they got warned to stop exporation in Nagaland by Naga rebels, and plans to buy a VLCC look like they will take a while to fructify.

India's Oil Barons

An international magazine has published a list of 'India's Top Ten Oil Men'. The list predictably features, Oil Minister Mani Shankar Aiyar, Reliance Industries Chairman Mukesh Ambani and ONGC Chariman Subir Raha. "Apart from these three, the newspaper has also included President of Reliance Petroleum business, PMS Prasad, Petroleum Secretary, MS Srinivasan, Advisor to Reliance Industries, Atul Chandra, and CMD of Indian Oil Corporation, Sarthak Behuria."


Blowing hot and cold, US President George W Bush, first blamed China and India for skyrocketing oil prices, and then offered to help them develop clean energy technology. The US needs to help itself first I guess, and take a decisive leadership in clean energy. Once the big breakthroughs are achieved, economics will mandate that the rest of us help ourselves. Still this is significant because there is nothing like a global partnership on technology development - and maybe a buyers' cartel too?