Sunday, July 03, 2005

India Petroleum Update

Bangladesh to be bypassed for Myanmar gas

India just might call Bangladesh's buff in the Myanmar-India pipeline deal. In addition to a rather high $125 million transit fee, Bangladesh was asking for free access to Nepal and Bhutan, for allowing India to use its territory to get a gas pipeline from Myanmar (where India owns gas equity in some pretty lucrative fields).

If India decides to build the pipeline in its own territory, the length and hence cost increases, but the transit fee saving compensates for that. In addition it will allow gas from the North Eastern states to be sold to the rest of India, proving a boon for those states. Why did anyone think of Bangladesh in the first place? :)

YAOCOC (Yet Another ONGC-Chinese Oilco Confrontation)

Another Canada-based company that ONGC will fight it out with a Chinese company to takeover. This one is called Petrokazakhstan, and as the name suggests it has huge interests in Kazakhstan. This property is expected to be on the agenda when Chinese President Hu Jintao visits Kazakhstan today for talks. China has huge advantages here as it already has some oil equity (unlike India) and is in the process of building an oil pipeline from that country to China. Of course ONGC and the Chinese CNPC are not alone. Among others there is Chevron Corp with which another Chinese company is in battle for Unocal.

Pakistan has meanwhile refused to buy diesel from India. Pak had agreed to consider the proposal, after Aiyar's recent visit to that country. Even though petroleum product prices in India are much higher than in Pakistan, the reasons for refusal on grounds of cost remain flimsy.

India's oil reserves

When India's oil reserves were last assessed almost 10 years ago, the estimate was 30 billion barrels. A re-assessment is being planned and the results should be interesting.

Follow-up on India's Biggest Gas Find

Size Disputes

First the Indian Director General of Hydrocarbons, VK Sibal, and then the Canadian partner in the consortium, GeoGlobal Resources, came out against the size claims on the find. Both said that current data is rather premature to decide the size of a reserve.

Trivia and Implications

Apparently GSPC almost did not get to bid for the K-G Basin block back in 2002, and Gujarat had to increase the net worth of the company by Rs 300 crore within 48 hours at the height of the Akshardham crisis.

Here are some calculations on possible implications on other gas projects in India.

The deal with Iran is to import 5 tonnes of LNG every year. This works out to 13,700 tonnes a day, which is slightly less than 19 million cubic meters per day.

As per current plans, in 2008 (2006?), Reliance will start commercial production of a little over 14 million cubic meters (mcm) of gas per day, from their KG Basin find. Estimates say that this could go up all the way to 40 mcm per day - within months. The ONGC find in the KG basin stands between 4 and 8 tcf (Reliance's is anywhere between 9 and 14 tcf) based on who you ask. So ONGC could produce another 10 mcm. The GSPC find at current estimate stands at a giant 20 tcf. But because it is from older sediment, compared to the Reliance find, the ultimate flow per day would be around 40-50 mcm per day. Cairn also made a 1 tcf find in the KG Basin.

So sometime around 2009, when the pipeline from Iran would start bringing gas to India, the KG Basin will be supplying almost 100 mcm of gas to Indian consumers everyday, at competitive and maybe even lower cost. By then Iran (7.5) and Qatar(10) together could be supplying India almost 17.5 mcm of gas per day in the form of LNG. Piped gas is about 40% cheaper than LNG, and if we include the Iran pipeline, it looks like there will surely be a shortage of demand for LNG in the country by then. Also consider this then.