19 Dec 2011;business-standard.com:Ajay Modi:New Delhi: Unlike the rest of the world, diesel is cheaper here, so industries are finding it makes sense to shift to the fuel. The perils of subsidy take different shapes. It is not only subsidised domestic LPG or kerosene oil being diverted for commercial use. With the price of diesel being stable under government control, industrial users of furnace oil in several states are increasingly turning to diesel instead. This is one reason why the consumption of diesel is now growing at a sharper rate than petrol after several years. It is not just diesel passenger vehicle sales driving this trend. Furnace oil is largely an industrial fuel. It is a key ingredient in generation of electricity and heat in a number of production units. Being market-linked, the price of furnace oil has been moving up. R S Butola, chairman of Indian Oil Corporation, the country’s biggest oil marketer and refiner, said furnace oil is selling at $103-104 per barrel in India, compared to diesel’s price of $97 per barrel. This is due to a price cap on diesel, as a result of which the domestic oil companies are retailing it at a loss of a little over Rs 12 per litre. The pricing of diesel, kerosene and domestic LPG is regulated by the government. Due to the huge gap between the government-set price of kerosene and the market price, largescale diversion takes place and many intended beneficiaries do not benefit. The situation is identical in the case of LPG cylinders meant for domestic use. Globally, the demand for furnace oil is declining, partly aided by concerns for the environment. Since the calorific value of diesel is higher than furnace oil and it is a cleaner fuel, it makes economic sense for consumers to switch over to diesel from furnace oil whenever the price is favourable. Domestic furnace oil consumption fell by 6.5 per cent in 2010-11 and the fall so far this year is around nine per cent. The country’s annual furnace oil consumption is 10.87 million tonnes, against diesel’s 60 mt. In the global market, by contrast, the price of furnace oil has remained below that of crude oil and much below that of diesel. “This phenomenon is causing distortion. Instead of burning furnace oil, consumers are burning diesel, which is not an efficient usage of diesel,” Butola said, adding there is an urgent need for policy makers to look at the pricing policy of petroleum products. The gap between diesel and furnace oil is different across states, due to taxation. The gap is sharpest in Delhi, where furnace oil sells at Rs 55,828 per tonne against Rs 49,501 for diesel. “If one adjusts the diesel price for its higher calorific value, its price becomes even cheaper, at Rs 46,725 per tonne,” said an industry official. In Uttar Pradesh, furnace oil sells at Rs 53,663 per tonne while the diesel price after adjusting for its higher calorific value is Rs 49,359 per tonne. “This trend started in August and it continues to widen, as the diesel price has remained unchanged,” the official said.
Post-Iran deal fiasco, India gets Israel’s gas offer
Sunday, 18 December 2011
19 Dec 2011;timesofindia.indiatimes.com:Indrani Bagchi:NEW DELHI: Israel, which suddenly finds itself flush with natural gas, has offered to export it to India. The offer was made by Israeli finance minister Yuval Steinitz to the Indian government during his visit here last week. In his conversations with finance minister Pranab Mukherjee and National Security Adviser Shivshankar Menon, Steinitz is believed to have said that Israel was looking to export gas to India. According to sources, the two countries will be setting up committees to do a feasibility survey of the offer. The discussions are expected to intensify during a rare visit by foreign minister SM Krishna to Israel in early January. India sources most of its natural gas from Qatar and Oman. Iran, which could have been a major supplier of LNG, cancelled a huge deal to India after it had been signed, following India's vote against its nuclear programme in the IAEA. A gas pipeline from Iran to India via Pakistan too has run aground on security considerations. Within the country, India's much hyped Krishna-Godavari gas basin has run into trouble after disagreement over pricing resulted in a drop in production. So India is in the market for big gas flows. Israel, which had been energy deficient for decades and locked in potentially unstable energy relationships with Arab countries that have been bitterly opposed to it, stumbled on a bonanza when huge quantities of natural gas were discovered off its northern coast. Gas is expected to start flowing from the Tamar field in 2013 and from the Leviathan in 2016. Varying estimates give Israel control over some 400 bcm of gas. It promises to reduce Israel's dependence on Arab states like Egypt and Jordan and offers the prospects of billions of dollars in revenue. Israel has already started the process of picking out export routes to Europe, through Greece and Cyprus. In the east, energy-hungry India offers the best market that is also free from political troubles for both countries. Israel and India have grown closer in the past decade through a strategic partnership that includes defence, count-terrorism and intelligence. It has also flourished despite the fact that India has strong traditional relations with the Arab world. In the early part of this decade, there was talk of a Medstream pipeline carrying gas and oil from Turkey though Israel which would be bound for India. But with Israel-Turkey relationship deteriorating significantly in the past couple of years, that pipeline has been shelved for the present. India is not only energy-deficient, it is overly dependent for oil from West Asia, many countries of which are in the midst of unprecedented political ferment. The Indian growth story would be severely impacted in the event of higher energy prices, or a shortage brought about by external factors. For the past decade, Indian governments have been engaged in diversifying energy sources -- from nuclear to renewable, gas to wind, India wants it all.
17 Dec 2011;economictimes.indiatimes.com:MOSCOW: Russian President Dmitry Medvedev on Friday said that his country will significantly boost the supplies of Liquefied Natural Gas (LNG) to energy hungry India beginning from 2016. Addressing the CEOs forum of the top companies of the two countries, Prime Minister Manmohan Singh said that Indian companies were interested in oil and gas projects in Russia. India's gas consumption is projected to increase 70 per cent by 2020. Mentioning the success of ONGC Videsh Ltd (OVL) venture in Sakhalin-1 offshore oil block, Medvedev also expressed Russia's interest in expanding cooperation with India in hydrocarbons, Foreign Secretary Ranjan Mathai told reporters. OVL has 20 per cent stake in Sakhalin-1, which has estimated reserves of about 307 million tons of oil (2.3 billion barrels) and 485 billion cubic meters of gas (17 trillion cubic feet). Medvedev said that Russian natural gas monopoly Gazprom has inked the memoranda covering major supplies of LNG to India with several Indian companies. Gazprom CEO Alexei Miller last month said the company would take India's growing demand for LNG into account in its plans to build export facilities under the Eastern Gas Programme. According to earlier reports, OVL is in talks with Russia's largest independent gas producer Novatek to participate in the Yamal LNG project. The project, being implemented by Novatek and France's Total, will produce liquefied natural gas on the Yamal Peninsula in the Russian Arctic at an estimated cost of USD 15-20 billion, local media reports said. It will see development of the giant Yuzhno-Tambeiskoye gas condensate field and the construction of an LNG plant. Novatek also plans to build a sea port in the town of Sabetta in Yamal and will construct an ice-class tanker fleet.
16 Dec 2011;timesofindia.indiatimes.com:Christin Mathew Philip:CHENNAI: The Tamil Nadu Pollution Control Board has recommended that the state government set up polymer energy plants to produce crude oil from plastic waste at the Kodungaiyur and Perungudi dumping yards. Everyday Greater Chennai produces 300 tonnes of plastic waste, which would yield 300,000 litres of crude oil, but it may not be immediately viable to set up plants to utilise the entire plastic waste. The Bangalore Municipal Corporation has implemented a similar project. The PCB's idea came from the experience of a private company called MK Aromatics which has been producing crude oil from plastic waste at its plant in Alathur on Old Mahabalipuram Road. A PCB team recently visited the plant and decided to replicate it at the government dump yards, said PCB member secretary K Karthikeyan. He added that the PCB had decided to buy diesel produced from this crude oil at the Alathur plant to encourage the venture. M K Aromatics director Mahesh Merchant said the plant used about 10 tonnes of plastic per day to produce 10,000 litres of crude oil. "There is very little pollution since plastic is not burnt," he said. "The plastic is turned into a molten state using a catalyst and vapourised before being converted to oil. The process is easy as it doesn't need segregation or washing. We also have distilling facilities to make diesel from crude," A plant of 10-tonne capacity costs Rs 10 crore. However, one major problem for the civic authorities is segregation of garbage. Despite repeated attempts at implementing source segregation by distributing colour-coded waste bins to households, source segregation remains a difficult task. To promote segregation of plastic from other waste, PCB has offered to buy plastic from households. For this, the government plans to set up 50 garbage collection centres across the city, each at a cost of Rs 8 lakh. The government has also okayed use of plastic in laying of roads.
16 Dec 2011;timesofindia.indiatimes.com:NEW DELHI: State-run oil marketing companies on Thursday did not raise petrol price as they failed to muster clearance from the oil ministry. The companies are expected to take another shot at getting political clearance on Friday. On record, the companies are free to revise the price of petrol in line with the fuel's bulk market price and global crude. But in practice, they don't move without an informal nod from the ministry, the majority shareholder. The companies were expected to raise petrol price by 50-60 paise from Friday as a sinking rupee and the fuel's rising price in the international bulk market widened the dent in their bottom lines. Sources said the ministry was weighing the impact of giving the companies the nod in the face of looming UP polls and ongoing Parliament session. The ministry may still go for it since the last two rounds of price reductions would have adequately demonstrated to the public the market-linked pricing of the fuel. The oil companies had reduced prices twice on November 16 and December 1 following cooling off in the international bulk rates of petrol and the rupee holding steady - although at a much weaker level. Petrol price was cut by Rs 2.22 per litre, or 3.2%, on November 16 and by another 78 paise per litre from December 1. But since then, the rupee has sunk to new depths - sinking to a historic low of 54.30 to a dollar on Thursday - and the bulk rates of petrol has risen to an average of $111.11 per barrel in Singapore in the last fortnight of this month - from $108.25 a barrel in the previous fortnight. The trend was visible around the time of the last reduction that had come with the warning of a hike in the ensuing fortnight. The only thing that can stop a hike now is if the companies or the ministry take into account Wednesday's sharp drop in crude prices and decide to wait out the fortnight. Brent slid by over $1/barrel on Wednesday as Eurozone worries deepened and oil exporters' cartel Opec ratified Saudi Arabia's higher output. "The under-recovery on petrol is Re 0.55-0.56 per litre. After adding local sales tax, the desired increase in Delhi comes to Re 0.65-0.66 a litre," a top executive of an oil company said.
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