Marketing and Distribution of Petroleum Products in India

(Updated in July 2011)


The public sector oil marketing companies (OMCs) which include Indian Oil Corporation Ltd. (IOCL), Bharat Petroleum Corporation Ltd. (BPCL) and Hindustan Petroleum Corporation Ltd. (HPCL) are primarily responsible for the marketing and distribution of petroleum products in India. With the opening of retail sector for the private players, Reliance Industries Ltd. (RIL), Shell and Essar have also entered the retail marketing related to petroleum products. The marketing and distribution infrastructure in the petroleum sector include - petrol/diesel stations, liquefied petroleum gas (LPG) distributorships, lubricants and greases outlets and the large volume consumer pumps are backed by bulk storage terminals and installations, inland depots, aviation fuel stations, LPG bottling plants and lube blending plants amongst others.  IOCL is the market leader in terms of marketing and distribution of petroleum products.

ROs in India:

The number of retail outlets (ROs) in India has increased from 31,650 in April 2006 to 40,819 in January 2011. IOCL has the widest network of ROs across India with 19,057 ROs as in January 2011. The number of IOCL ROs have increased almost 2.5 times since April 2002. The number of ROs of HPCL and BPCL have almost doubled since 2002. The increase in the the number of ROs in India from 2005-06 to 2010-11 and the petroleum products' retail market share is as follows:

LPG Distributors in India:

The number of LPG distributors in India has increased to 9,686 as in 2010 from 6,477 in 2001. Out of the total 9,686 distributors approximately 30 percent distributors are present in north India in comparison to approximately 15 percent distributors in east India. The distributors number increased to a 9,001 in 2005 from 6,477 in 2001 and then has achieve a plateau. Only 685 distributors have been added since 2005 in a span of five years. The trend of LPG distributors growth in India and the market share of LPG distributors is as follows:




SKO dealers in India:

There has been a very marginal increase in the number of superior kerosene oil (SKO) dealers in India since April 2004. The number of SKO dealers in India as in April 2010 is 6615 as against 6547 in April 2004. However the number SKO dealership has gone down since April 2008 from 6624 to 6615 in April 2010. IOCL is the market leader with respect to number of SKO dealers in India. IOCL has an extensive network of 3,963 dealers out of the total 6,613 dealers in India. IOCL commands almost 60 percent market share. The trend of SKO dealers' growth in India and the market share of SKO dealership in India is as follows:



As reflected above, the number of retail outlets (ROs) in India has increased from 31,650 in April 2006 to 40,819 in January 2011. The number of LPG distributors in India has increased to 9,686 as in 2010 from 6,477 in 2001. There has been a very marginal increase in the number of superior kerosene oil (SKO) dealers in India since April 2004. IOCL is the market leader in terms of marketing and distribution of petroleum products with 47 percent share in retail business, 53 percent share in the LPG distributorship and 60 percent share in SKO dealership.



Latest News Items. (Click for More)
LNG may help keep power tariff low - Karnataka to gain once pipelines are laid: Petronet 10/11/2014 12:00:00 AM
  • The price of LNG has a direct relation with the crude oil prices. "The use of LNG in the power sector has helped the nation keep the power tariff low," said A K Balyan, managing director of Petronet LNG. He added that hence there had been no substantial hike in the power tariff for the last 14 years. He also said that the Kerala government must take initiatives in laying pipelines to northern Kerala. Meanwhile, Tamil Nadu and Karnataka too can benefit from the Kochi terminal if the pipelines are laid. Balyan said, "Kerala was lucky to get an LNG terminal as other south Indian states were not having any access to this green fuel." He added, the laying of pipelines is crucial to the marketing and distribution of gas.

  • But India was far behind the developed countries as far as pipelines is concerned. He said that the USA has a pipeline network of about 2.5 million kms while India's pipeline is only 14,000 kms. The country has spent Rs 4,600 crore for the Puthuvype gas terminal. But its capacity utilisation is barely 1 per cent. Paul Antony, Chairman, Cochin Port Trust (CPT) said that the laying of pipelines in Kerala, Karnataka and Tamil Nadu is of paramount importance for the successful utilisation of the LNG terminal, at Puthuvype, near here. Speaking at the three-day workshop on the use of LNG, organised at FACT Ambalamedu House, he said that the gas pipelines could not be laid in the northern districts of Kerala due to stiff resistance from the people in the area.

  • Pipeline laying in Ernakulam district has already been completed. This is less than 10 per cent of the total network, connecting three south Indian states. He said, people's mentality has to change to benefit from a massive investment of Rs 4,600 crore spent on the Puthuvype LNG terminal. He also favoured a uniform pricing policy for natural gas. He suggested that in order to avoid the high disparity in the price of LNG in northern India and Kerala, there could be a pooling of gas pricing so that all the users would get it at a uniform price. Jaiveer Srivastava, chairman and managing director of FACT, said, though FACT was looking forward to the successful use of LNG at their ammonia plant, the exorbitant price of LNG has forced the company to suspend the use of gas in January 2014.

  • He said that there would be a favourable trend on the pricing front soon so that gas would be available to FACT at an affordable rate. He also expressed confidence that people would soon become more aware of the importance of LNG and they would demand gas connectivity to their region. "City gas will be a blessing for domestic consumers which will be safer and cheaper than LPG," he said. He also favoured a uniform pricing of gas through a pooling system. Balyan also informed that talks with the Kerala State Road Transport Corporation (KSRTC) are at an advanced stage for use of LNG in the corporation buses. Hindustan Life Care has already started use of LNG in their Thiruvananthapuram unit.

State-run oil retailers train staff in etiquette to face competition 10/4/2014 12:00:00 AM
  • The next time you visit a fuel retail outlet, don't be surprised if the customer attendant dispensing fuel greets you with a Namaste or a pleasant smile. With an eye on dealing with competition from private fuel retailers after diesel deregulation, etiquette training to staff is the latest value addition by public-sector fuel retailers. In a bid to retain their customers, oil marketing companies (OMCs) have also automated their fuel retail outlets and strengthened loyalty programmes. "Post diesel deregulation, we expect competition in the fuel retailing space to intensify. However, we have taken measures and are fully geared to meet future challenges," said S Varadarajan, chairman and managing director of BPCL.

  • The public-sector oil major has been focusing on its network management by holding dealer panel meetings and inspecting retail outlets through online automation systems. BPCL has so far automated 4,408 retail outlets. "Several focused initiatives like Customer Understanding for Business Excellence (Cube), retail outlet maintenance for ensuring maximum equipment uptime and vehicle tracking system are some steps taken for enhancing customer experience and retention. This will hold BPCL in good stead when the market opens up to competition," BPCL said in its annual report. As part of Project Cube, BPCL says it has learnt that adding small frills such as an air pressure check of tires or providing an oil change facility free of cost or cleaning up the car's windshield while a customer drives into a retail outlet can create loyalty.

  • "Cube has brought us closer to our customers. We are training our field staff at retail outlets to be sensitive towards the needs of a customer and how to talk to customers so that they feel happy. Our staff is also trained to deal with angry customers," says Milind S Patke, team leader, Project Cube. With crude oil prices touching $95.43 a barrel, diesel prices, for the first time in over six years, are at par with market levels. This could lay the ground for the government to officially deregulate diesel. Diesel under-recovery (loss) has been wiped out and there is an over-recovery (profit) of 35 paise a litre with effect from September 16.

  • This is a positive for private fuel retailers such as Reliance Industries and Essar Oil. While Reliance Industries is planning to re-start its 1,400 fuel retail outlets, Essar Oil is looking at expanding its network of fuel retail outlets. Essar has 1,400 outlets and it plans to set up another 1,600 in the next three years, making it the largest private fuel retailer. IndianOil Corporation (IOCL), the largest fuel retailer in the country with 23,993 fuel retail outlets, has launched a professional training initiative - Project Chetna -to enhance service standards of customer attendants on the forecourt.

  • With an emphasis on customer satisfaction, IOCL is automating its entire distribution chain, terminal and depot facilities. During 2013-14, some 1,700 retail outlets of IOCL were brought under automation, taking the total number of automated retail outlets to 6,077. Automating a retail outlet costs about Rs 78 lakh. IOCL says automation will help the customer, dealer as well as the company. Automation includes providing the customer with a printed bill and providing the details of the transaction done. "Many times customers doubt the litres of fuel dispensed against the amount charged. With automation, if the customer so desires, he can see how the transaction took place and verify the veracity of the same," said an official from IOCL.

  • During 2013-14, the company also launched various mobile applications such as X-Sparsh for enhancing dealers' productivity and X-Snehash for provision of relevant information on-the-go for retail customers. "Such unique initiatives of the Corporation are aimed at profit-oriented approach," IOCL said in its annual report. BPCL, which has 12,500 across the country, plans to add more. As a part of its market expansion plan, it has opened 882 new retail outlets with a focus on strategic locations in city and national highway markets, as well as under-represented pockets in rural markets and state highways.

Safety and security of pipeline operations: Measures taken by BPCL 9/23/2014 12:00:00 AM
  • BPCL recently conducted a review of the safety and security management system of its pipeline operations in vogue. In line with issues raised by the Petroleum Ministry, the corporation has initiated the following measures:

  • There is a well established pipeline integrity management system for cross-country pipelines and refineries. As regards marketing locations, the system is in place in LPG as per OISD 130. For POL locations, the system for pipelines/facilities outside the premises/jetties is being developed and shall be completed by end November 2014.

  • The base line data for all cross-country pipelines and in refineries is prepared and available. As regards marketing LPG locations, the same is available except ONGC-Uran pipeline which is 25 years old and is under replacement by a new pipeline. For POL locations, the data is being authenticated and the process will be completed by end November 2014.

  • Thorough inspection and necessary corrective actions are being undertaken in cross-country pipelines, refineries and marketing locations.

  • The pigging of pipelines are being done regularly in cross-country pipelines and the analysis of sludge generated to check internal corrosion rate is carried out at regular intervals as per the relevant OISD standards. The pigging is also carried out in all piggable pipelines in refineries and specific marketing locations in LPG as per applicable standards.

  • The scrapper pigging as per OISD 226 is not carried out as it is applicable only to Natural Gas Pipeline or City Gas Distribution Network. The same is not applicable for our cross-country pipelines, refineries pipelines and marketing pipelines.

  • The functioning of the Cathodic Protection System [CP] for all buried pipelines is ensured by regular monitoring in line with the OISD requirement and corrective actions taken as and when the need arises .

  • 100% power availability is ensured by checking and recording on daily basis at CP feeding locations of Impressed Current CP system.

  • The Intelligent Pigging [IP] Survey is carried out on the piggable pipelines in cross-country pipelines/refineries and marketing locations in LPG. The survey recommendations as well as External Safety Audit recommendations are being implemented in a time bound manner. The status of implementation is presented to the Board on quarterly basis.

  • As per PNGRB Regulations-2010, ERDMPs have been prepared and certified by Third Party Inspecting Agency empanelled by PNGRB for cross-country pipelines, refineries, all LPG and POL marketing locations except in four locations where the certificate is awaited. On-site mock drill is conducted twice in a year.

  • The short-comings noticed during the drills are de-briefed to all participants and action plan chalked out to rectify these deficiencies in a time bound manner.

  • All changes in design and operating parameters are done only after following proper management of Change system.

  • Regular follow-up is being done with the concerned State/District Authorities to ensure removal of encroachments on the pipeline Right of Way.

  • Line patrolling is done on a daily basis using the GPS/GIS based design support system in cross-country pipelines. However, for the Jetty pipelines and the other product transfer pipelines, the VHF is presently being used by the patrolling personnel from the police/contract security staff during the pipeline transfers for communication. The company plans to carry out the study to enhance the use of technology in another two months for other locations and initiate action thereafter.

Now, pooled price for gas under consideration - Power, Petroleum ministries working on Cabinet note 9/8/2014 12:00:00 AM
  • ‘Pooled price’ is emerging as an answer to resolve the difference between stakeholders in the oil and gas sector and their counterparts in power for the proposed new gas price. The Ministries of Power and Petroleum & Natural Gas are working together on a Cabinet note for such a proposal, a senior Power Ministry official said. This (proposal) is expected to be done in sync with the pricing of domestically produced gas, which the Government is to announce by the end of this month.

  • Pooling is deriving an average price for gas produced from all domestic sources. It will also have an element of imported gas, sources in the know said. This is not for the first time the power sector has pitched for pooling of gas prices. Earlier, when the Government had wanted to increase the price of domestic gas, the power sector was very vocal in stating that any increase over $5/unit (gas is million British thermal units) of the base price (excluding transmission charges, local taxes and levies, and marketing margins) is unviable for the electricity generators. According to power industry, every dollar’s increase in gas price will result in electricity costs going up by almost 45 paise a unit.

  • At present, there are several gas pricing regimes in the country - administered pricing mechanism, market-determined price based on pricing schedule and guidelines issued by the Government, gas sold on formula approved by the Government, price derived at arm’s length principle, and pricing under the production-sharing contract regime. With the steep drop in domestic gas output, the Power Ministry has been making efforts to resolve the fuel supply issue of stranded gas-based capacities - 24,148 MW. According to the Ministry, the total gas required for the power sector is 93 million standard cubic metres a day (mmscmd), and what it currently gets is minimal.

  • The current price, at which gas from various sources, including coal bed methane, is being sold to the power and fertiliser sectors is $4.2/unit (gas is measured in million British thermal units) to $6.87/unit excluding local taxes, marketing margins and transmission costs. In fact, most players have refrained from using expensive imported gas, despite enjoying special dispensation of zero Customs duty, as few distribution utilities are willing to buy the electricity generated. Meanwhile, a senior official-level panel comprising Secretaries of Power, Fertiliser and Expenditure, and the Additional Secretary in the Ministry for Petroleum & Natural Gas as member-secretary, has been holding consultations with all the stakeholders, including gas producers to decide on the new price for domestically produced gas, to be effective from October 1.

Petro network to be expanded in Odisha 9/6/2014 12:00:00 AM
  • Announcing Rs 4,500 crore expansion plans for Odisha, Union Petroleum Minister Dharmendra Pradhan said petrol, diesel and LPG network would be expanded to benefit all the consumers in the state. After reviewing the work of Indian Oil corporation, Hindusthan Petroleum Corporation and Bharat Petroleum and their marketing network in Odiaha, Pradhan said the state has LPG consumer base of 28 per cent of the population and it would be raised to 33 per cent this year and 50 per cent household in three years. At present the national average of LPG consumer base is 60 per cent. The endeavour of his ministry would be to bring Odisha at par with national average, he said.

  • Pradhan said three new product pipelines would be constructed between Paradip-Ranchi, Paradip-Durgapur and Paradip-Raipur. The new pipelines will go through several areas of the state, which will carry petroleum products to the most parts of the state. Now the coastal centric distribution network of LPG, petrol and diesel will be widened and expanded to the nooks and corners of the state to achieve the national average, the Union Minister said, adding existing LPG distribution centre network of 404 would be raised to 750 in next three years. Pradhan said new depots, product pipelines, LPG terminals and imported LPG terminals in Odisha would entail an investment over Rs 4,500 crore.

  • Berhampur terminal would be modernised and new depot would come up in Bhubaneswar. In addition to that more depots will be opened in South and Western Odisha. Balasore depot will be modernised under new expansion plan, he said. The Minister said under new expansion plan LPG distribution centres will be established within 15 km radius in all Gram Panchayats of Odisha. He said new expansion plan would create direct jobs to about 5,000 persons. Now over 10,000 people are employed in various petroleum projects of central oil companies in Odisha. Reviewing petrol pump network in the state, the Union Minister said the state had 1449 petrol pumps working at present. Within next three years 300 more petrol pumps will be added to the network.

Indian Oil Corporation limited expects to clock Rs 5 lakh cr in sales in 2014-15 8/28/2014 12:00:00 AM
  • IndianOil Corporation limited (IOCL), country's largest oil marketing company may see its turnover touch Rs 5,00,000 crore for the first time ever, in financial year 2014-15. IOCL's director, finance, P K Goyal during the company's annual general meeting in Mumbai said company's borrowings have declined to Rs 61,900 crore against Rs 86,263 crore in March 2014. "This will improve the bottom-line as well," Goyal said during the annual general meeting of the company held in Mumbai. IOCL clocked a turnover touched of Rs 4,57,553 crore in 2013-14, a jump of 10.3% over the previous year. Its net profit surged to Rs 7,019 crore, up 40.2% compared to 2012-13.

  • Turnover during the first quarter of this fiscal stood at Rs 1,24,956 crore. IOCL scrip was up 0.77% at Rs 355 on the Bombay Stock Exchange. Ashok Balasubramanian, Chairman, IndianOil Corporation said the company is well placed to take advantage of diesel deregulation as and when that happens. "IOCL stands in good stead as we have taken all necessary steps to address that (diesel deregulation)," said Ashok. IOCL is identifying location for setting up its 11 refinery in the country. "We have not identified where we would be setting a refinery. We are considering various options. We have teams for site identification and they are looking at various opportunities," Ashok said adding that new refinery could take shape only in the later part of the 13th five year plan.

  • IOCL is planing a 15 million metric tonnes per annum green field refinery on the west coast. Total investment in the refinery could be at Rs 35,000-40,000 crore. IndianOil controls 10 of India’s 22 refineries. On the exploration and production front, the company said though it is not a major player in exploration and production, its investment in Canada's field will give it gas for its own projects. "We don't expect our selves to become a major E&P player. It is only to take care of the company's needs," said Ashok. This March IOCL bought 10% in Canada-based Petronas' natural gas fields for an undisclosed amount. Petronas will give IOCL the right to 1.2 million metric tons of liquefied natural gas per year for two decades.

  • IOCL's overseas E&P portfolio includes nine blocks spanning Libya, Iran, Gabon, Nigeria, Timor-Leste, Yemen and Venezuela. IndianOil is associated with two successful discoveries in oil exploration blocks, one each in India and Iran. Commercial appraisal of these blocks is underway, it said on its website. IndianOil also farmed into an exploration block in Gabon along with Oil India Ltd. (OIL) as the operator. In addition, the IndianOil-OIL combine has acquired participating interest in a block in Nigeria. The company said in terms of investment, it would do whatever needs to be done for expanding its city gas distribution network. "Regarding procurement plans, we are already sourcing natural gas through Petornet LNG at both, Dahej as well as Kochi. Gas sourcing is not an issue," said Ashok.

GAIL to establish gas distribution network in Patna and Gaya 8/28/2014 12:00:00 AM
  • Gas Authority of India Limited (GAIL) will establish a City Gas Distribution (CGD) network in Patna and Gaya during the first phase of its Rs 10,000 crore Haldia - Jagdishpur 'energy highway' gas pipeline project. Among other cities, Bhagalpur and Muzaffarpur would be given priority for the CGD network and the pipeline was expected to benefit around 40 per cent population of the state.

  • This information was disclosed at a meeting of the Joint Coordination Group (JCG) of GAIL and state Industries Department on expediting CGD projects in Bihar, which was attended by Industries Department Principal Secretary Navin Verma and GAIL Director (Marketing) Prabhat Singh. "The CGD network will be launched in Patna and Gaya during the first stage of the gas pipeline project. Among other cities, Muzaffarpur and Bhagalpur will be given priority. Apart from households and transport facilities, gas will also be supplied to fertiliser, electricity, steel and other big, medium and small industries," said GAIL officials.

  • GAIL officials also said the CGD network would be completed in a phase-wise manner after estimating the demand and technical - economical possibilities. The officials also said GAIL would organise an industrial summit in Patna to publicise the benefits of the use of natural gas in the industries, as well as the dates from which it would be available in the state. Singh met Chief Secretary Anjani Kumar Singh and requested help in finishing the project. The proposed 2,050 km long Haldia - Jagdishpur pipeline would run through West Bengal, Bihar, Jharkhand and Uttar Pradesh and serve as an 'energy highway' to provide environment-friendly fuel to these states. Around 620 km length of the pipeline would run through Bihar.

Diesel decontrol on hold for now - Government wary of upsetting vote banks 8/27/2014 12:00:00 AM
  • The Ministry of Petroleum and Natural Gas has stopped short of proposing complete deregulation of diesel prices. In an inter-ministerial note on the pricing mechanism for petroleum products, the Ministry has endorsed the existing system of raising diesel prices by up to 50 paise a litre every month. Once retailers bring their rates in sync with market prices, a fresh proposal will be put up for the Cabinet Committee on Political Affairs to consider decontrol, the note said. Petrol prices have already been deregulated. This reluctance, according to industry observers, is a clear indication that the Government does not want to take any politically sensitive decision. A rise in retail diesel prices has direct implications for customers - the common man, transporters, power, agriculture; all are key vote banks.

  • Although, bulk diesel rates are linked to market prices, under the dual pricing system most transporters ended up buying from retail outlets. In fact, the note also seeks post-facto approval for bulk supply of diesel to farmer cooperative societies at the price applicable for retail consumers. Another industry insider said that given the BJP’s lukewarm performance in the recent Bihar Assembly bypolls, the Government may become more cautious about complete decontrol. The current under-recovery on diesel for the three oil marketing companies - Indian Oil Corporation, Bharat Petroleum Corporation, and Hindustan Petroleum Corporation - stands at ₹1.78 a litre. Under-recovery is the loss incurred by companies for selling diesel, domestic LPG and kerosene under the public distribution system.

  • The Government offsets the losses incurred by the PSU oil retailers for selling auto and cooking fuel at controlled prices through subsidies. While the major chunk of this burden is shouldered by public sector oil exploration and production companies ONGC and Oil India along with GAIL (India), a part is absorbed by the Government itself. A small portion is shouldered by consumers. The Ministry has proposed that under-recovery for the financial year 2014-15 onwards should be shared equally by the Government and upstream companies (ONGC, Oil India, GAIL).

  • Addressing the longstanding concerns of upstream companies, the Ministry has proposed that the Oil Industry Development Cess paid by ONGC and OIL on crude production from nomination fields - areas given to them prior to auction rounds - be considered as part of their subsidy contribution. The note said that 50 per cent of the total subsidy burden of ONGC and OIL will be the cess paid. According to the note, the gross under-recovery for the current fiscal year is estimated at ₹98,622 crore. The total share of upstream companies will be ₹49,311 crore, but after deducting the Oil Industry Development Cess of ₹10,111 crore, it will come to ₹39,200 crore. The remaining ₹59,422 crore will be met by the Government.

LPG: The new diesel? - Nearly half the FY15 petroleum subsidy to be accounted for by cooking gas 8/19/2014 12:00:00 AM
  • The phased diesel price decontrol, initiated in January 2013, has started showing results, with underrecoveries on liquefied petroleum gas (LPG) sales expected to exceed those on diesel this financial year. In 2012-13, subsidised LPG accounted for 24 per cent (Rs 39,558 crore) of oil marketing companies’ total underrecoveries of Rs 161,000 crore on the sale of diesel, LPG and kerosene. The share rose to 33 per cent in 2013-14 and is likely to further increase to 47 per cent of total estimated underrecoveries of Rs 1,04,500 crore this financial year. The rise is attributed to steady retail LPG prices, the recent rise in the cap on subsidised cylinders to 12 a year and the delay in rolling out the Direct Benefits Transfer programme in LPG distribution.

  • The fact that LPG underrecoveries have become a concern in petroleum subsidy reforms masks the benefits accruing from the fall in underrecoveries on the sale of subsidised diesel, owing to sustained monthly price increases of 50 paise/litre since January 2013. The contribution of diesel to the losses of oil marketing companies fell from 57 per cent (Rs 92,061 crore) of the total underrecoveries in 2012-13 to 44 per cent in 2013-14. It is felt that this financial year, the share will drop to 24 per cent. The last time diesel underrecoveries, as percentage of total underrecoveries, fell below the share of LPG was 2009-10. That year, subsidised diesel accounted for 23 per cent (Rs 9,279 crore) of the total underrecoveries, against LPG’s 35 per cent (Rs 14,257 crore).

  • The share of kerosene has largely remained between 20 per cent and 30 per cent as the government cuts the quota of Public Distribution System kerosene in line with the increasing penetration of cooking gas. Despite the fall in subsidy on account of diesel, gross underrecoveries were expected to remain high this financial year due to the high underrecoveries on the sales of domestic LPG, which would account for most of the overall pie, ratings agency Icra said in a recent note. “At the current level of Indian basket of crude at $110-111 a barrel and the rupee-dollar exchange rate at 60, LPG retail prices might need a rise (excluding taxes) of Rs 40-45 a cylinder even to keep LPG underrecoveries this year at the level of 2013-14,” said K Ravichandran, Icra’s senior vice-president and co-head (corporate ratings).

  • In the past two years, prices of subsidised LPG, which accounts for 86 per cent of oil marketing companies’ LPG sales, have been increased by a mere 3.7 per cent, in two tranches. In July 2012, the price was Rs 399 a cylinder, against the current Rs 414. As of now, oil marketing companies lose Rs 449 on the sale of each subsidised cylinder. In September 2012, the government had announced a cap of six a year on the number of subsidised LPG cylinders. The cap was revised to nine in January 2013 and to 12 in January this year. “The LPG demand growth is expected to remain high due to the increased cap on subsidised cylinders, which tends to encourage diversion of domestic LPG for auto-LPG, as well as for commercial purposes for which prices are deregulated and are nearly double that of subsidised domestic LPG,” Icra said.

  • A senior Indian Oil Corporation executive said overall LPG consumption had fallen from nine million tonnes (mt) a year four years ago to six mt last financial year, owing to a shift to piped natural gas. Analysts argue the relaxation in the LPG cap will not lead to the expected decline in consumption. Decisions to relax the cap on the number of subsidised sales and to keep the Direct Benefits Transfer scheme on hold had also contributed to the high subsidy burden on account of domestic LPG, Icra said.

Power, Oil Ministries officials to meet PMO on gas price pooling - Bid to revive projects stranded for want of fuel 8/19/2014 12:00:00 AM
  • To revive gas-based power projects stuck due to non-availability of fuel, the Power Ministry has renewed its demand for pooling the price of imported and domestic gas. Gas price pooling refers to the weighted average price of imported and domestic gas based on proportion of volume. Officials from the Ministries of Power and Petroleum and Natural Gas will present their views on pricing to the Prime Minister’s Office on Tuesday. The Power Ministry has sought views from companies affected by non-availability of gas. The power sector wants gas at an affordable price and subsidy for the State distribution utilities to enable them purchase electricity generated from gas-based plants. Electricity generated using coal costs ₹3-3.5/unit and this is sold to the consumer at ₹4-5.30/unit. However, electricity generated from gas costs not less than ₹5/unit and the consumer gets it at ₹6-7/unit.

  • With the Petroleum Ministry working on a new price for domestically produced gas, the Power Ministry feels that anything beyond $5/mmBtu is not viable for plants running on this fuel. Domestic gas price is in the range of $4-5.7/mmBtu. For the power plants, it costs $7-8/mmBtu after adding local taxes, marketing margins and transmissions charges. According to power companies, every dollar increase in gas price will raise power costs by 45 paise/unit and the financial health of distribution utilities in the States may not allow them to purchase expensive electricity. The industry’s arguments flow from the fact that two years ago the Government had allowed power companies to import gas without customs duty, but most players had shied away. This was because Indian electricity buyers were not willing to purchase expensive power, said a senior official from NTPC.

  • The landed cost of imported gas from long-term contract is $12/mmBtu, and to the user it is available at $13.5-14. While liquefied natural gas (LNG or imported gas) bought from the spot market is available at $10-10.5/mmBtu, the user gets it at $12.5-13. In 2012, the Power Ministry had issued an advisory to all the developers not to plan any projects based on domestic gas till 2015-16. But, now with output from Reliance Industries-operated KG-D6 block unlikely to increase before 2018-19, and electricity generated from imported gas having few buyers, the power sector is in a quandary.

  • Existing gas-based capacity (commissioned) in the country, as on June 30, was 21,211 MW, operating at an average plant load factor of 23 per cent. Of this, 6,996.5 MW, which is predominantly dependent on D6 gas, is lying idle, as supply from the fields has stopped since March 2013. In addition, 3,760.5 MW gas-based power plants (commissioned without gas tie-ups) are also lying idle, taking the total stranded capacity to 10,757 MW – both public and private sector – and the normative total investment involved is about ₹43,000 crore.

My Eco Energy launches its bio-fuel brand 'Indizel' at Rs 64 per liter 8/18/2014 12:00:00 AM
  • Pune based My Eco Energy (MEE), a bio diesel manufacturing company has launched its product under the brand name 'Indizel', priced at Rs 64 per liter. With this, MEE has begin its supply in Pune market by setting up first bio-diesel fuel station. The company will be engaged in the manufacturing, distribution, marketing and retailing of waste to bio-diesel, a non-petroleum based fuel. The fuel is made from various feed stocks including waste vegetable oils and non-edible oils like used cooking oil and acid oils (a waste from edible oil manufacturing process). My Eco Energy has invested Rs 250 crore for this venture.

  • The company has identified three locations for the manufacturing units at Kolhapur, Noida and Visakhapatnam. Also, MEE will expand its footprints in other states like Andhra Pradesh and Punjab in due course of time. For technology support, it has tied up with Austria based company Energia. My Eco Energy will use the expertise of London based Go Fuels which has been acquired by MEE promoters in 2012 for Rs 50 crore.

  • In the next one year MEE plans to open 500 pumps in Maharashtra. It has a capacity of producing 6.5 lakh litres of fuel on daily basis depending upon the supply of feedstock available. "Bio-fuel requires no new infrastructure, reduces carbon dioxaide emissions by 90 per cent, can be made from wide range of feed stocks and produce higher quality diesel that allows vehicles to run on 100 per cent renewable fuel. we need solutions to make fuel more sustainable, accessible, affordable and compatible in the existing infrastructure", said Santosh Verma, director My Eco Energy.

HPCL's analysis report for 2013-14: Details 8/18/2014 12:00:00 AM

Provided here is a report analyzing HPCL's performance during 2013-14. Following details have been outlined:

  • Global Scenario

  • Crude Oil Imports

  • Physical Performance & Initiatives

  • Enhancement of refining capacity

  • Marketing - retail, LPG, lubes, aviation and natural gas
  • Operation and distribution
  • Pipeline and projects
  • JV and subsidiaries
  • Outlook for 2014-15

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Oil subsidy plea on the boil for selling diesel, domestic cooking gas and kerosene at government controlled prices 8/7/2014 12:00:00 AM
  • The oil ministry wants around Rs 13,140 crore as subsidy for state-owned refiners for selling diesel, domestic cooking gas and kerosene at government controlled prices during the first quarter of the current financial year. State-owned oil marketing companies are keen the finance ministry clears the subsidy bill at the earliest as their first-quarter results are due any time. During April-June, the three retailers lost Rs 28,690.74 crore on diesel, kerosene and cooking gas.

  • Upstream PSU companies ONGC, Oil India and GAIL have been asked to meet Rs 15,546.65 crore, or 54 per cent of the under-recovery or revenue loss. ONGC has been asked to chip in with Rs 13,200.10 crore, official sources said. This is 4.5 per cent higher than the Rs 12,622 crore it had paid in the first quarter of the previous fiscal. OIL has been asked to provide Rs 1,846.55 crore, while the share of gas utility GAIL has been fixed at Rs 500 crore. The government is yet to announce its cash subsidy for the first quarter. Sources said of the upstream subsidy, IOC will get Rs 8,107.21 crore, BPCL Rs 3,830.56 crore and HPCL Rs 3,608.88 crore. Of the Rs 28,690.74 crore revenue loss in April-June, fuel retailers lost Rs 12,129 crore on domestic LPG, Rs 9,037 crore on diesel and Rs 7,524 crore on kerosene sold through the public distribution system.

  • According to some reports, given the efforts to move towards market-linked diesel prices and an expected decline in crude prices, under-recoveries on petroleum products are expected to drop to half of those in 2013-14 through this financial year. Thus, the decline in under-recoveries will have a significant positive impact on both upstream and downstream PSU oil companies. The under-recoveries for the financial year 2014-15 are projected to be Rs 91,665 crore, while the figure was Rs 1,39,869 crore in 2013-14. Meanwhile, oil minister Dharmendra Pradhan said UAE’s national oil company Adnoc and Kuwait Petroleum Corp (KPC) have evinced interest in hiring a part of India’s under-construction strategic storage in Visakhapatnam, Mangalore and Padur (Karnataka).

  • “The national oil companies of the UAE and Kuwait, namely Abu Dhabi National Oil Company (Adnoc) and KPC, have expressed interest (to store about 2 million tonnes of crude in the caverns),” he said in a written reply to the Rajya Sabha here. India, which is 79 per cent dependent on imports to meet its crude oil needs, is building underground storages at Visakhapatnam in Andhra Pradesh and Mangalore and Padur in Karnataka to store about 5.33 million tonnes of crude oil to guard against crude price shocks and supply disruptions. The storages at Visakhapatnam, Mangalore and Padur will be enough to meet the nation’s oil requirement of about 10 days. Official sources said the 1.33mt storage at Visakhapatnam would be ready by October while the 1.5mt Mangalore facility and 2.5mt unit at Padur are expected by mid-2015.

Draft CNG Guidelines-I: Petroleum Ministry issues clarification 8/7/2014 12:00:00 AM

The Petroleum Ministry, in consultation with the Ministry of Law and Justice, recently examined the matter pertaining to "CNG Stations and CGD network" under the PNGRB Act,2006. According the clarification, CNG Station is not covered in the definition of "City or local Natural gas distribution network" provided in the PNGRB Act 2006. Further, no authorization from PNGRB is required for setting up of a CNG station.

With the issuance of the clarification, all interested entities (including CGD entities) may set up CNG Stations in any part of the country. However, in line with the Ministry's present policy for granting marketing right of other transportation fuel i.e. HSD, MS and ATF, a need arose for developing the relevant guidelines for granting marketing rights for CNG, as a transportation fuel, including setting up CNG Stations to the eligible entities.

In the meantime, with a view to ensure that no one takes advantage of the policy vacuum in the interim period, i.e. till the guidelines are finalized, the Ministry had earlier clarified that till the proposed guidelines are finalized, only entities authorized/deemed authorized to set up CGD networks under the PNGRB Act,2006 can set up new CNG stations in their respective geographical areas.

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Increasing investment in oil and gas sector-IV: HPCL's comments on CGD and non-transport fields 7/28/2014 12:00:00 AM

Following are HPCL's comments on CGD and non-transport fuels:

Developing City Gas Distributions (CGDs)

  • Allocation of domestic gas to CGD entities for CNG and domestic usage on long term basis will not only promote investment in CGD but also protect the investment made. This will also facilitate for marketing of CNG to transport sector and households at an affordable price.

  • Local body may declare a corridor where different energy pipelines can be laid and ail requisite statutory approvals are given through a Single Window system including compensation to be awarded.

  • The time period commencing from EOl to award of job and commissioning of facilities should be strictly monitored and adhered. Failure to adhere should be linked to monetary penalties.

  • Provision of tax incentives viz. all tax holidays for 7 years.

Market development for non-transport fuels

  • In current practice, pipeline operators like GAIL, GSPL etc. are involved both in gas transportation and gas marketing activities. Though the pipelines are operated on common carrier principle, pipeline operators are not always liberal to give access in those pipelines to other entities even if it is underutilized, to protect their interest in marketing activities. Hence, it is proposed that transportation and marketing activities may be unbundled, so that separate pipeline entity and gas marketing entity operates on arm's length basis. This unbundling will improve gas marketing efficiency and bring more liquidity in terms of pipeline capacity.

  • As per PNGRB guidelines, the gas marketing infrastructure viz. Gas Pipelines and CGD Networks etc. needs to have third party access. The relevant open access codes in relation to gas pipeline and CGD network needs to be implemented in true spirit. As of date, there is no guidelines for open access in LNG Re-gasification Terminal which needs to be developed.

  • There is mismatch between LNG Re-gasification Terminal capacity utilization and Gas pipeline capacity utilization. Pipelines has long gestation period for laying and commissioning after it is planned. In some cases, even after getting statutory approvals, the pipeline companies face agitation from individual land owners which causes further delay for execution/ commissioning. There are several customers, markets which are not connected with pipeline grid and unlikely to be connected in near future. Direct marketing of LNG for automobile sector and Industrial unit will boost usage of LNG/Gaseous fuel in those markets. Though the direct LNG marketing practice is widely accepted internationally, it is in nascent stage in India. Necessary guidelines needs to be formulated for direct marketing of LNG and quick implementation of the same.

  • Because of localized gas production, limited reach of pipeline and beneficial tax structure, there are few markets where usage of gas/CNG has grown leaps and bounds in India. With the expansion of gas pipeline infrastructures, more numbers of users / markets will have access to gas in future. However, to encourage them for usage of gas and develop gas market uniformly across the country, it is suggested to have uniform tax rates across India.

  • 100% VAT waiver for CNG sales.

  • Incentive for customers who are converting to clean fuels by way of tax rebate/exemption, rebate on taxes for equipment procured for setting up of LNG Terminals, etc.

  • Presently, the gas sales agreements and the gas transportation agreements are biased towards seller or transporter. The strict clauses like "take or pay", "ship or pay", "penal clauses", no protection for customer in case of Force Majeure condition etc. makes consumers apprehensive to switch over to gaseous fuel or make any long term commitment. Hence, to encourage consumers, user friendly clauses needs to be drafted in these agreements.

Piped gas supply to households in Kochi to be delayed 7/21/2014 12:00:00 AM
  • Kochi has to wait for some more time to get piped gas supply to households. The launch of the City Gas Distribution Project in Ernakulam district will be delayed further because of the postponement of bid document sales to August by the Petroleum and Natural Gas Regulatory Board (PNGRB) at the request of bidders. The bids were scheduled to be closed in February this year, which was extended to May and later to July.

  • The Ernakulam district is one of the 14 locations across the country where PNGRB proposed to take up the CGD project to supply natural gas to households, ensuring year-long cooking gas supply without disruption. The PNGRB had first invited bids for gas distribution in 2011, but they were cancelled four times since then. The PSU oil marketing companies and the newly formed Kerala Gas Ltd, a joint venture of GAIL and Kerala State Industrial Development Corporation, had submitted bids for city gas distribution project in the district. The successful bidder will get a five-year exclusivity period and the first mover advantage.

  • According to KP Ramesh, Deputy General Manager of GAIL, Kochi, the delay in implementing the city gas project will deprive Kerala of domestic gas from the pool of 6.4 MMSCMD available as per the Gujarat High Court directives. The implementation of the city gas scheme is a win-win situation for both the government and the consumers as it will reduce the subsidy burden for the government and provide steady supply of cooking gas to households at rates lower than subsidised LPG, Ramesh said. When contacted, the Ernakulam District Collector, MG Rajamanickam said GAIL is awaiting the nod from PNGRB to start a demonstration project of piped gas to 100-plus households near the Cochin SEZ. GAIL has already erected a 2-inch tap and piped gas can be supplied within two months, if permission is granted.

  • The district administration, he said, is hoping on the launch of the demonstration project as it would create awareness among the public on the advantages of piped gas supply. This would help reduce the public resistance on laying pipelines at various places and can be extended to other parts of the State. Asked how long it would take to cover the entire Ernakulam district, he said this could be completed in the city limits at a fast pace as most of the flats have central LPG distribution system. However, laying of pipelines outside the city limits would take time on account of the protest.

CAG asks govt why oil marketing companies pay import parity price to pvt refiners for buying petrol, LPG 7/18/2014 12:00:00 AM
  • Pulling up the Government, the CAG in its report on Pricing Mechanism of Major Petroluem Products, has observed that the Petroleum Ministry buys petrol, LPG and diesel from private refiners at high prices, thus putting pressure on the margins of State-owned oil marketing companies (OMCs) like Indian Oil Corp, Hindustan Petroleum Corp and Bharat Petroleum Corp. Its main contention was that whether by doing so, private refiners were being provided undue financial benefits.

  • Highly placed sources said that the national auditor in the report (which is a performance audit of the pricing mechanism of these essential products), that is to be laid in Parliament on Friday (July 19), is learnt to have questioned the Government’s logic behind paying import parity price (a substantially high price paid for purchasing petrol, diesel and LPG, based on international rates as India imports them) for these products.

  • The CAG performance audit covers the period between 2007-08 and 2011-12. OMCs sell these products much below market price to the common man and therefore have to bear a huge subsidy burden. While Government has its own refineries from where petrol and diesel as well as LPG is distributed across the country, at the same time in order to meet shortfalls in supplies, these state-owned entities buy small portions of petrol, LPG and diesel from private refiners to bridge their supply gap. The CAG is learnt to have observed in the report that OMCs pay import parity price for these purchases, which puts pressure on their margins and in turn benefits private refiners, who charge high prices for selling these essential products to them.

  • Further to this, the national auditor, sources said, has also looked into the fact that despite petrol prices having been deregulated in 2010, why is it that OMCs continued selling the much required product at less than the market price. They added that CAG mainly trained its attention on the aspect as to whether the OMCs did so in order to facilitate the Government of the day to earn political brownie points, considering the fact that several assembly elections were held during the period covered by the audit report.

  • As a result of this, the OMCs continue to suffer losses on selling petrol below market prices, which reflects significantly in their quarterly as well as annual financial results. Meanwhile, the Petroleum Ministry on its part is said to have explained to the CAG that petrol, diesel and LPG is mostly provided by OMCs for pan India distribution through their State-owned refineries network. Only a small quantity of these products is purchased from private refiners. Also the payments made to private refiners for these purchases is at par with the payments, which are made to domestic refineries owned by the Government.

  • Sources privy to the development said that the Petroleum Ministry in its response to the CAG’s report, is learnt to have informed it that no undue gains were accrued to private refiners, as otherwise the other available option to bridge the supply shortfall of these products would have been of importing them from outside at much higher cost. While the CAG has raised concerns on OMCs paying import parity prices for purchasing essential fuels from private refiners, it is interesting to note that the UPA Government had itself set up an expert group under the Chairmanship of former Planning Commission member Kirit Parikh, for suggesting a pricing methodology for diesel, LPG and kerosene.

  • This panel suggested in its report, that came out in October 2013, at a paradoxical situation where owing to a significant increase in India’s refining capacity has led to a reduction in dependence on imported petroleum products. At the same time though, 77 per cent of crude oil consumed in India, is imported. In such a scenario, the Parikh panel was formed to look into the rationale by Government for continuing to fix refinery gate price (RGP) of sensitive petroleum products on Import Parity Price basis, which assumes that the product is imported.

Losses on diesel more than double to Rs 3.40 a litre even after monthly price increases 7/2/2014 12:00:00 AM
  • With escalating violence in Iraq spooking international oil markets, losses on the sale of diesel have more than doubled to Rs 3.40 a litre even after monthly price increases. The difference between the cost of diesel production and the retail selling price has widened to Rs 3.40 a litre now after narrowing to Rs 1.62 a litre last month, according to an official statement.

  • The losses doubled even after the Narendra Modi government continued with the previous United Progressive Alliance regime's decision to eliminate subsidy through small doses of monthly price increases. Diesel rates were hiked by 50 paise a litre yesterday. Diesel prices have cumulatively risen by Rs 10.68 a litre in 17 instalments since January 2013 when the UPA government had decided on the monthly hikes. When the Modi government came to power in May, losses on diesel sales stood at Rs 4.41 a litre. They narrowed to Rs 2.80 in the first half of June and then to Rs 1.62 in the second fortnight.

  • The losses had fallen rapidly since March as the prospects of a stable and decisive government under Modi helped the rupee gain against the dollar. Losses on diesel stood at Rs 8.37 per litre in March. Petrol prices were deregulated in June 2010 and have moved more or less in tandem with costs. Besides diesel, oil firms at present lose Rs 33.07 a litre on kerosene sold through the public distribution system (PDS) and Rs 449.17 on LPG, the statement said. "Oil marketing companies are now incurring combined daily under-recovery (revenue loss) of about Rs 271 crore on the sale of diesel, PDS kerosene and domestic LPG. This is greater than Rs 249 crore daily under-recoveries during the previous fortnight," it said. The under-recoveries for 2014-15 are projected to be Rs 91,665 crore compared with Rs 1,39,869 crore in 2013-14.

Iraq crisis effect: IOC announces a hike of ₹1.69 per litre in the retail price for petrol and ₹0.50 per litre for diesel 7/1/2014 12:00:00 AM
  • Indian Oil Corporation, the country’s largest oil marketing company announced a hike of ₹1.69 per litre in the retail price for petrol and ₹0.50 per litre for diesel, with effect from midnight of June 30. The prices are exclusive of State levies. “Due to the geopolitical unrest in the Middle East, there has been significant increase in international oil prices during the past two weeks,” IOC said in a statement. “The international prices of MS have increased by more than $4 per barrel and the rupee-dollar exchange rate has also deteriorated. The combined impact of both these factors warranted an increase in petrol prices,” the statement added.

  • Retail prices of diesel are being increased every month by ₹0.50 per litre every month since January 2013. IOC said even after the latest increase, the under-recovery on retail diesel stands at ₹3.40 a litre. Prices of public distribution system (PDS) kerosene and domestic LPG remained unchanged. IOC said it suffers under-recoveries of ₹33.07 per litre on PDS kerosene and ₹449/cylinder on LPG. “For the year 2014-15, the company is expected to incur under-recovery of around ₹56,550 crore on the sale of three sensitive products,” the company said in its statement.

BPCL Performance Highlights for 2013-14 - Marketing Updates 6/16/2014 12:00:00 AM

BPCL has a robust distribution network comprising of 115 storage depots as on March 31, 2014. Other major marketing highlights include:

  • 12 major installations

  • 50 LPG bottling plants,

  • 36 Aviation Service Stations,

  • 12531 Retail Outlets,

  • 3367 LPG Distributorships,

  • 2 lubricant blending plants and 1938 KM cross-country pipeline

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