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)
Identifying beneficiaries a challenge for cash transfer of kerosene subsidy 12/8/2014 12:00:00 AM
  • The government's plan to introduce direct cash transfer instead of distributing subsidised kerosene to cut down on leakages could face the hurdle of beneficiary identification. Unlike direct benefits transfer (DBT) in cooking gas, where oil marketing companies (OMC) had the data of the liquefied petroleum gas (LPG) customers, no such data exists with them for kerosene consumers. OMCs sell kerosene at subsidised rates to dealers, who in turn sell the fuel to fair price shops. Kerosene is currently distributed to ration card holders under at least three categories for varying levels of quota - above poverty line, below poverty line (BPL) and Antyodaya Anna Yojana. Cash transfer of subsidy would require identifying genuine users and linking their bank accounts with Aadhaar.

  • "Unlike LPG, which we monitor at the consumer level, OMCs do not keep data of kerosene consumers, as it is sold through PDS (public distribution system). But if the government is planning cash transfer, these issues would be worked out," said a senior Indian Oil Corporation (IOC) executive. India consumed 158 million tonnes (mt) of petroleum products in the past financial year, including 7.1 mt of kerosene. Thanks to near-stagnant domestic prices, OMCs' underrecoveries on kerosene have swelled over the years, leading to significant subsidy sharing burden for the government, too. Subsidised kerosene accounted for 21 per cent or Rs 30,000 crore of total under recoveries of Rs 139,000 crore in FY14. The share increased to 27 per cent (Rs 14,000 crore) of the total underrecoveries of Rs 51,000 crore in the first half of the current financial year.

  • Kerosene prices have risen marginally from Rs 14.83 a litre in June 2011 to Rs 14.96 at present. OMCs are, therefore, losing Rs 25.69 on every litre. The Centre is reportedly planning to write to states to provide subsidised kerosene only to un-electrified households. States that had achieved near 100 per cent electrification would be incentivised to become kerosene-free. Un-electrified households could choose between cash subsidy in lieu of kerosene allocation and upfront subsidy for greener solar lighting system.

  • According to Census 2011 data, kerosene is no longer a fuel of choice for cooking but is used for lighting purposes. It has been almost completely replaced by LPG in urban and semi-urban areas and biomass is the cooking fuel of choice in the rural areas. Less than two per cent of India's rural households use kerosene as cooking fuel. Kerosene subsidy outgo is estimated to come down to Rs 5,852 crore in next year's Budget to be presented in February. Total petroleum subsidy (for PDS kerosene, LPG and diesel) was Rs 63,427 crore in the current year's Budget. The move is being opposed by Tamil Nadu Chief Minister O Panneerselvam. "If the Union government is actually contemplating such a harsh measure, it would impose considerable hardship on the people of Tamil Nadu," he said in a letter to Prime Minister Narendra Modi.

  • The state has been urging the government to increase the monthly allocation of kerosene to meet Tamil Nadu's full requirement of 65,140 kilolitre (kl) a month. At present, the allotment of PDS kerosene to Tamil Nadu, after 10 successive reductions from the level of 59,780 kl in March 2010, remains at 29,056 kl. A task force on direct transfer of subsidies, headed by Unique Identity Authority (UIDAI)'s then chairman Nandan Nilekani, had identified ensuring effective targeting of subsidies as a fundamental challenge and suggested addressing wrongful inclusion. "A common example is that of the same beneficiary receiving subsidy for both the fuels, kerosene and LPG," the task force had said in its report.

  • The government had in December 2011 attempted direct cash transfer of kerosene subsidy through a pilot in Rajasthan's Alwar district. It had also planned to roll out the programme nationwide. Commenting on DBT in kerosene, a committee under former Planning Commission member Kirit Parish had said in its April 2014 report that the success could be achieved only if it was rolled out in all states with the subsidy restricted to BPL families. "The participating states should also put in place an institutional mechanism to undertake cash transfer of kerosene subsidy to the bank account of ration card holders in an efficient and transparent manner," it had said. It had recommended the DBT on kerosene for BPL families should completed within two years.

Tamil Nadu concern on LPG subsidy direct transfer 11/29/2014 12:00:00 AM
  • The Central government should consider involving agriculture cooperative societies, post offices and cooperative banks in disbursing cash subsidies directly to cooking gas users, according to the Tamil Nadu government. The Centre should also ensure the subsidy element is kept flexible to cover increasing cost of LPG. The Chief Minister O Panneerselvam, in a letter to the Prime Minister Narendra Modi, said the State government is concerned about the availability of adequate banking facilities in remote areas and consumer access to nationalised banks for consumers to easily access the subsidy under the Modified Direct Benefit Transfer to LPG consumers.

  • The cash transfer which has been launched from November 15 in 54 districts across the country will be rolled out in Tamil Nadu from January 1, 2015. The Chief Minister said, in remote areas the Primary Agricultural Cooperative Societies and Post Offices can also be involved in delivering the subsidy. Urban Co-operative Banks used where needed.

  • He also suggested the total subsidy should not be fixed but increased in line with LPG price increases. Panneerselvam reiterated the State government’s stand against transferring subsidy as cash under the Public Distribution System including kerosene and fertilisers where timely delivery of commodities is as critical as the quantum of subsidy. Also, “on grounds of sound administrative practice and to ensure that the States are true partners in development” the Central government should release the subsidy to the states which should handle the direct transfer of cash to beneficiaries’ bank accounts. Tamil Nadu would have preferred this for LPG also. But with Centre bearing the entire subsidy and the gas distribution by public sector Oil Marketing Companies it is an issue of the Centre’s administrative competence and jurisdiction.

Shell eyes a bigger pie of LNG market - Plans to expand Hazira terminal; set up another in Andhra Pradesh 11/26/2014 12:00:00 AM
  • Royal Dutch Shell, the first company to set up a LNG terminal at Hazira in Gujarat nearly nine years back, is targeting to grab a bigger share of the growing demand for imported gas in India. The Hague-based global energy giant is planning to nearly double the capacity at Hazira and is also setting up another facility in the east coast of India. “Hazira has the potential to be developed to 10 mtpa (million tonnes per annum). Currently, we are at 5 mtpa. We can incrementally expand Hazira by having more tanks and more vaporization. We are in process of doing detailed engineering work for an expansion which is going to take some more months to complete”, said James MacTaggart, general manager (new markets Asia & MENA) at Shell.

  • Hazira LNG Pvt (HLPL) is a joint venture between Shell (74%) and Total (26%). India was self-sufficient in natural gas until 2004, when it began to import LNG from Qatar. Because it has not been able to create sufficient natural gas infrastructure on a national level or produce adequate domestic natural gas to meet domestic demand, India increasingly relies on imported LNG, says the US Energy Information Administration (EIA).

  • India was the world’s fourth-largest LNG importer in 2013, following Japan, South Korea and China, and consumed almost 6% of the global market, according to data from IHS Energy. Indian companies hold both long-term supply contracts and more expensive spot LNG contracts. “We look at about 2% gas demand growth globally between now (2014) and 2030 year-on-year. Of this demand, LNG is expected to grow at about 5%. We expect it go from 240 mtpa to about 430 mtpa”, MacTaggart said in a recent interview. Shell, which is also the largest equity producer of LNG internationally, sold 35 million tonnes of the commodity in 2014 globally. Its Hazira terminal in Gujarat was operating at an average of 56.4% of total capacity in FY14, according to data available with the petroleum ministry.

  • At present, Japan, Korea and Taiwan buy about 70% of the LNG. These have been historically major buyers, supporting long term projects. But, Shell doesn’t expect much demand growth in those markets. Without these countries, many LNG projects in which Shell has been involved would never have happened-Australian, Brunei, or Russian project. These happened because Japan, Korea and Taiwan got together and bought 80-90% from these terminals. “The big change is in China, South East Asia, India and Europe. We see a large amount of growth in Europe. The domestic production in Europe is declining,” says MacTaggart.

  • Currently, India gas consumption hovers around 100-110 million metric standard cubic metre per day (mmscmd). Of this, about 30-35% is sourced through R-LNG. “The demand could be twice-thrice this number. It is the consumption”, says Anindya Chowdhury, general manager (gas) at Shell India Markets Private Limited. “ We are convinced that LNG will provide a balance of supply to customers. Based on our experience in the market over nine years we have a strong conviction about customers embracing LNG. In a short span of 10 years, LNG forms a third of gas supplies in India and there is a likelihood that this share will grow over time”, he said. Shell is now confident of setting up another LNG terminal at Kakinada in Andhra Pradesh. Earlier, it was working on developing a terminal for many years with Reliance ADAG, but it did not materialise.

  • “We were very close to an investment decision but that didn’t happen. Then because of very strong support of the chief minister of Andhra Pradesh we were brought into the state government-led project. That was the start of the consolidated project. Now we will work with partners to do a number of things. We have already done detailed engineering work on designing the structure. There is still a lot of work–establishing the company, marketing, decide on business structure. All that will take time”, said MacTaggart who is based in Singapore. In the new LNG terminal, Andhra Pradesh Gas Distribution Corporation (APGDC) holds 48%, while Gas de France (GDF) and Shell holds 26% each.

  • Shell says though the demand for LNG is vast, not everyone is getting to use it. It feels that investment in energy infrastructure should not be based wholly on commercial considerations or short-term price changes. What’s most important to industry is a stable supply of gas and electricity, which is more important than the ups and downs of short-term prices. “Shell does scenarios of what’s going to happen in 2050 or in 2100. We look at the world not on what is going to happen in six months. Ups and downs of pricing is important, but not the major driver of demand”, said MacTaggart. According to Chowdhury, if India has to grow at 8-9%, then energy growth has to come at 6%. “We can look around to see which energy source can provide such accelerated growth. LNG terminals can be set up reasonably quickly, if pipeline infrastructure can keep pace. LNG is well-suited to meet the growing energy demand.”

  • One disappointment for Shell, about which it was quite vocal, is how certain governments have moved away from LNG to coal. “Shell is of the view that LNG demand will grow and it’s better to go with renewable backed by gas. When you don’t have wind and solar power it’s much better to have gas. Coal and renewable are much more expensive and much worse”, said MacTaggart. The issue is important, Shell thinks, because the choices we make or the choices that our governments make are going to have regulations that encourage import of gas, which encourage aspiration for gas as opposed to coal. “It affects the quality of life. And we must not forget that. The important choices are, should we have more of gas or should we have more of coal,” said MacTaggart.

Marketing of CNG through Retail Outlets along pipelines: BPCL's comments 11/21/2014 12:00:00 AM
BPCL has extended its support to the initiative taken by the Petroleum Ministry towards creation of green corridors and has concurred to expeditiously roll out compression and dispensation of CNG from existing as well as proposed new Retail outlets along various Natural Gas Pipeline corridors. The corporation has noted that the existing pan-Indian presence of its Retail infrastructure, with over 10,000 retail outlets, dispensing MS & HSD for automotive usage can be leveraged for providing CNG option to the customers in an efficient and cost effective manner. The cost of a stand-alone CNG outlet would be of the order of Rs 5 Crore as against around Rs. 2 Crore for co-locating CNG facilities at an existing retail outlet. This would also help in ensuring an optimum utilization of land and common facilities at the ROs, while providing consumers an energy alternative for using a clean efficient automotive fuel from the same stations they regularly visit. BPCL has provided the following suggestions for the proposed CNG corridors:
  • MoP&NG has accorded priority allocation of domestic natural gas to domestic segment as well as for CNG for automotive use to City Gas Distribution Networks to incentivize the end-user to switch over to CNG as automotive fuel. It is requested that on similar lines, direct allocation of domestic natural gas be also made to BPCL for compression and subsequent dispensation as CNG in its retail outlets along the NG Pipelines. The allocation could be made on an annual basis and detailed modalities in this regard would be jointly worked out in consultation with other OMCs and submitted to MoP&NG for consideration.

  • CNG corridors may be declared in advance for all existing as well as proposed Natural Gas Pipelines. In this regard, the definition of "Tariff Zone" of a NG pipeline in the PNGRB's Regulations as a corridor of 300 Km in length and a width of 50 Kilometer (or 10% of the length of the pipeline, whichever is lower) on either side of the NG pipeline could be followed for declaring green CNG corridor for the purpose of identification of Retail Outlets for dispensing of CNG.

  • CGD Networks, which are in existence and those which are authorized by the PNGRB may be exempted from the proposed CNG marketing guidelines as they can continue to compress and dispense CNG by use of the BPCL's Retail Outlets as per the existing practice.

  • It is essential that connectivities through spur-lines from the main transmission pipelines be provided expeditiously by the pipeline operator and imbalance charge, if any for capacity booking in the NG pipeline be waived off as a special case considering that the Natural Gas requirement at an individual retail outlet is very small and the CNG sales are prone to demand fluctuations.

Prime Minister's Office discusses clearing hurdles in ethanol blending programme 11/20/2014 12:00:00 AM
  • Keen to ensure success of ethanol blending in petrol, the Prime Minister’s Office held parleys with the ministries of food and petroleum to clear bottlenecks to ensure adequate supplies so that the programme can be extended across the country. Currently, petrol doped with five per cent ethanol is being supplied only at few locations due to unavailability of sugarcane extract. Also, pricing of ethanol particularly after the global oil rates have plunged to a four-year low has been an issue. At present, it is compulsory to blend 5 per cent ethanol with petrol but the oil marketing companies (OMCs) are able to do around 2 per cent. “The meeting deliberated on clearing barriers faced by OMCs as well as sugar mills. It discussed on ensuring adequate supply of ethanol for blending with petrol across the country,” an official source said.

  • The PMO has directed the Petroleum Ministry to take steps to address all bottlenecks and ensure OMCs are able to use estimated 90-100 crore litres of ethanol available for blending in the country under the programme, the source said. In the meeting, the source said that the PMO also took note of the cancellation of a recent tender floated by OMCs for purchase of ethanol due to the pricing issue. OMCs are not keen to taken the burden of blending ethanol with petrol at a time when global oil prices are ruling lower. “The Petroleum Ministry has been asked to ensure that the ethanol blending programme is implemented successfully irrespective of what global oil prices prevail. The programme has larger benefits and long-term impact,” the source added.

  • For timely distribution of ethanol from sugar factories to oil depots, the Ministry has also been asked to consult state governments if single permit can be given to OMCs, the source added. In the meeting, the Petroleum Ministry officials informed that OMCs are not able to blend as they do not have adequate storage facilities and are not keen to undertake transportationof ethanol from one depot to another for blending purpose. OMCs are also finding ethanol price higher, the source said. The Food Ministry officials said that sugar mills are not able to supply on time due to delay in getting excise permits. Mills are not very keen to supply due to lower prices offered by OMCs for ethanol. Sugar mills get higher realisation from selling portable alcohol.

Government considers financial relief to restart 16,000 Mw gas-based power plants 11/18/2014 12:00:00 AM
  • The government is considering financial relief for about 16,000 Mw of stranded gas-based power plants by way of lower interest rates and extension of loan tenures, a senior official has said. According to the official, the ministries of power, finance and oil are working on various proposals that include lowering interest rates to base levels or even lower, extending loan repayment period to about 25 years from 10 years and allowing these plants to capitalise losses over a certain period after the start of commercial operations.

  • Companies such as Reliance Power, Essar Power, GMR Energy, Lanco Infratech and GVK Group will benefit if the proposals are accepted. The proposals are being mulled to support the Centre's plan to offer domestic and imported gas at 'pooled' price to the fuel-starved power plants. The additional proposals have been made to reduce an expected Rs 17,000 crore support that the Centre proposed to draw in three years from National Clean Energy Fund to keep electricity tariffs under check at Rs5.5 per unit, said the official quoted above. "The finance ministry will discuss with the Reserve Bank to offer financial relief to the stranded plants that are unable to meet their debt obligations since March 2013 due to lack of domestic gas. The proposal includes reducing interest rate to base level or even less when required," he said.

  • Depending on imported gas prices for pooling, power from gas-based projects is expected to rise to Rs9 per unit as the Centre had recently raised domestic natural gas price to $5.61 a unit from $4.2. The government also plans to force states to meet a portion of the electricity requirement from gas-based power plants and allow power companies sign contracts with distribution utilities without tariff-based competitive bidding. As per the tariff policy, power purchase contracts can be signed between states and power generators only through competitive bidding.

  • The Centre also proposes to waive off transmission charges and transmission losses for gas-based electricity and use about 1,500 Mw of the capacity as 'spinning reserve' that prevents grid collapse during peak hours. "Gas-based plants can support the grid well since they can be easily started and shut. The idea is to use 1,500 Mw of the capacity as spinning reserves for three hours aday for 250 days a year," the official said.

  • The new proposals will be added to a slew of reforms planned to help the gasbased power plants. Under the price pooling mechanism, any additional gas produced in the country in the next four years is proposed to be offered to power plants along with imported liquefied natural gas. State-run GAIL India will be the pool operator and will supply the fuel to power stations at an average 'pooled' price of domestic and imported gas. The electricity from the plants will be supplied to power distribution companies at less than Rs 5.5 per unit.

  • The government proposes to subsidise firms operating gas-based power stations from the National Clean Energy Fund made of a cess collected from coal miners. Companies will be allowed to recover Rs 1.30 per unit of electricity as fixed cost to meet their financial obligations and prevent the idling projects put up at an investment of Rs 64,000 crore from turning non-performing assets. The plan also includes simplifying procedure for availing customs duty waiver on LNG and scrapping value-added tax and central sales tax collected by states. Gas transporters Gail India and Reliance Gas Transportation Infrastructure Ltd will be asked to take 20% cut in pipeline tariff, which will help them improve utilisation of pipelines. GAIL will also be asked to reduce marketing margin by 75%.

Downstream opportunities in Vietnam: IOC expresses interest 11/12/2014 12:00:00 AM

Indian Oil Corporation (IOC) recently sent a delegation led by Debasis Sen, Director (Planning and Business Development) to Vietnam to explore the possibilities of cooperation in the downstream sector. The delegation conducted meetings with the Ministry of Industry and Trade, PetroVietnam and Petrolimex, which is in charge of distribution of petroleum products nationally. During the course of the meeting, IOC expressed interest and offered to process Vietnamese crude oil in their refineries and export finished products to Vietnam. IOC is also amenable to exploring possibilities of a joint venture with PetroVietnam for construction of storage and terminals as well as LPG bottling plant. IOC offered its expertise in refinery management in ongoing refinery projects in Vietnam. Following areas of interest have been outlined by IOC:

  • Vietnam is producing sweet crude oil and export to other countries while Vietnam still import 70% of market requirement for petroleum and other products. IOC proposes that Vietnam will send crude oil to India for processing at CMC's oil refinery and get the finish products. IOC will only charge premium for PV'N.

  • IOC is now operating 11,000 kilometers of pipeline in India and stands ready to cooperate with Vietnam.

  • IOC is ready to enter into JV with Petrovietnam for construction of storage and terminal, LPG bottling plants 

  • With PVN's efforts to build more refineries, IOC is ready to offer expertise in refinery management.

  • IOC would like to set up a JV with Petrolimex, supplying petroleums and other products of IOC and utilizing the network of distribution of Petrolimex which has 50% market share in Vietnam. IOC is ready to share experience with Petrolimex to improve the efficiency of operation. Petrolimex welcomed the ideas and look forward to receiving the full proposal from IOC.

  • IOC would like to join with Petrolimex to invest in a gas pipeline from North to South. Currently, Petrolimex is operating a 500 km of pipeline from Quang Ninh to Hanoi and adjacent areas. This was a big project but not viable in the sense that different province in Vietnam has different requirements and invested capital is too much. Both sides agreed that Petrolimex identified suitable project and recommend to IOC.

  • IOC is ready to set up a LPO Bottling Plant but was told that Petrolimex has had a similar plant already. However, the scope of cooperation is still there so it is agreed that this possibility is kept open

  • IOC is ready to set up a joint -venture for setting up a lubricant blending plant in Vietnam. Petrolimex informed that they have had a indigenous manufacturing capability for lubricant

  • IOC proposed to offer oil refinery management expertise to Petrolimex and was welcomed. However, Petrolimex informed that for their refinery, they would like to have Indian partner who can jointly invest financially and provide expertises, It was finally agreed on the following

  • Marketing of petroleum and other products including bitumen to Vietnam, utilizing the existing network of Petrolimex

  • Investment in pipeline: Petrolimex to recommend suitable project.

Setback to non-State marketeers: Domestic LPG cannot be sold 11/11/2014 12:00:00 AM
  • In a setback to non-state LPG marketeers, the Government’s top law officer has ruled that all domestically produced cooking gas (LPG) should necessarily be sold to PSUs for subsidised sale to consumers. Ranjit Kumar, Solicitor-General of India (SGI), the nation’s second highest law offer, has upheld the Oil Ministry view that sale of LPG by domestic producers to anyone other than State-owned oil marketing companies (OMCs) is not permissible under the LPG Control Order.

  • In his opinion on a query by the Ministry, he said non-State LPG sellers, called parallel marketeers, cannot source the fuel from domestic refiners. They have to import LPG if they intend to sell the cooking fuel in the domestic market. Sources said Kumar in his opinion upheld the Ministry’s view that parallel marketeers’ distribution/sale in the domestic market could only be of imported LPG subject to conditions prescribed in the LPG Control Order.

  • While India is surplus in refining capacity, it does not produce enough LPG to meet all of its demand. LPG is produced by both public sector firms such as Indian Oil Corp (IOC) as well as private firms such as Reliance Industries. This LPG is sold to consumers mostly through distributors appointed by the Government at subsidised rates. Reliance Industries, the largest single location LPG producer in the country, had last year contested the Ministry view saying rules do not mandate that all domestic LPG must be sold only to State firms. It had allegedly sold the cooking gas produced at its Jamangar, Hazira and Patalganga plants to retail customers. Sources said the SGI on the Ministry’s query on what action should be initiated against those LPG producers who had sold LPG in the parallel market, said the action should be in accordance with the law.

  • Kumar stated that parallel marketers were allowed to sell LPG sourced from domestic refiners from 2005. And so, they should be first given a notice/ warning that they cannot sell domestically produced LPG to the consumer directly and action as per law may be taken only if they do not adhere to the notice/ warning. The SGI said the LPG Control Order of 2000 defines a parallel marketeer as someone who is carrying on the business of importing, storing, transporting, marketing and distributing LPG. It does not prohibit the parallel marketeer from producing LPG but it cannot sell such production directly to consumers. The LPG Order nowhere permits domestically produced LPG to be sold by a parallel marketeer, who is a person other than a Government oil company, and that such parallel marketeer could only distribute/sell imported LPG.

Reforms don't mean subsidy cuts alone, says oil minister 11/8/2014 12:00:00 AM

Petroleum minister Dharmendra Pradhan has steered two crucial reforms in the energy sector. In an interview to TOI, he promises more steps in the coming months but makes it clear that the government's focus is on the common citizen. Excerpts:

What's next on oil ministry's agenda?

The reform momentum needs to be continued. One issue is sharing - whether it will be revenue sharing or production sharing. But there is a third model, which is based on a synergy between the two. There are other issues such as unified licensing, NELP (New Exploration Licensing Policy) and the Oil and Gas Sector Safety Bill. The government's priority is to focus on gas as a major source of fuel. So far, the gas grid was 15,000 km. In the Budget, the government has announced it will add 15,000 km over the next five years. Piped natural gas and CNG will be put on mission mode. The government is actively looking at gas pooling.

What is your plan for subsidized gas cylinders?

We are not going to increase the burden. Instead, we will focus on direct subsidy transfer to consumers, which will help check pilferage. Currently, subsidized 5kg cylinders are not so popular. That's an area we want to focus on. The poor don't have the purchasing power to buy 14kg cylinders that cost Rs 417 in Delhi. Their requirement is lower. If shampoo can be sold in sachets and push up volumes, why can't we give the choice to the consumer?

Oil ministry has been a high-stakes ministry with pressure from various groups. How are you dealing with it?

When the government took charge, the PM's first statement was that his government is dedicated to the service of the poor and that is the guiding principle of my ministry. Some people think reforms and being pro-poor can't go together. Reforms don't only mean reducing subsidies. The government's mantra is that reforms are for the poor. Reforms will increase investments and create jobs. Reforms will not burden the poor. The results of the pro-poor policy thrust can be seen in the success of the Jan Dhan scheme, where over Rs 5,000 crore has been deposited in banks, which may have otherwise found their way into Ponzi schemes.

What about shale gas?

Currently, only ONGC and Oil India can explore but we are creating a framework to involve the private sector. We need a mechanism to let people explore - oil, gas, shale gas or coal bed methane - and allow multiple use of licences. When we go for NELP-X, we will have provision for unified licensing so that, if gas is available, like in Cairns' oil field in Barmer, it can be explored and produced.

What is the timeframe for NELP-X?

We have analyzed earlier rounds and we have realized that there are three areas under NELP that need attention - technology, scientific data and addressing the constraints of production sharing contracts.

Do you have a plan for existing and marginal fields?

We have prepared a 10-point reform agenda for existing fields. ONGC has a lot of assets, including marginal fields, which it believes are not viable. The Cairn field, for instance, was with ONGC earlier. Today, technology is available but these fields need investment. We are planning to unbundle these fields through a transparent bid process so that production goes up.

What about reforms at other PSUs?

Our companies are into exploration, production, refining, distribution and marketing. Earlier, only a few products were being produced at refineries but now petrochemicals have emerged as a major area. We are still reliant on import of petrochemicals. We want our PSUs to explore global markets, where some of the private companies have gone. Our PSUs need to improve the gross refining margin (GRM). I have already told them that consumer interest is paramount and we can compete with private companies if the GRM rises.

You mentioned marketing and other areas...

After railways, petroleum and natural gas has the maximum footfalls. It's like running a huge public distribution system. The current approach needs to be made more consumer-friendly. We want to follow the PM's advice of 'Make in India'. Oil companies will invest around Rs 5 lakh crore in the 12th Plan. Over the years, we have started importing things like rigs, pipes and ships, which were earlier made here. If Tatas and Maruti have created such a large number of vendors, why can't GAIL, ONGC, IndianOil, BPCL or HPCL do it? Indian companies such as L&T can meet the requirement of the oil sector and we want to promote local manufacturing and create jobs in the country. GAIL needs nine vessels to ship gas from the US. We have asked it to get at least three Made-in-India ships.

Gas pooling proposal on petroleum ministry table - Move to benefit 16,000 Mw of gas power capacity 11/7/2014 12:00:00 AM
  • The power ministry has worked out a plan to pool the existing limited supply of domestic gas with imported regasified liquefied petroleum gas to help operationalise stranded gas-based power plants with a cumulative capacity of 16,107 Mw. The proposal has been forwarded to the petroleum ministry. If implemented, the move will lead to an additional generation of 39,000 million units of power valued at Rs 25,000 crore annually. The Union Cabinet could take up the matter soon for discussion, officials said. India has 21,211 Mw of gas-based power capacity commissioned. An additional 5,900 Mw is likely to be commissioned soon. Of this, 16,107 Mw is stranded including 6,997 Mw based on KG-D6 allocation and 3,761 Mw commissioned without gas allocation.

  • According to the proposal, state-run GAIL India will be the pool operator and will supply the fuel to power stations at an average pooled price of domestic and imported gas. After the pooling, electricity from the plants will be supplied to distribution firms at Rs 5.5 a unit. The ministry has also proposed to subsidise firms operating gas-based stations from the National Clean Energy Fund made up of a cess collected from coal-mining companies. The proposal fixes the cost of gas-based plants at Rs 1.30 a unit of electricity to allow firms to meet financial obligations.

  • According to the plan, states might have to waive value-added tax (VAT) on incremental gas, gas transporters such as GAIL and Reliance Gas Transportation will be asked to cut pipeline tariff by up to 20 per cent, GAIL would have to cut marketing margin by half. The government had on October 18 announced raising the price of gas from domestic fields by 33 per cent to $5.6 a unit from November 1. India's domestic gas production fell 13 per cent from 111 million standard cubic metres per day (mscmd) in 2012-13 to 97 mscmd in 2013-14. The output is expected to pick up marginally to 100 mscmd, or 36 billion cubic metres (bcm) in FY15 including 24 bcm from state-run Oil and Natural Gas Corporation, 2.8 bcm from Oil India and 9.7 bcm from production-sharing contracts regime blocks.

Oil companies loss on sale of subsidised LPG, kerosene up 35percent per day 11/4/2014 12:00:00 AM
  • Losses on sale of subsidised fuel have risen by 35 per cent to Rs. 188 crore per day even though oil firms have been losing less on LPG and kerosene because of fall in international oil rates. State-owned fuel retailers are losing Rs. 27.60 on sale of every litre of kerosene through the Public Distribution system (PDS) and Rs. 393.50 per 14.2-kg domestic cooking gas LPG, an official statement said. These are lower than Rs. 31.22 a litre loss oil firms were incurring on sale through PDS in second half of last month, and Rs. 404.64 per LPG cylinder. Despite the losses being lower, the statement said, the per day under-recovery has risen to Rs. 188 crore from Rs. 139 crore. “Oil Marketing Companies (OMCs), effective November 1, 2014, are now incurring combined daily under-recovery of about Rs. 188 crore on the sale of PDS kerosene and domestic LPG.

  • This is higher than Rs. 139 crore daily under-recoveries during previous fortnight,” it said. The statement did not explain as to how the daily under- recoveries have increased even through loss on both kerosene and LPG have declined. After diesel price was deregulated last month, only two products remain subsidised. The statement said the under-recovery or the revenue loss incurred on selling fuel below cost, in the first half of current fiscal was Rs. 51,110 crore. “The figure was Rs. 139,869 crore for full year in the 2013-14.” While the government had freed pricing of petrol from its control in June 2010, diesel was deregulated on October 18. Since then, diesel rates have cut twice - first by Rs. 3.37 a litre on October 19 and then by Rs. 2.25 per litre from November 1.

Oil PSUs learn to swim in rough waters - Entry of private players mean increased competition for the oil PSUs 11/4/2014 12:00:00 AM
  • It's exactly 125 years since the first oil deposits were discovered in India. But, even as the big push to India's oil and gas sector came after early-1990s when it was opened up to private players, the sector is still dominated by public sector companies like ONGC and Oil India in oil and gas exploration and production (E&P); IOC, HPCL and BPCL in fuel retailing and GAIL in gas transmission and distribution. And, there is conspicuous absence of the big global oil companies.

  • Domestic players have obviously not been able to bridge the ever widening demand-supply shortfall. The two key reasons for this state of affairs are lack of clear policies and incentives and absence of level playing field -- something that experts now believe may change soon. The real push for the sector came after NELP was launched in 1998 under which hydrocarbon blocks were allocated based on competitive bidding. To incentivise players, the government allowed market-linked prices (for crude oil) besides introducing a revenue-share policy.

  • While the move brought in majors like Reliance Industries (RIL), British Gas and Shell Inc among others, only a few of the 302 blocks awarded in nine NELP auctions have seen major discoveries. Of these, while Cairn's prolific Rajasthan block is seeing increasing oil production (about 30 per cent of India's current oil output), Reliance's KG-D6 basin has witnessed steady decline in gas output and discoveries by GSPC and ONGC are yet to start production. Though many of the NELP blocks are in exploration and development stages, the writing on the wall is pretty clear.

  • "If you look at the post NELP period, we have not seen significant ramp-up in production, as expected. A key disincentive was the highly subsidised regime," says Sumit Pokharna, deputy vice president, Kotak Securities. "The subsidies resulted in lower cash generation for the upstream PSU oil companies (like ONGC and Oil India), which in turn impacted their investment in exploration activities. However, now given the diesel regulation and efforts to reduce subsidy in other regulated fuels, the subsidy burden will come down leaving more money in the hands of these companies for investment purpose," he adds. It is not that ONGC and Oil India haven't done anything at all, but perhaps not to the extent of their potential, say experts.

  • "I wouldn't like to take away the credit from these companies but would say that they could have done better. They are among the best in terms of minting cash and growth potential. But the disappointment is the slow pace of exploration, execution as well as decision-making," says Mehraboon Irani, Principal & Head- Pvt Client Group Business, Nirmal Bang Securities. For now, ONGC, which discovered India's largest hydrocarbon reserves (Mumbai High) in 1974, remains a dominant player in India, both in oil and gas production.

  • One area where ONGC has done well is its foray into global markets through its subsidiary ONGC Videsh (OVL). OVL has acquired participating interests in 33 blocks in 16 countries with cumulative investments at $22 billion. Of these, 13 are producing assets and produced 8.36 MMT of oil and oil equivalent gas in 2013-14 -- it contributes to 14.5 per cent and eight per cent of India's oil and natural gas production, respectively. There have been other hindering factors as well. Experts say issues relating to royalties, costs, gas pricing as well as gaps in the existing regulations have hurt sentiments and has also led to disputes.

  • "The current issues and litigations highlight that there were not enough checks and balances in the policies to avoid possible disputes. However, we now believe that the new policies which are being framed now will take care of such issues," says Pokharna. Irani, too, is optimistic and hopes the situation to improve in the next six-nine months. Within days of coming to power, the government has announced a new gas pricing formula and de-regulated pricing of diesel. The latter is a big relief for incumbent public sector oil marketing companies (OMCs) which are reeling under pressure.

  • While there are gains for OMCs, it should also help bring back private players into the fuel retailing business and increase competition. In fact, Reliance and Essar group are already said to be working on plans to revive their fuel retailing operations. Pokharna says, "The government is also taking steps to curb kerosene consumption by providing PNG pipelines. Measures to curb leakage in LPG are also being taken. For instance, Delhi's kerosene consumption is now zero. With lower consumption and volumes (of regulated products), overall subsidy will also go down."

  • While competition for OMCs is set to rise, it is to be seen how they will protect their turf. But, Irani says it will take time for private players to make a difference in fuel retailing. In fact, competition will help improve efficiency of the oil PSUs, he adds. The companies are aware of the threat and have already started taking steps to improve service quality, expand offerings and introduce loyalty programmes.

  • Overall though, an analyst with a domestic brokerage says, "Considering their restraints and the balance-sheet side, the PSUs have done very well and have also expanded their refining capacities. BPCL, especially, has done wonders in term of acquiring global offshore blocks. So has GAIL. It has set up high-margin petrochemicals business, though the pace of expansion was slower than growth in demand. GAIL's core business of gas transmission and distribution though is enviable. Its investments in pipelines should start yielding good results once gas volumes rise.

  • Going ahead, in all the three segments namely, upstream, mid-stream and downstream, competition is bound to increase. Experts say while the PSU companies are strong with valuable assets and can withstand competition from private players, the government and its policies will play a critical role. "The buck still stops at the government's door. What if oil prices go up, will the de-regulation continue, how will the subsidy sharing work?" asks Irani.

LPG consumption grew fastest in three-and-a-half years in Sept 10/28/2014 12:00:00 AM
  • The steep rise in India’s consumption of liquefied petroleum gas (LPG) does not seem to be abating any time soon. Cooking gas consumption grew at 16 per cent in September, the fastest pace in three-and-a-half years, or 42 months for which official data is available, on the back of easing of the cap on subsidised cylinders per household. “LPG consumption for the thirteenth month in a row recorded a positive growth of 16 per cent during September 2014 and with a cumulative growth of 11.2 per cent for the period April-September 2014,” said the latest report on petroleum products sales released by Petroleum Planning and Analysis Cell (PPAC), the oil ministry’s technical arm. LPG consumption stood at 1.552 million tonnes in September against 1.344 million tonnes in the year-ago period.

  • The report did not reveal the break-up of the consumption growth in subsidised (accounting for 80 per cent of total consumption) and unsubsidised categories. Total LPG consumption had grown at 8.5 per cent in the previous month of August with subsidised consumption growing at 13.4 per cent and unsubsidised consumption registering a 70 per cent decline “mainly due to increase in subsidised cylinders from nine to 12 a year,” according to PPAC.

  • The fresh data establishes a sharp jump in domestic LPG sales along with a major drop in commercial sales in the current year, since the cap on subsidised cylinder was raised from nine to 12 in January 2014, cementing concerns over diversion and black-marketing of subsidised cylinders for commercial purposes. With heavy LPG subsidies taking a toll on oil marketing companies’ underrecoveries and the government’s petroleum subsidy burden, the United Progressive Alliance government had imposed a cap of six cylinders per household on LPG sales in 2012. The cap resulted in a 4.9 per cent dip in subsidised consumption between October 2012 and January 2013 when the cap was eased to nine cylinders. Commercial sales grew at 24 per cent during the period.

  • Over the next year until January 2014 when the nine cylinder cap was in place, subsidised sales still registered a 2.2 per cent decline. However, months before the general elections of May 2014, the cap was raised to 12 cylinders in January this year, kicking off an increase in demand for subsidised cylinders. In 2012-13, subsidised LPG accounted for 24 per cent, or Rs 39,558 crore, of the total under recoveries of Rs 1.61 lakh-crore of oil marketing companies (OMCs) on sale of three sensitive products — diesel, LPG and kerosene. The share went up to 33 per cent in FY14 and is likely to rise to 47 per cent of the total estimated underrecoveries in the current financial year.

  • Apart from the easing of the cap on subsidised cylinders, the rise is also attributed to sluggish growth in domestic LPG prices and the delay in rolling out direct benefit transfer, or DBT, in LPG distribution. The government had to bear Rs 85,000 crore of FY14’s losses of Rs 1.39 lakh crore as petroleum subsidy burden. Prices of subsidised LPG, which accounts for 86 per cent of OMCs’ LPG sales, have been revised only twice in the past two years. The twin revisions have led to a mere 3.7 per cent rise in the price from Rs 399 a cylinder in July 2012 to Rs 414 a cylinder now.

  • “LPG demand growth is expected to remain high due to increased cap of subsidised cylinders, which tends to encourage the diversion of domestic LPG for auto LPG and commercial LPG purposes where prices are deregulated and almost double that of subsidised domestic LPG,” according to research and ratings agency Icra. The PPAC report also shows that petrol consumption grew 21.6 per cent in September, the highest since May 2013, mainly on account of festivals that spruced up vehicular movements, increased two-wheeler movement due to less rains and low base of consumption during September last year. Also, diesel consumption dipped by a marginal 0.2 per cent in September because of speculation over a cut in prices.

Pooling of gas and coal on cards: Government plans to fuel up 91K MW of stuck power projects 10/27/2014 12:00:00 AM
  • After clarity on natural gas prices and an ordinance on coal, the government is set to decide on pooling of imported and domestic fuel prices to help stressed power stations with a combined capacity of 91,000 mw generate electricity that's badly needed as India tries to revive its economy. The Cabinet Committee on Economic Affairs is likely to decide on pooling gas and coal prices at its meeting this week, sources said.

  • The proposals include a bailout package for power plants idling due to scarcity of domestic gas and a plan to meet the needs of coal-based units till 2017. Of the 24,148 mw gas-based projects set up at an investment of about Rs 1,50,000 crore, those that can generate about 16,000 mw aren't running while the rest are operating at sub-optimal levels. The Supreme Court on September 24 cancelled 204 coal mine allotments of which 59 were to supply power plants with nearly 67,000 mw capacity. The 59 include 20 producing blocks supplying projects of more than 11,000 mw capacity. Plants that can produce another 7,200 mw have stalled as Coal India supplies have dried up.The government had on October 18 raised the price of gas from domestic fields by about 33% to $5.6 per unit from November 1.

  • Three days later, it said an ordinance would be issued to open coal to commercial mining by private firms and allot captive coal blocks to private companies through eauctions and on a nomination basis to government entities. The government now proposes to supply any additional gas produced in the country in the next four years to power stations along with imported liquefied natural gas. State-run GAIL India will be the pool operator and will supply the fuel to power stations at an average 'pooled' price of domestic and imported gas.

  • The electricity from the plants will be supplied to power distribution companies at Rs 5.5 per unit. The government also proposes to subsidise firms operating gasbased power stations from the National Clean Energy Fund (NCEF) made up of a cess collected from coal miners. After much deliberation, the fixed cost of the gas-based plants is planned to be capped at Rs 1.30 per unit of electricity that will allow the operating companies to meet financial obligations and prevent idle projects, totaling an investment of Rs 64,000 crore, from turning into non-performing assets.

  • The plan includes simplifying procedures for availing customs duty waivers on LNG and scrapping value-added tax and central sales tax collected by states. Gas transporters GAIL India and Reliance Gas Transportation Infrastructure Ltd will be asked to take a 20% cut in pipeline tariff, which will help them improve utilisation of pipelines. GAIL will also be asked to halve its marketing margin to $0.1 per million British thermal unit. A separate plan to provide longterm coal supplies to developers of power plants that have had their attached coal mines cancelled by the apex court is also likely to be considered by the Union Cabinet this week. The power ministry proposes such supplies to captive block based power projects that have secured debt, placed equipment orders and acquired land.

  • The proposal will immediately benefit power plants of about 36,000 mw combined capacity that are ready or likely to be commissioned by March 2017. Under the proposal, power plants with a total capacity of 78,000 mw that have signed letters of assurance with Coal India will get 90% of their requirement. Fuel supplies have also been sought for plants that can generate up to 21,000 mw that are set to begin operations after 2017 and have letters of assurance from Coal India. The ministry has sought 50% fuel supplies from Coal India for projects that do not have letters of assurance from the company but have signed power purchase agreements (PPAs) with states. If required, Coal India will supply imported coal to such projects after pooling prices with locally produced coal.

Fixed LPG subsidy sparks hopes of lower losses - Subsidised consumption accounted for 73percent of the total LPG usage last financial year 10/22/2014 12:00:00 AM
  • The government’s decision to fix domestic cooking gas subsidies could drive down Indian oil marketing companies’ total revenue loss on subsidised LPG sales by over 8 per cent to Rs 42,700 crore in the current financial year. Subsidised consumption accounted for 73 per cent of the total LPG usage last financial year. The three oil marketing companies — Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation — sold subsidised LPG at an average price of Rs 440.39 a cylinder. Total under-recoveries on LPG stood at Rs 46,458 crore — 33 per cent of gross under-recoveries of Rs 1,39,000 crore.

  • Assuming that the subsidies are capped at the current level of Rs 404.64 a cylinder, total losses on subsidised sales would come down by Rs 3,716 crore for the oil marketing companies. However, the figure for LPG under-recoveries would rise by a marginal one per cent over last year’s Rs 46,458 crore if the subsidy is capped at Rs 444.85 a cylinder, the average subsidy observed in the current financial year so far.

  • The Union cabinet had, on Monday, announced a re-launch of the Direct Benefit Transfer scheme for LPG distribution as part of fuel reforms. “Under the modified DBTL scheme, the subsidy a domestic subsidised cylinder will be fixed,” an official statement had said. Petroleum Minister Dharmendra Pradhan said that a new system fixing the subsidy would be designed after a discussion between the department of expenditure and his ministry. Currently, consumers pay less than half the market price till for a maximum of 12 subsidised cylinders in a year. “The cap of cylinders will be the same but the deliverable price will change. Till now, the price was same but the subsidy used to change,” he said.

  • Unlike the system put in place by the UPA government, where consumers were allowed 12 subsidised cylinders without any limit on how much loss would be borne by the oil marketing companies, the new system would entail a periodic revision in the price of the subsidised LPG cylinders so that the subsidy remained fixed. Consumers till now were paying the market price for any consumption beyond 12. India’s total LPG consumption has grown from 14,331 tonnes in 2010-11 to 16,336 tonnes last financial year. The share of subsidised consumption grew marginally from 86 per cent in 2010-11 to 87 per cent in 2011-12 before declining to 80 per cent in 2012-13 and further to 73 per cent in 2013-14. Total LPG consumption has jumped 11 per cent to 8,562 tonne between April and September current year from 7,737 tonne in the same period last year.

  • According to rating agency Moody’s, rising commodity prices actually have led to a significant increase in the subsidy outlay. The petroleum subsidy bill grew nearly six-fold over the last five years to Rs 85,500 crore in 2013-14 from Rs 15,000 crore in 2009-10. The government has implemented multiple reforms to the fuel subsidy program, including allowing oil marketing companies to increase diesel prices incrementally, withdrawing the subsidy on diesel sold in bulk and limiting subsidised consumption of LPG since 2012.

Kerala looks at petro outlets to soften liquor policy blow 10/21/2014 12:00:00 AM
  • Even as Kerala government’s monopoly liquor distribution arm Bevco is busy downsizing its outlets, the state’s grocery arm Supplyco is stretching out on an ambitous upsizing trip on its petroleum outlet network. Supplyco ( Kerala Civil Supplies Corporation) is readying to emerge the operator of the largest fleet of petroleum outlets in the state. At present, Supplyco (Kerala Civil Supplies Corporation) runs just 15 petroleum outlets. “In a lease arrangement with Indian Oil Corporation (IOC), the Supplyco-run fuel stations will soon be 36 in number,” says Kerala civil supplies minister Anoop Jacob. “In the intial phase, this will be on annual lease terms, with IOC and gradually, Supplyco would address its business head on,” he said.

  • Unlike the 332 Beverages Corporation (Bevco) outlets, which will be gradually phased out, at the rate of 10% per year, the state government’s fuel outlets are zooming by more than 100% in a single go. Supplyco has been negotiating for as amany as 21 fuel stations. Two has been acquired, one at Kottayam and other at Kannur. Kerala, expecting to be bruised in its R8,500-crore liquor revenue kitty, following the new liquor policy, had been scouting around for alternate cashcows to feed its social welfare projects like schoolchildren midmeal programmes and paddy procurement from farmers. “Besides, the petroleum retailing expansion, Supplyco is also planning to ramp up its bottled water sales. The marketing infrastructure of Supplyco bottled water and tea will be perked up at bus stations and railway stations,” the minister said.

  • At the rate of R1 lakh per day per fuel station, Supplyco works out an annual additional revenue of R90-100 crore through retailing of petroleum products, when all the proposed acquisitons are in place. Currently, IOC supplies to 1, 300 petrol pumps in the state. It is the phenomenal jump in motor density in Kerala that stimulated the idea of joyriding the rising fuel demand. “The main reasons for the increase in vehicle population are inefficiency of public transport, lack of a mass rapid transport system in the three major cities, cheap vehicle loans and high aspirations defined by Kerala’s 20-million strong NRI diaspora,” says Mahesh Chand of National Transportation Planning and Research Centre.

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.

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