Marketing and Distribution of Petroleum Products in India

(Updated in July 2011)

Overview:

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:

 

Conclusion:

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)
HPCL's Non-Plan Capital Budget, 2014-15: Company to go aggressive on marketing 4/22/2014 12:00:00 AM
 
  • HPCL's proposed budget for new marketing projects in NPCB 2014-15 is estimated at Rs. 3797 crore, which is higher than Rs. 2065 crore under NPCB 2013-14.

  • The estimated carryover as of April 1, 2014 is Rs. 1270 crore. Thus, the Gross Marketing project cost for NPCB 2014-15 including carryover is projected at Rs. 5067 crore as against Rs. 3932 crore for NPCB 2013-14. Out of this, Rs. 3543 crore is expenditure target in 2014-15 which includes Rs. 1077 crore towards carryover and Rs. 2466 crore towards new proposals.

  • The budget of new projects proposed in Retail segment is Rs. 750 crore as against Rs. 690 Crore in 2013-14. Of this, Rs 194 crore will be spent towards modernisation of the existing 500 Retail Outlets and another Rs 180 crore for 350 New Co-owned Retail Outlets.

  • The proposed budget of new projects proposed under Operations and Distribution (O&D) is Rs. 1494 crore as against Rs. 524 crore for 2013-14 and for LPG at 1,339 crore as against Rs 695 crore in 2013-14.

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No diesel price hike till the end of the road for UPA-2 - New regime to steer pricing policy after EC signals diversion of govt proposals via Cab Secretariat 4/21/2014 12:00:00 AM
 
  • Amid a spate of government proposals at its door, the Election Commission has asked all Union government departments to route their proposals through the Cabinet Secretariat. This means the freeze on diesel prices continues. The proposal on revising prices, pending before the commission, will have to be resent by the oil ministry through the Cabinet Secretariat. With the general elections notified on March 5, the model code of conduct became binding on the government, political parties and electoral candidates until the end of the election process. A senior government official says any diesel price hike is unlikely till a new government is in place. With this, the government has given a quiet burial to the phased decontrol of diesel prices. Any decision on further price increases will lie with the new government.

  • Oil marketing companies (OMCs) have been raising diesel prices by 50 paise a month since January 17, 2013, as part of phased decontrol. The Kirit Parikh committee had in October 2013 recommended a Rs 5 increase in one go. But the government did not take that proposal forward. "A decision on revision in retail prices for diesel shall be taken on receipt of further advice from the government," an IndianOil statement had said on March 31.

  • The statement also said the under-recovery on retail diesel was Rs 5.93 a litre (at the beginning of April). That was lower than Rs 6, the interim subsidy cap recommended by the Parikh panel; so, the issue of monthly price rises came under consideration of the government and was referred to the Election Commission. The under-recovery or revenue loss incurred by OMCs by selling diesel below the global price has come down to Rs 5.49 a litre from Rs 7.16 a month ago. In May 2013, it was just Rs 2.50 a litre, but the gap again rose to Rs 14.5 in mid-September, primarily due to the rupee's depreciation against the US dollar.

  • Complete decontrol of diesel prices will mean that the government or any of its companies do not have to bear revenue loss on retail sales of the fuel. There will be no revenue loss as the retail price will be benchmarked to the 0.05 per cent sulphur content Arab Gulf gasoline price. Applicable tax and margins would be built on top of the benchmark price.

  • The three state-run OMCs together suffered revenue loss of around Rs 1,41,000 crore on sale of the three controlled products - diesel, LPG and kerosene - last financial year, with a net impact of Rs 40,000 crore after taking into account government subsidy and upstream discounts. The OMCs have under-recoveries of Rs 34.43 a litre on kerosene (sold through the public distribution system) and Rs 505.50 a litre on domestic liquefied petroleum gas (LPG). The projected under-recoveries of IndianOil on the three items are Rs 62,000 crore for 2014-15. The figure for the sector is Rs 1,20,000 crore. Although phased decontrol of diesel prices has been stalled, the OMCs have reduced petrol prices twice this month. The prices in Delhi were cut by Rs 0.90 a litre in the first instance and subsequently by Rs 0.85 a litre.



 
Reliance Industries posts flat net profit in Q4 - Sales rise 13 per cent to ₹978.07 billion 4/19/2014 12:00:00 AM
 
  • Reliance Industries Ltd (RIL) posted a marginal rise in net profit for the fourth quarter ended March 31 at ₹5,631 crore, a 0.8 per cent increase from the ₹5,589 crore reported in the year-ago period. Turnover rose 13 per cent to ₹97,807 crore. The board of directors has recommended a dividend of ₹9.50 per fully paid-up equity share of ₹10, aggregating ₹3,268 crore, including dividend distribution tax. Higher refining margins during the quarter offset the decline in earnings from RIL’s core oil and gas exploration and production (E&P) business.

  • While revenue from refining and marketing improved 12.5 per cent in the fourth quarter to ₹87,624 crore against ₹77,872 crore a year ago, revenue from the E&P business was at ₹1,417 crore, declining 11.3 per cent. RIL said its KG-D6 field produced 178 BCF (billion cubic feet) of natural gas in 2013-14, a fall of 47 per cent from a year ago. Meanwhile, the company’s gross refining margins (GRMs) - the difference between the cost of processing crude and the selling price of the finished petroleum product - rose to $9.30 a barrel for the quarter from $7.60 in the previous quarter.

  • For the full year, the company’s net profit grew a modest 5 per cent to ₹21,984 crore in FY14 against ₹21,003 crore in FY13. “FY14 was a satisfying year for RIL. The refining business delivered the highest-ever profits with a sharp recovery in GRMs towards the end of the year. Petrochemical earnings grew sharply with margin expansion across polymers and downstream polyester products,” said Mukesh Ambani, Chairman and Managing Director. “We have also accelerated efforts to roll out our 4G services across the country, which will add an exciting new dimension to our consumer-facing service offerings,” he added.



 
Loss on diesel sales falls to Rs 5.49 a litre after appreciation in the value of the rupee 4/17/2014 12:00:00 AM
 
  • The loss on sale of diesel has been trimmed by 44 paise to Rs 5.49 a litre after appreciation in the value of the rupee made imports cheaper. State-owned firms Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp are losing Rs 5.49 on every litre of diesel sold, down from Rs 5.93 a litre in the first half of the month, an official statement issued here said. The loss, which is made good through government subsidy, has declined since March as the rupee strengthened against the dollar and global oil prices softened.

  • Oil firms lost Rs 8.37 a litre in the first half of March, which came down to Rs 7.16 in the second fortnight. The decline continued in April. The rupee has strengthened to 60.07 to a dollar from 60.90 previously, resulting in a fall in the under-recovery or revenue loss to Rs 5.49, the statement said. Besides diesel, oil firms are losing Rs 34.43 a litre on kerosene sold through the public distribution system, down from Rs 36.34 a litre last month. On cooking gas (LPG), the revenue loss has come down to Rs 506.06 per 14.2 kg cylinder from Rs 605.80 last month. The fall in under-recovery has meant that monthly diesel price hikes have been put on hold. Oil firms did not effect the price hike on April 1 on the grounds that the loss on sales of the fuel has fallen to less than Rs 6 a litre.

  • IOC said on March 31 there was no need to increase rates further because an expert committee headed by Kirit Parikh had suggested that the government should provide a subsidy of Rs 6 a litre on diesel. Since the oil firms are guaranteed Rs 6 a litre subsidy, they decided not to raise the rates any further. The Cabinet had in January last year decided that diesel prices should be raised by 40-50 paise a litre every month until losses on the fuel are wiped out. Diesel prices have risen by a cumulative Rs 8.33 a litre in 14 instalments since January 2013. “Oil marketing companies, effective April 16, 2014, are now incurring combined daily under-recovery of about Rs 337 crore on the sale of diesel, PDS kerosene and domestic LPG. This is lower than Rs 342 crore daily under-recoveries during previous fortnight effective April 1,” the statement said.



 
Sugar firms will get more for selling ethanol - Inter-ministerial panel agrees to change formula to make oil firms pay higher price 4/5/2014 12:00:00 AM
 
  • Realisations from ethanol for sugar companies is set to increase by up to a tenth as the Inter-Ministerial Group has agreed to revise the formula to fix the benchmark price. The public sector Oil Marketing Companies have been procuring ethanol from the sugar mills to implement the mandatory five per cent blending programme. The current benchmark price for ethanol at ₹44 a litre is derived from the lowest refinery transfer price (RTP) or the cost of petrol to the oil marketing companies. At its recent meeting, the ministerial group has agreed to consider the average of RTP for the previous financial year instead of the existing system, in keeping with the sugar companies’ demand.

  • This is expected to benefit the sugar mills. A Petroleum & Natural Gas Ministry official said that the realisations could go up by ₹1-2 litre, while the sugar industry expects an increase of up to ₹5/litre from the fresh tender to be floated in the next season starting October. The ministerial group consists of officials from the Ministry of Petroleum and Natural Gas, Food and Public Distribution among others. Sources said the move would entice sugar mills in Maharashtra to participate in the mandatory blending programme by offering ethanol to the Oil Marketing Companies. Mills from Maharashtra have largely stayed away from participating in the tenders of the oil companies and have preferred to sell in the open market due to the cumbersome process of securing their payments.

  • The companies have finalised offers for 65 crore litres of ethanol and so far, about 31.55 crore litres have been lifted by them. The five per cent ethanol blending programme is being implemented in nine States, while Uttar Pradesh, and a depot in Bangalore, and two depots in Maharashtra have introduced 10 per cent blending with petrol. As part of its energy conservation strategy, the Government has launched ethanol-blended petrol programme. However, blending of ethanol with petrol will have little impact on crude oil import, since petrol is only a by-product of the distillation process.



 
Losses by fuel retailers may quadruple to Rs 37 billion 3/21/2014 12:00:00 AM
 
  • Losses to be borne by Indian Oil Corporation (IOC) and other retailers of diesel, kerosene and cooking gas may quadruple to Rs 3,700 crore in this financial year as the finance ministry is unwilling to provide additional subsidy. IOC, Hindustan Petroleum Corp and Bharat Petroleum Crop together are projected to lose about Rs 1,41,000 crore in revenue this financial year on selling diesel, LPG and kerosene at rates set by the government. Of this shortfall, the finance ministry is willing to provide no more than Rs 72,800 crore, sources privy to the matter said. Another Rs 64,500 crore will come from upstream firms such as Oil and Natural Gas Corp, leaving Rs 3,700 crore to be absorbed by the three state-owned fuel retailers.

  • The loss they will bear is four times more than the Rs 900 crore hit taken by IOC, BPCL and HPCL in 2012-13. Sources said the finance ministry had given the fuel retailers Rs 27,772 crore in cash as subsidy for selling diesel, cooking gas and kerosene below cost in the first nine months of 2013-14. It will provide another Rs 10,000 crore this financial year and will roll over Rs 35,000 crore to 2014-15. ONGC and other upstream firms, which provided about Rs 47,972 crore as subsidy support during April-December, will give a little less than Rs 16,530 crore in the fourth quarter. Finance Minister P Chidambaram provided Rs 65,000 crore towards fuel subsidy in his interim budget for 2014-15. This includes Rs 35,000 crore carried over from the current fiscal, leaving only Rs 30,000 crore for 2014-15.

  • Sources said the oil marketing companies currently lose Rs 399 crore daily on selling diesel, kerosene and domestic LPG at government-controlled rates. They lose Rs 7.16 a litre on diesel, Rs 36.34 per litre on kerosene sold through the public distribution system and Rs 605.80 per 14.2-kg LPG cylinder. While the government freed petrol prices in June 2010, it started increasing diesel rates by 50 paise a litre every month in January last year with a view to cut subsidies. Since January 2013, diesel prices have risen by Rs 8.33. The three firms together lost Rs 1,00,632 crore on fuel sales in April-December and may end the financial year with a total under-recovery of about Rs 1,41,000 crore. This compares with an under-recovery of Rs 1,61,029 crore in 2012-13 and Rs 1,38,541 crore in the previous fiscal.



 
Loss on diesel sales declines to Rs 7.16/litre on the back of softening international oil rates 3/19/2014 12:00:00 AM
 
  • The loss on sales of diesel has been trimmed by more than Re 1 to Rs 7.16 per litre on the back of softening international oil rates. Public sector oil firms Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp are losing Rs 7.16 on every litre of diesel sold in the second fortnight of March, down from Rs 8.37 a litre in the first half of the month, an official statement issued here said.

  • The basket of crude oil that India buys has dropped to $105.36 per barrel from USD 106.18. Losses have also been trimmed because of the monthly increases of 50 paise a litre of diesel, excluding local sales tax or VAT. Since January 2013, diesel rates have risen by a cumulative Rs 8.33. Besides diesel, oil firms are losing Rs 36.34 per litre on kerosene sold through the public distribution system, up from Rs 35.76 a litre last month. On cooking gas (LPG), the revenue loss or under-recovery has come down to Rs 605.80 per 14.2-kg cylinder from Rs 655.96 in February.

  • Oil marketing companies are now incurring a combined daily under-recovery of Rs 399 crore on the sale of diesel, PDS kerosene and domestic LPG compared with Rs 411 crore daily during the previous fortnight, the statement said. The three firms had together lost Rs 1,00,632 crore on the sale of the three products in April-December and may end the financial year with a total under-recovery of about Rs 1,40,000 crore. This compares with an under-recovery of Rs 1,61,029 crore in 2012-13 and Rs 1,38,541 crore in the previous fiscal. The statement said during the current financial year, oil firms lost Rs 47,655 crore on sale of diesel at rates lower than cost and another Rs 30,604 crore on domestic LPG. They incurred an under-recovery of Rs 22,373 crore on the sale of kerosene, it added.



 
Safety Monitoring and Regulatory Body for the Indian Oil Industry III: Regulatory bodies and their area of activities in the Upstream Sector 3/18/2014 12:00:00 AM
 

Down Stream Sector

Refining of Crude Oil, Processing of Natural Gas, Manufacturing of Lubricating Petroleum, Greases and Specialties, Transportation of Crude Oil, Petroleum Products and Natural Gas; Marketing of Petroleum products and Natural Gas

  1. Petroleum and Explosive Safety Organization (PESO)

    Safety in downstream petroleum activities is regulated by Chief Controller, Petroleum and Explosive Safety Organization operating under Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce & Industry through the Petroleum Rules, 2002; the Gas Cylinder Rules, 2004 and the Static and Mobile Pressure Vessel (unfired) Rules, 1981. The Petroleum Rules 2002 were made in exercise of the power conferred by the Petroleum Act 1934. The Petroleum Act is administered by the Ministry of Petroleum & Natural Gas. Gas Cylinder Rules, 2004 and Static and Mobile Pressure Vessel (unfired) Rules, 1981 were made in exercise of the power conferred in the Explosives Act, 1884. The Explosives Act is administered by the Ministry of Commerce & Industry.

  2. Petroleum and Natural Gas Regulatory Board (PNGRB):

    PNGRB was formed in October, 2007 under Petroleum & Natural Gas Regulatory Board Act, 2006 to regulate the refining, processing, storage, transportation, distribution, marketing and sale of petroleum, petroleum products and natural gas excluding production of crude oil and natural gas so as to protect the interests of consumers and entities engaged in specified activities relating to petroleum, petroleum products and natural gas and to ensure uninterrupted and adequate supply of petroleum, petroleum products and natural gas in all parts of the country and to promote competitive markets and for matters connected therewith or incidental thereto. While PNGRB's roles and functions, as evident from above, are predominantly business oriented, authority to regulate technical safety standards was included in pertinent clauses. It is pertinent to mention here that the word "Safety" does not appear anywhere else in the Act other than the said two interrelated clauses effectively targeting the same objective mentioned above. Their role has been further limited by absence of requisite notifications of Government regarding inclusion of petroleum products under PNGRB umbrella as well as limited infrastructure / expertise and field level activity.

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Amazon picks Bharat Petroleum Corporation to gain upper hand in India 3/15/2014 12:00:00 AM
 
  • Online retail giant Amazon may be testing out fancy drones to deliver packages in the U.S., but in India it is going decidedly low-tech to give it an edge over rivals Flipkart and Snapdeal. According to people with direct knowledge of the matter, Amazon has rolled out a pilot project - for physical pick-up of packages - in partnership with Bharat Petroleum Corporation Limited (BPCL).

  • The physical pick-up service allows its users to order an item online, and pick it up from a physical store that Amazon has tied up with. This kind of service is primarily used by customers who may not be at home to collect the package or need a certain package urgently enough to go pick it up themselves. In Mumbai and Delhi, the company has tied up with state-owned oil marketing firm Bharat Petroleum. BPCL operates a retail chain known as In&Out at some of its filling stations across the country. It is through some of these In&Out stores that customers are allowed to pick up their packages.

  • When contacted, an Amazon spokesperson confirmed the development. “We are continually innovating to find solutions that enhance the convenience and experience for our customers on Amazon.in,” the spokesperson said. “Towards that, we are running a pilot in Delhi and Mumbai with BPCL to ascertain the benefits and mechanics of enabling a pick-up service. It is too early to comment any further. Depending on results, we will take a call on how and what we want to roll out and we will make a further announcement on this at an appropriate time,” the spokesperson added.

  • BPCL sources also confirmed the development. For the oil firm , this partnership gives an opportunity to utilise its retail outlets as a pick-up point. “Over night, this gives Amazon a decent physical distribution network to work with. This kind of savvy marketing and strategy, also seen with their partnership with India Post for cash-on-delivery services, is what keeps them on top,” said an industry executive, who did not wish to be named.



 
Gujarat Gas gets regulator nod to set up network at Bhavnagar 3/14/2014 12:00:00 AM
 
  • City Gas distribution major, Gujarat Gas Company Ltd (GGCL) informed that the industry regulator, Petroleum and Natural Gas Regulatory Board (PNGRB) has granted authorisation to set up and operate City Gas Distribution (CGD) network in Bhavnagar area in Gujarat. This will allow the company to cover an additional geographical area of 8,153 sq.km under CGD. In a filing with the Bombay Stock Exchange (BSE) on Thursday, GGCL informed, that pursuant to PNGRB's letter granting GGCL an authorisation to lay, build, operate, or expand city or local natural gas distribution network for the geographical area of Bhavnagar, GGCL has accepted the authorisation in Schedule D of the PNGRB Regulation, 2008, vide a confirmation letter to PNGRB on March 13, 2014. The area will comprise of Bhavnagar district and few talukas of the newly formed district of Botad.

  • As per the provisions of the PNGRB Regulation, 2008 of granting Exclusivity for City or Local Natural Gas Distribution Networks, the company owned by the state run Gujarat State Petroleum Corporation Group has been granted 300 months of infrastructure exclusivity, which is valid up to March 04, 2039 and 60 months of marketing exclusivity valid up to March 04, 2019 for the CGD network. Further, the authorised area for laying, building, operating or expanding the proposed CGD Network shall cover a geographical area of 8,153sq.km, said the company.



 
IOCL's Presentation to the Standing Committee: Details on Operations and Strategy 3/13/2014 12:00:00 AM
 

The website carries information shared by IOC to the Standing Committee on the following parameters:

  • Crude and Product Pipeline Length and Capacity

  • Fuel Distribution Network

  • Phased Capacity Addition

  • Fuel Quality Improvement Initiatives

  • Upgradation of Processing Capabilities

  • Further Integration into Petrochemical and Value Added Products

  • Major Projects and Approved Costs

  • Recent Developments in Marketing of Fuels

  • Diversification Plans

  • Audited Under-recoveries for Q3 FY-14 and Projections for Q4 and Full Year FY14

Please mail us at support@infraline.com for complete details.



 
Crude allocation from 2014-15 onwards-I: OMCs trash report of Industry Committee 3/12/2014 12:00:00 AM
 

The Oil Marketing Companies (OMCs) have shot down the recommendation made by the Industry Committee for allocation of crude oil to Indian refiners from 2014-15 onwards. The Committee was formed in August, 2013, to suggest an objective formula for allocation of crude oil which may adequately reflect the various dependent variables. A report on the same was recently submitted by the Committee. However, its recommendations have not been considered.

The Committee noted, "In view of the uneven distribution of the economic benefit of processing indigenous crude oil amongst PSU refineries, there is a need for complete review of crude allocation for the next year 2014-15 onwards". As per the recommendation of the Committee, while the allocation of crude oil to IOCL will increase from 47.04% to 60.96%, the share of MRPL will reduce to NIL. The share of HPCL & BPCL will decline from 13.66% and 32.69% to 11.27% and 27.53% respectively.

PSU refineries Refining Capacity (%) Existing Crude allocation (%) Allocations for 2014-15 & 2015-16 (%) Allocations from 2016-17 onwards (%)
IOC group 54.72 47.04 49.67 60.96
HPCL 12.33 13.66 12.42 11.27
BPCL group 20.41 32.69 31.48 27.53
MRPL 12.49 13.66 6.20 NIL
ONGC-tatipakka 0.66 0.24 0.23

The reasons cited in the report for increasing additional crude allocation to refineries of IOCL have been ferociously disputed by HPCL, BPCL and MRPL.

As per the OMCs, the review of the report has indicated certain anomalies viz. assigning advantage/disadvantage factors only to Mangla crude/MH crude without considering the disadvantage factor of Ravva crude; allocating MH crude to inland refineries (Mathura/Panipat) well connected to West Coast through pipelines; disconnecting crude allocation from under-recovery of OMCs and auction of indigenous crude; justifying allocation of crude to Mathura refinery due to environmental concern and ignoring the environmental concerns of Vizag refinery; justifying allocation of MH crude to CPCL for production of paraffin wax (a decontrolled product); denying crude allocation to MRPL on the grounds that they are not sharing under-recoveries while justifying crude allocation to CPCL and NRL who are also not sharing under-recoveries.

The committee was constituted to remove the uneven economic distribution of benefits arising to PSU refineries by processing indigenous crude, i.e. if a particular PSU refinery is enjoying major gains by processing higher quantum of indigenous crude, the other PSU refineries should not be denied the economic gains because of low/NIL allocation of indigenous crude. The report of the committee, however, appears to create further anomalies, as per OMCs.

In view of the above, the OMCs have proposed that atleast for FY 2014-15, crude allocation is maintained at the 2013-14 level/basis. The economic benefit arising out of indigenous crude allocation is quantified by the PPAC on the basis of existing crude allocation which may be allocated to all the PSU refineries in an equitable manner considering the under-recoveries or market share.

For further details, please mail your query to support@infraline.com



 
IndianOil offers Training Facilities to Ghana II: Training Modules offered 3/5/2014 12:00:00 AM
 

In the refineries segment, the company offers the following training modules,

  • Operation and maintenance of refineries;

  • Techno-economic feasibility study for revamp / upgradation of refineries;

  • Energy optimization, hydrocarbon loss control, product mix improvement;

  • Product planning and coordination;

  • Technical audit of operations, energy, environment, maintenance, quality etc.;

  • Turnaround management;

  • HAZOP studies for facilities;

  • Development, implementation and maintenance of Integrated Management Systems for quality assurance and environment management;

  • Imparting Training in India or abroad to Refinery personnel as per the need of clients.

In the pipeline segment, the company offers the following training modules,

  • Implementation of pipeline projects from concept to commissioning;

  • Operation and maintenance of pipelines;

  • Feasibility study on capacity augmentation of existing pipeline systems;

  • Corrosion management;

  • Technical and safety audits;

  • Imparting Training in India or abroad to personnel from Pipelines as per the need of clients.

In the marketing segment, the company offers the following training modules,

  • Market planning, coordination, scheduling & facilities planning;

  • Concept to commissioning of modern automated terminals;

  • Design and implementation of LPG Bottling plants, Aviation Fuel Stations, Lube Blending plants, Retail outlets etc.;

  • Technical assistance in aviation refueling and construction of hydrant refueling systems;

  • Operation management of bulk storage terminals and depots;

  • Logistic management for receipt, storage and distribution of petroleum products;

  • Tanker and Bunker operation management.

In the recent past, IndianOil has conducted several training programmes for officials of oil companies from countries such as Oman, Malaysia, Kuwait, Libiya, Nigeria, Madagascar, etc.



 
Loss on diesel sales rises marginally to Rs 8.37 a litre 3/4/2014 12:00:00 AM
 
  • The loss on diesel sales has inched up marginally to Rs 8.37 a litre even as a surge in international oil rates and a weakening rupee wiped out gains from a 50 paise increase in the price of the fuel. Public sector oil firms Indian Oil Corp, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd will lose Rs 8.37 on every litre of diesel sold in the first fortnight of March, up from Rs 8.31 a litre in the second half of February, an official statement issued here said.

  • The price of diesel had been increased by 50 paise a litre, excluding local sales tax or VAT, from March 1. This follows international prices firming up by about $2 per barrel and the rupee dipping from Rs 62.02 against the dollar to Rs 62.12. Besides diesel, oil firms are also losing Rs 36.34 per litre on kerosene sold through the public distribution system, up from Rs 35.76 a litre last month. On cooking gas (LPG), the revenue loss or under-recoveries have come down to Rs 605.80 per 14.2-kg cylinder from Rs 655.96 in February.

  • Oil marketing companies are now incurring a combined daily under-recovery of about Rs 411 crore on the sale of diesel, PDS kerosene and domestic LPG compared with Rs 456 crore daily during the previous fortnight, the statement said. The three firms had together lost Rs 1,00,632 crore on the sale of the three products in April-December and may end the financial year with a total under-recovery of about Rs 1,40,000 crore. This compares with an under-recovery of Rs 1,61,029 crore in 2012-13 and Rs 1,38,541 crore in the previous fiscal. The statement said during the current financial year, oil firms lost Rs 47,655 crore on sale of diesel at rates lower than cost and another Rs 30,604 crore on domestic LPG. They incurred an under-recovery of Rs 22,373 crore on the sale of kerosene, it added.



 
HPCL to get aggressive on refining, retailing - Renewable energy part of Vision 2030 2/26/2014 12:00:00 AM
 
  • Hindustan Petroleum Corp Ltd (HPCL) has launched Vision 2030, a new set of objectives to be achieved over the next 15 years. While this will include aggressive numbers for refining capacity, retail outlets and pipelines, there will also be an added focus on renewable energy options keeping in mind environment regulations in the future. Vision 2030 is the brainchild of S Roy Choudhury, Chairman and Managing Director, who retires at the end of this month. The idea is to ensure that HPCL stays ahead of the curve in a competitive environment, where private players such as Reliance Industries, Essar and Shell will also be part of the fuel retail arena.

  • It is perhaps keeping this in mind that the company has roped in international consultant McKinsey to study and recommend better integration of its operations right from refining to marketing. At present, these are largely silo functions, but going forward, greater synergies will become imperative for front and back-end operations. The savings on costs are expected to be “quite substantial” as a result. Choudhury, who took charge in August 2010, is upbeat about the Barmer refinery in Rajasthan, which is scheduled for commissioning over the next three years. “It’s going to be a critical project for the north and will enhance HPCL’s presence in the region,” he said. The Rajasthan refinery will kick off with a capacity of 9 million tonnes (mt), but this can be comfortably doubled to 18 mt.

  • The other critical pillar for the north is the 9-mt Bhatinda refinery, a joint venture between HPCL and the Lakshmi Mittal group. Its capacity, likewise, can be enhanced to 18 mt with the added prospects of supplying products to Pakistan. All it takes is building a pipeline from Bhatinda to Lahore for supply of petrol and diesel, says Choudhury. In reality, though, this will need a formal trade pact to be formalised between India and Pakistan. In the meantime, the Bhatinda and Barmer refineries will cater to demand for products in Punjab, Rajasthan, Delhi, Uttar Pradesh and Bihar.

  • From Choudhury’s point of view, the Barmer refinery is as relevant since it will have an integrated facility for petrochemicals. “It is definitely an interesting business stream for the future,” he says. HPCL will also increase the capacity of its Vizag refinery to 15 mt and this will be its single largest facility by 2017. Along with Mumbai, Bhatinda and Barmer, the company hopes to have 40 mt in place by that time. The next phase of expansion will see Bhatinda and Barmer double capacities, while work on a new west coast refinery could also kick off. All this is part of Vision 2030, where HPCL is expected to have 70 mt of refining capacity in its kitty.

  • Choudhury is pleased that his tenure saw the company strengthen its infrastructure base, comprising pipelines, terminals and retail outlets. The recent tie-up with the Shapoorji Pallonji group for an LNG terminal in Gujarat is expected to kick-start the process of a larger road map for gas distribution across the country. On March 1, Nishi Vasudeva takes over from Choudhury and will become the first woman to be at the helm of affairs in a public sector oil company.



 
IOC's training expertise: Details on programs conducted for foreign players 2/25/2014 12:00:00 AM
 

Indian Oil Corporation (IOC) has conducted several training programs for countries across the globe. This includes countries like Oman, Qatar, Libya. Kuwait. Nigeria, Sudan, Kenya, Sri Lanka. Bahrain, UAE and Malaysia. The company is also keen to joins hand with the petroleum sector of Ghana and offer its professional expertise in different facets of downstream operations through customized trainings. Following is a list of major recent training assignments conducted by the refinery major for its foreign clients:

Refineries

  • Operation and maintenance of refineries;

  • Techno-economic feasibility study for revamp / upgradation of refineries;

  • Energy optimisation, hydrocarbon loss control, product mix improvement;

  • Product planning and coordination;

  • Technical audit of operations, energy, environment, maintenance, quality etc.;

  • Turnaround management;

  • HAZOP studies for facilities;

  • Development, implementation and maintenance of Integrated Management Systems for quality assurance and environment management;

  • Imparting Training in India or abroad to Refinery personnel as per the need of clients.

Pipelines

  • Implementation of pipeline projects from concept to commissioning;

  • Operation and maintenance of pipelines;

  • Feasibility study on capacity augmentation of existing pipeline systems;

  • Corrosion management;

  • Technical and safety audits;

  • Imparting Training in India or abroad to personnel from Pipelines as per the need of clients.

Marketing Services

  • Market planning, coordination, scheduling & facilities planning;

  • Concept to commissioning of modern automated terminals;

  • Design and implementation of LPG Bottling plants, Aviation Fuel Stations, Lube Blending plants, Retail outlets etc.;

  • Technical assistance in aviation refueling and construction of hydrant refueling systems;

  • Operation management of bulk storage terminals and depots;

  • Logistic management for receipt, storage and distribution of petroleum products;

  • Tanker and Bunker operation management.

For further details, please mail your query at support@infraline.com



 
Government may have to carry over way more than Rs 350 billion in OMC under-recoveries 2/21/2014 12:00:00 AM
 
  • Going by the oil ministry's estimate of under-recoveries of oil marketing companies IOC, HPCL and BPCL this fiscal, it appears the government will have to carry over to next year much more than the R35,000 crore projected in the budget documents. Besides, next fiscal's allocation of government share of oil subsidy itself look grossly inadequate. If upstream companies ONGC, Gail India and Oil India as per convention bear 40% of this year's under-recovery of R1,40,000 crore estimated by the petroleum ministry for the fiscal, the government ought to pay about R84,000 crore to fuel retailers.

  • This broadly corresponds with the budget allocation of R85,480 crore. However, after taking into account the R45,000 crore subsidy requirement of Q4 of 2012-13 rolled over to current fiscal, what oil marketing companies can actually account for in their books this fiscal is just R39,000 crore. That leaves about R40,480 crore of unmet subsidy liability from 2013-14 to be carried over to 2014-15. This is much higher than the payment postponement of R35,000 crore admitted by the finance minister in the interim budget. In the wake of this, the oil subsidy allocation of R63,427 crore for 2014-15 clearly looks a serious understatement as that implies a subsidy burden of just R22,947 crore for the year.

  • Inclusive of R40,000 crore of unsettled dues to Food Corporation of India (FCI) and the R38,000 crore estimated by the fertiliser ministry as the difference between the revised outlay and subsidy requirement of fertiliser industry this fiscal, the total subsidy payment postponed would therefore be a whopping R1.18 lakh crore. In what seemed to correspond to FE's analysis of oil subsidy budgeting, rating agency Moody's said on Wednesday that "excluding the R45,000 crore paid out to OMCs in the current fiscal for the previous fiscal's under-recoveries, the budget provision of R80,800 crore leaves only R35,800 crore for reimbursements in the current fiscal. This implies a shortfall of R42,200 crore, according to our calculations."

  • For the budget math to hold true, the government not only has to boldly carry out reforms of fuel and urea pricing but also has to increase the burden on upstream companies further. ONGC has long complained of the rising burden of fuel subsidy and said this has been hampering the much-needed capex plans. GAIL India's demand for exempting it from having to bear subsidies has been supported by the petroleum ministry as well. Oil exploration companies, requiring to play a crucial role in bolstering the country's energy security by investing prudently in exploration and production, have anyway seen their share of the subsidy burden increasing from as low as 30% in 2003-04 to the current level.

  • Analysts say the practice of deferring subsidy payment has only become entrenched over the years. Till 2010-11, the government had settled all the pending dues to FCI under the food subsidy head. However, due to FCI holding on to huge foodgrain stocks, on an average in the range of 55 million tonne to 60 mt, against the requirement of around 25 mt under the Targeted Public Distribution System (TPDS) and buffer stocks norms, food subsidy rose sharply in 2011-12. While the government had allocated R72,370 crore under food subsidy budget for 2011-12, FCI incurred extra expenses of R32,000 crore, which was carried forward to next fiscal (2012-13) as unsettled dues.

  • A food ministry official said that the sharp spike in expenses against allocation under food subsidy forced the FCI to take a short-term loan and the corporation had to pay more than R6,000 crore towards only interest payment on these loans in the last fiscal. The government has revised the food subsidy estimate to R92,000 crore (RE) in the interim budget against R90,000 estimated earlier. Sources said that would still leave unsettled dues to FCI of R40,000 crore, given the jump in carrying costs. In conformity with the UPA's proclaimed commitment to the food security law, the amount earmarked for next year is R1,15,000 crore (including R88,550 crore for food security Act), up R23,000 crore from revised estimate for this year.

  • With a sharp rise in outstanding dues against funds allocated under the food subsidy head, the FCI will raise R15,000 crore as short-term credit for meeting expenses for carrying out its operations of procurement and distribution of foodgrain till the end of current fiscal. Besides, the FCI would raise R8,000 crore in the current fiscal through bonds. The interim budget for 2014-15 allocates R67,970 crore as fertiliser subsidy (same as RE of this year) against a projected industry demand for R90,000 crore. As for the current fiscal, the industry demand is R74,000 crore. Of the RE of R67,970 core, around R32,000 crore would be used to clear arrears. That leaves only about R36,000 crore for this year. So R38,000 crore expenses incurred by FCI this year would be compensated only next year.

  • “The fertiliser subsidy estimates given by Chidambaram are unrealistic. As has been the tradition with this government, there would once again be a huge rollover of unpaid subsidy. Moreover, the impact of higher gas prices would also be felt in the coming fiscal,” said Satish Chander, director general, Fertiliser Association of India (FAI). After paying last year's arrears, in the current fiscal, the finance ministry has paid only R14,500 crore towards subsidy under a special banking arrangement (SBA) to pay for the ailing fertiliser industry. Under special banking arrangements, companies are offered loans against subsidy receivables over and above their normal working capital limits, against sovereign guarantee.



 
Eastern Gases forays into domestic LPG market 2/14/2014 12:00:00 AM
 
  • Eastern Gases Ltd (EGL), a public limited company specialising in commercial bulk LPG, has entered the domestic LPG distribution market with its brand East Gas. The Worthwhile Foundation, a Delhi-based organisation with varied interests, has bagged the marketing rights for East Gas. The product will be available in 12-kg and 17-kg cylinders, the statement said. EGL is planning to appoint 1,500 dealers in Punjab, Haryana and Himachal Pradesh. It is also setting up a plant in Pundri to cater the domestic LPG requirements in these States, it added.



 
Piped LPG users can have cylinder connection too in Pune 2/5/2014 12:00:00 AM
 
  • The 26,000 flat owners in Pune using the piped or reticulated LPG system of Bharat Petroleum Corporation Limited's (BPCL) in their housing societies can now opt for separate domestic connections, if they do not wish to nominate a member of their housing society committee to receive the entire subsidy amount under the direct benefit transfer scheme (DBTL). "The housing societies with no nominated member will be supplied LPG at non-subsidized rates for their reticulated piped gas system. However, individual flats will now be allowed to buy another separate domestic LPG connection for their personal use, so that they can avail of subsidy for the first 12 cylinders without giving up their reticulated connection," said a BPCL official. This system will remain as long as no notification from the ministry on suspension of DBTL is received, he added. Such customers could use their quota of subsidized cylinders once they buy new domestic connections. After the subsidy quota of 12 per year is finished, they could use non-subsidized LPG, either from their society's reticulated system or their individual supply of non-subsidized cylinders, he said.

  • The official added that the societies that have already nominated a member will continue to get the subsidy in that member's account, as per the September 2013 order. The order issued by the oil marketing companies had stated that societies using piped LPG will have to nominate one member from the society committee in whose account the sum total of subsidy to be availed of by all flats in the society can be transferred. Oil companies, however, had added that they would not be responsible for resolving any conflicts arising from the distribution of the subsidy. Two LPG connections, piped as well as single domestic connection in one house, were earlier prohibited.

  • A clarification was recently sent by BPCL which stated, "One more option is now made available to piped gas customers to avail subsidised LPG. Now, the housing societies can take the entire supply of LPG through non-subsidized cylinders for their reticulated piped gas system. Those residents who want to avail of subsidy can be allowed to take individual LPG connection in their name after submission of KYC and Aadhaar numbers. They would get the subsidy amount in their bank accounts for the subsidy quota drawn by them. Any LPG drawn by them from reticulated system shall be at non-subsidized rate."

  • However, a Hindustan Petroleum Corporation Limited official said customers using reticulated LPG will first have to opt out of using the piped system by submitting an affidavit to their dealers and only then can they buy an individual domestic connection. Residents of societies with piped LPG can take individual LPG connections in their name if their society does not nominate a member in whose account the subsidy (to be availed of by all flats in the society) can be transferred. Buying individual connection will enable residents to avail the LPG subsidy for the first 12 cylinders. However, in such a case, housing societies will have to take the entire supply of LPG for their reticulated piped gas system through non-subsidized cylinders. Tejinder Singh Tur, chairman of Montvert Pristine near Aundh Road, had earlier taken up the issue of nominating a single member from the society in whose account the subsidy disbursement was to be made. His society has 604 flats, two gas banks and a capacity of 550 cylinders loaded at one time.

  • "According to bylaws made by the state government in the Maharashtra Co-Operative Societies Act, transactions have to be made into a common society account instead of a personal account belonging to an individual. Also, the bulk subsidy money of all the society residents transferred in such a way would have been subjected to income tax. Hence, we were opposed to the previous order," said Tur. He added that him, along with the society members, were relieved after receiving the latest directive. There are more than 40,000 customers using reticulated LPG in the city.



 
SC to examine ethanol blending bid rigging issue 2/4/2014 12:00:00 AM
 
  • Admitting the Bhartia-group promoted petrochemical company India Glycols’ (IGL) appeal, the Supreme Court on Monday issued notices to the Centre, the three oil marketing companies, the Indian Sugar Mills Association, and others, over the alleged bid rigging with respect to the Ethanol Blending Programme (EBP). While deciding to examine the price determination issue, a bench headed by Justice AK Patnaik sought reply from the ministries of petroleum and natural gas, chemicals and fertilisers, and consumer affairs, food and public distribution, Indian Sugar Mills Association, oil marketing companies (OMCs) — Indian Oil Corporation, Hindustan Petroleum Corporation, and Bharat Petroleum Corporation, National Federation of Cooperative Sugar Factories and the Competition Commission of India (CCI), on the programme in which alcohol is added to petrol.

  • IGL is engaged in manufacturing and marketing of ethanol-based chemical such as natural gums, industrial gases, etc. and is dependent upon ethanol as one of the basic inputs for running its core business. Ethanol, which is produced from molasses (a waste material of the sugar industry), has emerged as a potential alternative to fossil fuels, both as fuel as well as feedstock for various industries. Challenging the fair trade regulator CCI’s decision to reject its appeal against the alleged bid rigging, IGL senior counsel Dushyant Dave alleged cartelisation by the sugar mills and termed the meetings between the oil companies and the mills for price discussion and fixation of ethanol for blending with petrol as “anti-competition.”

  • This demonstrated abuse of their dominant position (by controlling among themselves the entire sugar/ethanol production in the country), IGL said, adding that the stakeholders coerced the government in accepting the purchase/sale price of ethanol as determined by the cartel. However, senior counsel Gopal Subramanium, appearing for the sugar body, said that OMCs were taking ethanol at the best possible prices. Alleging that the difference in the market price and the ‘cartelised price’ of ethanol is between 15-30%, IGL said that with limited availability of molasses-based ethanol in the country, any diversion of ethanol “shall adversely affect the very existence of the chemical industry in India.”

  • “The majority members of the Commission took the view that the said price, being ultimately agreed by the Cabinet Committee of Economic Affairs (CCEA), becomes an administered price and, therefore, not only a price tainted by sections 3 and 4 of the Competition Act, but also the said determination by CCEA being beyond the purview of the Act,” the appeal stated. In November 2012, CCEA had approved mandatory 5% blending of ethanol with petrol and also directed that procurement prices would be decided between the buyer and the supplier. After tenders for procuring ethanol were floated by the oil marketing companies in January last year, IGL and others had complained before CCI that there was joint tendering by the OMCs at the procurement end and identical pricing by sugar mills at the supply end.



 
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