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Modi at work-I: Sets the ball rolling in the petroleum sector

Sept 1:  Narendra Modi clearly has his own unique style of functioning like no other Prime Minister in the past.
8It is clearly a one-man show, as he alone seems to to be taking the decisions in conjunction with the secretary of the relevant ministry, with the cabinet secretariat and the PMO working as monitoring and coordinating authorities. 
 8Modi is the CEO, the administrative minister the departmental head, and the secretary is the points man.
8Decisions are translated into real targets as was evident from the excel sheet that came out recently from one of Modi`s meetings on the infrastructure sector.
8On the petroleum sector, Modi, perhaps goaded by petroleum minister Dharmendra Pradhan, was the one who ordered the revival of the long defunct Jagdishpur-Haldia Pipeline (JHPL).
 8The Prime Minister`s orders were simple: the fertilizer projects at Gorakhpur, Barauni, Sindri and Haldia have to be revived. 
 8If required, Modi has expressed his willingness to provide a viability gap funding (VGF) of upto 20% to facilitate the completion of the pipeline.
8Then again, the government has also decided to consider gas pooling for resolving the problem of gas shortage for power plants.
The Prime Minister is keen that stranded gas based capacity should somehow be restarted so that more power can flow into the grid.
Comment: It looks like the Prime Minister will single handedly move the agenda in the petroleum sector. The first set of goals have already been fixed. More action is likely in subsequent meetings.
 Click here for more information

Modi at work-II: Demands 10% annual efficiency improvement

Sept 1:  In the review meeting taken on the infrastructure sector, Prime Minister Narendra Modi has called for a 10% increase in efficiency in the infrastructure sector in one year.
 8The Planning Commission, as long as it is still in existence it seems, will monitor the efficiency parameters in these sectors.
 8Modi has put together a joint mechanism under the Cabinet Secretary for meeting regularly for resolving issues of various ministries and state governments. In these meeting all issues related to a state in various sectors could be taken up comprehensively. The same approach could be adopted for sectors.
 8A database on all major contracting firms in various sectors should be developed, Modi has claimed, so that it will help in sorting out contractual difficulties.
 8Specific performance targets will be put together by the PMO in consultation with the administrative ministries.
 8The Prime Minister will review the performance of ministries vis-a-vis the targets set in the 1st week of September, 2014.
Click here for more information

Modi at work-III: Planning Commission gets to work

Sept 1: On Modi's instructions, the Planning Commission has gone to work on monitoring efficiency parameters of the infrastructure sector.
The Commission has circulated the following points to the administrative ministries:
Efficiency parameters for each of the sector have to be identified and 10% increase should be targeted for 2014-15.
Three or four efficiency parameters may be identified by each sector and achievement in 2013-14 as well as target for 2014-15 be formulated for these efficiency parameters.
No specific mention was made of efficiency parameters for the sectors by the Prime Minister so it is up to the administrative ministry to set these targets.
The Commission has already begun looking at month-wise targets from August onwards.
8Depending upon the data gathered, the Planning Commission will prepare a comprehensive presentation for the PM's review.
Click here for more information

North block finalizes PPP model for gas grid-I: Lowest VGF to be the bid parameter

Sept 1: The finance secretary has put together the basic PPP structure for 3000 km of gas pipeline to complete the National Gas Grid.
The PPP route to the gas grid was part of the finance minister`s budget speech of 2014-15.
The concept will apply for only 3000 km of pipeline length as of the additional 15,000 km, 12,000 km has already been authorized either by the petroleum ministry or by the PNGRB.
 The following tentative structure has been finalized
Tariff to be determined by the regulator
The PPP will be only for the pipeline and gas supply will be an independent exercise, with O&M charges linked to volume of gas transported
Bid parameter will be the lowest Viability Gap Funding sought (project cost will include capex and opex)
8Land will have to be made available by the petroleum ministry or the sponsoring authority (Right of Way with predetermined lease charges to the landowners)
 Click on Details for more

North block finalizes PPP model for gas grid-II: Petroleum ministry to identify sponsoring authority

Sept 1: The following decisions were eventually taken in the meeting called by the finance secretary for a PPP for a National Gas Grid
The ministry will identify an entity which will be the sponsoring authority for the project
Currently even though the PNGRB authorizes gas pipelines, an arms length distance is essential in PPP between regulator and sponsoring authority
PNGRB to approve the bidding process to be carried out by the sponsoring authority
The petroleum ministry will identify a stretch for a pilot PPP project that should preferably be linked to an anchor customer
The sponsoring authority will bid out the laying of the pipeline to the lowest Viability Funding Gap proposal.
8The finance ministry will help out with the Transaction Advisory Services.
 Click on Details for more

Cash strapped Atul Punj meets Saurabh Chandra-I: Complaints of non-payment of Rs 2000 crore by ONGC

Sept 1:  The chairman of cash strapped Punj Lloyd Group, Atul Punj, recently met the petroleum secretary Saurabh Chandra to complain about the non-payment of around Rs 2000 crore by ONGC against the Heera Re-development project (HRP). The dues are apparently pending for the last five years.
8Chandra had called Punj to figure out a way to expedite the work at the Mangalore underground cavern being constructed by ISPRL for which Punj Lloyd was handed a Rs 329 crore contract. Chandra is the chairman of ISPRL and he is keen on getting the complex commissioned as soon as possible.
8The commissioning of the contract, which is directly supervised by the petroleum ministry, was scheduled for completion by December 22, 2013.
during the meeting, said that his company was facing a severe cash crunch and he needed more working capital, over and above the mobilization advance that had already been given for completion of the project. He said that the major reason behind the cash squeeze was the withholding of Rs 2,000 crore in dues by ONGC.
8As PLL has been having severe working capital problems, it often has to depend on release of payments from ISPRL to make payments to the sub-contractors and workmen. The contractor has already taken a mobilization advance of Rs 32.99 crore in line with the provisions of the contract and this amount is being recovered from the company on a regular basis through running bills.
 8Punj informed that Rs 22.45 cores has already been recovered from the running bills and he was in need of a working capital of around Rs 5 to 6 crore to get going.
8Fearing that the advance given to the contractor could be used for some other project, and not the Mangalore cavern project, ISPRL is now thinking of paying directly to the sub contractors under Punj Lloyd so that the work can be carried ahead without any interruption.

Cash strapped Atul Punj meets Saurabh Chandra-II: Final decision on September 15

Sept 1:  Atul Punj's complaint to the petroleum secretary Saurabh Chandra, notwithstanding, a final decision on the reported Rs 2000 crore of outstanding payments from ONGC is expected to come on September 15 when an Outside Expert Committee (OEC) will give out its verdict
8The Rs 2,000 crore dispute refers to the refund of LD and BG as well as payment for additional works against the Heera Re-Development Project which was completed much behind its original schedule. While PLL-PT Sempec combine had raised a claim of $198.71 million plus Rs 499.66 crore, ONGC filed counter claims of $4.78 million plus Rs 1,217 crore. Both the parties agreed to resolve the dispute through an Outside Expert Committee (OEC).
 8The OEC had asked ONGC to pay an amount of $136.80 million and Rs 264.08 crore to the PLL-PTS consortium. Concomitantly, it also recommended that ONGC would be entitled to certain additional expenses but only totaling up to an amount of $308,482 and Rs 5.28 crore on account of their counter claims.
 8ONGC however was not happy with the OEC decision and decided than a fresh OEC with the following members, VK Shunglu (Former Comptroller & Auditor General of India), PC Hota (Former Chairman, UPSC) and SC Tripathi (Former Petroleum Secretary), should look into the claims once again. This time, the PLL-PTS consortium, raised a claim of Rs 1,970 crore, while ONGC filed counter claims of Rs 1,246 crore.
 8After several rounds of meetings, the OEC has now informed that conciliation proceedings are over and it will submit a report by September 15, 2014.
everything has to wait till a final decision on this is taken by the OEC.

Defence Ministry makes it difficult for ONGC in MN-OSN-2000/2 block: Multiple mobilization of rigs causes cost to go up

Sept 1:  The cost of appraisal of the second discovery -- dubbed MDW-10 -- in the ONGC's Mahanadi block MN-OSN-2000/2 has gone up from $152.96 million to $172.84 million because of multiple mobilization of rigs on account of frequent stoppage of work by the Ministry of Defence.
 8The operator of the block, ONGC, brought in a drilling rig, Platinum Explorer, from its adjoining block MN-DWN-98/3 due to range clearance directives issued by the defence ministry (MoD) in view of missile testing being carried out in the region.
 8The rig, Platinum Explorer, was used to drill the third well, MDW-24, in the block for appraisal of the second gas discovery. However, later the rig had to be moved back to the MDW-23 location after drilling 1,403 metres and placing of a conductor casing in the well MDW-24 on account of a clearance notice by the MOD.
 8ONGC arranged for another drilling rig, GSF Explorer, from its KG basin operations and re-positioned it on the MDW-24 location for continuing drilling of the well when restrictions were lifted.
 8In view of the delay in drilling, combined with multiple mobilization and de-mobilization of the rig from the adjacent ONGC block, the total appraisal cost went up from $152.96 million to $172.84 million, thereby putting a question mark on the viability of the block.
 8Even with the lower cost estimates, the effective resource potential of the Block MN-OSN-2000/2 did not suffice for a standalone development for the two gas discoveries. Hence, now that the cost has gone up, it was considered prudent to conceptualize an integrated development of the two discoveries along with the gas discoveries made in the contiguous deepwater block held by ONGC.
 8The consortium partners have agreed for a combined DoC and an Integrated Development Plan for cost effective development of the discoveries.
 8The 8,330 sq km block MN-OSN-2000/2 in the Mahanadi Offshore was awarded to a consortium of ONGC (40% and Operator), IOC (20%), GAIL (20%), and OIL (20%) under NELP-II.

Existing and proposed gas pipelines authorized by PNGRB: Details

Sept 1: The website carries here, for reference purposes, details of all existing and proposed gas pipelines authorized by PNGRB. The details are carried in terms of:
Pipelines accepted by PNGRB as central government authorized pipelines
Natural gas pipelines authorized by PNGRB through bidding route
Central government authorized pipelines but yet to be accepted by PNGRB
Authorized by PNGRB under Regulation 18 (without Central government authorization)
Name of all the pipelines along with the name of the entity laying the pipeline
Distance of all the trunk lines and spurlines, along with their capacity
Tariff determined by PNGRB for all existing gas pipelines
8Year-wise tariff (Rs/mmBtu) for bid-out gas pipelines
 Click here for details

KG-D6 production update (Week ending August 10, 2014): Gas output slips further

Sept 1: Average gas output for the KG-D6 block showed a downward trend for week ending August 10, 2014.
8Figures collated by the DGH for the week ending August 10, 2014 showed gas output from the D-6 block at 12.31 MMSCMD, down from 12.40 MMSCMD for the week ending August 3, 2014 and 12.46 MMSCMD for the week ending July 27, 2014.
8The production for the week ending July 27, 2014, July 20, 2014, July 13, 2014,  July 6, 2014, June 29, 2014 and June 22, 2014 were recorded at 12.46 MMSCMD, 12.47 MMSCMD, 12.53 MMSCMD, 12.65 MMSCMD, 12.74 MMSCMD and 12.84 MMSCMD, respectively. Clearly, the trend is negative.
8Of the total current production of 12.31 MMSCMD, gas production from D1 and D3 fields was about 7.36 MMSCMD, while from the MA field it was about 4.95 MMSCMD.
D1-D3 Field:
8The daily average gas sales from D1-D3 field during the week was about 7.36 MMSCMD, down from 7.44 MMSCMD during the previous week.
8Notably, one of the wells A-10, which was work-overed during June 8 to July 3, 2014 is still under observation after the work-over job, and two wells, namely A2a and B4 which were worked over prior to A10 for water-shut off jobs did not meet the desired results.
8One investigative cum substitute well was drilled for investigating the prospects of the undrained areas near B7 well bore, and the results have been submitted to DGH recently.
8Out of 18 wells, only 8 wells are in production.
D-26 (MA field):
8The daily average gas sales from MA field during the week was about 4.95 MMSCM compared to 4.96 MMSCM during the previous week.
8The daily average oil production from the MA field during the week ending August 10, 2014 was down to about 5,501 barrels per day while condensate production was up to 789 barrels per day as compared to the daily average oil production and daily average condensate production of 5,601 barrels per day and 745 barrels per day, respectively, for the previous week ending August 3, 2014.

Aftermath of GAIL pipeline blast-I: Ministry wants industry to take action

Sept 1: In the aftermath of the GAIL gas pipeline blast, the petroleum ministry held a meeting with all major pipeline operators to review the safety and integrity of pipelines including cross-country pipelines, jetty pipelines, non-piggable pipelines, SPMs and sub-sea pipelines. In the meeting, the OISD highlighted some of the major points in which immediate action was required. Among them were:
Scrapper pigs and pig residue analysis have to be done mandatorily
8OISD pointed out that some pipeline operators are using foam pigs instead of proper scrapper pigs for carrying out pigging operations, and this must be corrected immediately.
8Also, the periodicity of the pigging should be defined and followed meticulously.
8Again, pig residue analysis is also not being carried out uniformly by all the pipeline operators, and corrective action must be taken on this.
8To work out the internal corrosion rate through the various statistical tools, essential inputs on the rate of internal corrosion need to be obtained. To enable this, it is essential to carry out the pig residue analysis immediately after the scrapper pigging is complete.
Intelligent pigging survey (IPS) to ascertain health of pipelines must be carried out regularly
8Concern has been raised over the fact that in most cases, an intelligent pigging survey (IPS) is not being carried out at the mandated frequency of once in ten years, which is a critical activity for ascertaining the health of pipelines.
8The entire pipeline industry has been asked to ensure IPS is carried out periodically, and also ensure that anomaly verification and rectification measures are taken up immediately.
8It was further informed that the first IPS inspection must be carried out within 10 years of commissioning, and the results of this inspection should be compared with the original commissioning data.
Corrosion monitoring and coating survey must be done
8OISD highlighted the need to carry out Current Attenuation Test (CAT) and Director Current Voltage Gradient (DCVG) surveys and the  need for recorded defects to be attended to without delay.
8Further, corrosion monitoring facilities (corrosion probes, coupons, ER probes) must be installed to monitor internal corrosion rate.
8Corrosion inhibitor must be used as per requirement, that is, when rater of internal corrosion is greater than 1 mpy.
8Again, current interference survey must be carried out wherever two pipelines are known to be passing along the same right of way (ROW) or a high tension (HT) line is passing nearby. Slippage on this may result in damage of the external coating, since it leads to increase in DC current consumption.
8Also, monolithic insulating joints must be used instead of insulating gaskets, so that integrity of insulating joints is ensured.

Aftermath of GAIL pipeline blast-II: Faulty valves must be repaired immediately, says ministry

Sept 1: The petroleum ministry, with the help of OIDB, worked out the following additional measures to be taken to ensure safety of pipeline systems:
Slippages due to sectionalizing valves not working in remote; scrapper valves to be repaired

8External Safety Audit findings as well as various incident investigations have pointed to some remotely controlled sectionalizing valves not working
8Corrective action must be taken to ensure that all valves operate on remote, as this saves invaluable time and also reduces the loss of product.
8OISD has also pointed out that some scrapper body valves are not working properly, particularly in gas pipelines at many locations, and these need to be repaired immediately.
8Further, hand operated valves (HOVs) installed on old pipelines need to be converted into motor operated valves (MOVs) for remote operation.
Vigil and ground patrolling of ROU to be done
8Line patrolling needs to be done by all pipeline operators, by using modern techniques like GPS and GIS based decision support system for effective monitoring of the Right of User.
8Again, since boundary pillars are essential to demarcate the Right of User (ROU) and Right of way (ROW), it is important that all missing boundary pillars in ROU be restored to ensure easy identification of ROU.
8Further, since encroachments are safety hazards, all pipeline operators must ensure that the ROU is free from all types of encroachments. Industry members have been specifically asked to monitor this and take up the issue with relevant state law and order authorities for quick resolution, and seek ministry intervention if required.
8Pilferage has been highlighted as a concern area, especially in the current day context. Pipeline operators must make efforts to achieve a target of nil pilferage. All necessary coordination must be maintained with the local police and administration authorities to facilitate this.
Non adherence to standard operating procedures and work permit system in various critical activities
8OISD has highlighted the need for standard operating procedures (SOPs) to be prepared and followed meticulously, especially for critical activities such as repair of pipeline leaks, mud plugging, pigging, operating procedure, shut down procedure and emergency handling, across all pipeline locations.
8Work permit system for mainline works, as per OISD-STD-105, must also be followed at all pipeline locations.
8Also, P&IDs, route maps and hydraulic gradients must be displayed at control rooms to facilitate mobilization in case of any emergency

Aftermath of GAIL pipeline blast-III: Accidents waiting to happen in Jetty pipeline systems, warns OISD

Sept 1: It is not just the safety of long distance pipelines that the ministry is worried about, pipelines and attendant facilities are jetties also violate safety norms. Among the problems encountered are:
Maintenance of jetty pipelines and facilities
8OISD has called for pipeline facilities falling under the Port Trust are not being maintained adequately.
8Maintenance and inspection of pipelines laid on the trestle is very difficult, since they are very congested and inaccessible. Companies have been asked to ensure that for all new jetty projects, care is taken to provide ample space and accessibility between the pipelines.
8Also, inspection and maintenance of corroded pipelines on the trestle, is a critical issue. Notably, all the pipes in the port area are supported on these trestles, and therefore, maintenance of trestle must also be carried out periodically.
8It has been highlighted that ensuring provision of cathodic protection in all the underground pipelines as well as their effective functioning is critical, and hence scheduled maintenance needs to be carried out properly. Notably, some underground pipelines, which are externally coated but do not have cathodic protection  are prone to external corrosion, and this needs to be minimized.
8Immediate action has been advised to all pipeline operators to remove the encroachments which have come up in the ROUs in case of most of the jetty lines.
8Also, in jetty pipelines, there needs to be a dedicated pipeline group to ensure the health and integrity of the pipelines.

Aftermath of GAIL pipeline blast-IV: SCADA either not available or not functional in many pipelines, says OISD

Sept 1: A host of other problems with pipeline maintenance has been highlighted by the OISD in the meeting called by the petroleum ministry, including:
SCADA and leak detection systems not functional in some pipelines
8It has been pointed out that SCADA and leak detection systems (LDSs) are either not available or not functional in some pipelines. These are essential facilities and so their availability and functionality must be ensured.
8Also, standby communication is not available over and above OFC communications in some pipelines. All pipeline operators have been advised to ensure a third party leased line communication system as standby, to enable uninterrupted communication and implementation of SCADA to meet emergency situations.
Design issues must be taken care of
8OISD has emphasized that surge analysis must be carried out for all new pipelines at the design stage itself.
8Also, any changes to the basic design conditions must be done by the pipeline operators only after a thorough technical analysis and through systematic management of change (MOC) procedures
Supervision, inspection, training and residual life analysis must be done
8The OISD team also emphasized the need for adequate supervision and inspection to be ensured by the owner or operator for all maintenance works carried out by contractors.
8Regular knowledge and skill training must be done for employees on fire and safety and other related fields.
8Also, residual life analysis must be carried out for aging pipelines which have outlived their design life.

Aftermath of GAIL pipeline blast-V: Databank of non-piggable pipelines to be built

Sept 1: The OISD highlighted a range of other problems faced in the pipelines.
Maintenance of non-piggable pipelines
8OISD has highlighted the need for creating a data bank of  all non-piggable lines for companies such as GAIL, ONGC and OIL, which does not exist currently.
8These companies have been asked to give complete details of their pipeline network to OISD to enable proper audit by OISD.
8Further all the pipeline operators have been asked to carry out inspection of these lines at their respective locations in line with OISD-GDN-233 and undertake immediate repair, if any.
8Immediate corrective action has also been advises for some of the pipelines which do not have pigging facilities despite their length being more than 10 KM.
Critical pigging issues with SPM and sub-sea pipelines
8ONGC, Essar, Adani, HMEL and BPCL have slipped up on maintenance of pigging facilities in case of critical SPM and sub-sea pipelines, says OISD. The pipeline operators have been asked to immediately carry out scrapper pigging.
8Essar, Reliance, ONGC, Cairn, HMEL, IOCL, Adani and BPCL have been asked to carry out intelligent pigging survey (IPS) for all sub-sea lines.
8Functional test of valves are not being carried out, particularly for sub-sea isolation valves. OISD has asked Essar, Reliance, ONGC, Cairn, HMEL, IOCL, Adani and BPCL to take necessary corrective action.
8Many of these pipeline operators have claimed that they do not have proper scrapper launching facilities. Some say that since they have a single subsea line (non-looping), it is not possible to carry out pigging. OISD has called for a meeting with the operators to find a solution to this issue.

Aftermath of GAIL pipeline blast-VI: Other action items

Sept 1: Among the other action points flagged by the petroleum ministry were:
8GAIL, ONGC and OIL have been asked to put together a dedicated pipeline group for ensuring health of all such pipelines.
8All pipeline operators have been asked to ensure that valve distances across the major river crossings are kept as close as possible to the upstream and downstream bank of the river for isolation of theses portions of the pipelines, and ensure that these are remote operated.
8State irrigation departments have been asked not to allow construction of any structures near river banks which can loosen the parent soil.
8Pipeline operators have been asked to ensure inspection of all major river crossings before and after monsoon or flash flood for sufficiency of cover or for any other conditions affecting the safety and security of the crossings.
8Adequacy of surge relief tank capacity at all the applicable locations must also be reviewed by the pipeline operators.
8Concerns were raised over the Oil Spill Response management system, by one of the operators, Essar. Since this is both a critical and very sensitive issue, the possibility of collectively dealing with spill response capabilities through a separate meeting with Essar, Adani, HMEL, BPCL, IOCL and ONGC on this issue is to be explored.
Consider declaration of "Utility corridor" for the pipeline ROW/ROUs
8The pipeline operators in turn has suggested the possibility of declaring  ROWs and ROUs as "Utility corridor''.
Unified regulatory regime for pipeline safety:
8Ministry to work on Cairn's suggestion of having a unified regulatory regime for pipeline safety.

News Briefs

Sept 1:  8Ministry okays relinquishment of CBM block Satpura CBM block: The petroleum ministry has okayed the relinquishment of the CBM block -- also known as ST-CBM-2008/IV -- due to poor prospectivity.
 --Dart Energy, the operator of the block, had requested for relinquishment after completing the MWP for Phase-I. The MWP for the Phase-I involved drilling of 15 core holes and two test wells, which indicated either poor to no development of coal seams or coal seams with very high gas under saturation over a large area.
 --The G&G data submitted by the operator has been checked and field visit has also been carried out by DGH representatives as part of the relinquishment process.
 --While the block was operated by Dart Energy with 80% share, the remaining 20% stake was with Tata Power.
 8Second unit of Palatana power plant in Tripura to be commissioned this month: The second unit of the Palatana power plant in Tripura is expected to be commissioned during September 2014.
 --After trial runs and stabilization, the plant will be ready for commercial operation from mid-November 2014 onwards.
 --It is pertinent to note that ONGC Tripura Power Co. Ltd (OTPC) -- a JV between ONGC, Government of Tripura and IL&FS -- is developing the 726.6 MW power generation plant (having two independent units of 363.3 MW each) at a cost of over Rs 3800 crore.
 --The website carries here, for reference purposes, a brief profile of the project which includes details on: generation, transmission, fuel supply, project investment and power allocation.

Tender Briefs

Sept 1:  8Cairn floats tender for reprocessing of 3D OBC seismic data in Ravva block: Cairn has floated a tender for reprocessing of 3D OBC seismic data for its PKGM-1 (Ravva) block in the Krishna-Godavari basin.
 --Cairn is planning to reprocess approximately 280 SKM of 3D OBC marine seismic data, within varying water depth of 5 metres to 45 metres, during the October-December, 2014, period.
 --Interested bidders can put in their offers before September 10, 2014.
 --Click here for more information
8More tenders: Some more tenders floated by oil and gas companies are:
 --Procurement of calibration gas for online gas chromatograph [GAIL] Details
 --Procurement of centralizers, Mehsana [ONGC] Details
 --Procurement of industrial gases, Karaikal [ONGC] Details
 --Re-tubing of condensers, Gujarat Refinery [IOC] Details

Cost recovery from D-6 block-I: Ministry in a fix

August 29: The petroleum ministry seems to have found itself in a loss over how to recoup the $1.797 billion capital recovery from RIL for creation of extra facilities in the D-6 block.
As a first step, after the deductions, RIL was meant to remit $ 115.26 million as additional profit petroleum for up to the FY 2012-13
Since RIL was showing no signs of paying up, the government had thought that the money could be extracted from GAIL against payments for supply of D-6 gas as well as from crude oil sold to CPCL and HPCL from the MA field of the D-6 block.,
But a subsequent investigation by the petroleum ministry has come out with a surprise: there are no public sector companies who are paying RIL for supply of gas or crude and therefore the capital recovery through deductions from public sector payments cannot be made.
GAIL was meant to receive 2.59 mmsmd of gas for production of LPG but given the low priority attached to the commodity, supply of D-6 gas was stopped.
Then again, the government owned Dabhol power plant was meant to receive 8.9 msmcmd of D-6 gas but given that the power sector`s priority was lower than that of fertilizers, no RIL gas was supplied to it.
CPCL, an IOC subsidiary, was nominated as the government offtaker for the KG D-6 crude but for some reason in April, 2014, RIL shifted to a tender route to sell the crude.
CPCL sent in a conditional bid that was rejected by RIL and the crude was then supplied to RIL`s own Jamnagar refinery.
The government today does not have an option to ensure recovery of the outstanding amount from RIL and its partners, BP and Niko.
8The way out is through arbitration and litigation and that is a long and circuitous route and it is going to take a long time before any recovery can happen.

Cost recovery from D-6 block-II: Minister orders an investigation

August 29: The petroleum minister Dharmendra Pradhan has ordered a full investigation into the lapses that lead to a situation where the government is not in a position to carry out the recovery of capital cost from RIL`s D-6 block.
The first point that Pradhan has said that would need to be investigated is the reason for the delay in the initiating the recovery process.
Notices were first issued in May 2, 2012 and the wheels of the government turned very slowly indeed after that. Detailed computations on the recovery were only made only in December, 2013 and the DGH had then observed that the recovery could be made from gas sales to GAIL and crude to CPCL and HPCL.
A notice was issued for deductions on February 2, 2014 but then petroleum minister Veerappa Moily had put it off, claiming that the views of the contractors be obtained before notices were served. Eventually however, the contractors and the public sector units were only notified of the deductions to be made in July, 2014 after the proposal was okayed by the new petroleum minister.
More importantly, CPCL was the government nominated buyer for RIL crude but in March, 2014, RIL insisted on a letter of credit for supply of crude which the refinery refused.
Subsequently, RIL opted for the tender route for sale of crude for 2015-16.
CPCL sent in a conditional bid agreeing to the letter of credit but sought a revision in the pricing mechanism apparently taking into account the deteriorating quality of the MA crude and increased levels of naptha content.
RIL rejected the bid and decided to route the crude instead to its Jamnagar refinery.
CPCL`s conduct is currently under investigation as is the delay in the initiation of recovery proceedings by the petroleum ministry.
8Officers who delayed the processing of the file are also being investigated within the ministry.




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