Page 1

(Monthly e-newsletter) CONTENTS:

April 2012

FOREWORD OIL, GAS & ENERGY NEWS NEWS LOCAL · PM Manmohan Singh to inaugurated HMEL Bathinda refinery on Apr 28 · HMEL commissions $4 bn Bathinda oil refinery · RIL, BP submit revised field development plan · OIL to hive off overseas assets to new subsidiary · ONGC to get six months more to drill Raniganj-North block · Cairn gets govt nod for raising Mangala output · Government likely to appoint regulator for natural gas pricing · BPCL plans JV for LNG terminal · Oil firms’ losses on fuel sales may spike next fiscal · Oil ministry plans to review CBM pricing · IGL challenges tariff cut order in court · RIL-BP allowed to survey only 5 gas fields in KG-D6 block · Cairn India ups Mangala reservoir estimate by 36%: Sources · India oil refining capacity surge 46% by March 2017 · ONGC to get six months more to drill Raniganj-North block NEWS GLOBAL · Chinese firm surpasses Exxon in oil production · BP closes $1.67 billion sale of Canadian business · Australia posed to be LNG leader · IEA: Oil market tightening has halted · Under regulator’s firm hand, Mexican giant change course · Daniel Yergin believes new set of challenges awaits energy industry · Oil prices buoyant; Singapore GRM down 4% QoQ to USD7.6/bbl · Exploring 5 new oil and gas fields on agenda PetroScan-April 2012


· · ·

TransCanada mulls switching natural gas mainline to oil service 2nd UPDATE: Shell Boosts Asset Sales, Posts Consensus-Beating Profit Mozambique seeks greater share in future gas blocks

NEW & RENEWABLE ENERGY · New study brings down India’s shale gas potential drastically · IndianOil Sets Up 5 MW SOLAR PHOTO-VOLTAIC (PV) POWER PLANT IN RAJASTHAN · The Right Flames the Volt · Government boosts 2012 natgas production estimate · Fracking chemicals disclosures set off few alarms · ZeaChem adds to Boardman demonstration ethanol plant hosts Gov. Kitzhaber · China home to five of top 10 solar module makers · Solar industry awaits China trade decision · EIA: Wind power putpaced most other renewables from 2001 to 2011 · GE to Supply NextEra with 288 Turbines for Ontario Wind Projects · EPA to Allow 15 Percent Renewable Fuel in Gasoline · Spain targets Argentine biodiesel in YPF reprisal SUSTAINABILITY & CLIMATE CHANGE · Can economy prevail over ecology? · Pure-play carbon credit companies in crisis HSE · EPA pushes off air rules for oil and natural gas · API: Systems in place to strengthen offshore operations · Oil-spill response systems are expanded in the Gulf of Mexico INNOVATION · Patent filing drive creates quality, biz concerns GENERAL READING · Prospects brighten for silicon wafer fab units as global firms offer support · Team of researchers develop world’s lightest material · Six money facts for new income earners · 124 nations need new energy systems for sustainable growth:WEF · Indian CEOs less concerned about skills shortage: Survey · India plans 90-seater civilian plane · Biogas plants to be set up in schools and markets · Oil and Gasoline · 7 ways to wake the dead and inspire action · Welfare programmes change people’s behaviours · HR Startups Set to Get a Leg Up from Veterans INTERVIEW · Sudhir Vasudeva | Deepwater exploration is the future of ONGC PICTURES OF THE MONTH

PetroScan-April 2012


Foreword Dear Patron of Petrotech, I am pleased to present the April issue of PetroScan to you, which will take you to through happenings in the a broad whole spectrum of oil and gas industry. The good news of the month was that 9 mtpa (180,000 bpsd) HMEL Guru Govind Singh Refinery, Bhatinda, was commissioned and dedicated to the nation, on 28th April. This US$ 4 billion (Rs 21500 crores) refinery, is joint venture of HPCL and Mittal Energy Investment Pte Ltd, Singapore, which was constructed and commissioned in a record 48 months time, with EIL as PMC. Under the leadership of its CEO Mr Prabh Das, the strengths of both the venture partners were leveraged to build a world class asset for the country. The team Petrotech, congratulates the entire team and leadership of HMEL for their seamless effort in commissioning and dedicating this refinery to the country. In 2010, the Bina refinery in the heart land India, of BPCL –Oman joint ventured, was commissioned, and now this refinery in the northern part of India, has been successfully commissioned. In next tow years, we will have one IndianOil refinery on the east coast India at Paradip, and a Nagarjuna gorup refinery on the southern Indian coat at Kudlur. We only have to leverage our surplus refining capacity, to offset the losses made on the subsidies. But, will it be possible? The weakening rupee, has further increased our import bills, and pushed the Indian oil industry under greater pressure of subsidies. In spite of it and under all circumstances, we must applaud the efforts of our O&G companies for keeping energy pipelines always flowing for meeting our country’s ever-growing energy needs. Not on a single occasion they allowed the Petrol Pumps o run dry, even though they have to sell Petrol, diesel, Kerosene and LPG, at price lower than the cost. But how long, will it carry on like this? The huge investment in creating large infrastructures, like refineries, pipelines, depots and retail outlets, must pay back. The subsidies, besides promoting inefficient and unnecessary use of scarce petroleum products, also jeopardy the energy security of country, and for country like ours, which imports almost 80 % of oil & gas, its, also a national security risk. We may recall that development of SERVO brands of lubricants was necessitated by the emergent need for national security, and we need to make some breakthrough innovation to improve the situation. Till such time, it can be improved by improving efficiencies of our plant, equipments and automobiles, and increasing the share of renewable bio-fuels. The state govts need to encourage production and use of ethanol as bio-fuel, with remunerative price for fuel ethanol, and tax rationalization etc. IndianOil-R&D has set-up and is in the process of commissioning, first of its kind pilot plant for ligno-cellulosic ethanol, which has been designed in association of NREL, USA and developed totally in-house. Scaling up from pilot to commercial scale is the challenge which must be overcome in maximum of next two to three years. If it has to be done faster, then all oil companies must join hand together, instead of each one going alone and reaching nowhere. Its time of collaborative work, and it must be encouraged and adopted for better and faster success. PetroScan-April 2012


Another, possibility could be an early exploitation of unconventional oil and gas reserves of our country, and at the same time invest heavily in the related R&D, and skill development. As stated by the Chairman ONGC, Shri Vasudeva, the future lies in deep water exploration, and we must take it up early. The PetroScan, shares many news and views, which may help create a new vision and work plan of our own for better innovation and aligning our purpose with performance, in better way than our peers and competitors. No oil company is competitor, its only the energy security, which is our competitor, which we , together, must beat. Please mail us your comments and suggestions, which we value greatly, You may also send your contrubution for the PetroScan and the Journal of Petrotech, which we shall publish with your credentials of contribution. Wishing you happy reading, Anand Kumar Director, Petrotech ***********************************************************

OIL, GAS & ENERGY NEWS

NEWS LOCAL PM Manmohan Singh to inaugurated HMEL Bathinda refinery on Apr 28

The Rs 21,500 crore Guru Gobind Singh Refinery near Bathinda - the largest investment in Punjab since independence - was formally inaugurated by Prime Minister Manmohan Singh on April 28. The refinery is located in southwest Punjab, 250 km from Chandigarh. A joint venture of Hindustan Petroleum Corporation Limited (HPCL) and Mittal Energy - a subsidiary of steel tycoon Lakshmi Mittal's company - the project had become fully operational recently and is awaiting formal inauguration. Refinery managing director and CEO Prabh Das said recently that it had been made operational in record time. Das said the refinery, where construction began in 2008 after the initial delay, had started refining mineral oil in August 2011, less than 48 months later. He said with the cooperation of the Punjab government, the company could construct a crude oil terminal and a 1,017-km cross-country pipeline in a record time of 27 months.

PetroScan-April 2012


Deputy Chief Minister Sukhbir Singh Badal said with the refinery becoming fully operational, a number of tertiary industries would benefit in the Bathinda area. Besides, he said, hundreds of youth would get employment. The project's foundation stone was laid by the then prime minister Atal Bihari Vajpayee in 1998. However, it was stalled when the Congress government led by Amarinder Singh came to power in Punjab in 2002 and objected to the terms and conditions of the project. The project was revived again in 2008 after the Parkash Singh Badal government returned to power in Punjab in 2007.

HMEL commissions $4 bn Bathinda oil refinery

PTI March 29, 2012 HPCL-Mittal Energy Ltd, a joint venture of state-owned Hindustan Petroleum and steel czar Lakshmi Mittal, on Thursday announced commissioning of $4 billion refinery at Bathinda in Punjab. The 9 million tons a year (180,000 barrels per day) Guru Gobind Singh Refinery at Phullokari, Bathinda, has become fully operational and started commercial production of fuel. HPCL and Mittal Energy Investment Pte Ltd, Singapore - a Lakshmi N Mittal Group company, hold 49 per cent stake each in HEML while the remaining 2 per cent interest is held by financial institutions. Commenting on the successful commissioning, Mittal said: "The venture has leveraged strengths of each partner and combined best practices from both sectors. To build a world class asset, we brought leading practices in project management, decision making and corporate governance to the table, executing the project on schedule." Engineers India Limited was the Project Management Consultant. The project was financed by a consortium of Indian banks led by State Bank of India, it said. HMEL Chairman and HPCL Chairman and Managing Director S Roy Choudhury said: "GGSR has come up in record time... This refinery will help in meeting the growing Indian demand and more particularly help in bridging the large demand-supply mismatch of petroleum products faced in the northern region of the country." The unit had achieved the first liquid sales in December with dispatch of kerosene and the first solid sales last month with sale of petroleum coke. The refinery has high Nelson Complexity Index which will enable maximising value added products even from heavy / sour crudes. Crude oil to the refinery is ferried through a 1,014-km pipeline from Mundra in Gujarat where the oil is imported from abroad. The refinery is a zero bottom plant, with a very high Nelson Complexity Index

PetroScan-April 2012


RIL, BP submit revised field development plan

With KG-D6 output hitting an all- time low, Reliance Industries and its British partner BP plc have submitted to the government a revised field development plan for enhancing gas production from MA field in the block. RIL-BP propose to drill one gas production well on the MA oilfield in the eastern offshore KG-DWN-98/3 or KG-D6 block besides intervention jobs in at least two of the existing six wells on the fields, sources privy to the development said. MA is the only oil find made by RIL in the 7,645 square kilometre KG-D6 block. The field produces about 11,200 barrels a day of along and associated gas of 6.45 million cubic meters per day. MA field makes up for about onefifth of the 34.09 mmcmd of current gas output from KG-D6 block. Sources said six wells had been drilled on MA field, of which one had to be closed because of water loading and sand ingress. RIL-BP plan to do workover (intervention activity involving invasive techniques to raise output) on the closed well and at least one more well facing similar problems. This together with a seventh well, which would only produce gas unlike the current five wells that produce both oil and gas, would help the field raise output to 8 mmcmd. MA field had begun oil production in September 2008 and gas in April 2009 and in 2010 had averaged 8 mmcmd of gas output. Sources said the revised FDP for MA field was submitted to the Directorate General of Hydrocarbons (DGH) in February and RIL-BP have made technical presentation. Also, RIL-BP are working on an integrated and capital efficient plan for block development, involving production from all the 18 gas discoveries in KG-D6. They projected first gas from R-Series, the third largest gas find in KG-D6 block, by 2015 and production from satellite fields by 2016 subject to timely regulatory approvals. RIL began production from Dhirubhai-1 and 3 (D1&D3) fields, the largest among the 18 gas and one oil find, in April 2009 but output has fallen from a peak of 54 million cubic meters per day in March 2010 to 27.64 mmcmd this month. Together with 6.45 mmcmd of gas production from D-26 or MA oil field in the same area, block output is 34.09 mmcmd. The plan would help in cost savings of over USD 1 billion due to integration and optimisation. In addition, un-incurred phase-II cost of D1&D3 field development plan (USD 3.1 billion out of total cost of USD 8.8 billion) would not be required to be spent, they said. Sources said RIL-BP plan to connect R-Series and four satellite fields, for which a USD 1.529 billion field development plan was approved by the government in January, to the existing infrastructure used to produce gas from D1&D3 and MA. Also, other satellite fields would be hooked up to these. R-series and four satellite fields alone have potential to add 30 mmscmd of output.

PetroScan-April 2012


OIL to hive off overseas assets to new subsidiary

Financial Chronicle In a bid to insulate the company from impact of political turmoil in West Asia and far-eastern countries, state-run explorer Oil India (OIL) proposes to hive off overseas assets into a new subsidiary. OIL board will meet on this Wednesday to take a call on forming this subsidiary and limit the hit on parent company vis-à-vis financial liabilities. OIL chairman NM Borah said that the decision on floating a subsidiary would completely depend on board members’ approval. If board decides to form a 100 per cent subsidiary, the company will go-ahead and seek regulatory clearances, he added. The need for creating an overseas subsidiary was felt by the company management after socio-political turmoil in several countries where Oil India is undertaking exploration activities. If we shift our overseas portfolio to a separate company, it will prevent financial liabilities on the parent company, said Borah adding, it will also help to concentrate on overseas operations. At present, OIL overseas operations are spread over onshore Gabon, Farsi offshore in Iran, onshore blocks in Libya, Nigeria, Yemen, Timor Leste, Carabobo in Venezuela and Egypt offshore. While Iran is going through the sanctions of both US and European Union, there has been social unrest in Libya, Venezuela and post-Mubarak power struggle in Egypt ahead of Presidential polls. OIL evacuated its team from Libya after social un-rest in the country in 2011. At present, none of these assets are producing hydrocarbons. The Carabobo project in Venezuela that OIL holds in partnership with other Indian and foreign explorers is expected to pump out crude oil by 2015. At the same time, OIL is carrying out due-diligence of several overseas assets for farming in partnerships. Some of these projects include Finley Resources and Chesapeake Energy Corporation acreages in the US and Etablissements Maurel & Prom SA’s project in Gabon. A team headed by OIL director (exploration) BN Talukdar recently visited Finley Resources and Chesapeake Energy Corporation offices and held talks for forming possible joint ventures. OIl has cash reserves of Rs 12,000 crore. It is looking to deploy about Rs 6,000 crore for merger and acquisition opportunities.

ONGC to get six months more to drill Raniganj-North block

The Economic Times NEW DELHI: The oil ministry will grant ONGC another six months to drill the required number of wells and draw plans for producing coal bed methane (CBM) from the Raniganj-north block in West Bengal, which was given to the state-run firm nine years ago. This will be the third extension for the project, in which ONGC holds 74% stake and its partner Coal India holds the rest. ONGC initially held nine CBM blocks, but relinquished five of them. After successful drilling of pilot wells in the block, ONGC will submit a development plan to the government for producing CBM from the blocks. ONGC is yet to start commercial production from the blocks whereas private firm Great Eastern is already producing gas from Raniganj-south and Reliance Industries and Essar are set to start commercial production after the oil ministry approves CBM prices for their respective blocks. According to Directorate General of Hydrocarbons, which has recommended an extension for ONGC, Raniganj-north blocks has a resource potential of 43 billion cubic meter of gas, which is comparable with Great Eastern Energy's producing block in its vicinity.

PetroScan-April 2012


ONGC officials said the delay in completion of wells in Raniganj block was because CBM prospective area overlapped with Ichhapur and Moira-Madhujore coal mines. "There was also land acquisition problem due to upcoming Bengal Aerotropolis project," an ONGC official said requesting anonymity. Problems continue despite taking up the matter with the West Bengal government and the oil ministry. "We had to shift locations of the wells and purchase land directly at exceptionally high cost," the official said. Oil ministry officials confirmed the development. "DGH has examined ONGC's request and recommended six months extension for phase-II, which will be adjusted in the next phase," an oil ministry official said requesting anonymity. ONGC has reported significant success in its Jharia block where drilling of wells has resulted into gas production and the company is selling some incidentally produced gas. CBM is an eco-friendly natural gas stored in coal seams, which is mainly used as industrial fuel. India has an estimated 4.6 trillion cubic meter of CBM reserves. So far, 238 billion cubic meters CBM has been established. CBM is also called a green fuel as its commercial production helps in reducing the green house gas effect by preventing direct emission of methane gas from coal mines.

Cairn gets govt nod for raising Mangala output

New Delhi, Apr 19, 2012, (PTI) After more than 6-month wait, the Government today gave approval to Cairn India to raise output from its largest oilfield in Rajasthan block by 25,000 barrels per day to 150,000 bpd. Rajasthan block oversight committee, called Management Committee, at its meeting today approved raising Mangala oil field production from 125,000 bpd to 150,000 bpd, sources privy to the deliberations at the MC meeting said. Cairn is likely to jack up output at Mangala to 150,000 bpd in next few days. Together with over 25,000 bpd of output from Bhagyam, the second largest of the 25 oil and gas finds in the Rajasthan block, the Thar dessert block currently produces over 150,000 bpd and in the next few days production would rise to at least 175,000 bpd. MC is headed by Director General of Directorate General of Hydrocarbons (DGH) and has representatives of the oil ministry. It approved the increase in Mangala output after independent studies confirmed 1.29 billion barrels of oil equivalent reservoir's ability to produce at higher rates on a sustained basis, sources said. The Reserve Estimation Committee of state-owned Oil and Natural Gas Corp (ONGC), which holds 30 per cent interest in the Rajasthan block, too had approved of higher in-place reserves in Mangala and raising output. DGH had asked for an independent third party study of the reservoir and a separate report on the adequacy of surface facilities to handle higher output before approving an output increase that has been pending for over six months now. Houston-based Knowledge Reservoir certified 1.29 billion barrels of oil equivalent in the Mangala reservoir, the second such certification after renowned Gaffney, Cline & Associates (GCA) gave a similar assessment. Technip in a separate study approved adequacy of surface facilities to handle 175,000 bpd of production (150,000 bpd from Mangala and another 25,000 bpd from Bhagyam oilfield, the second largest of the 25 oil and gas finds Cairn has made in the Barmer basin block in Thar desserts of Rajasthan). Cairn had on March 30 written to the Oil Secretary G C Chaturvedi saying it had commissioned Train-3 or third plant at the Mangala oil processing facility to raise capacity to handle over 175,000 bpd of crude oil. "Production from the Mangala field can be enhanced by 25,000 bpd with immediate effect by hooking up the spare capacity wells which are lying idle. This does not involve any additional capital expenditure," it wrote. Also, the pipeline

PetroScan-April 2012


which transports Rajasthan crude to refiners like Reliance Industries can "safely transport the additional volume of crude oil," it had said

Government likely to appoint regulator for natural gas pricing

New Delhi: The Indian government may appoint a regulator to help it determine the price of natural gas that is supplied by oil and gas explorers, such as Reliance Industries Ltd (RIL), to power and fertilizer firms. Seeking advice:The regulator will help determine prices of gas supplied by oil and gas explorers, such as RIL, to power and fertilizer firms. An empowered group of ministers (eGoM) looking into the issue of allocating gas to fertilizer, power and some other companies has directed the oil ministry to “suggest an appropriate regulatory authority to aid and advise eGoM on the issue”. Mint has reviewed a copy of the minutes of the eGoM meeting on 24 February. The suggestion follows a plea by RIL in 2010 to increase the price of gas midway through its five-year supply contracts with consumers on the grounds that the price it is charging is at a discount to global prices. RIL started supplying gas from its D6 fields in the Krishna-Godavari (KG) basin in April 2009 to power and fertilizer companies at a base price of $4.2 (around Rs 214 today) per million British thermal units. The supply contracts end in 2014, after which they have to be renegotiated. “EGoM further noted that the gas prices fixed in 2009 were valid for a period of five years, and on this ground, the request of the contractor for revised prices was turned down in 2010 itself when international prices were comparatively lower,” according to the minutes of the meeting. An oil ministry spokesperson declined to comment. “We are not privy to such eGoM-ministry communications, therefore, cannot comment,” an RIL spokesperson said in a response to an emailed query. To be sure, the oil and gas industry is already governed by two regulatory bodies. The Directorate General of Hydrocarbons (DGH) advises the oil ministry on technical and economic issues related to the sector. It comes under the oil ministry’s administrative control. The Petroleum and Natural Gas Regulatory Board (PNGRB) oversees transportation tariffs and other costs of petroleum commodities related to refining, processing, storage, transportation, distribution, marketing and sale. Unlike DGH, PNGRB was created by an Act of Parliament and functions independently. S. Krishnan, chairman of PNGRB, said he was not sure if the agency would be asked to regulate gas pricing. “I cannot say if such a move would contravene any existing guidelines,” he said. Sunjoy Joshi, a former oil ministry official and director of the New Delhi-based Observer Research Foundation, said that in all likelihood, the government would go in for a new regulatory body. Observer Research Foundation is funded by RIL. “The government needs an independent upstream regulator to regulate prices. So, it might go in for a new body,” Joshi said. Dipesh Dipu, director of the consulting practice at Deloitte Touche Tohmatsu India Pvt. Ltd, disagreed. “If the government does want to regulate natural gas prices, it will probably modify regulations to mandate the existing regulator (PNGRB) for that, otherwise there could be turf issues,” Dipu said. RIL is facing criticism for declining gas production from the KG-D6 basin, and is involved in a dispute with the oil ministry over the denial of $1.24 billion in costs claimed by the company for developing the D6 field. The group of ministers has also sought the advice of the law ministry and the attorney general on the issue. On Friday, Prime Minister Manmohan Singh said that his government may change the gas pricing policy to offer incentives to producers of natural gas. “We are conscious that remunerative energy prices are needed to ensure expanded energy supply,” Singh said at the 7th Asia Gas Partnership Summit 2012 in New Delhi on Friday. “Oil and gas are national resources and, therefore, should be within the framework of government and regulatory oversight.” PetroScan-April 2012


EGoM has also provided a temporary reprieve to non-urea fertilizer plants by declining to suspend gas supply from the KG-D6 field to them till at least May. The proposed move has been “kept in abeyance” till 24 May and the fertilizer ministry has been asked to come up with guidelines on the move, which will then be reviewed by the group of ministers, according to the minutes of the eGoM meeting. The oil ministry has held that companies producing non-urea fertilizers should be ordered to buy gas at market prices since the retail prices of non-urea fertilizers have been freed from the government control, and they can pass on the changes in input prices to consumers, Mint reported on 23 December. Prices of non-urea fertilizers, including diammonium phosphate, muriate of potash and various categories of complex fertilizers, were freed in April 2010. The government still regulates the retail price of urea, but is working on a draft policy to free this from its control. The group of ministers also accepted the oil ministry’s view that existing and future allocations of gas discovered under the new exploration licensing policy to power plants be subject to the condition that the entire electricity produced shall only be sold at tariffs determined by the tariff regulator of the power plant.

BPCL plans JV for LNG terminal

Financial Chronicle Bharat Petroleum Corporation (BPCL) is exploring a possibility to set up a liquefied natural gas (LNG) terminal in India with a joint venture partner to meet the growing demand for imported natural gas as domestic gas production declines. The company is in talks with few oil and gas companies including ONGC, and is looking at setting up a 5 million tonnes per annum (mtpa) terminal to cater to the rising demand for gas from the power, fertiliser and city gas distribution companies. A senior company official told Financial Chronicle that the discussion is at a nascent stage and the company is looking at all possibilities on the east as well as the West coast. In the long run, the exploration and production arm of BPCL also plans to bring the gas from the latest discovery in Mozambique to India, where the terminals can be of great help to the company, besides helping the country to meet the growing demand efficiently. The output from RIL held KG D6 basin has fallen to less than 40 mmscmd from its peak of 60 mmscmd in 2010. Since then, all the major power and fertiliser companies have been paying an average of $14 per mmbtu for the imported LNG compared with RIL’s $4.2 per mmbtu. “We would look at a terminal of 5 mtpa at a cost of around Rs 4,500 crore for the re-gasification plant. The formalisation of the plan and locations and others will be done in six months’ time. One location that is under consideration is Mangalore, but we have not yet finalised that,” the BPCL official said. BPCL is importing crude oil for its refineries. Its move to set up a LNG terminal is also necessitated by its gas finds in Mozambique oil block billed as three times bigger than KG-D6 basin with in-place reserves of 50 plus mtpa. The company also plans to bring some portion of the gas post-production to India. Other than BPCL some other oil and gas majors are also initiating the process to set up LNG terminals to meet the growing demand within the country. Indian Oil Corporation is in talks with Ennore Port to set up a terminal at an investment of Rs 4,300 crore for importing LNG. GAIL India is starting its LNG terminal at Dabhol by the end of this month or early next month, Financial Chronicle reported on Tuesday, while Petronet LNG has zeroed in on Gangavaram Port in Andhra Pradesh for their third LNG terminal with a 5 mtpa capacity.

PetroScan-April 2012


Oil firms’ losses on fuel sales may spike next fiscal

IOC chairman sees firms losing Rs 2 trillion in below-cost sales; Rs 1.32 trillion in losses expected this fiscal New Delhi: Government-owned oil marketing companies (OMCs) may witness a 52% jump in losses on account of selling fuel below cost at state-mandated prices to Rs 2 trillion in the next financial year, said R.S. Butola, chairman, Indian Oil Corp. Ltd (IOC), the nation’s largest fuel retailer. Such an increase will impact the financials of government-owned OMCs such as IOC, Hindustan Petroleum Corp. Ltd (HPCL) and Bharat Petroleum Corp. Ltd (BPCL), which currently register losses from this of Rs 439, Rs 12.04 and Rs 28.54 on a cooking gas cylinder, one litre of diesel and the same volume of kerosene, respectively. According to the petroleum ministry, OMCs currently register a daily under-recovery of around Rs 465 crore. The average price of crude oil in the Indian energy basket on 13 March was $124.84 per barrel. While India partially deregulated fuel prices in June 2010, allowing government-owned OMCs to fix the price of petrol instead of selling it at government-determined rates, prices are only raised after government approval. Petrol price increases have been put on hold due to the state assembly elections in Uttar Pradesh, Uttarakhand, Punjab, Manipur and Goa. The total losses on this account to be borne by refiners this fiscal is expected at Rs 1.32 trillion compared with Rs 78,190 crore last year, according to the petroleum ministry. In the nine months ended December, it stood at Rs 97,313 crore. Credit rating firm Crisil Ltd said in a report last month that it expects the Congress-led United Progressive Alliance government to raise the prices of regulated fuels such as diesel, cooking gas and kerosene in the wake of rising crude oil prices due to “ongoing geopolitical tensions” over Iran. India depends on imports to meet 80% of its oil needs. “Average crude oil prices will remain firm in the range of $110-120 per barrel during 2012, higher than the earlier estimates of $100 per barrel, despite a weak global economy,” Crisil said in its report. While the government promised to offset Rs 30,000 crore of the Rs 64,900 crore registered as losses from selling fuel below cost by the oil refiners in the first half of 2011-12, there were delays in disbursement. In addition, a contribution of Rs 21,633 crore was also been made by oil and gas explorers, including Oil and Natural Gas Corp. Ltd, Oil India Ltd and GAIL (India) Ltd, as discounts. The residual Rs 13,267 crore had to be absorbed by the refiners. With crude oil prices averaging $113 per barrel in the first nine months of the first year, compared with the expectation of $110 per barrel, the losses on this front amounted to Rs 973 billion, said a 7 March report from the IDBI Capital Market Services Ltd equity research desk. “Further, upstream subsidy burden stood at 37.9% in 9MFY12, which we expect to increase to 42% in FY12E,” it said. “Also, government contribution till date announced is at Rs 300 bn (billion), which is just 31% of the total UR (under-recovery). Consequently, oil marketing companies are facing severe liquidity concern and their debt levels are at all-time high levels. If crude oil price remains at current levels then total under-recoveries may go up to Rs 1.4tr in FY12E.” IOC, HPCL and BPCL would have posted a combined net profit of Rs 5,246 crore for the year ended 31 March 2011, had they not absorbed a notional cumulative loss of Rs 6,894 crore on selling fuel below cost.

Oil ministry plans to review CBM pricing

Mumbai: Faced with radically different pricing proposals submitted by two operators of large coal bed methane (CBM) blocks, the oil ministry is taking a closer look at pricing. The two operators are Essar Oil Ltd, which operates a CBM block in Raniganj in West Bengal, and Reliance Industries Ltd (RIL), which has its block in Sohagpur in Madhya Pradesh.

PetroScan-April 2012


Essar has submitted a pricing proposal of $4.2 (around Rs 222 today) per million British thermal units (mmBtu) to the government, while RIL proposed a formula linked to the international crude price, under which the price works out to around $15 per mmBtu. Essar has the largest CBM acreage in India, with about 10 trillion cubic ft of gas across five blocks. Peak production from its Raniganj block is estimated at 3.5 million standard cu. metres per day (mscmd) by 2014-15. RIL is expected to produce 3.5 mscmd from its Sohagpur block by 2014 as well. The government is caught in a bind as it is trying to make domestic gas (a commodity currently in short supply) available to consumers—especially in the power and fertilizer sectors—at a reasonable price. But approving a lower-than-potential price will deprive it of revenue to be shared with it by firms from the sale of gas derived from coal. The ministry is closely examining the pricing proposals submitted by Essar and RIL, including whether they are in line with the arm’s length pricing mechanism that the government requires them to follow. “The ministry is looking into various angles with respect to CBM pricing, though no final decision has been taken yet,” a person close to the oil ministry said. “The matter is that Essar wants to sell its gas to a company that is in a way connected to it. On the other hand, RIL wants a very high price for its gas. The issue has to be reconciled.” He declined to be named. The person said the oil ministry was studying the matter independently, but could not take a view on this matter by itself, and was gathering inputs from other government quarters. In a written reply to a question in the Rajya Sabha on Tuesday, minister of state for petroleum and natural gas R.P.N. Singh said the oil ministry will decide on the pricing formula proposed by RIL “in line with provisions under the CBM contract and ministry of petroleum and natural gas guidelines”. The contract signed with CBM operators provides for approval of the formula within 60 days from the date of receipt of the proposal or from the date on which additional information and clarifications were received, the reply added. RIL submitted its proposal on 21 February this year, he said. The minister said Essar made its proposal on 19 September 2011, but additional clarifications were sought from the company, which were provided on 10 January and 5 March. One of the largest buyers of Essar’s CBM is a company called Matix Fertilisers and Chemicals Ltd, which has a manufacturing unit in West Bengal. Matix’s vice-chairman and promoter Nishant Kanodia is the sonin-law of Ravi Ruia, vice-chairman and co-promoter of the Essar Group along with brother Shashi Ruia. One of the conditions in the contract signed between CBM block operators and the government states that the former will have the freedom to market gas after discovering the best price on offer through the so-called arm’s length sales principle. This refers to sales made freely in the open market between willing and unrelated sellers and buyers, where the two have no contractual or other relationship, directly or indirectly, that can influence the selling price. Even though Essar may not have any business relationship with Matix, the government is examining whether its price bid can be said to have followed the arm’s length principle since the promoters of the two companies are related. “Essar has followed due process as per the CBM contract to arrive at the discovered price of $4.2 per mBtu for a high-volume, long-term off-take and is awaiting the government’s approval on the same,” an Essar Group spokesman said in an email. “The contract with Matix Fertilisers is strictly on an arm’s length basis and also satisfies the gas utilization policy giving priority to the fertilizer sector. It must be noted that owing to several factors like local demand-supply of gas, regional infrastructure constraints, alternative fuel availability and off-take capacities, etc., the price of CBM gas is likely to be different in different geographies.” “We have not heard from the government on any proposal on pricing, hence we cannot comment on the same,” an RIL spokesman said. Essar is yet to start commercial production from its Raniganj block, pending approval of PetroScan-April 2012


its proposed price for the gas from the government. However, it is selling gas produced under test conditions to Matix at $5.75 per mmBtu. Essar’s case is more complicated since Matix meets the government’s recently laiddown criteria of gas block operators giving preference to the so-called priority sector, comprising power and fertilizer companies, the person said. Ever since output at India’s largest gas reservoir, the D6 block in the Krishna-Godavari basin operated by RIL, has slumped, power and fertilizer companies that depend on gas as fuel have been facing a shortage, leading to lower plant utilization or higher operating expenditure due to costly imports. The government has since decided to allocate all domestically available gas to these two sectors. The oil ministry issued a set of guidelines for the pricing and commercial utilization of CBM gas on 15 June, 2011, which asks producers to inform the former of the quantity, location and timeline of expected gas availability “in order to utilize the CBM gas for the priority sector”. The government guidelines further state that the operator should undertake price discovery among priority-sector consumers, and final customers should be selected based on the proposals received from the Union and state governments, on the basis of the Centre’s aforementioned gas utilization policy. It is this stance of the government that has led to a difference of opinion with RIL. In a 21 July letter, RIL told the government that the guidelines adversely affected its contractual rights and interest. It also called the changes proposed by the government “unilateral”. It pointed out that according to the original contract signed with the government, operators had the freedom to sell gas to any customer at market-determined rates. While seeking approval of the pricing formula for CBM gas, RIL said the contract entailed that the gas sale should be such that the producer gets a return on risk capital deployed and the government gets a higher production-linked payment, and hence at the highest price on offer. The company sought the government’s approval to transport the gas using the Hazira-Vijaipur-Jagdishpur pipeline to areas where existing customers (including power and fertilizer firms) were reeling from a gas shortage and importing costly natural gas. RIL further committed to offtake its entire CBM produce for its own consumption at the price proposed by itself, further emphasizing that it had proposed the best price. In its guidelines, the ministry states that it would approve or suitably modify the contractor’s proposal taking into account the price of dominant indigenous gas in that region. The government’s intention to factor in the price of dominant indigenous gas in the CBM operator’s region may queer the pitch for Essar, as another operator sells CBM gas in the same region at a higher price. Great Eastern Energy Corp. Ltd (GEECL), the first Indian firm to be listed on the London Stock Exchange’s Alternative Investment Market, has been commercially producing CBM gas at Raniganj since 2007 at a price of $6.79 per mmBtu. Yogendra Kumar Modi, GEECL’s executive chairman and managing director, said his company had “communicated to the government that it was in the best interest of both parties (the CBM operator and the government) if the gas was sold at the highest price”. “According to the PSC (production-sharing contract) between the government and the contractor, the sale of CBM has to be market-driven at an arm’s length price, since there is no cost recovery involved and the royalty to be paid to the government is calculated on gas sales alone,” Modi said. In the case of conventional gas production, an operator is entitled to recover development cost from the revenue earned by selling the fuel, and the government’s share of profit is calculated on the balance. Deepak Mahurkar, leader, oil and gas practice, at consultancy PricewaterhouseCoopers, said the differential pricing of gas is possible. “Currently there exists multiple pricing of natural gas derived from different sources,” he said. “It remains to be seen how the government offers flexibility in pricing as opposed to resultant fixed and uniform price.” The intent was to provide the contractor the freedom to price the gas at discovered rates; in different areas there would be consumers with high and low affordability, and that may bring in differential pricing, he added. “Gas market infrastructure development has moved into supply-driven mode, and better affordability, resulting into better availability, would be the desired outcome,” Mahurkar said. livemint.com PetroScan-April 2012


IGL challenges tariff cut order in court

New Delhi: The Petroleum and Natural Gas Regulatory Board (PNGRB) slashed by 64% the transportation and compression charges that Indraprastha Gas Ltd (IGL) can levy on the gas it carries, putting the financials of the Delhi-based gas distributor under pressure and sending its stock tumbling. IGL has challenged the so-called speaking order, which was issued by the regulator late on Monday, in the Delhi high court. The company, which began operations in 1998, is jointly promoted by state-owned GAIL (India) Ltd and Bharat Petroleum Corp. Ltd (BPCL), which together own 45% of the company. GAIL is the biggest gas distributor in India. PNGRB, which regulates downstream transport tariffs for oil and gas, issued the order to reduce prices for consumers. The company now charges a pipeline distribution tariff of Rs 104.5 per million British thermal units (mBtu) and a compression charge of Rs 6.66 per kg of gas transported. On 19 March, 2008, PNGRB had notified a pipeline distribution tariff of Rs 38.58 per mBtu and compression charges of Rs 2.75 per kg. PNGRB now wants IGL to bring tariffs down to these levels, with retrospective effect from April 2008. “Though IGL submitted the tariff in 2009 to the board, it also raised various issues on the powers of the board to fix the tariff, which was never addressed by the board. PNGRB has finalized the tariff now around three years after the submission,” the company said in a statement. M. Ravindran, IGL managing director, could not be reached for comment. The company appealed against the Monday order in the high court on Tuesday on the ground that it had been “denied the principle of natural justice”. A company spokesperson said it had challenged the various technical assumptions that PNGRB had cited in its order but declined to give details about the petition filed. He declined to comment on the company’s financials. IGL posted a profit of Rs 296 crore in the year ended 31 March 2011. PNGRB chairman S. Krishnan, however, dismissed these claims. He said the decision was based on technical data and that the regulator had been seeking data from IGL for a while now. “Our decision is logical, based on numbers. We’ll respond to the company in court,” he said. Graphic by Yogesh Kumar/Mint IGL slumped 34% on BSE to Rs 229.80 on Tuesday. The benchmark Sensex rose marginally to 17,243.84. Analysts said the regulator’s move could have a negative bearing on the gas transport sector as a whole. “Under this scenario, IGL will struggle to make even normative returns on the capital it has invested in the business, in our view,” Reuters news agency cited Citigroup analysts as saying in a note to clients on Tuesday. While it was unclear whether PNGRB’s move would directly impact GAIL or other gas transporters, Sanjay Jain, director at New Delhi-based investment firm Taj Capital Ltd said firms charging in excess of regulatory norms would have to “fall in line". Bhavesh Chauhan, an analyst at Mumbai-based Angel Broking Ltd, said several companies including GAIL, Gujarat Gas Co. Ltd and Gujarat State Petronet Ltd (GSPL) may face scrutiny that would send share prices down

PetroScan-April 2012


over the next few days. “The regulator is showing a clear intent to clamp down on companies overcharging,” he said. The impact of the regulator’s move is already being felt on these stocks—Gujarat Gas fell 15% and GSPL declined 7.5% on Tuesday. GAIL fell 2.5% and BPCL shed 2%. Chauhan said payments with retrospective effect could add up to Rs 1,500 crore. Bloomberg estimated refunds to customers at Rs 1,800 crore. Reuters and Bloomberg contributed to this report., aman.m@livemint.com

RIL-BP allowed to survey only 5 gas fields in KG-D6 block

New Delhi: The government has rejected Reliance Industries’ proposal to invest in survey of all discoveries made in KG-D6 gas block, and has instead directed the company to restrict pre-development expenses only to fields that have been proved to be commercially viable. RIL and its British partner BP Plc had proposed undertaking concept validation and Front End Engineering Design (FEED) for all the 16 gas discoveries surrounding the currently producing Dhirubhai-1 and 3 fields in the 7,645 sq km KG-DWN-98/3 or KG-D6 block. But the block oversight committee, headed by upstream oil regulator the Directorate General of Hydrocarbons, on 20 April rejected the proposal saying pre-development investments can only be done in fields which have either been proved to be commercially viable or whose field development plan has been accepted by the authorities, sources said. The Management Committee, which also has senior officials of the Oil Ministry as members, approved RIL-BP making the investment in the four satellite fields whose $1.529 billion FDP was approved in January, and on D-34 or R-Series field whose commerciality had been approved in February. Sources said all investment in pre-development activities are deducted from revenues earned from gas sales before profits are split between the operator and the government. Any infructuous investment would restrict government profit take, the Management Committee (MC) felt. In all, 18 gas and one oil discovery has been made in the KG-D6 block in Bay of Bengal. Of these two gas finds, D1 and D3, and one oil, D-26 or MA, have been put on production. Of the remaining 16 gas discoveries, commerciality of only five has been approved. Commerciality is the first step to developing a discovery and essentially means the find holds enough reserves to be commercially produced at current rates. Sources said DGH maintained that pre-development activities (FEED and concept validation) cannot be undertaken on D29, 30 and 31, whose commerciality was rejected a few weeks back. RIL-BP felt a comprehensive survey on entire block would save cost and aid in drawing an integrated development plan for all the 18 finds by October. The integrated plan, they feel, would help in arresting flagging out from the block. RIL began production from Dhirubhai-1 and 3 (D1&D3) fields — the largest among the 18 gas and one oil find — in April 2009, but output has fallen from a peak of 54 million cubic meters per day in March 2010 to 27.64 mmcmd this month. Together with 6.45 mmcmd of gas production from D-26 or MA oil field in the same area, block output is 34.09 mmcmd. PTI

Cairn India ups Mangala reservoir estimate by 36%: Sources

Cairn India has hiked Mangala reservoir estimate by 36%, reports, CNBC-TV18's Nayantara Rai quoting sources. From operators’ point of view, Cairn India and ONGC are ready to ramp up production immediately. On March 30, they moved a resolution that they can ramp up production in Mangala to 150,000 barrels a day. However, DGH is reluctant to give an approval to that production ramp up go. The DGH believes that one of the key lessons from the falling gas production at the KGD6 has been that the companies should not rush in to ramp up production. But Cairn India is trying its best to get that nod as soon as it can. PetroScan-April 2012


Cairn India has also revised the reservoir estimates at Mangala by 36%. It has brought to the attention of oil ministry as well as the DGH saying that the reservoir performance as well drilling activities as carried out warrants the production at Mangala should indeed be increased.

India oil refining capacity to surge 46% by March 2017

India's oil refining capacity will exceed 6.2 million barrels per day (bpd) by March 2017 from about 4.26 million bpd now, Oil Secretary GC Chaturvedi said in a speech delivered to an industry function on Monday. India and other emerging markets are boosting refining capacity to feed rising regional demand, while their counterparts in the United States and Europe restructure or shut plants as fuel sales slow. Chaturvedi also said India's oil consumption is set to grow by over 4% in the next 10-15 years as compared to the global oil demand growth of only 0.8%. He said diminishing availability of crude oil and its high prices are a matter of concern as India's per capita energy consumption will have to increase to power its economic growth.

ONGC to get six months more to drill Raniganj-North block

NEW DELHI: The oil ministry will grant ONGC another six months to drill the required number of wells and draw plans for producing coal bed methane (CBM) from the Raniganj-north block in West Bengal, which was given to the state-run firm nine years ago. This will be the third extension for the project, in which ONGC holds 74% stake and its partner Coal India holds the rest. ONGC initially held nine CBM blocks, but relinquished five of them. After successful drilling of pilot wells in the block, ONGC will submit a development plan to the government for producing CBM from the blocks. ONGC is yet to start commercial production from the blocks whereas private firm Great Eastern is already producing gas from Raniganj-south and Reliance Industries and Essar are set to start commercial production after the oil ministry approves CBM prices for their respective blocks. According to Directorate General of Hydrocarbons, which has recommended an extension for ONGC, Raniganjnorth blocks has a resource potential of 43 billion cubic meter of gas, which is comparable with Great Eastern Energy's producing block in its vicinity. ONGC officials said the delay in completion of wells in Raniganj block was because CBM prospective area overlapped with Ichhapur and Moira-Madhujore coal mines. "There was also land acquisition problem due to upcoming Bengal Aerotropolis project," an ONGC official said requesting anonymity. Problems continue despite taking up the matter with the West Bengal government and the oil ministry. "We had to shift locations of the wells and purchase land directly at exceptionally high cost," the official said. Oil ministry officials confirmed the development. "DGH has examined ONGC's request and recommended six months extension for phase-II, which will be adjusted in the next phase," an oil ministry official said requesting anonymity. ONGC has reported significant success in its Jharia block where drilling of wells has resulted into gas production and the company is selling some incidentally produced gas. CBM is an eco-friendly natural gas stored in coal seams, which is mainly used as industrial fuel. India has an estimated 4.6 trillion cubic meter of CBM reserves. So far, 238 billion cubic meters CBM has been established. CBM is also called a green fuel as its commercial production helps in reducing the green house gas effect by preventing direct emission of methane gas from coal mines.

PetroScan-April 2012


NEWS GLOBAL Chinese firm surpasses Exxon in oil production

Posted on March 29, 2012 at 6:48 am by Associated Pressin Energy demand, Oil NEW YORK — A big shift is happening in Big Oil: an American giant now ranks behind a Chinese upstart. Exxon Mobil is no longer the world’s biggest publicly traded producer of oil. For the first time, that distinction belongs to a 13-year-old Chinese company called PetroChina. The Beijing company was created by the Chinese government to secure more oil for that nation’s booming economy. PetroChina announced Thursday that it pumped 2.4 million barrels a day last year, surpassing Exxon by 100,000. The company has grown rapidly over the last decade by squeezing more from China’s aging oil fields and outspending Western companies to acquire more petroleum reserves in places like Canada, Iraq and Qatar. It’s motivated by a need to lock up as much oil as possible. The company’s output increased 3.3 percent in 2011 while Exxon’s fell 5 percent. Exxon’s oil production also fell behind Rosneft, the Russian energy company. PetroChina’s rise highlights a fundamental difference in how the largest petroleum companies plan to supply the world as new deposits become tougher to find and more expensive to produce. Every major oil company has aggressively pursued new finds to replace their current wells. But analysts say Western oil firms like Exxon Mobil have been more conservative than the Chinese, mindful of their bottom line and investor returns. With oil prices up 19 percent in 2011, they still made money without increasing production. PetroChina Co. Ltd. has a different mission. The Chinese government owns 86 percent of its stock and the nation uses nearly every drop of oil PetroChina pumps. Its appetite for gasoline and other petroleum products is projected to double between 2010 and 2035. “There’s a lot of anxiety in China about the energy question,” says energy historian Dan Yergin. “It’s just growing so fast.” While PetroChina sits atop other publicly traded companies in oil production, it falls well short of national oil companies like Saudi Aramco, which produces nearly 8 million barrels a day. And Exxon is still the biggest publicly traded energy company when counting combined output of oil and natural gas. PetroChina ranks third behind Exxon and BP in total output of oil and natural gas. PetroChina is looking to build on its momentum in 2012. “We must push ahead,” PetroChina chairman Jiang Jiemin said in January. PetroChina has grown by pumping everything it can from reserves in China, estimated to contain more than 6.5 billion barrels. It drilled thousands of oil wells across vast stretches of the nation’s northern grasslands. Some of those fields are ancient by industry standards, dating close to the beginning of China’s communist government in the 1950s. The commitment to aging fields distinguishes PetroChina from its biggest Western rivals. Exxon and other major oil companies typically sell their aging, low-performing fields, or they put them out of commission. PetroChina also has been on a buying spree, acquiring new reserves in Iraq, Australia, Africa, Qatar and Canada. Since 2010, its acquisitions have totaled $7 billion, about twice as much as Exxon, according to data provider Dealogic. Several other Chinese companies have become deal makers around the globe as well. Total acquisitions by Chinese energy firms jumped from less than $2 billion between 2002 and 2003 to nearly $48 billion in 2009 and 2010, according to the International Energy Agency. More times than not, the companies are paying above the industry average to get those deals done. It’s making some in the West nervous.

PetroScan-April 2012


In 2005, for example, CNOOC Ltd., a company mostly owned by the Chinese government tried to buy American oil producer Unocal. U.S. lawmakers worked to block the deal, asking President Bush to investigate the role the Chinese central government played in the process. Chevron Corp. eventually bought Unocal for $17.3 billion. “There’s a resistance to Chinese investment in (U.S.) oil and gas,” Morningstar analyst Robert Bellinski says. “It’s like how Japan was to us in the 1980s. People think they’re going to take us over. They’re going to buy all of our resources.” That’s unlikely to happen. It doesn’t make economic sense to export oil away from the world’s largest oil consumer. But the Chinese could make it tougher for Big Oil to generate returns for their shareholders. China’s oil companies have been willing to outspend everyone and that drives up the price of fields and makes it more expensive for everyone to expand. “You now have to outbid them,” says Argus Research analyst Phil Weiss. “If you can’t, you’re going to have access to fewer assets.” Longer term, Chinese expansion globally will bring benefits to the U.S. and other economies. By developing as many oil wells as possible — especially in Africa, Iraq and other politically unstable regions — China will help expand supply. “Frankly, the more risk-hungry producers there are, the more oil will be on the market, and the cheaper prices are,” says Michael Levi, an energy policy expert at the Council on Foreign Relations. Despite its swift expansion, PetroChina and other Chinese companies still have much to prove to investors, analysts say. PetroChina’s parent, China National Petroleum Corp., for example, has spent millions of dollars in Sudan to provide highways, medical facilities and shuttle buses for the elderly. Oil companies typically don’t do that. All of that increases the cost of business and minimizes the returns for shareholders. In 2009 and 2010, PetroChina’s profit margins for its exploration and production business were only about twothirds that of Exxon Mobil’s. Its stock price has climbed less than 1 percent, in the past year, compared with a 3.7 percent rise in the stock of Exxon Mobil Corp. “You have to ask yourself: What is the purpose of PetroChina?” Bellinski says. “It is to fuel China. That’s it. Although they’re a public company, I’m very skeptical that they have any interest in shareholder value creation.”

BP closes $1.67 billion sale of Canadian business

BP PLC said Monday it has closed the sale of its Canadian natural gas liquids business to Plains Midstream Canada, a subsidiary of Plains All American Pipeline L.P. BP announced the deal, valued at $1.67 billion, in December. The sale is part of its efforts to shed $45 billion in assets, mainly to meet the costs arising from the oil well blowout in the Gulf of Mexico last year. The Canadian business is involved in extracting, processing and transporting natural gas liquids across Canada and in the Great Lakes region of the United States. It includes 2,600 miles of pipelines, storage facilities, processing plants, and long-term leases on rail cars that move petroleum products. As of Sunday, BP's remaining business in Canada will fall under BP Canada Energy Group ULC. Those operations include integrated supply and trading business, oil sands, and existing Arctic significant discovery licenses. Its exploration licenses in the Beaufort Sea will continue to be directed by BP Exploration Operating Company Limited. Shares of BP rose 34 cents, or almost 1 percent, to close at $45.34. Plaines All American ended up 89 cents, or 1 percent, at $79.34.

PetroScan-April 2012


Australia posed to be LNG leader

Published: April 11, 2012 at 2:39 PM Advertisement SYDNEY, April 11 (UPI) -- Australia could surpass Qatar as the world's largest exporter of liquefied natural gas by the end of the decade, experts say. Australian oil and gas major Woodside's $15.1 billion Pluto LNG project, scheduled to deliver its first shipment this month, adds a "third leg" to Australia's resources boom which has been fueled by exports of coal and iron ore, the Financial Times reports. The project will process gas from the Pluto and Xena gas fields in Western Australia, estimated to contain 4.8 trillion cubic feet of dry gas reserves. Pluto is underpinned by 15-year sales agreements with Japan's Kansai Electric and Tokyo Gas, both of which became project participants in January 2008, each acquiring a 5 percent interest. Australia now has under construction 70 percent of the world's LNG capacity, capable of supporting 40-50 years of production, says Australia's Bureau of Resources and Energy Economics. Those projects – seven in total, not counting Pluto – together total $175 billion in committed LNG investment, Australian federal resources and energy minister Martin Ferguson said at last month's Energy State of the Nation Forum in Sydney. Yet Australia's LNG sector isn't without challenges, including strict regulations and rising project costs. Woodside's Pluto, for example, was originally targeted for production last year and incurred $900 million in additional costs, International Business Times reports. On Monday, Woodside said it would delay its final investment decision until the middle of 2013 on its proposed $30 billion Browse LNG project in Western Australia. That project includes three gas fields estimated to contain a combined contingent resource of about 13.3 trillion cubic feet of dry gas and 360 million barrels of concentrate. Australia also faces increasing LNG competition, particularly from the United States, posed to become a major exporter because of its shale gas reserves. "From a buyer's perspective, security of supply is critical and foremost in their minds when they are contracting volumes," Craig McMahon, head of Australasia upstream research at Wood Mackenzie was quoted as saying by the Times. "While Australia may have challenges, it's still OECD production, it's still low political risk and even if projects are a bit late, it is still safe and secure production for the next 20 to 30 years." Noting that the United States' LNG arena is based on cheap Henry Hub gas – the benchmark U.S. gas price – McMahon says: "that's something a Japanese or South Korean buyer can't control and that makes them feel uncomfortable." Post Fukushima, Japan is increasingly relying on LNG to replace the nuclear power shortfall, as only one of its 54 commercial nuclear power plants is currently in operation Read more: http://www.upi.com/Business_News/Energy-Resources/2012/04/11/Australia-posed-to-be-LNGleader/UPI-99231334169598/#ixzz1rp6r76qY

IEA: Oil market tightening has halted

HOUSTON, Apr. 12, 04/12/2012 By OGJ editors Preliminary data for this year’s first quarter indicate that increased oil supply and sluggish demand imply a global build in oil inventories exceeding 1 million b/d, according to the International Energy Agency in its latest monthly Oil Market Report.

PetroScan-April 2012


While data for the quarter suggest that total industry stocks within the Organization for Economic Cooperation and Development built by about 500,000 b/d, even if absolute stock levels in Europe and Asia remain below the 5-year average. And preliminary indications are that crude stockpiling by Saudi Arabia and China may amount to a combined 700,000 b/d for the first quarter, IEA said. The stockpiling so far has been driven by concerns about supplies during the upcoming summer, after sanctions on Iran fully take effect. IEA said deliveries of Iranian crude to traditional buyers could drop by 800,000 b/d to 1 million b/d this summer, but key producers in the Organization of Petroleum Exporting Countries have already shown that they can replace lost volumes. Total OPEC oil output is near 31.5 million b/d, according to IEA figures, with Saudi Arabian production averaging 10 million b/d in February and March. Oil demand The Paris-based agency forecasts that global oil demand will average 89.9 million b/d in 2012, up from 89.1 million b/d from 2011. This forecast is unchanged from a month ago. Demand growth in Asia continues to dominate, accounting for 700,000 b/d of the global 800,000 b/d of growth expected this year. IEA said the only noteworthy change in demand from last month’s report is the stronger growth now foreseen in oil-rich regions such as the Middle East, now forecast at 205,000 b/d as opposed to 155,000 b/d last month, and the former Soviet Union, now seen climbing by 125,000 b/d, previously by 115,000 b/d. More price-sensitive regions, such as North America, where IEA forecasts that demand will decline by 229,000 b/d this year, correspondingly have had demand estimates revised lower. US oil demand will average 18.69 million b/d this year, down from last year’s 18.9 million b/d, according to IEA. EIA outlook Earlier this week, the US Energy Information Administration, in its short-term energy and summer fuels outlook, forecast that US oil demand will average 18.7 million b/d this year, down from last year’s average of 18.84 million b/d. EIA expects that US demand in 2013 will rebound to the 2011 level. During this year’s April-September summer driving season, regular gasoline retail prices will average about $3.95/gal, peaking in May at a monthly average price of $4.01/gal, EIA forecasts. EIA also projects that worldwide oil demand will climb to average 88.81 million b/d this year and to 90.11 million b/d in 2013 vs. 87.92 million b/d last year. OPEC’s monthly report In addition, OPEC released its monthly Oil Market Report for April. Projected worldwide oil-demand growth in 2012 remains at 900,000 b/d—with demand averaging 88.6 million b/d—as offsetting economic developments across the globe have left the forecast unchanged from the previous report, the report said. In its initial forecast for this year, OPEC had pegged global growth at 1.3 million b/d. US oil demand remains a key uncertainty to the current demand assessment, and the upcoming driving season might be affected by high retail gasoline prices and the pace of the economic recovery. At the same time, improving consumption in Japan could positively impact world oil demand growth, OPEC said. Output in North America will account for most of the forecast 580,000 b/d of non-OPEC supply growth this year, followed by supply from Latin America and the FSU, as total non-OPEC oil supply averages 52.97 million b/d, according to the report. Middle East supply is expected to experience the largest decline, followed by Africa and OECD Europe.

Under regulator's firm hand, Mexican giant changes course

International Herald Tribune April 25, 2012 By ELISABETH MALKIN The state-owned company, Pemex, is trying to become more nimble and efficient after decades of simply drilling as many wells as it could. PetroScan-April 2012


For seven decades, Pemex, Mexico's state-owned oil monopoly and a mainstay of the government's revenue, regulated itself -- which is a polite way of saying it could do pretty much as it pleased. No authority challenged the wisdom of investments like the billions it has spent in the Chicontepec oil field to extract just a trickle of petroleum, even as private companies have pulled torrents from similar shale in Texas and North Dakota. The company's safety procedures went largely unscrutinized, as it joined the oil majors drilling in deep water in the Gulf of Mexico. And the company faced no serious consequences for not keeping its promises to raise output or operate more efficiently. But in the past few years, that has begun to change. The tiny National Hydrocarbons Commission, created by Mexico's Congress in 2008 to increase regulatory oversight of the company, is proving to be a surprisingly sharp thorn in Pemex's side. The five-member panel of energy specialists, which has a staff of 61 and an annual budget of about $7 million, has begun to confront the company's executives over where and how they drill for oil. With new regulations and its own blunt assessments of the practicality of Pemex's projects, the commission is pushing the company to explain its plans. Pemex does not have to follow the regulators' recommendations, but the commission's young president, Juan Carlos Zepeda, is speaking out when it does not. "The strength of the commission is in public opinion," said Mr. Zepeda, 42, an economist who contends that Pemex, officially Petroleos Mexicanos, should be more transparent as it spends $20 billion this year to find and pump oil. "The force of change will come from Congress, from opinion leaders, from national universities, from society." As a symbol of Mexican nationalism, created in 1938 when the government expropriated foreign-owned oil companies, Pemex occupies a peculiar place in the country's energy policy. The jobs it generates give it powerful political allies, and its union is so strong that no president risks defying it. The government relies on the company's oil revenue for as much as 40 percent of the national budget, taxing it so heavily that last year the company lost $6.5 billion on sales of $111.5 billion. As long as oil gushed from Pemex's giant offshore fields, there seemed little reason for anyone to challenge the status quo. But production has declined since 2004, and the company's ability to find and exploit new sources of oil has been cast into doubt. The commission has closely tracked the Chicontepec project, on which Pemex has already spent nearly $9 billion. The regulators told the company that in its haste to meet ambitious production goals, it was drilling hundreds of new wells without studying the region's geology or the best recovery techniques. The criticism was quickly picked up by members of Congress. Mr. Zepeda is also scrutinizing Pemex's plans to push deeper into the Gulf of Mexico. The memory of the BP disaster there in 2010 is still fresh, and Mr. Zepeda is concerned that Pemex does not have enough experience to drill three new exploratory wells at depths of almost 10,000 feet, or 3,000 meters -more than twice the average depths at which it has been drilling in the region. David Shields, an independent oil analyst based in Mexico City, said the change in approach was significant. "It was heresy in the past to question whether Pemex was doing things properly," Mr. Shields said. The commission's five members all once worked for Pemex or for government entities involved in energy. But their decisions have shown independence, said Miriam Grunstein, an oil specialist at the C.I.D.E., a public research university in Mexico City. "They have integrity," Ms. Grunstein said. "They're really admirable. It's completely unexpected." In the past few weeks, Pemex and the chief of its production and exploration subsidiary, Carlos Morales Gil, have begun responding to the pressure. The company officially reduced its estimate for probable reserves in Chicontepec by about 30 percent, to 6.49 billion barrels of oil equivalent, ending two years of wrangling with Mr. Zepeda's team. PetroScan-April 2012


Then, at the end of March, Pemex announced that it had signed a contract for deepwater containment systems with Wild Well Control, a Houston company that handles oil well disasters, including the 2010 BP spill, and it is in talks with a consortium of gulf oil companies to provide additional services. Pemex is also analyzing whether it should buy additional insurance for the deepwater wells, Mr. Morales said. Jeremy Martin, the director of the energy program at the Institute of the Americas in San Diego, said Mr. Zepeda was right to take his concerns about Pemex public. "He is holding their feet to the fire, especially Carlos Morales," Mr. Martin said. "At a minimum, he is forcing Morales to respond." Mr. Zepeda said he sensed the beginning of a shift at the company but added, "For Pemex to fully recognize an authority, it will take a cultural change that is going to take some time." Mr. Morales of Pemex expressed exasperation with the commission's oversight. "It is like being the coach of the national soccer team," he said in an interview. "Everybody wants to tell the coach what to do." Mr. Morales suggested that some of the guarantees the commission wanted from Pemex before the company began drilling in deeper waters reflected the commission's inexperience. "We have been doing these things for 70 years," he said. But Ms. Grunstein said Pemex's efforts in deep water had little to do with sound business management. "They want to prove to Mexicans and to the world that they can do it," she said. "It's a heavily reputational thing." Although Pemex does not have the experience for easy development of unconventional fields like Chicontepec, where the oil is tightly locked in the rock, it has no choice. The Mexican Constitution prevents Pemex from doing what would be standard practice anywhere else in the world -- striking partnerships with private companies to share costs and revenue. But there has been some positive news. Pemex's oil production has stabilized at about 2.5 million barrels a day, down from the 2004 peak of 3.4 million. This year, Pemex will finally replace each barrel it produces with a new barrel of proven reserves, a goal that long eluded it. And a new boss, Antonio Narvaez Ramirez, is in charge at Chicontepec, where 2,100 oil wells are spread over low hills covered with orange groves and cattle pastures. Mr. Narvaez has spent 18 months overhauling operations and adopting many commission suggestions. "Pemex is used to doing things in a conventional way because the oil fields were conventional," he said. "But that's finished, and we have to go against the conventions." When Mr. Narvaez arrived, he monitored the wells with variably colored Post-it notes on a wall. Now he has a computerized system to transmit production information in real time to his tablet computer. Some of his changes are low-tech but effective, including keeping a fleet of maintenance trucks that can be deployed immediately to fix most of the mechanical problems in an oil pump. Others are more complex, including new types of well design to permit horizontal drilling and multistage hydraulic fracturing. The subsequent impact on the local community is just beginning. "There is more movement, more jobs," said Marisol Tapia Rodelo, 29, who runs a roadside restaurant in the village of Palma Sola, where giant trucks operated by Pemex and its contractors rumble by and workers turn up every lunchtime. Chicontepec's production, now about 65,000 barrels of crude oil a day, is rising, although the goal Pemex now cites -- 300,000 barrels -- is far off. "In the end, we will learn how to produce in the field," Mr. Zepeda said. "The shame is that it cost a lot of money. The learning curve is too expensive."

PetroScan-April 2012


Daniel Yergin believes new set of challenges awaits energy industry

Published: Tuesday, April 17, 2012, 4:57 PM, By Richard Thompson, The Times-Picayune A lot has changed about U.S. energy production in the two decades since Daniel Yergin wrote The Prize: the Epic Quest for Oil Money and Power, his Pulitzer Prize-winning history of the oil industry that was published in 1991. By the time the 771-page book hit the shelves, former Iraqi dictator Saddam Hussein had just invaded the small, petroleum-rich country of Kuwait, and Yergin, the co-founder and chairman of the consulting firm Cambridge Energy Research Associates, predicted that "ours was still going to remain the age of oil," he said Tuesday at a breakfast briefing sponsored by the World Trade Center of New Orleans. Since then, the Soviet Union collapsed; China became an oil importer instead of an exporter; climate change emerged as a hot-button political issue, and natural gas production boomed in the U.S. with the advent of new drilling methods allowing companies to tap large reservoirs of resources trapped in shale formations. All that led Yergin to his latest book, which focuses on developing sustainable energy supplies. The Quest: Energy, Security, and the Remaking of the Modern World, was published last year. Now, Yergin believes a new set of challenges await the energy industry, particularly in Louisiana, as the pace of issuing permits for new offshore wells lags behind pre-oil spill levels, and the number of drilling rigs has declined as the price of natural gas has fallen to its lowest level in more than a decade, helped in large part by the Haynesville Shale play. "I think we're above what we thought would be the slow recovery scenario, but it's still taken a very long time," Yergin said about the pace of permitting in the Gulf of Mexico. "The time has come down. It's understandable. What was created was a new regulatory system, and that doesn't happen overnight, but I think the goal is that it has to be more efficient." Yergin estimated that it could take three to four years until offshore production catches up to pre-oil spill levels. "Things certainly are better than they looked a year, a year-and-a-half ago," he said, "but it's not back to the right level of activity, and that is a drag on the economy." Noting that President Obama cited projections that developing natural gas could support more than 600,000 jobs by the end of the decade in his third State of the Union address earlier this year, Yergin expects that domestic energy production will be a major campaign talking point leading up to the presidential election this fall, especially if gasoline prices remain high. "They're thinking about it in terms of jobs, and people two or three years ago, from the policy point of view, did not think about energy in terms of jobs," he said.

Oil prices buoyant; Singapore GRM down 4% QoQ to USD7.6/bbl

Motilal Oswal has come with its March quarterly earning estimates for Oil & Gas sector. According to the research firm, crude price assumption for FY12/13/14 is USD114.5/ 110/100/bbl and USD90/bbl over long term. Oil prices buoyant; Singapore GRM down 4% QoQ to USD7.6/bbl Brent crude prices averaged USD119/bbl (USD110-127) during 4QFY12 led by the likely sanctions on Iran and the threat by Iran to close down the Strait of Hormuz in retaliation. The regional benchmark Reuters Singapore GRM averaged USD7.6/bbl v/s USD7.9/bbl in 3QFY12. Light distillate cracks recovered sharply but the gains were offset by the decline in middle distillate cracks. We expect Singapore GRMs to remain in range of USD79/bbl in medium term as the continued shutdown of refineries would help absorb new capacity coming up in 201213 to some extent. However, demand destruction due to high product prices poses a downward risk to our assumptions. Petchem spreads decline sharply; volume remain flat in 4QFY12:

PetroScan-April 2012


In polymers, PE and PP spreads over naphtha declined 9-16% QoQ, while PVC spread was down 46% QoQ (a decade low level). Integrated polyester spreads were down 8-10% QoQ. Margins are likely to remain under pressure led by continued supplies from the Middle East. Full-year under-recoveries at INR1.4t; model upstream share at 40%: We expect under-recoveries to increase 27% QoQ to INR410b led by high oil prices and increased international diesel prices. The subsidy-sharing would be again ad-hoc and as was the case in previous years, it will be finalized in this quarter. We have modeled upstream sharing at 40%/38.8% and downstream sharing at nil/7% for FY12/FY13, respectively, with the balance being the government's share. However, given that the government is already reeling under high fiscal burden, we believe there remains upside risk to our FY12 upstream sharing estimate. Valuation and view: High crude oil prices do not augur well for OMCs. However, the likely nil subsidy sharing during the current fiscal and likely price hikes after the budget session makes them attractive. Among OMCs, BPCL is our top pick due to the upside potential from its E&P business. We remain neutral on GAIL and GSPL as operational earnings are unlikely to surprise positively led by headwinds for incremental gas availability in India. Strong earnings sustainability augurs well for Petronet LNG. Maintain Neutral on RIL to factor in the continuous decline of gas from the KG-D6 basin, non-clarity on cash utilization, RoE reaching sub 15% levels and increased share (80%) of cyclical refining and petchem businesses, where the outlook continues to remain weak. Cairn India, being an upstream pure play, would be the biggest earnings beneficiary of higher oil prices. But the key things to watch out in the near future are production ramp-up, reserve upgrade and dividend policy. Our key assumptions: Our crude price assumption for FY12/13/14 is USD114.5/ 110/100/bbl and USD90/bbl over long term. We expect regional benchmark Singapore Reuters GRM to remain in range of USD7-9/bbl in the near term. We model Singapore GRM at USD8.2/bbl in both FY13 and FY14. (Rs in million)

Sales Mar.12 BPCL 564,427 Cairn India 35,694 Chennai Petroleum 128,968 GAIL 100,892 GSPL 2,561 HPCL 537,623 IOC 1,282,850 Indraprastha Gas 6,918 MRPL 156,941 ONGC 174,535 Petronet LNG 68,621 Reliance Inds 934,000 Company

Net profit % YoY % QoQ Mar.12 % YoY % QoQ 24.7 -4 36,646 291.9 16.7 -2.3 15.3 21,450 -12.7 -5.2 25.1 15.7 1,946 -29.1 LP 13.4 -10.4 6,906 -20 -36.7 0.4 -6.5 1,131 -24.9 -10.3 35.5 12.2 44,473 296.1 63.2 30.6 11.4 85,866 119.9 -0.8 35.8 4.6 693 0.2 0.2 26.4 21.4 2,101 -62 91.4 13.4 -3.7 35,884 39.5 -22.6 72.2 8.4 2,975 44.2 0.7 28.5 9.7 40,923 -23.9 -7.8

Exploring 5 new oil and gas fields on agenda

Tehran Times TEHRAN - The National Iranian Oil Company plans to explore five new oil and gas fields in the current calendar year, which began on March 20, the NIOC's Director for Exploration Mahmoud Mohaddes said. PetroScan-April 2012


“Last year, six oil and gas fields were discovered, holding up to 2.87 billion barrels of recoverable oil reserves and 847 billion cubic meters of natural gas,” Mohaddes added, the ISNA News Agency reported. Iran ranks the fourth worldwide with 155 billion barrels of recoverable oil reserves, next to Venezuela, Saud Arabia and Canada. On March 3, Mohaddes announced the discovery of a huge oilfield with considerable reserves in southern Iran, which was among the biggest fields discovered in the country. With 34 trillion cubic meters of natural gas reserves, Iran has the world's second-largest natural gas reserves after Russia. In January, an NIOC official stated that the country’s natural gas reserves will last up to 100 years. The Mehr News Agency quoted Mohammad-Ali Emadi as saying that according to Iran’s fifth five-year development plan (2010-2015), the country’s gas production capacity should increase by 250 million cubic meters per day. He also said that Iran’s crude oil reserves will end by the next 50 years, adding that the country’s oil output would rise by one million barrels per day by 2015. The official went on to say that the country’s oil deposits are recoverable by 29 percent on the average.

TransCanada mulls switching natural gas mainline to oil service

CALGARY — TransCanada Corp. said it’s taking a serious look at converting its underused mainline, Canada’s largest natural gas pipeline, to oil service, a prospect that would give a big boost to the idea of a Canadian solution to anti-oil sands activism by shipping more of Canada’s Western oil to Eastern consumers. CEO Russ Girling said Friday refiners in Eastern Canada and oil producers in Western Canada are keen on the concept and have asked TransCanada to look into the feasibility of converting parts of the system. “We are going to actively pursue it and see if we can turn it into an opportunity for both, the oil and gas industry and TransCanada,” Mr. Girling told reporters after addressing the company’s annual meeting. The giant pipeline is TransCanada’s original business and is one of Canada’s nation-building infrastructures. For decades, it is has moved natural gas from Empress, Alta., down to the U.S. northeast and into Ontario and Quebec. But the pipeline is running at half capacity because of the discovery of big new shale gas deposits such as the giant Marcellus in the United States that are pushing new supplies into the pipeline’s historic market. The new supplies are so abundant they have depressed natural gas prices to decade-low levels, while pushing up transmission costs for producers and customers. Disputes over who should pay for the underused, regulated infrastructure will land before the National Energy Board on June 4. A hearing into changing the structure of the system as well as tolls for 2012 and 2013 is expected to last until September. If technically feasible, the conversion would be nation-building in new ways. The pipeline could potentially carry between 300,000 barrels a day and 800,000 b/d, Mr. Girling estimated, making it a significant channel for growing oil sands production in Alberta that risks being stranded as a result of activists opposing new pipeline plans to the United States and to Canada’s West Coast. TransCanada’s own proposed Keystone XL from Alberta to the U.S. Gulf Coast has been one of the targets. Enbridge Inc.’s Northern Gateway from Alberta to Kitimat in British Columbia is also being opposed, and pushback has started against an expansion of the Trans Mountain line between Edmonton and Vancouver proposed by Kinder Morgan Canada. While there has been increasing talk of pushing more Western Canadian oil to the East in recent months, it has been undermined by limited oil pipeline capacity. A conversion of the mainline would benefit Eastern Canadian markets by increasing their energy security. They are now supplied by offshore oil at world oil prices. Meanwhile, Western Canadian oil is selling at deep discounts in the U.S. because of lack of pipeline capacity. “It would be a win for the oil industry and could be a win for TransCanada,” said Edward Kallio, director of gas consulting at Ziff Energy Group in Calgary.

PetroScan-April 2012


“With 2.2 million barrels of oil coming online between now and 2020, we’ll need Gateway, the Trans Mountain Expansion, and the Keystone pipeline,” he said. “With issues relating to Gateway and Keystone, a TCPL conversion is very much Plan B, and could become Plan A if these issues are not resolved.” Natural gas customers who are now relying on supply from the West would have to find new sources. TransCanada would have to sort out the technical issues of converting a pipeline from gas to oil, relating primarily to maintaining pipeline integrity. But the obstacles don’t seem insurmountable. Mr. Girling said the company learned a lot when it undertook a similar pipeline conversion from gas to oil as part of the first phase of Keystone, which is now in service and moving more than 500,000 b/d to the U.S. “So the questions is: ‘Can we do that in a way that makes sense for everybody, for our gas shippers and for our oil shippers.’ And that is the conversation we have going on right now … at the 30,000-foot level, it seems to make sense,” he said.

2nd UPDATE: Shell Boosts Asset Sales, Posts Consensus-Beating Profit

By Alexis Flynn, Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Royal Dutch Shell PLC (RDSB.LN) Thursday raised the amount of asset sales it plans for this year as it posted consensus-beating adjusted profit for the first quarter due to high oil prices and a small increase in its production. The results marked a return to form for Europe's largest energy firm, which disappointed investors with lackluster numbers in the prior period. Shell's strategy of focusing on boosting output from its gas-to-liquids and oil-sands projects paid off modestly, even though some analysts are wary that such unconventional projects rely on high energy prices to cover the higher costs of unconventional production. "We are implementing our strategy by improving near-term performance, delivering a new wave of production growth and maturing the next generation of growth options for shareholders," said Chief Executive Peter Voser. "Asset sales for 2012 are likely to be over $4 billion, compared with our earlier guidance of $2 billion to $3 billion," said Mr. Voser. He didn't specify where or what assets would be sold. The Anglo-Dutch company said the clean current cost of supplies, a keenly-watched figure that strips out gains or losses from inventories and other nonoperating items, was $7.28 billion in the three months ended March 31, up 15.7% from $6.29 billion in the first quarter of 2011. This was above analysts' expectations of $6.75 billion. The adjusted figure is broadly comparable with net income under U.S. accounting rules. Shareholders also received a 2.4% increase in their first-quarter dividend from last year, the company said, with the payout rising to 43 cents per ordinary share. The continued ramp-up of production from giant unconventional projects, like the Pearl gas-to-liquids plant in Qatar and Shell's Canadian oil sands upgrader, helped the company post a modest improvement in overall output. Total oil and gas production was 3.552 million barrels of oil equivalent per day, an increase of about 1.4% on the year, although it was some 7.5% higher than in the fourth quarter. Analysts were expecting production to decline 0.6%. However, net profit for the quarter dropped 0.7% to $8.72 billion from $8.78 billion a year ago. Higher purchasing costs, which rose nearly 11% to $94.06 billion, took some of the shine off the bottom line. Shell's Chief Financial Officer, Simon Henry, said this increase reflects higher-cost purchases of crude oil and raw materials. The price of international benchmark Brent crude was 12% higher in the first quarter of 2012 than a year earlier. Group revenue was $123.77 billion, up 7.8% from $114.84 billion in the first quarter of 2011. Diluted earnings per share were $1.40, compared with $1.42 the previous year. Analysts hailed the result. "It's a good beat. It's 10% ahead of our estimate of clean net income," said Investec Securities' Stuart Joyner. He cautioned, however, that refining and marketing earnings, which dropped 32% from a year ago, were a cause for some concern. "Downstream is very weak. There is still a bit of risk for downstream for the full year," said Mr. PetroScan-April 2012


Joyner. Shell is well-placed for the long term, said Bernstein Research in a note to clients. "The company's leading position in low decline-rate assets positions it well for long-term growth," it said. "Shell also has one of the best exploration portfolios of the majors."

Mozambique seeks greater share in future gas blocks

Wed, Apr 25 2012 MAPUTO, April 25 (Reuters) - Mozambique plans to increase the maximum stake it holds in future oil blocks to up to 40 percent from a current maximum of 25 percent, the head of the national oil company said on Wednesday. Recent gas discoveries by U.S. oil and gas producer Anadarko Petroleum and Italy's Eni have boosted interest in the southern African country and Mozambique hopes to keep a greater share of future profits in the country. "The plan is to go up to 40 percent in all future projects, to improve state control of the companies and get more income for the country," Nelson Ocuane told Reuters on the sidelines of an energy and mining conference in Maputo. "It will be possible to do it as we get income from the projects in which we are participating at the moment." In future Mozambican national oil company Empresa Nacional de Hidrocarbonetos (ENH) may also opt to develop certain blocks on its own if it has developed its financial muscle to do so, Ocuane added. ENH currently holds a 25 percent stake in the Pande/Temane onshore field operated by South African petrochemical group Sasol and a 10 percent stake valid for the exploration phase in offshore blocks run by consortia operated by Anadarko, Eni and Norway's Statoil. The country will need to mobilise $3 billion by the end of next year to keep its 10-percent stake in the Rovuma basin offshore projects as they move to the next phase, Ocuane added. The actual stakes ENH would take in individual blocks would be decided on a case-by-case basis, depending on funding required. Mozambique plans to launch the next bidding round for blocks in Rovuma by the end of this year, an official from the national oil institute said earlier this week. Companies including Eni, Exxon Mobil, BP, Malaysia's Petronas, Shell, Tullow Oil , Vitol and Noble Energy, have expressed interest in future bidding rounds, he said. (Reporting by William Mapote and Agnieszka Flak; editing by Keiron Henderson) © Thomson Reuters 2011. All rights reserved. Users may download and print extracts of content from this website for their own personal and non-commercial use only. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters and its logo are registered trademarks or trademarks of the Thomson Reuters group of companies around the world. Thomson Reuters journalists are subject to an Editorial Handbook which requires fair presentation and disclosure of relevant interests. This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to colleagues, clients or customers, use the Reprints tool at the top of any article or visit: www.reutersreprints.com.

NEW & RENEWABLE ENERGY New study brings down India’s shale gas potential drastically

The Financial Express, 2012-04-19 03:20:41+05:30 initial hype over India’s shale gas potential seems to be making way for a more sober assessment of the unconventional energy that could actually be extracted from rock formations.

PetroScan-April 2012


From an initial assessment of 300 trillion cubic feet (TCF) to 2,100 TCF of producible and non-producible gas present in Indian basins (called in-place gas), the latest study has brought down the ‘technical recoverable’ gas to about 6.1 TCF. The estimate of technical recoverable gas recently given to India by the US Geological Survey is a fraction of the in-place gas that could be recovered with existing technology without regard to cost. If commercial viability of extraction is also taken into consideration, the amount of recoverable gas would be lower. Earlier, the US Energy Information Administration had given an estimate of 293 TCF of in-place gas, whereas New York-listed Schlumberger had made an initial gas-in-place estimate of 300-2,100 TCF. Even the latest assessment of 6.1 TCF could prove to be ambitious when experts get access to more geological data and interpret them to remove the various uncertainties involved in making projections. The most reliable estimates are 'proven reserves', indicating the amount of hydrocarbon that could be extracted through existing wells in a developed oil or gas field. India, which plans to announce a policy for auctioning shale gas blocks by March 2013, is way behind China that has already signed its first shale gas production sharing contract with the Royal Dutch Shell in March. Beijing wants to produce 6.5 billion cubic meters (BCM) a year of shale gas by 2015 and close to 100 BCM by 2020. Gas accounts for only 10.6% of India’s primary sources of energy, compared to the world average of 24%. Raising the use of gas in the energy mix would help the country lower its dependence on coal, its largest source of energy. It would also help in reducing the country’s oil import bill and carbon emissions. However, concerns regarding water contamination and the potential for triggering seismic activity could slow down India’s quest for this clean source of energy. After banning shale gas exploration for almost a year due to its role in two earthquakes, the British government on Tuesday supported hydraulic fracking or pumping water, sand and chemicals into earth to shatter rock formations and capture the gas, under strict safeguards. Fracking would be stopped even if minute seismic activity is noticed. “There is an environmental cost attached to whatever form of hydrocarbon you drill for... We need to find ways to mitigate them for the sake of having clean energy,” said Deloitte's Asia Pacific head for energy & resources Adi Karev. International Gas Union president Abdul Rahim Hashim told FE recently that India has got the conventional natural gas, coal bed methane and shale gas. Some of the moratoriums on shale exploration in countries such as France are perhaps based on perception rather than reality, he said. Indian policymakers should consider the facts on these matters so that they do not decide not to utilise the resources that will go a long way in reducing the nation’s carbon emissions, Hashim added

IndianOil Sets Up 5 MW SOLAR PHOTO-VOLTAIC (PV) POWER PLANT IN RAJASTHAN

Energy is vital to India’s growth and emissions are a global concern. IndianOil recognises Renewable Energy (RE) as an important source to meet the growing energy requirements of the nation while minimizing its carbon footprint. IndianOil’s foray into Grid connected solar power market began with its commissioning of a 5 MW solar photovoltaic (PV) power project in village Rawra, Jodhpur, Rajasthan in January 2012 under the Jawaharlal Nehru national Solar Mission Phase 1 Batch 1. The work was awarded to M/s BHEL, Bangalore on LSTK basis. Indian Oil was the only Central PSU to be selected on reverse bidding process out of over 350 applicants in the first round.

PetroScan-April 2012


The project consists of 23040 no’s of PV modules each with a rated power output of 220 Wp generating DC power. 20 no’s of Power Conditioning Units (PCUs) , 250 kW each, convert this DC power to AC power at 415 V which is further stepped up to 33 kV by 5 no’s of Transformers, 1250 kVA each. This power at 33 kV is then fed into the Grid by means of a 15 km long transmission line from the plant site to the Grid sub-station. The plant has been running smoothly since commissioning with daily electricity generation in the range of 20,000 kWh – 25,000 kWh depending on the amount of solar insolation. As per Executive Director(RE&SD), Shri S.K. Sarangi, this project was completed in record time of only 5½ months, overcoming lot of challenges for which he gave credit to the dedicated team of IOCL, BHEL and REIL.

The Right Flames the Volt

By JOE NOCERA It was Thursday morning and several dozen owners of the new Chevrolet Volt had gathered at a restaurant overlooking the East River. Across town, the New York International Auto Show was in full swing. The Volt, of course, is the innovative electric car from General Motors, and G.M. was using the occasion of the auto show to meet with Volt owners. Outside, a row of sporty Volts gleamed in the bright sun. On the market for a little more than a year, the Volt is a different kind of hybrid, containing both a 400-pound battery and a 9.3 gallon gas tank. The battery gets around 40 miles per charge, but “range anxiety” isn’t the problem that it is for owners of a purely electric car. When the Volt’s battery runs out of juice, the car shifts to gasoline. It is really quite ingenious. Inside, the mood was upbeat. A month earlier, the Volt had been named European Car of the Year. It was coming off its best sales month yet, with some 2,200 cars sold. Its problems with the government — which conducted a severe rollover test that caused a Voltto catch fire — appeared to be over; the National Highway Traffic Safety Administration had given the Volt its highest crash-safety rating. Between bites of eggs and bacon, the Volt owners gushed about how well the car drove — and how much gasoline they were saving. They were early adopters, of course, willing to pay a high price ($40,000 before a $7,500 tax credit) to get their hands on a new technology. Many of them had become nearly obsessed with avoiding the gas station; for those with short commutes, it could be months between fill-ups. “When you talk to people about the car,” said Eric Rotbard, a lawyer in White Plains, “the killer moment is when you tell them you are getting 198 miles per gallon.” An owner at another table chimed in, “Is that all you get?” Everyone laughed. Yet there was also an undercurrent of nervousness at the breakfast. A reporter for Fox News had been prowling the auto show, asking nasty questions about the Volt. For months, the conservative propaganda machine — including Rush Limbaugh, Bill O’Reilly, and Neil Cavuto, the Fox News business editor — had been mocking the Volt, and linking it to President Obama, who has long touted the promise of electric cars. Cavuto, who has called the Volt “roller skates with a plug,” was rumored to be going on the air that very night with yet another Volt hatchet job. What is the connection between President Obama and the Volt? There is none. The car was the brainchild of Bob Lutz, a legendary auto executive who is about as liberal as the Koch brothers. The tax credit — which is part of the reason conservatives hate the car — became law during the Bush administration. “It’s nuts,” said Lutz, when I spoke to him earlier in the week. “This is a significant achievement in the auto industry. There are so many legitimate things to criticize Obama about. It is inexplicable that the right would feel the need to tell lies about the Volt to attack the president.” In his regular blog at Forbes, Lutz has tried to counter what he has called the “rabid, sadly misinformed right.” But he has largely given up. The last straw came when his conservative intellectual hero, Charles Krauthammer, PetroScan-April 2012


described the Volt as “flammable.” Krauthammer, Lutz felt, had to know better. Although he remains deeply conservative, Lutz told me that he has become disenchanted with the right’s willingness to spread lies to aid the cause. At the breakfast I attended, many of the Volt owners wanted General Motors to fight back. But Chris Perry, a G.M. marketing executive, cautioned that that would only bring more attention to the Volt’s status as “a political punching bag.” He added, “We are looking at the long term, and we know this is going to pass.” Which it surely will — after November. As it turns out, Cavuto went easy on the Volt when his show aired that night. He used a recent article in The New York Times — about how long it takes for electric cars to reap savings for their owners — to take a few jabs at the electric car movement. But his guest that night was James Lentz, the president of Toyota Motors, who wanted to talk up the Prius, so Cavuto politely soft-pedaled his criticism. “Toys for the well-to-do” was the worst he was willing to go on this night. Not to worry, though. With seven months to go before the election, Cavuto and his Fox News brethren will have plenty of opportunities to denigrate an innovative car, employing American technology and creating American jobs, in order to besmirch a president who had nothing to do with it. It is, after all, what they do.

Nanoparticles improve solar collection efficiency

Using minute graphite particles 1000 times smaller than the width of a human hair, mechanical engineers at Arizona State University hope to boost the efficiency - and profitability - of solar power plants. Photovoltaic (PV) solar panels are popping up more and more on rooftops, but they're not necessarily the best solar power solution. 'The big limitation of PV panels is that they can use only a fraction of the sunlight that hits them, and the rest just turns into heat, which actually hurts the performance of the panels,' explains Robert Taylor, a graduate student in mechanical engineering at Arizona State University. An alternative that can make use of all of the sunlight, including light PVs can't use, is the solar thermal collector. The purpose of these collectors - which take the form of dishes, panels, evacuated tubes, towers, and more - is to collect heat that can then be used to boil water to make steam, for example, which drives a turbine to create electricity. To further increase the efficiency of solar collectors, Taylor and his colleagues have mixed nanoparticles particles a billionth of a metre in size - into the heat-transfer oils normally used in solar thermal power plants. The researchers chose graphite nanoparticles, in part because they are black and therefore absorb light very well, making them efficient heat collectors. In laboratory tests with small dish collectors, Taylor and his colleagues found that nanoparticles increased heat-collection efficiency by up to 10 percent. 'We estimate that this could mean up to $3.5 million dollars per year more revenue for a 100 megawatt solar power plant,' he says. What's more, Taylor adds, graphite nanoparticles 'are cheap' - less than $1 per gram - but with 100 grams of nanoparticles providing the same heat-collecting surface area as an entire football field. 'It might also be possible to filter out nanoparticles of soot, which have similar absorbing potential, from coal power plants for use in solar systems,' he says. 'I think that idea is particularly attractive: using a pollutant to harvest clean, green solar energy.'

Government boosts 2012 natgas production estimate Tue, Apr 10 2012, By Joseph Silha NEW YORK (Reuters) - The U.S. government sharply raised its estimate for domestic natural gas production this year for a third month in a row, dashing bullish hopes that deep cuts in drilling might be starting to temper a supply glut. While the Energy Information Administration projected greater gas consumption for the year, primarily PetroScan-April 2012


due to switching by utilities to gas from pricier coal, it was not expected to be enough to bring the market back in balance, raising the odds for a storage crisis this fall. "EIA raised production more than demand, which is going to make people hesitate about getting long (buying) futures. Cash (physical prices) are still drifting lower, which means there's just too much gas around," said Steve Mosley at SMC Advisory Services in Arkansas. But as prices languish at a decade low of nearly $2 per million British thermal units (mmBtu), the EIA suggested the market could begin to tighten next year. It forecast production at near flat after seven straight yearly gains, while consumption was expected to grow by about 1.4 percent. In its April Short-Term Energy Outlook, EIA said it expected marketed natural gas production in 2012 to rise by 3 billion cubic feet per day, or 4.5 percent, to a record 69.22 bcfd, up from its March outlook that had output this year at 67.91 bcfd. The expected gains in marketed output follow a 4.8 bcfd, or 7.9 percent, increase in 2011 to 66.22 bcfd, the largest year-over-year increase in history and easily eclipsing the previous record of 62.05 bcfd in 1973. Natural gas consumption this year is expected to rise 2.84 bcfd, or 4.3 percent from 2011, to 69.60 bcf daily. EIA said large gains in electric power use will offset declines in residential and commercial demand. The steady rise to record production, primarily due to increased supplies from shale, has lessened the nation's dependence on Canadian imports, which have dropped from about 15 percent of total supply four years ago to about 11 percent now. A steep drop in gas drilling - the Baker Hughes gas rig count is down 31 percent since peaking at 936 in October - has raised expectations that historically low gas prices might finally force producers to slow output, but EIA noted the decline has not yet had an impact on production. Gas futures prices on the New York Mercantile Exchange slid to a new 10-year low of $2.029 on Tuesday. The largest demand increase this year is expected to come from utilities that switch to cheaper gas from pricier coal to generate power. LNG imports are expected to fall by 0.3 bcfd, or 28 percent, to about 0.7 bcfd in 2012. Imports will likely come in the form of contractual cargoes to the Everett terminal in Boston and the Elba Island terminal in Georgia, the EIA said. EIA expects Henry Hub natural gas prices in 2012 to average $2.51 per million British thermal units, down 21 percent from last month's outlook and about 37 percent below 2011's estimated average of $4. In 2013, the EIA sees prices rising 89 cents, or 35 percent, to $3.40 per mmBtu. (Additional reporting by Edward McAllister; editing by Alden Bentley and Andre Grenon)

Fracking chemicals disclosures set off few alarms

By Matthew Tresaugueand John MacCormack, Updated 11:29 p.m., Sunday, April 1, 2012 CARRIZO SPRINGS — Energy companies have disclosed some of the chemicals pumped into the ground to extract oil and gas at more than 1,700 locations across Texas in the first two months since the state began requiring the site-specific information. Yet the early returns have brought a collective shrug in the Eagle Ford play in South Texas, where almost every oil and gas well is hydraulically fractured - or fracked - with a brew of water, sand and chemicals. "The regulation is fine, but it's not going to do any good," said David Trotter, an oil and gas attorney and a partner in the 4,500-acre Peùa Creek Ranch in Dimmit County, on the western flank of the Eagle Ford. "No one will know how to interpret what things go into the frack job one way or another, whether it's doing any harm or good." Oil and gas drilling has expanded rapidly in the past few years because of hydraulic fracturing. The increased activity has led to calls to disclose the cocktails used to break tightly packed rock containing oil and gas. The reports show that drillers employ dozens of chemicals, such as hydrochloric acid and methanol, to help free oil and gas deposits in the shale rock. Chemicals, however, are a small part of the overall mix, which is mostly water and sand. Reports online PetroScan-April 2012


Texas is one of at least nine states to require energy companies to disclose most of their chemicals in an attempt to resolve concerns about the safety of drilling. The reports can be found on FracFocus, an industry-supported website operated by two groups representing regulators. Even before the Texas rule took effect Feb. 1, companies voluntarily posted their fracturing fluids at 4,200 Texas sites on the registry. As of Friday, Texas had 5,932 oil and gas wells listed at FracFocus, by far the most of any state. No challenges "This kind of activity is bound to help industry with public perception," said Scott Anderson, policy adviser for the Environmental Defense Fund in Texas. "I am confident it will be a net positive because if people don't have the information, they will fear the worst." Critics say the Texas rules fall short because they allow energy firms to withhold trade secrets. The missing ingredients make it impossible to predict how the chemicals will react in the fracturing process, they say. The rules allow landowners to challenge proprietary claims for fracking fluids, but no one has, Texas Railroad Commission spokewoman Ramona Nye said. The disclosure push comes amid surging oil production in the Eagle Ford, one of the nation's hottest plays. The region, where the first well was drilled only four years ago, produced more than 30 million barrels in 2011, with forecasts for even more this year. Trotter has nine shale wells on his land, including three drilled in August by Chesapeake Energy Corp., the nation's second-largest natural-gas company. Chesapeake reported using recipes with up to 40 ingredients - although water and sand make up more than 98 percent of the fluid. The company pumped about 6 million gallons of water into one well and more than 4 million gallons into each of the other two wells, records show. The chemicals include hydrochloric acid to crack the rock, methanol to prevent pipe corrosion, and petroleum distillate hydrotreated light to reduce friction in the well. These chemicals can pose serious health threats, from liver damage to respiratory problems, but also are found in everyday products, such as household cleaners. No worries, yet Despite the greater disclosure, some scientists say it remains unclear whether the chemical makeup, which varies by company and well, should cause concern. Jim Byrd, 68, who has allowed drilling on his Dimmit County land, said he has few concerns about contaminated water wells because of the standards for surface casing and cementing, designed to protect water and formations outside the well bore. "If they were using dangerous chemicals, it would be an issue," Byrd said. "But I don't know that they are." Just in case, Charlie Riha, a retired teacher with a 100-acre ranch in the Eagle Ford play, is taking baseline samples from his water well before Chesapeake begins to drill adjacent to his property. "It doesn't cause me any worries," Riha said. "Down the line it might, but not yet." The Environmental Protection Agency is examining claims that hydraulic fracturing has contaminated water wells in North Texas and four other states. An interim report is due this year, with the final study to be released in 2014. A recent University of Texas study, meanwhile, found no evidence of polluted groundwater because of hydraulic fracturing. The risk, the scientists said, appears greater from surface spills of undiluted chemicals. The primary issue is poorly constructed wells that allow gas or fluids to leach into aquifers, the study said. No one, however, should suggest that hydraulic fracturing is risk-free, said Anderson, the EDF analyst. Regulators should more closely scrutinize drilling plans and operations to ensure the protection of aquifers, he said. 'Things happen'

PetroScan-April 2012


Scientists and environmental groups should use the disclosure statements to gain a better understanding of how the chemicals are used, how often, and what the long-term health risks may be, said the Sierra Club's Cyrus Reed, who worked on the Texas law. "If it was just sand and water, people would not be concerned," Reed said. "It's in everyone's best interests to get away from the most toxic chemicals. In a perfect world, there are no problems with the wells or the handling of these chemicals, but things happen."

ZeaChem adds to Boardman demonstration ethanol plant, hosts Gov. Kitzhaber

By Christina Williams Sustainable Business Oregon ZeaChem CEO Jim Imbler was in Boardman Monday to play host to Gov. John Kitzhaber and talk about the jobs his company's plant will provide for eastern Oregon. The company also formally announced construction of the final phase of its Boardman demonstration ethanol production plant, adding capabilities funded by a $25 million U.S. Department of Energy grant. The final phase of the plant's construction — which will add the capability to turn biomass into sugar on the frontend and produce cellulosic ethanol on the back-end — is expected to be completed this summer. The demonstration plant started operation on its key processing technology in January. That same month, the company landed a $232 million loan guarantee that will help fund the construction of a commercial-scale plant, which is also planned for Boardman. While the demonstration plant has a capacity of 250,000 gallons per year and will employ 25 people when it's fully operational, the commercial plant would have the capacity of 25 million gallons per year and would employ a full-time staff of 65 people. "This is a good-paying industry," Imbler said. Imbler said he's been more than pleased with the state of Oregon and with Boardman's reception of the company, which is based in Lakewood, Colo. "My only complaint is the wind," Imbler said. ZeaChem has not announced any other plants, but Imbler said the company is looking at additional sites in the U.S., Canada and Australia. The plants, like the one in Boardman, would use local biomass sources for production into cellulosic ethanol. The plants can also provide green chemicals for use in product manufacturing. The Boardman plant is working with Greenwood Resources to supply biomass for the facility. It will also process straw from regional wheat farmers. “ZeaChem is exactly the type of innovative company that is driving Oregon’s economy and revitalizing our rural communities,” said Gov. Kitzhaber in a prepared statement. “This facility and the planned commercial plant are creating quality jobs, while producing sustainable alternatives to fossil-fuel products by using local resources.” Tags:Alternative fuels, Green jobs, Biomass, Green chemistry

China home to five of top 10 solar module makers

By Erik Siemers Five of the world’s top 10 solar module manufacturers are based in China, accounting for 22.4 percent of the market, according to a new report. The report from Lux Research underscores the struggles facing Germany panel-maker SolarWorld AG, the 10thranked producer on the list that, through its Hillsboro-based North American headquarters, is embroiled in an effort to counter Chinese government subsidies by seeking tariffs on imported Chinese panels. The top 10 companies combined produced 12.5 gigawatts worth of solar modules, representing 44 percent of the global market. PetroScan-April 2012


Though the list is led by an American manufacturer — Arizona-based First Solar, with 2 gigawatts of production in 2011, or 7 percent of the market — the next three spots are Chinese brands: Suntech Power (6.5 percent market share), Yingli Green Energy (5.5 percent), and Trina Solar (4.9 percent). It’s not only the Chinese that are on the rise. The Lux report noted how Japan’s Sharp — which bases its U.S. solar operations in Camas, Wash. — and South Korea’s Hanwha Solar One joined the top 10, an indication of both countries’ interest in boosting their share of the market to match-up with Chinese competition. SolarWorld, meanwhile, gained another ally in its trade case against China. The SolarWorld-led Coalition for American Solar Manufacturing on Wednesday said Somerset, N.J.-based panelmaker MX Solar USA is now the third company to go public with their participation in the China trade case. They join SolarWorld and Milwaukee, Wisc.-based Helios Solar Works, which declared its support last week. Tags:Solar energy, China Companies:Lux Research, SolarWorld, First Solar

Solar industry awaits China trade decision

Solar industry experts expect tariffs will be imposed on Chinese-made solar-power panels by the end of March as a result of a SolarWorld-led complaint about unfair competition from cheap Chinese imports. But it’s uncertain how high they the tariffs will be and what will happen to the U.S. solar industry after that And that uncertainty is a big headache for people such as Scott Franklin, president and CEO of Boulder’s Clean Energy Solutions Inc. Franklin’s company is the parent of both Lumos LLC, a solar equipment design and development company, and Lighthouse Solar, which installs solar-power systems for residential and commercial customers. The two companies have sold and installed Chinese-made solar panels for about five years and employ nearly 100 people at 12 locations across the United States, Franklin said. “The biggest thing for us is the uncertainty. That’s the hardest to manage,” Franklin said. “My hunch is that there will be some tariff imposed. The question is how much.” Franklin said it’s difficult to bid on projects without knowing how high the tariffs, also called duties, might be. “How can you buy something if you don’t know what the price will be?” he said. The U.S. Commerce Department is expected to announce March 5 the preliminary results of its investigation into a complaint that the Chinese government’s subsidies of its solar-panel manufacturers have unfairly hurt U.S. manufacturers.

EIA: Wind power outpaced most other renewables from 2001 to 2011

Wind power was the fastest growing source of nonhydro renewable energy in the U.S. between 2001 and 2011, according to the Energy Information Administration. The EIA cited federal tax incentives and state renewableenergy commitments for the industry's growth. Maine's nonhydro renewable-energy sector set the pace, rising from 20% of the state's total energy mix in 2001 to 27% in 2011 WASHINGTON, April 10 (UPI) -- Maine led the way in non-hydroelectric renewable energy in the United States and, as a whole, wind power is making the greatest gains, the EIA said. Maine increased the portion of non-hydroelectric energy production in its energy mix from 20 percent in 2001 to 27 percent last year, the U.S. Energy Department's Energy Information Administration reports. South Dakota and Iowa were close behind, with substantial increases since 2001. The EIA attributed the increase to renewable portfolio standards, benchmarks for the share of renewable energy in state's overall energy mix. It added that federal tax credits and grants helped boost the renewable energy sector across the board. The EIA said of all the renewable energy options, wind was making the most substantial gains. PetroScan-April 2012


"Wind was the fastest growing source of non-hydroelectric renewable generation, as many operators of wind turbines have benefited from these (federal) programs," the agency said. U.S. President Barack Obama has called for an "all-of-the-above" domestic energy strategy. The White House had said it aims to generate 80 percent of domestic energy needs from renewable resources by 2035.

GE to Supply NextEra With 288 Turbines for Ontario Wind Projects

By Justin Doom on April 10, 2012 General Electric Co. (GE) (GE) will supply a subsidiary of NextEra Energy Inc. (NEE) (NEE) with 288 turbines for six wind farms in Canada that will be able to power about 120,000 homes. The 1.6-megawatt turbines will be used in NextEra Energy’s projects in Ontario that will be operational in 2013 and 2014, Fairfield, Connecticut-based GE said today in a statement. NextEra Energy is developing the projects after winning 20-year power purchase agreements from the Ontario Power Authority. “These projects will benefit the environment, and they will help create jobs and generate additional economic opportunities,” NextEra Chief Executive Officer Armando Pimentel said in the statement.

EPA to Allow 15 Percent Renewable Fuel in Gasoline

Apri 2,2012 Agency approves first applications for registration of ethanol to make E15 WASHINGTON - The U.S. Environmental Protection Agency (EPA) approved the first applications for registration of ethanol for use in making gasoline that contains up to 15 percent ethanol – known as E15. Ethanol is a renewable fuel that can be mixed with gasoline. For over 30 years ethanol has been blended into gasoline, but the law limited it to 10 percent by volume for use in gasoline-fueled vehicles. Registration of ethanol to make E15 is a significant step toward its production, sale, and use in model year 2001 and newer gasoline-fueled cars and light trucks. To enable widespread use of E15, the Obama Administration has set a goal to help fueling station owners install 10,000 blender pumps over the next 5 years. In addition, both through the Recovery Act and the 2008 Farm Bill, the U.S. Department of Energy (DOE) and U.S. Department of Agriculture have provided grants, loans and loan guarantees to spur American ingenuity on the next generation of biofuels. Today’s action follows an extensive technical review required by law. Registration is a prerequisite to introducing E15 into the marketplace. Before it can be sold, manufactures must first take additional measures to help ensure retail stations and other gasoline distributors understand and implement labeling rules and other E15-related requirements. EPA is not requiring the use or sale of E15. Ethanol is considered a renewable fuel because it is generally produced from plant products or wastes and not from fossil fuels. Ethanol is blended with gasoline for use in most areas across the country. After extensive vehicle testing by DOE and other organizations, EPA issued two partial waivers raising the allowable ethanol volume to 15 percent for use in model year 2001 and newer cars and light trucks. E15 is not permitted for use in motor vehicles built prior to 2001 model year and in off-road vehicles and equipment such as boats and lawn and garden equipment. Gas pumps dispensing E15 will be clearly labeled so consumers can make the right choice. More information: http://www.epa.gov/otaq/regs/fuels/additive/e15/

PetroScan-April 2012


Spain targets Argentine biodiesel in YPF reprisal

Fri, Apr 20 2012, by Martin Roberts MADRID (Reuters) - Spain retaliated against Argentina on Friday for seizing control of Spanish-owned energy company YPF with a measure that could curtail multimillion-dollar imports of biodiesel from the Latin American nation. The Spanish industry ministry will approve a biodiesel plan later on Friday, Deputy Prime Minister Soraya Saenz de Santamaria said after a weekly cabinet meeting. She gave no details, but one possibility would be a measure giving preference to European Union-produced biofuel in meeting compulsory motor fuel blending requirements. Spain's biodiesel industry has lobbied for years for such a rule. Industry sources estimate that Spain imported 720,000 tonnes of biofuel from Argentina in 2011, worth some 750 million euros (US$990.6 million). Spanish biofuel plants are running at an estimated 14 percent of capacity. "The goal is to encourage the use of biodiesel of EU origin," an industry ministry source said. In all, 74 percent of biodiesel used in Spain is imported, and 90 percent of that comes from Argentina and Indonesia. Spain has threatened "consequences" for Argentina since it decided to expropriate 51 percent of YPF from Madrid-listed Repsol. But tough action is difficult against a country that has been shut out of world debt markets and has ignored international fines in previous disputes. Argentine President Cristina Fernandez said on Friday that her country could use more biodiesel itself if Spain cuts imports. "We are in a position to absorb that production," Fernandez said, adding that her government would not complain to the World Trade Organization if Spain reduced its purchases. Spain bought two-thirds of Argentina's biodiesel exports between January and March of this year, according to the private Argentine Biofuels Chamber (Carbio). "The exclusion of Argentina would have direct, negative effects on production and sales," said Gustavo Idigoras, an Argentine biofuels analyst. "The country would have to make a bigger effort if it lost the Spanish market." Argentina is the world's leading supplier of soyoil and soy-based biodiesel. More than 12 million tonnes of Argentine soybeans were used last year to make biodiesel, compared with total output of some 49 million tonnes in the 2010/11 season. Argentina's decision to seize control of YPF has angered key trade partners who were already losing patience with protectionist measures by Latin America's No. 3 economy. Karel De Gucht, the European Union's trade commissioner, wrote to Argentina to express the bloc's "serious concerns about the overall business and investment climate in Argentina," singling out the YPF takeover and import curbs for criticism. "You are certainly aware of the very serious legal considerations these measures raised from a World Trade Organization perspective," he said in an April 19 letter distributed by the EU at a G20 meeting in Washington, DC. "The EU keeps open all possible options to address this matter," the letter read. Earlier, the European Parliament urged the Commission to consider reprisals such as the suspension of trade benefits, mirroring a recent decision by Washington. U.S. President Barack Obama decided last month to suspend Argentina from the U.S. Generalized System of Preferences (GSP) program, which waives import duties on thousands of goods from developing countries, after it failed to pay compensation awards in two disputes involving American investors. Argentina has said it will not pay Repsol the full amount the Spanish company wants for its stake in YPF, which has been under intense pressure from Fernandez's center-left government to increase production. Repsol has said YPF is worth $18 billion as a whole and that it would seek compensation on that basis. According to Reuters data, YPF's market capitalization as of Friday was $7.3 billion. PetroScan-April 2012


One member of the European Parliament, conservative Martin Callahan from Britain, called on EU foreign ministers to launch a joint initiative to expel Argentina from the G20. "Hard-hitting words from the EU are only playing to President (Fernandez's) nationalist agenda, bolstering her position against the West," Callahan said in a letter to EU High Representative Catherine Ashton on Friday. Argentine Economy Minister Hernan Lorenzino told reporters in Washington: "This issue has not been and is not being discussed at the G20." ($1 = 0.7571 euros) (Additional reporting by Tracy Rucinski in Madrid, David Sheppard in New York, Krista Hughes in Washington and Maximiliano Rizzi and Maximilian Heath in Buenos Aires; Writing by Tracy Rucinski; Editing by Bernard Orr, Toni Reinhold and Tim Dobbyn) Source: Reuters

SUSTAINABILITY & CLIMATE CHANGE Can economy prevail over ecology?

Local bodies should play a key role in managing the Western Ghats ecosystem. K. Murali Kumar The Madhav Gadgil report on managing the fragile ecology of Western Ghats poses a radical challenge to the dominant paradigms of growth and governance. The report was submitted last August, but is yet to be made public. April 17, 2012: There are times when the government needlessly brings upon itself the embarrassment of a reminder from one of its own agencies, of a responsibility it has forgotten or ignored. Set against its context, that reminder constitutes censure of neglect and, indirectly but no less potently, of an opportunity lost to retain the moral ground that has been rapidly slipping from under its feet. Recently, a media report stated that in response to an appeal by a resident of Kerala, the Chief Information Commissioner, Mr Shailesh Gandhi, has directed the Ministry of Environment and Forestry to make public the report on the Western Ghats submitted last August, which the MoEF has kept under wraps. The silence on, and suppression of, the report of the “Western Ghats Ecology Expert Panel” chaired by eminent environment scientist Prof Madhav Gadgil is baffling at first sight. There is nothing in it that can be termed “classified” or inimical to national “security”. In fact, the report remains true to its mandate. It's job, described in the Ministry's annual report on the environment for 2009-10, was to “assess the state of the ecology of the Western Ghats, demarcate areas which need to be notified as ecologically sensitive zones, recommend the modalities for the establishment of the Western Ghats Ecological Authority under the Environment Protection Act, 1986” a professional regulatory body no less, “…and to ensure sustainable development with the support of all concerned States.” The WGEEP report was submitted last August some twelve months after the panel's appointment; it is significant that the report came exactly a year after a panel headed by Mr N C Saxena had submitted his report on the Orissa Mining Company's proposal for bauxite mining. That report seems like a curtain raiser, a prelude to the larger exercise for the Western Ghats running down and affecting the eco-systems and economies of four States — Maharashtra, Goa, Karnataka and Kerala. So why should the Madhav Gadgil report not get the attention, the sharp light of public scrutiny it richly deserves?

PetroScan-April 2012


Challenging the order Perhaps it is precisely because of its vastness, its breadth and depth of reforms for a more sustaining environment that has scared away policymakers from offering it to the public. What the panel has done basically is to question two central props of current ‘top-down' political and economic policy and practice: the ‘growth' model and its administrative-bureaucratic apparatus. Its specific solutions and measures — from bans to promotions for “thoughtful” conservation — are clues to a model that can sustain growth because it conserves natural assets, and achieves both through an administrative machinery based on local validation, initiatives and participative governance. What the panel, therefore, offers is a challenge to the existing order of growth as we have known it, with all its waste and spoliation wilfully or conveniently ignored. The central dilemma The starting point for the WGEEP, unstated but interstitially evident, is a central dilemma inherent in Niyamgarh and in the WG. The region is considered one of the world's eight “hottest hot spots” of biodiversity but it is also rich in iron, manganese and bauxite ores. This is a double-edged gift and has defined man's uneasy relationship with nature. Since the last century but “particularly in recent decades” this “hotspot” of biodiversity has been in “continual decline” with “many biological communities and types” becoming extinct; mining, often “in violation of all laws” have wrecked “environmental damage and social disruption.” The central dilemma of resource-rich hills leads to an inversion, a disequilibrium that is a consequence of industrialisation so far. As the WGEEP puts it, “By and large, the Western Ghats have been subjected to a rapid erosion of natural capital with the building up of man-made capital.” With this indictment the panel strikes at the root of current development practice, its principal weakness. If development leads to depletion of the “stock” of natural capital, how sustainable can progress be? Eco-Sensitive Zones The WGEEP classifies the entire WG into three Ecologically Sensitive Zones (ESZs) and suggests measures that are breathtaking in their sweep; some for all, others specific to each zone, depending on the level of environmental degradation. There are three categories of measures which the detailed list of do's and dont's for the ESZs contain. The most radical because they are challenge some key “drivers” of current growth are the Interdictions “across the Western Ghats': So no to Genetically Modified Crops: Special Economic Zones: New Hill Stations, Conversion of public lands to private ownership. In the case of ESZ-I and ESZ-II graded in order of their fragility the panel advocates a moratorium on new mining leases, on the use of hazardous or toxic waste processing units among others. The second set of measures could be put under the rubric of Regulation. Again, across the Western Ghats the WGEEP suggests the use of “Building Codes consisting of green technology and green building materials, the implementation of the of Forest Rights Act “in its true spirit.” The third perhaps the most innovative consist of Promotion: sustainable actions with incentives thrown in. The panel suggests payments such as “conservation service charges” to encourage indigenous stock of fish and the redeployment of chemical fertiliser subsidies towards usage of organic manure production of biogas and organic farming, the maintenance of “sacred groves.” Bottom-up governance The panel challenges finally the way governments have worked (or do not). Its critique of existing bureaucratic forms of environment protection is countered by an emphasis on conservation, from the identification of resources to the their conservation, by local bodies from fishermen's cooperatives to gram panchayats. While proposing the Western Ghats Ecology Authority at three tiers of government down to the district-level, the panel considers local voluntary bodies to play an important role. It points out at one stage that environmental protection is not just a matter of scientific inquiry (or bureaucratic rules) but a “human concern.” And that should be good enough reason for the report to be made public. PetroScan-April 2012


Pure-play carbon credit companies in crisis

Times of India MUMBAI: The crash in carbon credit prices globally has served a crushing blow to companies operating in this space in India. Firms, whose business models were based purely on profit from sale of carbon credits, have either closed down or substantially downsized their operations. A carbon credit is a type of a tradable greenhouse gas emission reduction unit issued to projects under the Kyoto Protocol. One carbon credit is equivalent to one tonne of carbon dioxide (CO2) mitigated. A consultant or a trader usually earns a profit from the sale of carbon credits by a manufacturer. With prices falling from around 10-12 euros per unit six-eight months ago to 3-4 euros today, the consultants' profits have slumped by one-fourth. This has forced some of these companies to down shutters. Sources said companies which have been impacted by this include Noble India, whose India carbon credit desk was closed down, and Gensol Consultants which has restructured and downsized its operations. "The entire team had to go through a lot of pain during these turbulent times. We have downsized and restructured our operations. But, thankfully, our venture capital partner has supported us through this," said Anmol Singh Jaggi, director, Gensol Consultants, which is now in the process of raising further money for its solar and power trading business. However, consultancies which had a more diverse portfolio in sustainability have managed to survive. Sudipta Das, partner (climate change and sustainability), E&Y, said the impact of the price crash on the firm was not large enough because carbon credits form a small part of the firm's sustainability division. "There was an initial rush for registering projects under the CDM (clean development mechanism) executive board to get carbon credits, but it was only when a number of applications from India were turned down that firms started facing the heat. Many have either folded up or substantially downsized their operations," said Arvind Sharma, head (climate change and sustainability services practice), KPMG India. According to Krish Krishnan, CEO, Green Ventures International, one of the trends that have emerged is that a lot of consultants that were operating in the pure-play CDM space have diversified into allied segments like renewable energy and energy efficiency. Many small and medium players are even looking at business opportunities outside India in least developed countries. However, the sentiment is unlikely to improve with worst-case scenarios being presented by certain industry reports that state carbon credits could be tending towards an unthinkable "zero" level. "The mindset of Indian companies has changed dramatically. Earlier, they were not even prepared to sell their carbon credit at 15 euros, and now they have given open mandates to sell whenever the price comes to 4 euros," said P Ram Babu, CEO, General Carbon Advisory Services. Only a few years ago, a rosy picture was being painted around the carbon credit market. As against the forecast that the business of advisory and consultancy could touch Rs 500 crore in ten years on the back of a strong carbon credit pipeline, the industry today is not even talking about reaching the halfway mark yet.

PetroScan-April 2012


HSE EPA pushes off air rules for oil and natural gas

Posted on April 2, 2012 at 2:13 pm by Puneet Kollipara in Drilling, Economics, Environment, Environmental Protection Agency, Fracking The Environmental Protection Agency will delay issuing long-awaited air standards for the oil and natural gas industry for two weeks, citing the need for more time to review public comments. The agency, which faced a deadline of Tuesday to issue the rules under a court agreement with environmental groups, must now do so no later than April 17, under terms of a revised consent decree. The standards aim to cut ozone-forming volatile organic compounds by one-fourth, while reducing VOC emissions from new and updated gas wells that are hydraulically fractured by 95 percent. They also would cut methane emissions by about 26 percent and toxic air emissions by 30 percent, according to the EPA. “EPA and parties have agreed to a two-week extension on a consent decree to issue final air rules for the oil and natural gas industry,” Betsaida Alcantara, EPA spokeswoman, said in an email. “The agency requested the additional time to fully address the issues raised in the more than 156,000 public comments we received on the proposed rules.” It’s unclear which comments in particular raised the issues EPA cites as causing the delay, the second time the agency has punted the rules. But the oil and natural gas industry’s main lobbying group, the American Petroleum Institute, has raised concerns with the rules and sought additional time to implement them and compliance flexibility. David Doniger, climate and clean-air director with the Natural Resources Defense Council, an environmental group that supports the rules, alleged that the flexibility industry seeks “would leave out the vast majority of natural gas fracking wells and effectively exempt the vast majority of their VOC and methane pollution from any controls.” Robin Cooley, an attorney with Earthjustice, a law firm representing WildEarth Guardians, the lead plaintiffs in the court agreement, didn’t immediately return a request for comment. The rules could cause drilling operations using hydraulic fracturing to fall below projected levels temporarily, largely because not enough emission-cutting equipment would be immediately available, according to a report prepared for API. Companies would have to cut the number of wells they drill to meet the new requirements as a result, according to the report. Obtaining and installing the equipment also would impose additional costs on drilling, according to the report by the research firm Advanced Resources International, whose cost estimate roughly doubles the EPA’s own calculation. And while some companies already are cutting emissions from their drilling operations, API said a “one-size-fits-all” approach could have pitfalls for some companies. “EPA needs to fix these rules so they reduce emissions yet are still compatible with oil and natural gas development that creates jobs, government revenue and improves our energy security,” Howard Feldman, API director of scientific and regulatory affairs, said recently. The rules would apply to the roughly 11,400 wells that are fractured, and the estimated 14,000 that are refractured, each year, as well as storage tanks and other industry equipment. During one stage of the hydraulic fracturing process, a mix of fracturing fluids, water and reservoir gas surge to the surface. The flowback, which usually lasts three to 10 days, generally includes the greenhouse gas methane, VOCs and other chemicals. EPA has said companies could capture the natural gas that escapes into the air at the drilling sites and then sell the fuel. The agency also has said the change would result in a net savings of nearly $30 million annually, while at the same time slashing air pollution from an oil and gas production method that is being used nationwide. PetroScan-April 2012


The oil and gas industry argues it already has incentive to capture natural gas when economically feasible and that the agency overestimated the projected cost savings. The updated emission rules for the oil and gas industry are required under the Clean Air Act. Environmentalists sued the EPA to force the update. “President Obama pledged in the State of the Union that we would exploit shale gas supplies ‘without putting the health and safety of our citizens at risk,’” the NRDC’s Doniger said in an email. “So over the next two weeks we will remind the administration of the public health and environmental stakes here, and we will encourage the administration to reject the fog of misinformation coming from the industry and approve these standards — with the strong curbs on air pollution from natural gas fracking wells — without delay,” Doniger added

API: Systems in place to strengthen offshore operations

A comprehensive reappraisal of offshore oil and gas safety and environmental protection practices by the industry since the April 2010 Macondo deepwater well blowout and oil spill has laid the foundation for significant improvements, an American Petroleum Institute official said. “As a result of this work, and extensive resources devoted to safety that continue to draw on the best minds from the industry and government, we’ve established a multilayer system, with many built-in redundancies to help prevent incidents, to intervene and stop a release that might occur, and to manage and clean up spills,” Erik Milito, API’s upstream and industry operations group director, said during an Apr. 11 teleconference. He emphasized that this was an industry-wide effort, which also involved the National Ocean Industries Association, the International Association of Drilling Contractors, and other US oil and gas trade associations as well as their foreign counterparts. US and foreign government participation also was crucial, he said. Milito told reporters that this improved offshore oil and gas operations network has three primary elements: prevention, embodied in the industry’s Center for Offshore Safety, through industry drilling standards and the promotion of robust safety and environmental management systems; new innovative well containment and intervention capabilities; and improved planning and resources for oil spill response. In a document describing specific steps, API noted that it has taken preventative measures by updating two standards: No. 53, covering blowout prevention systems for drilling wells, and No. 65-2, involving isolation of potential flow zones during well construction. It said it also has issued two new standards: Recommended Practice No. 96, covering deepwater well design and construction, and Bulletin 97, describing well construction interface document guidelines. ‘On the same page’ “I think this will be a key document,” Milito said of Bulletin 97. “This came from a recommendation of the president’s taskforce to put everyone on the same page.” It will have two sections, he explained. “One will bridge the well operator’s and drilling contractor’s safety and environmental management systems [SEMS] so that everyone understands what’s required,” he said. “The other will be well-specific, including design and risk assessments so everyone is aware of the risks with that well, with that rig, and with the well design.” Independent third-party SEMS audits will be required to obtain an API RP 75 certification and satisfy US Bureau of Safety and Environmental Enforcement requirements, according to Milito. “Developing these standards has brought the industry together to discuss these problems, with government participation,” he said. “In many respects, it’s enhancing the communication among the various participants in the well’s operation.” In the area of well containment and intervention, API noted that the offshore oil and gas industry has invested heavily in deployable deepwater response vessels and systems capable of capping and stopping the flow of crude if there is ever a loss of control. Deployment and development of massive stacks weighing more than 100 tons was closely coordinated with BSEE, it indicated.

PetroScan-April 2012


It said that two organizations—Marine Well Containment Co. and Helix Well Containment Group—were established by early 2011 to quickly deploy capping stacks, equipment, and vessels to operate in depths up to 10,000 ft, pressures up to 15,000 psi, and capacity of more than 50,000 b/d of oil and 90 MMcfd of gas. Spill response efforts API said spill response efforts include a 5-year program, with government collaboration, involving 25 research projects involving sensing and tracking, dispersant use and application, in-situ burning, mechanical recovery capabilities, shoreline protection and cleanup, and alternative response technologies. It added that the oil and shipping industries created the Marine Preservation Association and Marine Spill Response Corp., which continue to operate, following federal passage of the 1990 Oil Pollution Act one year after the tanker Exxon Valdez ran aground and spill much of its crude oil cargo into Prince William Sound off Alaska. API noted that the $2.4 billion Oil Spill Liability Trust Fund, which the industry supports and funds, ensures that immediate financial resources are available to pay for damages from a spill. The fund also covers payments to federal, state, and Indian tribes; provides states access for cleanup activities; and covers removal costs incurred by the US Coast Guard and US Environmental Protection Agency, API said. Milito said the industry has always demonstrated a strong commitment to operate safely and responsibly offshore, and has deepened that the commitment in the nearly 2 years since the Macondo well accident. “The bar continues to rise, the commitment is stronger, and the mechanisms are in place to support the strongest safety standards possible,” he maintained.

Oil-spill-response systems are expanded in the Gulf of Mexico

Spill response firm bulks up on skimmers and boom Two years after the Gulf of Mexico oil spill, the Marine Spill Response Corp. has increased its fleet of deepwater skimming vessels, planes for spraying chemical dispersants and booms for trapping crude, said Randall Luthi, president of the National Ocean Industries Association. The company has also devoted funds to low-visibility spilldetection systems, said spokeswoman Judith Roos. "There is no doubt that this is an industry that's better prepared to respond," Luthi said. Posted on April 20, 2012 at 10:32 am by Jennifer A. Dlouhy in Gulf Oil Disaster, Oil spill Oil industry leaders widely tout the development of emergency containment systems to trap crude at damaged subsea wells as a sign they are now better prepared to deal with offshore gushers than they were two years ago. But Randall Luthi, head of the National Ocean Industries Association, said another big change is the investment in new vessels to skim oil in case of a spill and more booms to trap it. “There is no doubt that this is an industry that’s better prepared to respond,” Luthi said. Luthi cited an expanded fleet of planes, ships and boom at the Marine Spill Response Corp., a not-for-profit funded by the Marine Preservation Association that developed after the Exxon Valdez tanker ran aground near Alaska. Since the Deepwater Horizon disaster, the MSRC has been adding equipment to its arsenal to respond to oil spills, with a planned expansion that ended earlier this year. Here are some of the changes, by the numbers: · 17: The number of deep-water skimming vessels MSRC now has, up from seven before the 2010 Gulf spill. · 65,000: Total feet of ocean boom set aside for the Gulf of Mexico. · 2: The number of dedicated aircraft for spraying chemical dispersants or doing aerial surveillance that MSRC used to have. Now, the group has two C-130s and four King Air BE 90s.

PetroScan-April 2012


The company also has invested in low-visibility spill detection systems with radar and infrared capability to help guide vessels into thick patches of oil, said MSRC spokeswoman Judith Roos. MSRC’s fleet also includes new high-efficiency skimmers that are replacing aging equipment, Roos said, Oil exploration and production companies operating in the Gulf of Mexico generally have to prove to regulators that they have sufficient equipment and resources to respond to a spill. By affiliating with MSRC, the companies can satisfy those mandates. Recent companies that have joined the group include Anadarko Petroleum Corp., Apache Corp., Energy Resources Technology, Cobalt, LLOG, Nexen Inc., Noble Energy Inc., and Statoil. They join six E&P companies that were part of MSRC at the outset: BP, Chevron, ConocoPhillips, Exxon Mobil, Murphy and Shell. Other companies offer a suite of oil spill response services in the Gulf of Mexico, including Clean Gulf Associates.

INNOVATION Patent filing drive creates quality, biz concerns

By Ryan Huang , ZDNet Asia on April 10, 2012 International patent fillings hit a record high in 2011 with 181,900 applications, with China accounting for the highest growth rate. However, some market watchers believe the drive toward patent filing may ultimately lead to quality issues and higher global costs of doing business. According to the World Intellectual Property Organization (WIPO) in a statement released March, China, Japan and the United States accounted for 82 percent of total growth in the number of patents filed last year. "The recovery in international patent filings that we saw in 2010 gained strength in 2011," said WIPO director-general Francis Gurry. "This underlines the important role played by the PCT (Patent Cooperation Treaty) system in a world where innovation is an increasingly important feature of economic strategy." Rise of China Worldwide, the Chinese recorded the highest growth in the number of patents filed at 33 percent, ahead of Japan which was the second-highest at 21 percent. However, market watchers point out that China's growth here may not be PCT International Applications driven by a rise in innovation. Top 5 Song Zhu, partner at law firm Hogan Lovells, noted that the rise in patents was primarily the result of "industrial, technological transformation" and 2011 Country Growth increased investment in research and development. est. He added that the Chinese government had also encouraged Chinese companies to obtain patents. "The government provides various incentives, United 48,596 8% States including direct financial support, to companies that acquire patents. "The performance of local governments is evaluated in part by the number of Japan 38,888 21% patents acquired by local companies. In the pursuit of numbers, the quality of patents will probably suffer to some extent," added Song. Germany 18,858 5.7% This view was shared by David Llewelyn, deputy dean-designate of the China 16,404 33.4% school of law at the Singapore Management University (SMU). The professor noted that although there was "undoubtedly a significant South 10,447 8% increase in genuine innovation in China", the number of patents filed was only Korea one indicator as many applications eventually were not granted. Source: WIPO PetroScan-April 2012


Doubts over patent quality "There are many financial incentives offered to file for patents and the [Chinese] government encourages socalled 'indigenous innovation'," Llewelyn explained. "The real question is the quality of the results and what is done with it." He noted that owning a patent is a liability until it is commercialized, and only when it is will it become an asset. In China, the number of patents and patent applications has become "a sign of corporate virility", he said, where businesses aim to be able to proclaim "my pile is bigger than yours". "But, as we all know, size is not everything," noted Llewelyn. Doubts over patent quality, however, were played down by Robert Stephen, partner at law firm Olswang. Although he noted that some companies might have filed simply to "take advantage of movies on offer", applications were still formally examined by China's State Intellectual Property Office (SIPO). Stephen said: "SIPO appears to be reasonably strict on patentability--at least, that's our experience with SIPO--so patents granted from China should not have quality issues. It may be the case that the pool of pending patent applications has a quality issue, but the substandard cases will be weeded out by SIPO." A very low percentage of Chinese applications go on to be filed outside of China, noted the lawyer, who added that he would be "looking with interest to see if that number will increase". Higher business costs and patent trolling Amid the rising number of high-profile patent spats between tech companies such as Facebook and Yahoo, as well as Apple and Samsung, market watchers told ZDNet Asia that the global drive toward patent filing generally could mean higher costs for businesses. According to Olswang's Stephen, the more patents a company owns, the higher the change one of its patent could be asserted by a non-practicing entity, or a patent troll, to as a way to generate income. SMU's Llewelyn agreed: "The more the number of patents, the higher the number of court cases. Playing the IP (intellectual property) game has become increasingly important in China and for that, you need patents, trademarks and copyrights. And deep pockets."

GENERAL READING Prospects brighten for silicon wafer fab units as global firms offer support

Businessline Empowered panel ropes in Accenture to prepare detailed business proposal The Government's effort to set up semiconductor wafer fabrication units is finally making some headway. At least five global semiconductor makers have expressed interest in supporting the project in some way or the other. They include Infineon Technologies, ST Microelectronics, Russian major Sitronics, GlobalFoundries and a consortium comprising Jaypee Associates, IBM and Israeli firm Tower Jazz. Sources in the Department of Electronics and IT (DEITy) said that feelers were also sent to other technology firms, including Taiwan Semiconductor Manufacturing Company (TSMC), Intel and Freescale. “While Freescale and TSMC have declined the proposal, Intel has offered advisory support on infrastructure and financial matters related to semiconductor manufacturing,� the source said. GlobalFoundries (earlier part of AMD) has indicated that it can offer know-how for 200 nm technology and also consultancy on process intellectual property. An empowered committee, set up by the DEITy to monitor the progress of the project, has selected consultancy firm Accenture to make a detailed business proposal to enable the semiconductor firms take a final decision on investing in the project. PricewaterhouseCoopers had also submitted its bid but lost out on pricing. Accenture quoted Rs 38 lakh for the contract compared with PwC's Rs 79 lakh. PetroScan-April 2012


Semiconductor fabrication is an essential requirement for promoting local manufacture of electronic items. The Government wants to have at least two semiconductor wafer fabs in the country, for which it has been scouting for companies that can offer technology and investment. In June 2011, the Government had invited technology providers and investors to submit a preliminary EoI for setting up of semiconductor fabs in the country. The empowered committee set up to evaluate the progress of the project recently met to discuss the response received. “We have got various proposals from different companies on how they can contribute to the project. Applied Material Ltd, for example, has expressed interest in developing human resources required for the fab project and it is looking at the possibility of doing R&D in the manufacturing centre,” said a Government official. MNC-PSU PARTNERSHIPS The panel has also recommended that DEITy should explore possible partnerships between multinational technology firms and Indian public sector units like BEL and BHEL. But the actual investments from these companies will come only after the Government makes it clear on how it plans to support the projects financially. All the countries where fabs have been set up have offered fiscal incentives to the investors. “The Finance Ministry is of the view that incentives should be linked to production and marketing through indirect tax concessions rather than provide equity or grant. This would ensure that the investor and technology provider brings marketable cutting edge technology,” the official said adding that the empowered panel has taken a view that a mix of grant and marketing linked incentives might be required to attract investors. The Planning Commission will give its inputs to Accenture to develop a business package that will be offered to the technology firms. Interested technology firms will be asked to send their proposals on what incentives they expect from the Government and how they plan to execute the project.

Team of researchers develop world's lightest material

Science Centric A team of researchers from UC Irvine, HRL Laboratories and the California Institute of Technology have developed the world's lightest material - with a density of 0.9 mg/cc - about 100 times lighter than Styrofoam. Their findings appear in the 18 November issue of Science. The new material redefines the limits of lightweight materials because of its unique 'micro-lattice' cellular architecture. The researchers were able to make a material that consists of 99.99 percent air by designing the 0.01 percent solid at the nanometre, micron and millimetre scales. 'The trick is to fabricate a lattice of interconnected hollow tubes with a wall thickness 1,000 times thinner than a human hair,' said lead author Dr Tobias Schaedler of HRL. The material's architecture allows unprecedented mechanical behaviour for a metal, including complete recovery from compression exceeding 50 percent strain and extraordinarily high energy absorption. 'Materials actually get stronger as the dimensions are reduced to the nanoscale,' explained UCI mechanical and aerospace engineer Lorenzo Valdevit, UCI's principal investigator on the project. 'Combine this with the possibility of tailoring the architecture of the micro-lattice and you have a unique cellular material.' Developed for the Defence Advanced Research Projects Agency, the novel material could be used for battery electrodes and acoustic, vibration or shock energy absorption. William Carter, manager of the architected materials group at HRL, compared the new material to larger, more familiar edifices: 'Modern buildings, exemplified by the Eiffel Tower or the Golden Gate Bridge, are incredibly light

PetroScan-April 2012


and weight-efficient by virtue of their architecture. We are revolutionising lightweight materials by bringing this concept to the nano and micro scales.'

Six money facts for new income earners

It is the season of the young taking up their first job assignment. The first pay cheque starts the journey into the world of personal finance. Here are six pointers to help you in this exciting, sometimes stressful, journey with money. First, managing money is primarily about cash flow. The income earned comprises the inflow and the expenses incurred constitute the outflow. Both these do not match in time or amount, and worse, remain unpredictable for most part. Making a monthly budget is an obsolete art. A simpler option is to list out and pay off all mandatory expenses, such as the education loan, rent, phone bill, among others, as soon as the cash comes in. What remains is relatively easy to manage even if you decide to stay at home the last weekend since you exhausted the cash. Separating the routine from the unexpected is a good skill to acquire. Second, learn to think of cash as a limited resource with multiple uses. There is always an alternative use you can put your money to. Think about it when you allocate cash. Being too conservative makes you worry that you are not enjoying your earning; spending too much leads to guilt of not being careful with money. A simpler way to deal with this problem is to have a mental budget that is represented as a percentage of your monthly income. Third, money grows in value over time, if invested. The basic math to know when you deal with money is that a rupee invested today will gain in value and be worth so much more in the future. Therefore, leaving money undeployed erodes its worth. When you allocate your income, pay yourself first. A 10-20% allocation to saving and investing means that this amount, which you leave untouched in an investment, grows in value with time and you build an asset. Building assets can help you manage your future cash needs better. Your ability to manage any risk to your income from job changes, or your need to part-fund a higher education, or your ability to take a break to raise a family, all depend on how much you have accumulated as investment and assets. You can derive an income from your assets, sell when in need, offer them as collateral for loans, liquidate partially or offer as guarantee. Fourth, align your money decisions to your specific situation before making choices. Buying a house might save you the rent, but you pay an EMI, which can be burdensome if your job is risky. If you relocate for better career opportunities, you will find it a problem to fund the EMI and live in a new city. If you plan to get married soon, taking on a car loan, home loan and personal loan, all in short succession, will leave you with little to spend on your spouse and yourself in the early days of courtship. If you have just started earning and have no dependants, you may not need insurance. Don’t commit to a large premium just to save tax and expect to compulsorily save an amount you may find tough to sustain. Begin with simple bank term deposits, buy a few tax-saving bonds and deposits, then a few mutual funds, and open a PPF account. Once your investments have grown to cover at least 2-3 years of your annual income, you are ready for illiquid, large assets, such as a house. If you cannot stop yourself from speculating in the stock market, ensure you have staked only a small percentage that can’t hurt you. Fifth, get familiar with operational and legal processes associated with money. Your relationship with your bank is critical when you need a loan, so don’t fritter it away by forgetting to pay a credit card bill. Understand you tax obligations and deadlines. Get help with your accounts if you are a working professional with limited time, and complete your registrations, returns and paperwork in time. Ensure you have kept records of your income, investments and bank statements. Good housekeeping is a great help if you need to raise funds at short notice or explain your assets to the taxman. Keep your address, phone number and e-mail updated with your bank and

PetroScan-April 2012


other service providers. Take the time to understand the Internet, phone and mobile security for financial transactions. Several tutorials are available on the Internet for these simple tasks. Sixth, personal finance is as the term suggests—personal. Your money habits are driven by your cultural context, upbringing, personal values and preferences. Understand and accept the kind of person you are when it comes to money. You may be generous or stingy, meticulous or careless, honest or dishonest. How you deal with money will be driven by different motivations. It is a good habit to keep emotion out of money decisions. When you lend to a friend, more often than not, you lose both money and friendship. There are hand loans that are tough to recover. There are expenses that may be difficult to avoid. Make sure you are not using money to acquire popularity, acceptance and love. These are difficult to sustain and seldom last. Learn to be discrete with your money; it is yours and you should always retain the freedom to decide how, when and how much of it you will use.

124 nations need new energy systems for sustainable growth:WEF

Financial Chronicle New Delhi As many as 124 countries including India need new energy systems to harness growth potential of their economies in a sustainable manner, the World Economic Forum said today. It noted that the existing energy architecture is inadequate for balancing economic, environmental and energy security needs. The energy systems of 124 countries are currently not ready for a transition to a sustainable and secure energy architecture required to harness economic growth, it said in a report. Titled 'New Energy Architecture: Enabling an Effective Transition', the report pointed out that nations which are managing the transition to a new energy architecture would have to deal with trade-offs and difficult choices. "... USD 38 trillion of global investment in energy supply infrastructure is required by 2035 to keep up with an added 40 per cent rising energy consumption in the same time span," said the report, prepared in collaboration with global management consultancy and technology services provider Accenture. Estimates suggest that a staggering 1.3 billion people worldwide still do not have access to electricity. "Now more than ever, decision-makers must understand the core objectives of energy architecture generating economic growth and development in an environmentally sustainable way while providing energy access and security for all," it said. Meanwhile, an depth study on India has suggested creation of a unified energy regulator to support the expansion of renewables sector and rationalise energy prices through the gradual phase-out of subsidies, among others.

Indian CEOs less concerned about skills shortage: Survey

Anjali Prayag Bangalore, April 23: Businessline Despite the existing skills gaps in the industry, Indian CEOs are less concerned about than their Chinese or global peers. According to PwC 15th Annual Global CEO Survey 2012, Indian CEOs were also more optimistic about talent availability and short-term growth prospects compared to their global peers. Around 76 per cent of Indian CEOs were willing to take the onus of training the available talent. They have expressed interest in investing in vocational training programmes compared with 54 per cent by their global

PetroScan-April 2012


peers. The PwC survey was conducted among 1,258 CEOs in 60 countries and included 76 from India. CEO across countries also said they were unable to pursue a market opportunity because of talent challenges. Ms Padmaja Alaganandan, Executive Director, Consulting, PwC India, said: “Globally, CEOs are still positive about India and have ranked the country as the fourth most favourable nation for overall growth prospects in the next 12 months, just behind China, US and Brazil.” She feels that Indian CEOs may be underestimating the extent of this challenge today. “Investment in skills and capability building remain a key requirement and if not addressed swiftly with appropriate initiatives, we could see a situation where lack of talent could stifle expansion and innovation.”

India plans 90-seater civilian plane

Times of India CSIR Sets Up Design Bureau For Indigenous Development Of Aircraft New Delhi: India is working on developing its own 90-seater civilian aircraft with the Council for Scientific and Industrial Research (CSIR) saying “the strategy for its production has already been evolved” with the design “planned to have unique features like enhanced fuel efficiency, use of bio fuel with low carbon footprint, short to long range haul, shorter air strip requirement and ultra modern avionics”. A design bureau has been set up to undertake indigenous design and development of the plane, called the National Civil Aircraft (NCA-90). A total of seven prototypes are proposed to be developed by CSIR along with the National Aerospace Laboratories (NAL) “to prove the design and demonstrate compliance with respect to airworthiness requirements and certification”. The Planning Commission says the aircraft will be tailored to suit market requirements and will have attractive operating economics. It estimates that “the design and development of the aircraft would cost Rs 4,355 crore. The estimated series production cost would be another Rs 3,200 crore”. Confirming this to TOI, Dr Sudeep Kumar, head of CSIR’s planning and performance division, said, “We have set up two separate committees — one for joint venture development that is looking for a corporate group or groups who will join us in developing the aircraft from scratch and then will commercially produce it. The second committee is a technical one which is overlooking the entire project of developing the aircraft.” Dr Kumar added, “The council has already had talks with the Tata group and will soon meet with Mahindra Aerospace to look for partnership.” Bangalore-based NAL had earlier developed India’s first multi purpose 14-seater civilian aircraft Saras. But on March 6, 2009, two IAF test pilots along with a flight test engineer were killed when the second prototype crashed 30 km from Bangalore. “Saras was 14-seater while NCA is 90-seater. NCA will also be a state-of-the-art machine. We have been asked by the Planning Commission to move a Cabinet note,” Dr Kumar said. According to the CSIR, most developed countries have their own national aircraft. “It is a niche technology. No country wants to share it with others. India has its desired expertise through NAL to develop its very own national civilian aircraft,” Dr Kumar said. Developing the NCA-90, officials say, will not only put India as part of this elite group but will also develop the ancillary industry. NEW WINGS The Planning Commission says the 90-seater civilian aircraft will be tailored to suit market requirements and will have attractive operating economics. It estimates that “the design and development of the aircraft would cost 4,355 crore. The estimated series production cost would be another 3,200 cr” A total of seven prototypes are proposed to be developed by CSIR along with the National Aerospace Laboratories

PetroScan-April 2012


Biogas plants to be set up in schools and markets

A project to install biogas plants in three schools in the city has got underway. The project, being funded by the Kerala Sustainable Urban Development Project (KSUDP) cell of city Corporation, is expected to be implemented within a month. Cotton Hill Government Higher Secondary School for Girls; Government Girls HSS, Pattom; and Government Vocational Higher Secondary School, Manacaud, are the three schools where the decentralised waste treatment plants will be installed under the project. Biogas plants with a capacity to process up to 150 kg a day will be installed in these institutions under the Community Infrastructure scheme of KSUDP. A project official said that steps had been initiated to invite tenders for setting up the plants. “We have already installed biogas plant at SMV School and it is functioning smoothly. Works on the plants in these three schools will be completed during the summer vacation so that from the next academic year, waste generated from the school, especially the school kitchen, can be processed on the school campus,” said Deputy Mayor G. Happykumar. Mayor K. Chandrika said that decentralised waste treatment plants would be set up in all government and aided schools in the Corporation limits in the next financial year. “Schools in newly annexed wards such as Vattiyoorkavu and Kachani have already initiated schemes to install biogas plants. In fact the construction of the plant in Kachani Government High School is nearing completion,” Ms. Chandrika said. She added that the Corporation had also initiated steps to set up decentralised garbage processing plants in markets in the city. “Work on a biogas plant in the Peroorkada market has commenced. However, we are facing some difficulties in setting up plants in Manacaud and Palayam markets,” she said. Two markets “At Palayam we already have a major project along with INKEL and TRIDA. This project includes construction of waste treatment plant,” Ms. Chandrika said. The Corporation is also mooting a proposal to install a treatment plant to process animal waste from its abattoir at Kunnukuzhy.

Oil and Gasoline

More than a century and a half after its discovery, oil continues to play an essential role in the global economy, despite fears that reliance on petroleum is fueling rapid climate change. Over the last decade, the price of oil has taken a roller coaster ride, usually in a cyclical pattern that is in sync with the global economy. A strong economy tends to increase the demand for oil and drive up the price, while a weak economy generally has the opposite effect. As a rule of thumb, economists say a $10 decline in the price of a barrel of oil increases economic growth 0.2 to 0.3 percentage points, helping many businesses dependent on oil, like airlines and makers of plastics and fertilizers. But the opposite is true as well, and the surge in gas prices in 2012 raised fears that it might damage the still-vulnerable economic recovery. Oil consumption has dropped more than 5 percent since 2005, whilenatural gas use has risen 10 percent. Overview While it remains the top source of energy, oil has fallen off its pedestal since the energy shocks of the 1970s and 1980s, which proved how reliant the developed world had become on petroleum products, and how vulnerable it was to shortfalls in supplies. In 1973, oil accounted for 46 percent of the world’s total energy consumption; by 2005, its share had declined to 35 percent. But oil remains well ahead of other energy sources: coal meets 25 percent of the world’s energy needs; natural gas is next with a market share of 20 percent; and nuclear power meets 6 percent of the planet’s energy needs. Besides price volatility, concerns about energy security, as well as

PetroScan-April 2012


the environment and the threat of global warming, have put oil’s position under pressure. There are also concerns about the effects of instability in the Arab world, as well as tensions between the United States and Iran. The U.S.: Inching Toward Energy Independence Across the United States, the oil and gas industry has been vastly increasing production, reversing two decades of decline. Using new technology and spurred by rising oil prices since the mid-2000s, the industry is extracting millions of barrels more a week, from the deepest waters of the Gulf of Mexico to the prairies of North Dakota. At the same time, Americans are pumping significantly less gasoline. While that is partly a result of the recession and higher gasoline prices, people are also driving fewer miles and replacing older cars with morefuel-efficient vehicles at a greater clip, federal data show. Taken together, the increasing production and declining consumption have unexpectedly brought the United States markedly closer to a goal that has tantalized presidents since Richard Nixon: independence from foreign energy sources, a milestone that could reconfigure American foreign policy, the economy and more. In 2011, the country imported just 45 percent of the liquid fuels it used, down from a record high of 60 percent in 2005. How the country made this turnabout is a story of industry-friendly policies started by President George W. Bush and largely continued by President Obama — many over the objections of environmental advocates — as well as technological advances that have allowed the extraction of oil and gas once considered too difficult and too expensive to reach. National oil production, which declined steadily to 4.95 million barrels a day in 2008 from 9.6 million in 1970, has risen over the last four years to nearly 5.7 million barrels a day. The Energy Department projects that daily output could reach nearly seven million barrels by 2020. Some experts think it could eventually hit 10 million barrels — which would put the United States in the same league as Saudi Arabia. The natural gas industry, which less than a decade ago feared running out of domestic gas, is suddenly dealing with a glut so vast that import facilities are applying for licenses to export gas to Europe and Asia. However, the increased production of fossil fuels is a far cry from the energy plans President Obama articulated as a candidate in 2008. Then, he promoted policies to help combat global warming, including vast investments in renewable energy and a cap-and-trade system for carbon emissions that would have discouraged the use of fossil fuels. More recently, with gasoline prices rising and another election looming, Mr. Obama has struck a different chord. He has opened new federal lands and waters to drilling, trumpeted increases in oil and gas production and deemphasized the challenges of climate change. Tensions With Iran and Syria As spring approached in 2012, the prospect of gasoline at $5 a gallon was not far-fetched. Gas prices were already at record highs for the winter months — averaging $4.32 in California and $3.73 on Feb. 29, according to AAA’s Daily Fuel Gauge Report. Demand for gasoline rises with the approach of summer, typically pushing prices up around 20 cents a gallon. And gas prices could rise another 50 cents a gallon or more, analysts say, if the diplomatic and economic standoff over Iran’s nuclear ambitions escalates into military conflict or there is some other major supply disruption. For the typical driver who pumps 60 gallons a month of regular unleaded gasoline, a 50-cent increase in price means an extra expense of $30 a month. The prospect of such a price increase underscores the political and economic risks that Western political leaders must contend with as they decide how to address the Iran situation. A sharp rise in the prices of oil and gas would crimp the nation’s budding economic recovery. It would also cause big political problems at home for President Obama, who is already being attacked by Republican

PetroScan-April 2012


presidential candidates over gas prices and his overall energy policies, and for European nations struggling to deal with the Continent’s debt crisis. The Federal Reserve chairman, Ben S. Bernanke, told a House committeeon Feb. 29 that rising global oil prices were “likely to push up inflation temporarily while reducing consumers’ purchasing power.” The Iran situation has already raised the price of crude oil as much as 20 percent, according to oil experts. On Feb. 29, the price of the benchmark American crude settled at $107.07 a barrel. That is about four dollars higher than on the same day in 2008. Later that year, oil and gasoline prices surged to new records, including a record nominal high of $145.29 a barrel for oil and $4.11 a gallon for gasoline in July. Despite a fall in gasoline demand in the United States and Europe, global oil markets were tightening because demand for energy from Asian countries, particularly China and India, was rising at surprisingly strong rates even as output declined from several important producing countries. Oil prices have surged about 8 percent since Iran threatened to cut off oil imports to France, Spain, Italy and other European countries in February 2012 as a pre-emptive move against Western moves to tighten sanctions. The European Union has decided to place an embargo on Iranian oil and ban shipping and insurance on its cargoes. Washington has decided on banking sanctions to curtail Iran’s ability to earn money from its oil exports. But any success in tightening sanctions on Iran could squeeze global oil supplies, pushing up prices and causing serious economic repercussions at home and abroad. And the escalating civil turmoil in Syria, a crucial ally of Iran, is likely to increase price volatility, experts say. Instability in the Arab World; Efforts by OPEC In 2011, events unfolding in the Arab world, the epicenter of global oil production, were a sobering reminder that trading in oil, that mother of all commodities, is at heart a political game. In December, OPEC agreed to increase its production target for the first time in three years. In previous years, OPEC’s 12 members had increasingly followed their own production and export policies. Saudi Arabia ramped up its production in early 2011, when the outbreak of revolution in Libya halted 1.3 million barrels a day of exports. Saudi Arabia, which produces about a third of OPEC’s total production and is the only member with significant spare capacity, had been working hard behind the scenes to restore the organization’s credibility after a meeting in June 2011 ended with no agreement. Iranian representatives appeared to be in no mood to challenge the Saudis in December, despite rising tensions between the two countries over the Saudi military intervention in Bahrain and allegations of an Iranian-backed plan to assassinate the Saudi ambassador to the United States. The new quota does not set targets for individual members. But the total production target includes Iraq and Libya, two countries expected to ramp up production. Iran, which held the rotating presidency of OPEC in 2011, proposed that Iraq hold the seat in 2012. The ministers agreed, signaling that Iraq would again be a major player in the organization for the first time since the United States-led invasion and toppling of Saddam Hussein in 2003. Few oil experts were surprised that the unrest had unnerved the market. The world is thirsty for oil, and supply and demand are in delicate balance. There is little room for more disruptions in supplies. Indeed, spare capacity — essentially that amount of extra oil that OPEC members are able to produce in a pinch — is about five million barrels a day. That is about 6 percent of the oil that the world consumes every day. That cushion is greater than in 2008, when it equaled about 2 percent of daily consumption, but it remains worryingly thin. Historical Background The existence of oil seeps has been known since the dawn of civilization. But the industrial revolution created the need for better lighting. The first commercial oil well was struck by Colonel Edwin L. Drake in Titusville, Pennsylvania, in 1859, igniting an oil rush that quickly spread to Texas and California. At the time, oil in the form of kerosene was used as fuel for lamps. Spurred by the automobile revolution at the beginning of the new PetroScan-April 2012


century, which brought on a huge demand for gasoline, the nascent industry quickly expanded around the world, with geologists fanning the globe and striking oil from Russia to Indonesia. By the 1950s, most of the big fields of the Middle East, including Saudi Arabia’s giants, had been discovered. After the Second World War, the business was dominated by a small group of very powerful and mostly American companies, which were dubbed the Seven Sisters: Standard Oil of New Jersey, which later become Exxon; Royal Dutch Shell, an Anglo-Dutch company; British Petroleum, which eventually shortened its name to BP; Standard Oil of New York, or Socony, which became Mobil; Standard Oil of California, or Socal, later Chevron; Gulf Oil; and Texaco. At the height of their power, these companies dominated the petroleum trade, and set international oil prices. OPEC and the Birth of Oil Nationalism The turning point in the politics of oil came in the 1960s and 1970s, when new governments formed after the independence movement that swept through Africa and the Middle East began demanding a bigger share of the natural resources lying under their country. These demands led to the creation of the Organization of the Petroleum Exporting Countries, in 1960, in Baghdad. Within a few decades, these governments nationalized their oil industries, formed national companies, and, in many places, kicked out foreign companies. In the 1970s, international companies had unrestricted access to 85 percent of the world’s known oil reserves at the time. The former Soviet bloc controlled 14 percent, and national oil companies only restricted access to one percent of the globe’s known oil pool. By the middle of this decade, the picture had changed dramatically. International oil companies only have full access to seven percent of the world’s oil reserves today, mostly in the Untied States and the North Sea. The rest is either controlled by Russian companies or by national oil companies that offer limited access to foreign investments. Saudi Arabia, which holds a quarter of the world’s known oil reserves, does not allow any foreign investments; its oil industry is controlled by Saudi Aramco. Oil has unique features that make it hard to replace: Few other fuels pack as much punch in such a small volume, and can be so easily moved around. It also dominates the transportation sector, which accounts for 64 percent of all the oil used around the world. The rest is used in the petrochemical and plastics industry, as well as in construction and in some industries. The various components that make crude oil can be separated by distillation. By increasing the heat, refiners can obtain various products, ranging from light fuels, like gasoline, to kerosene, gas oil, lubricating oil, and then to heavier products such as fuel oil, bitumen, and paraffin. Oil Shocks The Arab-Israeli conflict of 1973, some Arab producers led by Saudi Arabia set up an oil embargo against the United States to protest against their support of Israel. While the embargo was short-lived, it drove up prices and showed how potent a weapon oil could be. But for producers, the weapon turned out to be a doubled-edged one. Consuming countries began to establish energy policies that aimed at reducing their dependency on oil, encouraged conservation, and boosted the development of other sources of energy, including nuclear power. The second oil shock of the late 1970s and early 1980s, which followed the Iranian Revolution, precipitated that movement. It also spurred a new wave of exploration in the North Sea and Alaska, where massive new reserves were discovered. By the mid-1980s, however, with oil prices falling, energy policy in the United States took a backseat for the next two decades. The Rise of China Since the beginning of the 2000s, the industry has undergone another major shift. The rise of China’s economy meant that the developing world was becoming an increasingly important consumer of oil. Between 1998 and PetroScan-April 2012


2008, China accounted for a third of the growth in global oil demand. Its consumption, which reached 8 million barrels a day, rose more than five times faster than the rest of the world. Still, the United States remains the world’s top consumer, accounting for roughly one in four barrels of oil. In 2008, it consumed 19.4 million barrels a day in 2008, out of a total of 84.4 million barrels a day. Running Out of Oil? As long as the world has relied on oil, it has feared running out of it. In recent years, the theory of peak oil has resurfaced, claiming that the world’s ability to increase production had reached its high-water mark, and that producers would not be able to maintain their output at current levels. But thanks to new technologies, such as three-dimensional seismic imaging, horizontal drilling, or the ability to drill in ever-greater water depths, the industry has so far managed to raise its output. Many executives argue that the limits today are not to be found underground but in geopolitical factors above ground which limits access to oil reserves. Still, policymakers are striving for ways to reduce oil consumption and reduce greenhouse gas emissions. In the United States, Congress has adopted very aggressive mandates to spur the development of biofuels, while encouraging the growth in hybrid and eventually electric vehicles. It’s a daunting challenge. The world’s population is expected to grow by 50 percent over the next four decades, and with it, the need for fuel.

PetroScan-April 2012


7 ways to wake the dead and inspire action

By Chris Petersen on April 20th, 2012 | Comments (0) By our job title or through appointment, we all get called on to lead groups or projects. And when the time comes to stand up in front of the group, what happens? The first PowerPoint slide goes up and … *crickets* … the silence of death by PowerPoint is deafening and swift. Since PowerPoint launched, millions upon millions have suffered death by slides. The irony is that PowerPoint is designed to be one of the most powerful visualization tools to mobilize groups. The challenge lies not in the tool, but whether a leader uses it as a crutch or a way to bring life to their story. A leader is defined as one who guides, motivates and inspires. Since humanity first started gathering at campfires, effective leaders have been great storytellers. The human brain is literally “wired” for themes and stories. The reason that so many leaders fail to inspire with PowerPoint is because they don’t have a compelling story; they fail to call for action; and they use PowerPoint bullet points as a crutch for speaker notes. Here are seven ways leaders can wake the dead and inspire action. 1. Start with the story. All inspiring speeches and presentations can be diagrammed as a story with a beginning, middle and end. A great story has a personal dimension and an emotional appeal. If you don’t have a story, no amount of slides will fill the void or inspire. 2. Start with the end. As a leader, what do you want the outcome to be? What is the call to action? Like a good novel, everything should be designed to build to a climax. Your groups should not only get your point, but say “WOW” … let’s get going. 3. Open with a bang. How many presentations have you seen that open with credentials and introductions? BORING! You have one slide to grab the audience and capture them with the story. The great visionaries, like Steve Jobs, most often only used a single photo or a couple of words to start legendary stories. 4. A picture is still worth 1,000 words. In addition to being wired for stories, humans are visual creatures. A compelling photo or graphic is a powerful way to send the message, make it memorable and save words. 5. Storyboard in 10 or less. The art of storyboarding main concepts has been lost. Limit yourself to no more than 10 slides to lay out your story. If you can’t do it in 10 slides, 100 won’t make it better … it will be much worse. If you can’t script your story in 10 headlines, it’s not a good story and you won’t be inspiring. 6. NO bullets. If you are a leader aspiring to inspire your team to action, kill all bullet points on your slides. If you need notes, print them. If your group needs data or facts, send it to them. The very best way to focus your group is limit your slides to only graphics and a maximum of 12 words. The best way to limit your words is use 64-point type. 7. Don’t assume; call for action. Don’t assume anything. If you want the group to act, then ask for specifics and use verbs specifying behavior. Bonus: Use tweetable headlines. The goal of the leader is not only to tell the story, but to get the members to be story-sharers. In the age of social media, the best way to do that is think of headlines that can be tweeted. There is nothing like 140 characters to limit words, kill bullet points and inspire people to share the vision. Your ammo should be the art form of being a storyteller, not bullets [points] that deafen the audience. Chris Petersen is a strategic consultant who specializes in retail, leadership, marketing and measurement. As CEO of IMS, he has built a legacy of working with Fortune 500 companies to achieve measurable results in improving their performance and partnerships. Petersen is the founder of IMS Retail University, a series of strategic workshops focusing on the critical elements of competing profitably in the increasingly complex retail marketplace. For more information, visit IMS.

PetroScan-April 2012


Welfare programmes change people’s behaviours

Many people like to envision worlds where the State will tax the rich and help “the needy” – this ranges from free health care to unemployment insurance to disability insurance, etc. There are many problems with these schemes. One of them is the fact that people respond to incentives. We are not bricks, we are not stones, but men, and being men, we will optimise. When unemployment insurance is offered, people will try less hard to find a job, to acquire skills that will get them a job, to migrate to a place where jobs are more easily found, etc. When health care is free, people are more inclined to be fat or smoke or otherwise take less care of themselves. And so on. The first element of the behavioural change is lying and misrepresentation by citizens. Reuters Among economists, it’s considered obvious that people drive in a more rash manner when wearing a seat belt, but in the wider discourse, this raises hackles. When researchers found that drivers pass closer when overtaking cyclists wearing helmets as compared with overtaking bare-headed cyclists, economists were among the few who were not surprised. Laypersons generally recoil from the idea that the presence of a government giving out free open heart surgery increases obesity. The first element of the behavioural change is lying and misrepresentation by citizens. When a government says it will give out disability insurance, people have an incentive to go to a civil servant and claim that they are disabled. I remember hearing a story from Holland, when a certain set of rules were constructed to give an early pension to the disabled, and policy makers had estimated that 1 percent of workers would be eligible for those benefits. In a few years, 10 percent of workers tried to claim these benefits, and front-line civil servants were placed in the difficult situation of having to identify the few genuinely disabled within the large pool that was claiming to be disabled. The second layer is genuine changes in behaviour. Ljungqvist/Sargent have emphasised the damage caused by European-style welfare programmes, which encourage or support withdrawal from the labour market. Some of these problems are now coming about with NREGA (National Rural Employment Guarantee Act). Migration out of villages is central to India’s future, but NREGA is reducing the incentives of people to engage with the urban labour market and ultimately to leave. I just came across an example of behaviour distorted by incentives that veers on the fantastical: An unemployed Austrian man sawed his foot off, to avoid being found fit enough to go back to work. We find it incredible that Aron Lee Ralson cut off his right arm (to avoid certain death). But sawing your foot off to avoid going back to work? This is a colourful story and only an anecdote. The man is most likely a nutcase. It is nobody’s case that such extreme responses will come about on a large scale. The claim of the microeconomics literature is more limited: that on average, fairly significant behavioural changes come about in response to changes in the rules of the game. Through this, welfare programmes have unintentional consequences that go far beyond those visible at the surface. Politicians and bureaucrats in India like to roll out more welfare programs. It would be useful to bring alternative perspectives on these questions, which are mainstream worldwide but are considered cutting edge in India: about the limited governance capacity of the state, about the fiscal crisis that the state faces, and about the behavioural changes induced by welfare programmes. In this field, you may like to see a paper by Vijay Kelkar and me.

HR Startups Set to Get a Leg Up from Veterans

Top human resource managers join hands to launch . 60-cr VC fund for peers They’ve been crafting people policies at some of India’s top companies for many years, but now, this motley bunch of human resource veterans has come together to seed-fund entrepreneurs running HR services businesses. Five anchor investors — Santrupt Misra, CEO, carbon black business, and director (group HR) of Aditya Birla Group; Pratik Kumar, executive VP for HR at Wipro; Arvind Agrawal, president, corporate

PetroScan-April 2012


development and group HR in RPG Group; NS Rajan, partner and global leader of people & organisation practice responsible for HR advisory services worldwide at Ernst & Young; and Venky Mysore, CEO and MD of Kolkata IPL Team (the only non-HR investor) — have come together to float ‘The HR Fund’. The fund — with an initial corpus of . 60 crore — will be an investment company, which will soon start funding HR startups in India. Varun Talwar, the CEO of the fund and founder of Withya Group, and Pankaj Bansal, co-founder of PeopleStrong, an HR outsourcing and recruitment process outsourcing firm, are the other key people who have put in equity. A number of limited partners, CEOs and HR heads are also gradually coming on board. The genesis of the idea was a twomonth study on HR in the US that Talwar did in the summer of 2011. He realised HR was a big business opportunity and identified 12 areas that were working well in the US. Talwar, an investor in PeopleStrong, came to India and presented a white paper to 4-5 HR heads on the fund. First Investment in HR Social Media “Raising money for these ideas is like selling fine art. A typical venture capital fund does not understand this space,” says Talwar. “The idea was to first go to people who understand the industry. In the future, we can look at raising money from institutional investors.” The potential investee companies for the fund will be human resources companies in software, training space, contingency staffing and those in professional employer organisations like admin staffing. The fund will look to invest in four companies this year; one has almost been shortlisted. “The first investment is in HR social media. We want to build a social media engine for HR…something on the lines of TED,” says Talwar. TV Mohandas Pai, chairman, Manipal Global Education Services, and an HR veteran who is not part of the initiative thinks there will be challenges for the fund. “A dedicated HR VC is interesting, but it has to be seen if it can be scaled up. In talent acquisition we are good, but need to improve in performance management, career development and talent engagement.” But he is willing to experiment. “I have not been asked to join the fund, but if approached I would definitely want to give it serious thought,” Pai says. What’s the rationale for a fund centred on a function that was — and is in some organisations even now — considered a support function? “More and more CEOs are recognising that HR is an important function. HR has come a long way and it is to do with business,” says Talwar, who puts the size of the HR industry in India at $2 billion. “This shows HR has moved from the backroom to the boardroom, but exits will remain a challenge,” says Manish Sabharwal, chairman, TeamLease. “Sector-focused funds are not common and one dedicated to HR (is not common),” he adds. TeamLease raised Rs 100 crore as private equity from ICICI Venture in 2011 to fund expansion of its vocational education programmes. And in 2009, Gaja Capital Partners invested $5.38 million in TeamLease for 16.77% stake. Knight Riders CEO Venky Mysore, who has spent 25 years in financial services, says that as a CEO, 80% of his time was spent on people issues. “There are quite a few funds that support generic ventures, but not in HR,” he says. For the HR veterans, this is a commitment to the function. Says NS Rajan, who is one of the anchor investors in the fund: “The HR fund is committed to providing a much needed thrust to HR, which is woefully short of service providers capable of rendering world-class services to corporates. I truly believe in the fund’s vision though I have zero management role.” While it is common to find tech entrepreneurs who are in their 20s, that’s not the case in the HR space, though some HR heads have started businesses after retirement. This fund will create an ecosystem of service providers in HR and spur entrepreneurship, according to an investor. “I am looking for a force multiplier that can start a new trend in HR and strongly believe the fund will strengthen the ecosystem,” says Rajan. PetroScan-April 2012


INTERVIEW Sudhir Vasudeva | Deepwater exploration is the future of ONGC

Vasudeva says ONGC will invest close to Rs 26,000 crore to arrest the decline in output from ageing fields Maulik Pathak Ahmedabad: Oil and Natural Gas Corp. Ltd (ONGC) chairman and managing director Sudhir Vasudeva spoke in an interview in Ahmedabad about plans to enter the city gas distribution centre (CGD) business, deepwater exploration and arresting the decline in output from ageing fields, among other issues. Edited excerpts: You recently announced a joint venture with ConocoPhillips of the US. What next? We have signed an MoU (memorandum of understanding) to join us as a partner and share technology for 19 blocks in India. We will also explore the possibility of partnering in the US and other countries. Whenever there will be a policy of shale gas in place in India, ConocoPhillips would be our preferred partner. Deepwater exploration is the future of ONGC and we would want them as our partner, first time and every time. In the next six months, we will be able to chalk out a road map, including future investment plans. We are aiming to recover 1 billion tonnes of oil and oil equivalent from unconventional hydrocarbon sectors like deepwater and shale gas by 2020. Revival strategy: Vasudeva says ONGC will invest close to Rs 26,000 crore to arrest the decline in output from ageing fields. There has been a decline in production for quite some time now, especially in Bombay High. Are you looking for a strategic partner for Bombay High? Fifteen big fields that are contributing 80% of our production are about 35-40 years old. Through our efforts in IOR/EOR (improved oil recovery/enhanced oil recovery) we are able to recover 8.5 million tonnes (mt) and against the global decline of 4.5-5% per annum, we have been able to arrest it to 1.5-2% levels. For Bombay High, we must accept that the law of diminishing returns does not work here. The board yesterday (Wednesday) cleared the proposal of Rs 600 crore for first part of phase three redevelopment plan for Bombay High. This is expected to yield 1.03 mt of oil and 213 million cubic metres of gas. We will not be able to take the production from 28% of recoverables to 40% in this phase. Maybe there would be a phase four. As far as a strategic partner is concerned, we are not really looking at one now. What are your plans for the marginal fields that are not commercially viable? We will bring together four-five fields that are lying close to each other and build a common platform for them for transporting crude. We will be investing close to Rs 26,000 crore for developing 11 clusters comprising 34 marginal fields and this will help us yield 11 mt of oil and oil equivalent. Thanks to this, we have advanced our target for gas production for 2018 to 2014. What is the status in the South China Sea where China has opposed a venture between ONGC Videsh Ltd and a Vietnamese oil company for exploration? It is a very hard bottom and we have removed the rigs as of now. It is for the Vietnamese government to support and protect us. Our investment is a completely commercial one. If there is a political issue, it is for the Indian government to look into it.

PetroScan-April 2012


ONGC has been battling manpower issues. One out of every three persons at the officer-level and above is going to retire by 2014. Attrition has been a problem for us. It is also a matter of pride when we see private oil and gas companies flourishing with ex-ONGC employees driving their growth stories. From 46,000 employees at the time of Bombay High’s discovery, our strength is today reduced to 33,000. To overcome the problem, we are in the process of hiring 7,000 people in the next five-six years. We are thinking of inducting at the middle-level also. We are exploring the option of outsourcing some work at the field-operator level. It is the middle-level people who are going to own this company in future and we have hired McKinsey to work out a strategy. What is the status of the stake sale offer by British Gas (BG Group Plc) at Gujarat Gas Co. Ltd, where you had bid jointly with Gujarat State Petroleum Corp. (GSPC) and Bharat Petroleum Corp. Ltd (BPCL)? Are you going to sweeten the offer? We have also roped in Oil India as a JV partner in the consortium. While GSPC will hold 50% equity in the JV, ONGC and BPCL will each give 5% of the equity stake to Oil India Ltd. We are the only bidders for this. British Gas feels that the valuation we have offered is low. It is now a matter of negotiation between us. We’ll see if we can sweeten the bid or not. Why haven’t you been able to achieve financial closure for the ONGC-Petro Additions Ltd (Opal) petrochemical complex at Dahej after six years? What is the current cost of the project? The cost of the project is currently Rs 21,440 crore, up from Rs 12,440 crore. This is mainly due to the inclusion of many other products. Also, the project was initially conceived in 2006. Power, which was not considered earlier, has been included in the project. The project will soon achieve financial closure. Currently, ONGC has a 26% stake while GAIL India Ltd and GSPC hold 19% and 5%, respectively. We might go for an IPO (initial public offering of shares) in future. There were talks of ONGC jointly setting up a refinery project with Cairn India Ltd in Rajasthan. The 680 km crude pipeline project by the Cairn-ONGC venture has been stuck for over a year. There are already so many refineries in Rajasthan, like the one in Mathura or Bina; so it is for the government to decide if it wants more. Once the government decides that it wants more, the question of who would develop it arises. For the pipeline project, there have been some negotiations recently and we hope to resolve the issue soon. There has been a lot of controversy regarding the recent stake sale to Life Insurance Corp. (LIC) of India. What are your views on this? It’s a government decision and I can say nothing on this. How significant is the Krishna-Godavari onshore discovery that you made recently? We’ve made a discovery and have drilled one which is producing 75-76 cubic metres per day. However, it is too early to say anything beyond this. We don’t know how big a field it is. maulik.p@livemint.com

PetroScan-April 2012


Mr Sudhir Vasudeva, CMD, ONGC receives the Gold Trophy of SCOPE Meritorious Award for Environmental Excellence & Sustainable Development for the year 2010-11

SCOPE award for Excellence and Outstanding Contribution to Public Sector Management- I ndividual Leader II PSE category 2009-10 presented to Shri N.M.Borah, Chairman & Managing Director, by Dr Manmohan Singh, Hon'ble Prime Minister of India at a function in Vigyan Bhawan at New Delhi on 31st January, 2012

PetroScan-April 2012


Mr. Sudhir Vasudeva, CMD ONGC receiving the outstanding PSU of the Year Award from Mr. Kamal Nath, Union Minister for Urban Development & Poverty Alleviation

Shri A.K. Purwaha, C&MD, EIL receiving “SCOPE Meritorious Award in Specialized Fields 2010-11", under the category of Best Practices in Human Resource Management from H.E. Smt. Pratibha Devisingh Patil, Hon’ble President of India

***********************************************

PetroScan-April 2012

Petroscan April  

April Issue of Petroscan

Read more
Read more
Similar to
Popular now
Just for you