MAJOR BOOST
TO EFFORTS TOWARDS MAXIMISING ENERGY SECURITY
INITIATIVE
TO EXPAND USE OF LPG IN HOUSE-HOLD SECTOR
Moving ahead on the
performance of earlier years, Year 2002 has been historic in the
hydrocarbon sector where a number of milestones were crossed and
new initiatives launched by the Ministry of Petroleum & Natural
Gas. Efforts to enhance oil security received a big boost with
one of the world's biggest discoveries this year in the deep-waters
off Andhra Coast and another one near Surat, acquisition of equity
oil abroad and consolidation of gains from efforts to harness
the alternative sources of energy like blending of ethanol with
petrol. The country continued to maintain self-sufficiency in
refining capacity in a year when oil sector was deregulated with
the dismantling of Administrative Pricing Mechanism (APM). Marketing
of transportation fuels was thrown open for healthy competition
in oil sector. After the long waiting list for domestic LPG connections
had been wiped out, a strategy was evolved through the launch
of smaller 5 Kg. LPG cylinders for facilitating use of LPG in
economically weaker households and consumers in rural, remote
and hilly areas. The New Year begins with the National launch
of ethanol-petrol blending programme in Mumbai on 1st
January. A National Auto Fuel policy backed with inputs from Experts
is on the anvil as part of the initiatives for providing better
services and quality of products.
1. Significant
Successes under NELP
The impetus given
to exploration and production of oil and gas in the country was
marked by a major success as one of the world’s biggest discoveries
of gas this year was reported by Reliance Industries in a deepwater
block awarded under the first Round of New Exploration Licensing
Policy (NELP-I). The gas discovery has about 7 trillion cubic
feet (TCF) of "in-place-reserve" which is comparable with the
Bassein Gas field having 9 TCF reserves. This discovery is expected
to make a significant contribution to reduce the gap between demand
for gas which is about 150 million cubic metres per day (MMSCMD)
and the availability of about 65 MMSCMD. The Reliance discovery
as per preliminary estimates would provide 25-35 MMSCMD gas for
about 6-8 years. Coming on a day when ONGC-Videsh Ltd (OVL) secured
equity in Sudan, Shri Ram Naik, Minister of Petroleum & Natural
Gas while announcing the two developments at a Press Conference
in Mumbai on 31st October 2002 said, "Two historic
developments have given a big boost to India’s efforts to achieve
energy security - one is securing equity oil from the West and
the discovery of the country’s own gas in the East".
The Second Round
of NELP also tasted first success this year with a gas discovery
reported by NIKO Resources of Canada on 13.11.2002 in a block
near Surat. The discovery has come within 1-1/2 years of Contract
Signing for NELP-II blocks on 17.07.2001. In addition to 47 Blocks
awarded under the first two rounds of NELP (NELP I&II), Government
approved award of 23 more blocks for exploration and production
under the Third Round of NELP (NELP-III) in November 2002. Thus
as many as 70 blocks have been awarded in three years as against
22 blocks in previous 10 years. Delayed in signing contracts for
awarded blocks have become a thing of past as Production Sharing
Contracts (PSCs) were signed in 7 months during the NELP-I and
3 ½ months for NELP-II against earlier 2-3 years, thus giving
a boost to investors’ confidence. To supplement availability of
natural gas, 7 blocks have been awarded for production of Coal
Bed Methane (CBM) gas.
2. Equity Oil
abroad
An Agreement was
signed by ONGC Videsh Limited (OVL) on 29.10.2002 to acquire 25
per cent share in a 12 Million Tonne Per annum crude oil producing
field in Sudan for about Rs. 3,600 crore. This adds to the success
of OVL acquiring 20% stake in Sakhalin Oil Fields in Russia at
a cost of Rs.8,000 crore. The country would annually get 4 to
8 Million Tonnes of crude oil from 2005 and 5-8 million cubic
metres of gas from 2008 onwards respectively. The Vietnam gas
field where OVL has 45% share at Rs. 980 crore investment in the
2 TCF reserve field commenced commercial supplies of gas to customers
on 18.12.2002. OVL also acquired interests in attractive exploration
blocks in US, Myanmar and Libya this year.
3. Petro-agro
sector on Threshold of Revolution
Government is on
the threshold of ushering in a revolution in the petro-agro sector
by mandating 5 per cent blending of ethanol with petrol from 1st
January 2003 in sugarcane producing States in the first phase.
All areas of those 9 States and 4 contagious Union Territories
would be fully supplied with 5% ethanol blended petrol by 30th
June 2003. These States are Uttar Pradesh, Punjab, Haryana, Maharashtra,
Gujarat, Goa, Andhra Pradesh, Karnataka and Tamil Nadu and continuous
Union Territories are Chandigarh, Dadra & Nagar Haveli, Daman
& Diu and Pondicherry. Out of about 7 million tonnes of petrol
consumption in the country, 4.6 million tonnes is accounted for
by the first phase States/UTs. At this level, about 32 to 35 crore
litres of ethanol would be required for blending, providing useful
utilisation of sugarcane molasses otherwise going waste. The use
of ethanol would be expanded to whole country in the second phase
and blending percentage would be raised to 10 per cent in the
third phase. The R & D studies have begun to evaluate blending
of ethanol with diesel. The programme to blend ethanol with transport
fuels would bring better returns to sugarcane farmers, supplement
scarce resources of hydrocarbons and bring environmental benefits
by reducing pollutants with its properties of helping better combustion.
Presently 9-ethanol petrol blending projects are operational in
U.P. (four), Punjab (two), Maharashtra (two) and Andhra Pradesh
(one). Six of these projects commenced this year after successful
run of 3 pilot projects.
Describing these
developments, Shri Naik said at a Press Conference in Hyderabad
on 19.11.2002, "These initiatives and developments would have
a special place in the history of India’s Hydrocarbon Sector.
The programme of blending ethanol obtained from renewable source
sugarcane molasses would supplement the oil and gas discoveries
in rapidly realising the goals of achieving oil and gas security
envisaged in India Hydrocarbon Vision 2025".
4. APM Dismantling
Ushers in Reforms
The Administered
Price Mechanism (APM) which governed the prices of transportation
fuels, LPG and kerosene since 1975 was dismantled with effect
from 1.4.2002 to foster competition by allowing private entities
in the field of marketing. The price of petrol, diesel, kerosene,
LPG and Aviation Turbine Fuel (ATF) will move in line with international
price trends. LPG and kerosene would continue to be subsidized
with a fixed subsidy from the Government for another 3 to 5 years.
As a consequence of the policy of dismantling the APM and allowing
private entities, marketing rights have been granted to Reliance
Industries (5849 pumps), Essar Oil (1700 Pumps), ONGC (600 pumps)
Numaligarh Refinery (510 Pumps). This will lead to addition of
40% to the existing strength of retail outlets. Of these ONGC
and Numaligarh Refinery are Public Sector Undertakings while Reliance
Industries and Essar Oil are private companies.
In a major decision
as part of deregulation of oil sector and to attract investment
in the petroleum product pipelines, the Government notified a
new Petroleum Product Pipeline Policy on 20.11.2002 for laying
pipelines in the country on common carrier principle. As per the
guidelines, companies and investors will have complete freedom
in respect of the pipelines originating from refineries or meant
for captive use. The pipelines exceeding 300 km in length and
those originating from a port location, grant of Right of User
(ROU) will be on common carrier principle. The promoter would
offer opportunity to others to take part in the project and the
pipeline will have 25% extra capacity over and above that required
by promoter and other interested parties.
The Government has
proposed to set up a Petroleum Regulatory Board to oversee the
petroleum sector in the country. To facilitate the setting up
of the Board, the Government has introduced the Petroleum Regulatory
Board Bill 2002 in Lok Sabha on 6th May 2002. The main
functions of the proposed Board are to protect the interests of
consumers and entities, ensure uninterrupted and adequate supply
of petroleum and petroleum products in all parts of the country
etc. Till the Bill is passed, this work is being done by the Petroleum
Ministry.
Strategic disinvestment
of IBP - a standalone marketing company - was carried out through
international competitive bidding for Government equity of 33.58%
fetching Rs.1,153 crore to the exchequer. Government also decided
to disinvest its shares in HPCL through strategic sale and BPCL
through Initial Public Offering. Employees would be offered a
certain percentage of shares at 1/3rd price.
To augment the marketing
network of oil companies for making available services and petroleum
products at the doorstep of consumers, 3760 petrol-diesel, LPG
and SKO-LDO dealers were selected by the Dealer Selection Boards
(DSB) since January 2000. Following a controversy, the Government
cancelled all the selections of dealers since 1st January
2000 and decided to auction them through competitive bidding.
However, the cancellation was not upheld by the Supreme Court
and the Apex Court set up a Committee to inquire into 417 cases
out of the total 3760. While the directions of the Supreme Court
are being complied with, the remaining dealerships could be operated/commissioned
in accordance with the laid-down guidelines.
- 5 Kg Domestic LPG Cylinders
Introduced
The smaller 5-kg
LPG cylinders for use in the households were launched on 16.08.2002
in Shimla. The smaller cylinders have been introduced with a view
to make the LPG connections affordable to economically weaker
strata, ensure smooth transportation in hilly and remote areas.
The new strategy would serve government well in achieving the
target of taking LPG to 50% households in the country over next
two years from the current level of about 30%. Making steady progress,
so far the 5-kg cylinders have been introduced in the 16 States
of Andhra Pradesh, Arunachal Pradesh, Assam, Bihar, Chattisgarh,
Himachal Pradesh, Jammu & Kashmir, Karnataka, Maharashtra,
Meghalaya, Punjab, Rajasthan, Tamil Nadu, Uttaranchal, Uttar Pradesh
and West Bengal. The deposit for a 5 Kg. cylinder is cheaper at
Rs. 350/- per cylinder compared to Rs. 700/- for 14.2 kg. cylinder.
Similarly, a 5 Kg. cylinder refill cost less than Rs. 100/- as
against about Rs. 250/- per cylinder for a 14.2 Kg. cylinder.
Incidentally, the deposit on 14.2 kg conventional LPG cylinders
was reduced to Rs. 700/- from Rs. 900/- earlier this year. This
accrued from the shift directed by Government to procure cylinders
through tenders. Government’s drive to expand LPG market has resulted
in addition of over 60 lakh consumers in the year so far taking
total LPG customers to about 680 lakhs in the country.
6. Self Sufficiency
in Refining Crude Oil
The country is self
sufficient in refining crude oil and the capacity now stands at
116.5 Million Tonnes against the annual consumption of about 100
Million Tonnes at 2001-02 level. This benefits the country by
not importing expensive products like petrol and diesel and local
value addition to crude by converting to more expensive products
within the country. Three new refineries are being constructed
at Paradip (Orissa) by Indian Oil Corporation Limited (9 Million
Ton), Bhatinda (Punjab) by Hindustan Petroleum Corporation Ltd.
(9 Million Ton) and Bina (Madhya Pradesh) by Bharat Petroleum
Corporation Limited (6 Million Ton). The total investment in these
3 new Refineries would be about Rs. 25,000 crore.
7. Rehabilitation
of the Families of Martyrs
Retail Outlet (RO)
Dealerships and LPG Distributorships were allotted to 439 widows/next
of kin of martyrs killed in action in Kargil. Oil Companies are
investing Rs. 40 Lakh per RO and Rs.20 Lakh per LPG distributorships
so as to provide dealerships in a ready to operate status. In
addition, 9 RO dealerships were allotted on 13.12.2002 to the
families of terrorists’ attack on Parliament a year before under
the first allotments by the present government under discretionary
quota scheme. This Scheme was formulated for discretionary allotment
of retail outlets/LPG distributorships to the wives/next of kin
of armed forces/Para Military forces/Government servants killed
in action in the course of performance of duty.
- Supply of Clean Fuels
The sale of world
standard diesel with 0.05% sulphur maximum content commenced in
Hyderabad/Secunderabad w.e.f. 16.12.2002 adding to metro cities
of Delhi, Mumbai, Kolkata and Chennai which already has this grade
fuel. Similarly cities of Ahmedabad, Bangalore, Kanpur and Pune
which also has high number of vehicles causing air pollution will
be covered from 1st April, 2003. The supply of superior
grade diesel (0.05% sulpha) is comparable with USA, Canada, Japan,
Singapore etc. Unleaded petrol and 0.25% sulphur petrol/diesel
are on sale already throughout the country since February 2000
and January 2000 respectively. About Rs. 10,000 crore were invested
in refineries for improvements in the quality of fuels. According
to a study conducted by Central Road Research Institute in March
2002, about 85% improvement in air quality in Delhi has come from
better quality Bharat Stage – II petrol and diesel being sold
in Delhi.
The supply of CNG
was augmented in Delhi ending the times of long queues following
Supreme Court directions in March 2001. With recent commissioning
of 23 km CNG pipeline a circular loop of pipeline is in place
for convenient supply of gas to CNG stations. Present 101 CNG
stations against 68 in March 2001 caters to the largest CNG bus
fleet in the world of about 7200 buses and 4000 mini buses forming
part of about 75,000 CNG vehicles in the city. Next come Beijing
with 1600 and Seoul with 1000 buses. CNG supply is also being
augment in Mumbai with plans for increasing CNG dispensing points.
As part of making available multiple choice to consumers for cleaner
fuels along side better petrol & diesel and CNG, Auto LPG
Dispensing Stations (ALDSs) are being commissioned in the country
for facilitating use of LPG also a clean fuel in the automobile
sector. There are plans to commission 228 ALDSs in the first phase.
So far 54 stations have been commissioned in different cities
and 97 are in different stages of commissioning which is expected
by 31.3.2003.
Keeping in mind the
environmental concerns, Government plans to have an integrated
and holistic National Auto Fuel Policy. The Interim Report of
the Expert Committee set up to recommend such a policy was accepted
by Government in January 2002 and the Final Report received in
September 2002 is being discussed for implementation. The implementation
of road map recommended by the Committee upto 2005 requires investment
of Rs. 18,000 crore to reach Bharat Stage II level for entire
country and Euro-III in 7 mega cities. Additional 12,000 crore
would be required to match the recommended fuels by 2010.
