 "oil, crude, gas, refinery, plant")
It had all the spices needed for a Bollywood masala flick, for India's oil & gas industry year 2016 had it all – controversies, mergers, deals, recovering global crude prices, and a referee act by the Organisation of the Petroleum Exporting Countries (Opec) to stabilise oil prices by cutting production, which might have long-term impact as far as India is concerned.
ONGC-RIL gas wars take a fresh turn
The year saw one of the high-profile gas wars between India's largest hydrocarbon explorer Oil and Natural Gas Corporation and Mukesh Ambani-led Reliance Industries taking a new shape. Following ONGC’s allegation that gas has migrated from its KGDWN98/2 (KGD5) and Godavari PML in the KG basin to adjoining KGD6 block of RIL, the government had appointed a one-man panel by retired judge A P Shah.
Shah in his report stated that while RIL should pay the compensation, ONGC will not get a share of it as the government is the owner of all unproduced natural resources. Later, the government issued a notice slapping a penalty of $1.55 billion on RIL for “unfairly enriching” and producing natural gas belonging to ONGC. Year 2017 might see the legal battle on this heating up as RIL and its partners have given arbitration notice. Two of the three-member arbitration team are former Supreme Court judge G S Singhvi as government member and former UK High Court judge Bernard Eder representing RIL. The two arbitrators will now decide on a presiding judge of the panel.
Ciarn-Vedanta merger
The Anil Agarwal-led Vedanta group got clearance for the merger of Vedanta Ltd (formerly Sesa Sterlite) with Cairn India from the shareholders of both the companies in September this year. In July, Vedanta and Cairn India announced a revised deal in which Vedanta offered minority shareholders of Cairn India one equity share and four redeemable preference shares with a face value of Rs 10 each. The merger is in the process of getting regulatory clearances and the company expects to complete the merger by March 2017.
Rosneft-Essar Oil deal
In October, Russian oil major Rosneft announced the $10.9 billion (Rs 72,800 crore) acquisition of Essar Oil and Vadinar refinery. The Russian oil major is doing the acquisition in a consortium of oil trading firm Trafigura and private investment group United Capital Partners. The consortium is set to pay an additional $2 billion (Rs 13,300 crore) for the acquisition of Vadinar Port, too. The deal, which will be the largest foreign direct investment in India, is likely to be closed in the first half of 2017.
Russia becomes India's hydrocarbon source
The Dharmendra Pradhan-led ministry was successful in acquiring substantial stakes in two Siberian oil & gas fields of Russian energy giant Rosneft for $4.2 billion. A consortium of Indian companies like Indian Oil Corporation, Oil India and a unit of Bharat Petroleum Corporation was successful in grabbing a 29.9 per cent stake in Tass-Yuryakh oilfield from Rosneft and also 23.9 per cent stake in the Vankor oilfield. Later, ONGC Videsh also grabbed a 11 per cent stake in Vankor fields making 2016 the year in which India got the highest and assured assets abroad.
Petronet-RasGas deal
India’s Petronet LNG was successful in striking a deal with Qatar’s state-owned gas producer RasGas at nearly half the cost originally agreed upon. While Petronet was getting LNG at $12-13 per million British thermal unit (mBtu), it dropped to $6-7 per mBtu in 2016 because the new deal struck between both the countries. Under the new contract, the price will be based on a crude price-linked formula. The new contract will end in 2028. Interestingly, 2017 might see merging of Qatar Petroleum’s RasGas and Qatargas into a single entity.
Pradhan Mantri Ujjwala Yojana
The year saw the largest social-sector projects the country's retail sector has ever seen with the Narendra Modi-led government launching the Pradhan Mantri Ujjwala Yojana (PMUY) on May 1 at Ballia in Uttar Pradesh with a target to provide connections to 50 million below-poverty-line families in three years, with government support of Rs 1,600 crore per connection. The Dharmendra Pradhan-led petroleum ministry has achieved the target of 15 million connections for this financial year in December — a good three months ahead of schedule. The government has allocated Rs 8,000 crore for the scheme in which connections are issued in the name of the women in those families.
Other key highlights for India
Year 2016 saw India shifting into a new regime of Hydrocarbon Exploration Licensing Policy from the previous New Exploration Licensing Policy with the new regime getting Cabinet nod. The bidding rounds for discovered small and marginal fields were also concluded in 2016 with the auction seeing 134 e-bids from 42 companies for the 67 fields. The contract areas are likely to be awarded in January 2017.
Opec’s referee act
The end of 2016 also saw Opec coming into action taking steps to increase crude oil prices, which were in the range of $30-45 a barrel till the end of the year. The oil industry lobby has decided to go for an output cut of 1.2 million barrels per day (bpd) from January with even non-Opec countries such as Russia, too, expected to reduce production by 600,000 bpd. However, the revival of prices to above $50 range is likely to help shale producers in the US. The production cut is likely to prop up prices in 2017, which might result in India cutting excise duty on fuel and also going back to a subsidised regime. According to sources, the government might consider sharing higher prices between customers and the government through reduction in excise duty and increase in retail prices, once the prices goes above $60 a barrel.
