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Friday, February 26, 2021

ONGC takes leaf out of Reliance’s ebook, floats subsidiary to purchase personal fuel – Occasions of India

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NEW DELHI: Taking a leaf out of Reliance Industries Ltd‘s playbook, state-owned Oil and Natural Gas Corporation (ONGC) is forming a brand new subsidiary for fuel enterprise that could possibly be used to bid and purchase fuel from the agency’s personal fields.
The board of ONGC at its assembly on February 13 authorized creation of a brand new wholly-owned subsidiary firm for fuel and liquefied pure fuel (LNG) enterprise worth chain topic to vital approvals, based on the agency’s third quarter earnings announcement.
“The corporate is being shaped with the target of sourcing, advertising and marketing and buying and selling of pure fuel, LNG enterprise, Hydrogen enriched CNG (HCNG), fuel to energy enterprise, bio-energy/ bio-gas/ bio methane/ different biofuels enterprise, and so forth,” it stated.
ONGC could use the brand new subsidiary to purchase any new fuel that the agency produces from fields corresponding to KG-D5 within the Krishna Godavari basin, individuals with direct information of the matter stated.
The federal government had in October 2020 allowed associates of fuel producers to purchase the gas in open public sale.
This coverage change allowed Reliance to purchase two-thirds out of the extra 7.5 million normal cubic metres per day of fuel it together with companion BP plc of UK plans to supply this yr from the brand new fields in KG-D6 block.
“ONGC can also take a look at this feature now. The brand new subsidiary can take part in any public sale that ONGC will do for incremental fuel from KG-D5 block,” a supply stated.
Apart from guaranteeing competitors and truthful value discovery, the ONGC subsidiary can then promote the fuel so sourced to companies corresponding to Mangalore Refinery and Petrochemicals Ltd (MRPL) at a margin.
This could assist ONGC earn higher margins on the fuel produced.
“Proper now fuel is a loss-making enterprise for ONGC. The federal government controls fuel value which is lower than price of manufacturing,” the supply stated.
The federal government has mounted a value of USD 1.79 per million British thermal unit for ONGC’s fields. That is half of the price of manufacturing.
It permits a better price of USD 4.06 per mmBtu for troublesome fields corresponding to deepsea fields (KG-D6 and KG-D6) however even that’s lower than the price of manufacturing from extremely capital intensive initiatives.
The present regulation means even when Reliance found a value equal of USD 6-7 per mmBtu for the 7.5 mmscmd of recent fuel from KG-D6, it will get solely USD 4.06 until March 31.
The identical would apply for ONGC. It would uncover a price greater for the 15 mmscmd incremental fuel deliberate from KG-D5 block however it could get solely USD 4.06 as per present value.
“So, basically the ONGC’s fuel subsidiary can bid and purchase KG-D5 fuel. It’s going to pay ONGC USD 4.06 per mmBtu however can promote to MRPL or some other buyer at a value greater than that, guaranteeing that the fuel enterprise turns into a viable proposition,” the supply stated.
The federal government has given operators the liberty to find market costs however this price is topic to a pricing ceiling or cap that the federal government notifies each six months. The cap for six months to March 31, 2021 is USD 4.06 per mmBtu.
Within the February 5 public sale, Reliance O2C Restricted, an affiliate of Reliance Industries Ltd, picked up 4.8 mmscmd out of the 7.5 mmscmd fuel auctioned.
State fuel utility GAIL (India) Ltd gained 0.85 mmscmd of provides whereas Shell picked up 0.7 mmscmd.
Adani Complete Fuel Ltd received 0.1 mmscmd, Hindustan Petroleum Company Ltd (HPCL) 0.2 mmscmd and Torrest Fuel 0.02 mmscmd. Different patrons included IRM Power (0.1 mmscmd), PIL (0.35 mmscmd) and IGS (0.35 mmscmd), they stated.
Sources stated the fuel was purchased at a value of USD 0.18 per million British thermal unit low cost to JKM (Japan/Korea liquefied pure fuel import value), that’s value of JKM (minus) USD 0.18 with tenures starting from 3 to five years.
Reliance O2C is the brand new unit that holds the agency’s refinery and petrochemical property.
Earlier in November 2019, 5 mmscmd of pure fuel was bought at a value within the vary of round 8.6 per cent of Brent crude oil for tenure starting from 2 to six years. That fuel went to patrons like Essar Metal, Adani Group and state-owned GAIL.
Reliance-BP began manufacturing of fuel on December 18 final yr from the R Cluster ultra-deep-water fuel subject in block KG-D6 off the east coast of India.
The duo are growing three deep-water fuel initiatives in block KG-D6 — R Cluster, Satellites Cluster and MJ — which collectively are anticipated to satisfy round 15 per cent of India’s fuel demand by 2023.
ONGC is growing a set of discoveries within the KG-D5 block which sits subsequent to Reliance’s D6 space.
ONGC’s fields, which started manufacturing final yr at a restricted price of 1 mmscmd, are estimated to have peak manufacturing charges of 16 mmsmd of pure fuel and 80,000 barrels per day of oil.

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