Oil and Gas Sector – HELP, Open Acreage Policy, etc.

Aug, 31, 2018

[op-ed snap] The shale gas challenge

Note4students

Mains Paper 1: Geography | Distribution of key natural resources across the world (including South Asia & the Indian sub-continent)

From UPSC perspective, the following things are important:

Prelims level: Shale gas, fracking, Directorate General of Hydrocarbons

Mains level: Pros & Cons of shale gas exploration and its role in reducing India’s oil import bill


Context

New hydrocarbon policy approved

  1. The Central government has approved a far-reaching policy that allows private and government players to explore and exploit unconventional hydrocarbons (including shale gas) in contract areas
  2. These areas were primarily allocated for extracting conventional hydrocarbons

Shale gas exploration a difficult task

  1. Shale gas is trapped under low permeable rocks
  2. A mixture of ‘pressurised water, chemicals, and sand’ (shale fluid) is required to break low permeable rocks in order to unlock the shale gas reserves
  3. The process requires around 5 to 9 million litres of water per extraction activity, posing a daunting challenge to India’s freshwater resources

Inadequate provisions to deal with low water availability

  1. The Directorate General of Hydrocarbons (DGH) issued a guideline on environment management during shale gas extraction, stating that “overall volume of fracture fluid is 5 to 10 times that of conventional hydraulic fracturing” and “the (fracturing) activities are likely to deplete water sources and cause pollution due to the disposal of flowback (produced) water”
  2. The guideline falters and states that these challenges will be dealt while granting environmental clearances as per the Environment Impact Assessment (EIA) process
  3. The EIA process, however, does not differentiate between conventional and unconventional hydrocarbons
  4. Sensing this regulatory gap, the DGH in its guideline proposes five new reference points (term of references) relating to water issues in the fracking process that a project proponent must explain while applying for the environmental clearance
  5. However, these five reference points are not succinct to resolve the water-specific issues posed by the fracking activities

Why regulating water usage is important for India?

  1. The importance of clarity in water usage and the place of shale gas extraction in India is linked directly with water requirements of priority sectors like agriculture
  2. A recent study from Duke University observes that from 2011 through 2016, the water use per well in the U.S. increased up to 770% resulting in some shale wells consuming up to 42 million litres of water per well
  3. The study further conveys that over a period of time, the usage of water dramatically increases for extracting the same amount of shale gas from a well

A threat of ground & surface water contamination 

  1. Shale rocks are usually adjacent to rocks containing useable/ drinking water known as ‘aquifers’
  2. While fracking, the shale fluid could possibly penetrate aquifers leading to methane poisoning of groundwater used for drinking and irrigational purposes
  3. When shale fluid is injected underground at high pressure to fracture the rock, 5-50% (depending on the local geology) of the fluid returns to the surface, known as ‘flowback water’ and the flow continues as oil and gas is pumped from the well
  4. The flowback water is usually methane-contaminated, and therefore it poses different recycling and leakage issues than usual wastewater

Guidelines ineffective on various fronts

  1. The DGH guideline states that a project proponent must “design and construct wells with proper barriers to isolate and protect groundwater”, but misses out on broadly describing the nature or properties of a barrier that can be considered ‘proper’ to isolate and protect the groundwater
  2. The DGH guideline touches upon the exclusive nature of the flowback water but neither proposes any substantive treatment method nor recognises the increase in flowback water during repeated extraction of shale gas from a well over a period of time

Way Forward

  1. Indian households and irrigation thrive on groundwater
  2. Implementation of the fracking processes without a consultative thought through process, especially on ‘water usage policy’, may result in larger issues including water stress, contamination of groundwater, and related health hazards
Jul, 31, 2018

[op-ed snap] A long-term strategy to reduce crude imports

Note4students

Mains Paper 3: Economy | Effects of liberalization on the economy

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: Strategy to reduce oil imports and make a sustained supply of other cost effective fuels


Context

Turmoil in oil industry

  1. The oil industry has been witnessing significant turmoil and uncertainty in recent months
  2. The primary benchmark for international oil prices, the Brent crude, reached a level ($80.49 per barrel) in May that was not seen since 2014
  3. Histrionics around the US sanctions on Iran have also affected sentiments considerably
  4. In recent weeks, tariffs imposed by the Donald Trump administration and the increasing production from Saudi Arabia and Libya have caused the abatement of prices

Impact on India

High oil prices is a double whammy for India:

  1. It would widen the country’s trade deficit
  2. And also impose a fiscal burden on account of fertilizer, kerosene and LPG subsidies

Possible options to reduce oil prices & their impact

  1. The expectation is that the excise duty on petroleum products might be lowered unless the recent fall in prices sustain
  2. The government had collected around ₹2 trillion from such duties in 2017-18, which played a crucial role in fiscal management
  3. So, lowering the excise duty would exert pressure on the fiscal balance
  4. Alternatively, oil marketing companies (OMCs) may be asked to absorb losses but that would intrude on their capital expenditure plan
  5. That would also send rather negative signals to markets, which have been watching out for any government moves on price control and passing over subsidy burdens to oil producing and marketing companies, and, in effect, rolling back pricing reforms

A strategy that can be used

  1. India now needs a carefully devised strategy that is not driven by short-termism but aims to gradually insulate the country from global oil price volatility
  2. Such a strategy should be centred on three things:
  • Expediting the migration to electric mobility
  1. Since the transport sector accounts for around 70% of the total diesel sales in the country, it is an appropriate sphere for a transition from traditional fuels to electric motors
  2. A favourable incentive mechanism (subsidy up to 60% of the total cost of an electric bus) to help the adoption of electric buses gain traction is already in place
  3. What we now need to do is to get the pace of building electric vehicle (EV) supportive infrastructure to catch up with the addition of new electric buses to the public transportation system
  4. Within the transport sector, trucks alone account for around 28% of the diesel consumption. Thus, creating dedicated electric corridors for trucks on the highways could go a long way in curbing oil imports
  • Expanding the biofuel blending in petrol
  1. Increasing the blending proportion of domestically available biofuels in cooking gas and transportation fuel is another way to reduce India’s reliance on imported crude oil
  2. Ethanol is mainly used for blending in our country and it is mostly derived from sugarcane molasses means its production is contingent on weather patterns
  3. Sugarcane, refining of which creates molasses, is a water-intensive crop, so fresh incentives to increase ethanol production may not be good economics in a country where water scarcity is a serious problem
  4. Hence, methanol, produced from coal, should be given more weightage when it comes to blending
  5. Besides, biodiesel supply should be augmented by making jatropha farming more productive through genetic modification
  • Stimulating exports
  1. If all these measures together reduce oil imports by 20%, the country could save up to $18 billion a year in terms of foreign exchange (assuming oil prices stay around their current level)

Way Forward

  1. Reducing the country’s reliance on oil imports would bode well for energy security, and make our financial markets less volatile in the event of untoward developments in the oil market
  2. The savings from reduced oil imports could in turn be used to finance infrastructure projects, which are crucial for India’s long-term growth prospects
Jul, 31, 2018

Govt. plans ‘ISRO-like’ ocean mission

Note4students

Mains Paper 3: Science & Technology | Awareness in the fields of IT, Space, Computers, robotics, nano-technology, bio-technology

From UPSC perspective, the following things are important:

Prelims level: Particulars of the DOM

Mains level: All such missions are important from examination point of view.


News

Deep Ocean Mission

  1. The Centre has drawn up a five-year, ₹8,000 crore plan to explore the deep recesses of the ocean.
  2. The Union Earth Sciences Ministry tasked with coordinating the exercise unveiled a blueprint of the Deep Ocean Mission (DOM).
  3. Among the key deliverables to achieve these goals are an offshore desalination plant that will work with tidal energy and developing a submersible vehicle that can go to a depth of at least 6,000 meters with three people on board.
  4. The focus will be on technologies for deep-sea mining, underwater vehicles, and underwater robotics and ocean climate change advisory services, among other aspects.

Other deep-sea missions

  1. India has been allotted a site of 75,000 square kilometers in the Central Indian Ocean Basin (CIOB) by the UN International Sea Bed Authority for exploitation of polymetallic nodules (PMN)
  2. These are rocks scattered on the seabed containing iron, manganese, nickel and cobalt.
  3. It is envisaged that 10% of recovery of that large reserve can meet the energy requirement of India for the next 100 years.
  4. It has been estimated that 380 million metric tonnes of polymetallic nodules are available at the bottom of the seas in the Central Indian Ocean.
  5. India’s Exclusive Economic Zone spreads over 2.2 million square kilometres and in the deep sea, lies unexplored and unutilised.
  6. Recently India’s exclusive rights to explore polymetallic nodules from the seabed in Central Indian Ocean Basin (CIOB) have been extended by five years by International Seabed Authority

Back2Basics

UN International Sea Bed Authority

  1. The International Seabed Authority (ISA) is an intergovernmental body that was established to organize, regulate and control all mineral-related activities in the international seabed area beyond the limits of national jurisdiction, an area underlying most of the world’s oceans
  2. It is an organization established by the Law of the Sea Convention
  3. It is based in Kingston, Jamaica
  4. Currently, the Authority has 167 members and the European Union, composed of all parties to the Law of the Sea Convention
  5. The Authority operates by contracting with private and public corporations and other entities authorizing them to explore, and eventually exploit, specified areas on the deep seabed for mineral resources essential for building most technological products
Jun, 29, 2018

[pib] Additional 6.5MMT Strategic Petroleum Reserves at Chandikhol in Odisha and at Padur, Karnataka

Note4students

Mains Paper 3: Indian Economy| Infrastructure: Energy, Ports, Roads, Airports, and Railways etc.

From UPSC perspective, the following things are important:

Prelims level: Locations of SPR

Mains level: Initiatives for ensuring energy security


 News

  1. The Union Cabinet has approved establishment of additional 6.5 Million Metric Tonne (MMT) Strategic Petroleum Reserve (SPR) facilities at two locations, i.e. Chandikhol in Odisha and Padur in Karnataka, including construction of dedicated SPMs (Single Point Mooring) for the two SPRs.
  2. The SPR facilities at Chandikhol and Padur will be underground rock caverns and will have capacities of 4 MMT and 2.5 MMT respectively.

Generating more employment through PPP

  1. The in-principle approval is to take up the project under PPP model to reduce budgetary support of Government of India.
  2. The terms and conditions of such participation would be determined by M/oP&NG in consultation with Ministry of Finance after conducting road shows to elicit requirements of the market, including prospective investors.
  3. The construction phase of the SPRs is likely to generate significant direct & indirect employment opportunities in the states of Odisha and Karnataka.

Back2Basics

Strategic Petroleum Reserve Programme

  1. The Indian Strategic Petroleum Reserve (ISPR) is an emergency fuel store.
  2. Strategic crude oil storages are at 3 underground locations in Mangalore, Visakhapatnam and Padur (near Udupi).
  3. All these are located on the east and west coasts of India which are readily accessible to the refineries.
  4. These strategic storages are in addition to the existing storages of crude oil and petroleum products with the oil companies and serve in response to external supply disruptions.
  5. FM Arun Jaitley in his 2017-18 budget speech has announced that two more such caverns will be set up Chandikhole in Jajpur district of Odisha and Bikaner in Rajasthan as part of the second phase.
Jun, 19, 2018

Why this week’s OPEC meeting matters for India

Note4students

Mains Paper 3: Economy | Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

From UPSC perspective, the following things are important:

Prelims level: OPEC Meetings and their Outcome

Mains level: Effects of rising crude oil prices on Indian Economy.


 News

The world is waiting to see whether the Organization of the Petroleum Exporting Countries (OPEC) will decide to increase crude oil production at its meeting to be held in Vienna

Why is this meeting so important?

  1. With OPEC accounting for around 40% of global production, any decision will have a wide-ranging impact on energy markets.
  2. The meeting is also significant as it comes in the backdrop of a supply cut by OPEC and Russia, which triggered a rally in global crude oil prices.
  3. Prices have fallen since then. Also, there are growing fears of a trade war escalation, which may impact global growth.

How do international crude oil prices affect India?

  1. Retail prices of petrol and diesel in India track global prices of these fuels, not crude, but they are broadly linked to crude oil price trends.
  2. Crude oil prices impact India’s oil import bill and trade deficit. Lower oil prices had dramatically improved India’s terms of trade in 2015-16.
  3. A rally in global oil prices had pushed up the average cost of the Indian basket of crude

How did the Indian government respond to high prices?

The government has so far refused to roll back its decision to link domestic and international fuel prices and has said that it is working toward a ‘long-term solution’.

Why is this meeting particularly important for India?

  1. India’s energy needs are mainly met through imports, and OPEC accounts for around 83% of the country’s total crude oil imports.
  2. Oil minister who is scheduled to participate in the 7th OPEC seminar has maintained that India is a price-sensitive customer and will seek reasonable rates as its energy demand grows.
  3. He has also said market fundamentals do not support such high prices

Is Opec alone responsible for the oil market uncertainty?

  1. There have been both internal and external pressures on the grouping.
  2. There has been a rally in oil prices due to factors such as US President Donald Trump pulling his country out of the 2015 nuclear accord with Iran, and Opec and Russia cutting supplies.
  3. In addition, Venezuela’s oil output has collapsed to the lowest since the 1950s and geopolitical tensions have also played a part.

Back2Basics

Organisation of the Petroleum Exporting Countries (OPEC)

  1. OPEC  is an intergovernmental organization of 14 nations
  2. The 14 countries accounted for an estimated 44 percent of global oil production and 73 percent of the world’s “proven” oil reserves
  3. OPEC’s stated mission is “to coordinate and unify the petroleum policies of its member countries and ensure the stabilization of oil markets, in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers, and a fair return on capital for those investing in the petroleum industry
  4. The OPEC Conference is the supreme authority of the organization and consists of delegations normally headed by the oil ministers of member countries
  5. The Conference ordinarily meets at the Vienna headquarters, at least twice a year and in additional extraordinary sessions when necessary
May, 26, 2018

India’s ONGC to quadruple production from Bay of Bengal block

Note4students

Mains Paper 3: Economy | Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

From UPSC perspectives, the following things are important

Prelims Level: Location of the Gas Block

Mains Level: Importance of the increase in the production of natural gas


News

Increase in output from Deendayal natural gas block in the Bay of Bengal

  1. India’s state-owned exploration company Oil and Natural Gas Corp. Ltd (ONGC) will by early 2019 quadruple the output from an offshore gas block in the Bay of Bengal
  2. The ONGC had spent a billion dollars on the block last year
  3. Output from the block off India’s east coast will reach as high as a million standard cubic metres per day by January 2019

Why is this increase important?

  1. ONGC, which meets up to 40% of India’s total natural gas demand, had been saddled with ageing fields and dropping production for almost a decade

Target set by the government

  1. Government has set a target of increasing the share of natural gas in India’s energy mix to 15% by 2030, from 6.5% now
  2. Government wants to cut down on energy imports, especially crude oil

Demand of natural gas in India

  1. India consumed around 145 million cubic metres of natural gas a day, nearly 50 percent of it imported, in 2017-18
  2. The government has projected India’s potential demand at nearly 500 million cubic metres of gas a day
Apr, 17, 2018

India to launch gas trading hub

Note4students

Mains Paper 3: Economy | Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

From UPSC perspective, the following things are important:

Prelims level: Natural gas trading hub, Petroleum and Natural Gas Regulatory Board

Mains level: India’s ambition of becoming a gas-based economy and various issues associated with it


News

Developing an ecosystem for gas trading

  1. The government plans to launch a natural gas trading hub by October
  2. It will also be creating an Indian gas benchmark which will spark a surge in consumption of the cleaner-burning fuel
  3. Oil regulator Petroleum and Natural Gas Regulatory Board (PNGRB) has sought bids to hire a consultant to help develop a regulatory framework for operationalizing the gas trading/exchange hub

What’s in the offing

  1. In order to further boost the consumption of natural gas in the country, Government is considering the establishment of a Gas Trading Hub / Exchange (GTHE)
  2. Here natural gas could be traded and supplied through a market-based mechanism instead of multiple formula driven prices

Current mechanism

  1. Currently, the government fixes the price of the bulk of domestically produced natural gas
  2. The rate is arrived at using price prevalent in gas-surplus nations of US, Canada, UK, and Russia

Internationally accepted practice

  1. A hub is used as a central pricing point for a network that could aid better price discovery for domestic as well as imported gas
  2. India is not only country launching trading hub
  3. China plans to launch a natural gas trading hub in Chongqing this year
  4. The world’s biggest natural gas hub is the Henry Hub in the US state of Louisiana
  5. Britain has National Balancing Point (NBP) as the main gas hub

Back2Basics

Petroleum and Natural Gas Regulatory Board (PNGRB)

  1. The Petroleum and Natural Gas Regulatory Board Act, 2005 establishes the Petroleum and Natural Gas Regulatory Board (PNGRB) to regulate downstream activities in the petroleum and natural gas sector
  2. The PNGRB shall regulate the laying and expanding of (a) transmission pipelines for gas and petroleum and (b) city/ local gas distribution networks
  3. Entities will have to register with the PNGRB to market petroleum products and natural gas, operate LNG terminals and establish storage facilities beyond specified capacity
  4. PNGRB will monitor PNG prices and can take corrective measures to prevent restrictive trade practice by the entities
  5. The PNGRB will have the same powers as a civil court to settle disputes. The Appellate Tribunal under the Electricity Act will serve as the Appellate Tribunal for this Act
Apr, 16, 2018

India to ally with China on ‘Asian premium’

Note4students

Mains Paper 2: IR | Bilateral, regional & global groupings & agreements involving India &/or affecting India’s interests

From UPSC perspective, the following things are important:

Prelims level: Asian premium, OPEC, International Energy Forum

Mains level: India’s dependence on oil imports and various issues related to it


News

Against Asian premium

  1. India would coordinate with China and other Asian countries to raise voice against the “Asian premium” being charged by the Organisation of the Petroleum Exporting Countries (OPEC)
  2. India with China’s help will chalk out the strategy that would result in getting a better price from OPEC countries
  3. India had also raised the issue on the sidelines of International Energy Forum

Back2Basics

Asian premium

  1. Asia is far more dependent on oil imports from the Middle East (ME) than any other major importing region in the world
  2. Because of this dependence, it is widely believed that Asian customers have been paying a premium for the Middle East crude oil relative to those in the US and EU
  3. A number of studies have consistently identified higher prices for exports to Asia relative to US and EU prices
  4. This is called as “Asian premium”

Organisation of the Petroleum Exporting Countries (OPEC)

  1. OPEC  is an intergovernmental organization of 14 nations
  2. The 14 countries accounted for an estimated 44 percent of global oil production and 73 percent of the world’s “proven” oil reserves
  3. OPEC’s stated mission is “to coordinate and unify the petroleum policies of its member countries and ensure the stabilization of oil markets, in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers, and a fair return on capital for those investing in the petroleum industry
  4. The OPEC Conference is the supreme authority of the organization and consists of delegations normally headed by the oil ministers of member countries
  5. The Conference ordinarily meets at the Vienna headquarters, at least twice a year and in additional extraordinary sessions when necessary
Apr, 12, 2018

Govt nod for natural gas exploration in areas allotted to Coal India

Note4students

Mains Paper 3: Economy | Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

From UPSC perspective, the following things are important:

Prelims level: Cabinet committee on economic affairs (CCEA), coal bed methane (CBM)

Mains level: India’s energy security concerns and measures taken to overcome them


News

Exploring natural gas

  1. The cabinet committee on economic affairs (CCEA) has approved exploration and production of natural gas from areas allotted to state-run Coal India Ltd
  2. This will help expand India’s coal bed methane (CBM) sector

Push for a gas-based economy

  1. India has been pushing for a gas-based economy
  2. As the world’s fourth-largest liquefied natural gas (LNG) importer, it has been trying to leverage the glut in global LNG supplies to renegotiate its contracts
  3. The decision will help India’s natural gas production and reduce the demand-supply gap in the country
Apr, 11, 2018

[pib] MoU between Indian Consortium and Saudi Aramco

Note4Students

From UPSC perspective, the following things are important:

Prelims level: Ratnagiri Refinery

Mains level: Petroleum sector in India and future prospects


News:

  • An Indian Consortium consisting of IOCL, BPCL and HPCL and Saudi Aramco signed a Memorandum of Understanding (MoU) to jointly develop and build an integrated refinery and petrochemicals complex, Ratnagiri Refinery & Petrochemicals Ltd. (RRPCL) in the State of Maharashtra.
  • The strategic partnership brings together crude supply, resources, technologies, experience and expertise of these multiple oil companies with an established commercial presence around the world.
  • The refinery will be capable of processing 1.2 million barrels of crude oil per day (60 million metric tonnes per annum, or MMTPA).
  • It will produce a range of refined petroleum products, including petrol and diesel meeting BS-VI fuel efficiency norms. 
  • RRPCL will rank among the world’s largest refining & petrochemicals projects and will be designed to meet India’s fast-growing fuels and petrochemicals demand
Apr, 09, 2018

[pib] 16th International Energy Forum Ministerial

Note4Students

From UPSC perspective, the following things are important:

Prelims level: International Energy Forum

Mains level: Various summits hosted by India and their importance


News:

  • India hosted the 16th International Energy Forum Ministerial (IEF16).
  • The Prime Minister Shri Narendra Modi inaugurated the event.
  • IEF16 is the largest gathering of Energy Ministers from across the globe, industry leaders and heads of key international organizations who will debate the future of global energy.
  • The International Energy Forum (IEF) aims to foster greater mutual understanding and awareness of common energy interests among its members.
  • It has 72 member countries signatories to the IEF Charter, which outlines the framework of the global energy dialogue through this inter-governmental arrangement. Apart from them, 20 countries are also participating in this meeting as special invitees.
  • Covering all six continents and accounting for around 90% of global supply and demand for oil and gas, the IEF is unique in that it comprises not only consuming and producing countries of the IEA and OPEC, but also the Transit States and major players outside of their memberships, including Argentina, China, India, Mexico, Russia and South Africa.
  • Hosted by India and co-hosted by China and Korea, IEF16 aims to focus on how global shifts, transition policies and new technologies influence market stability and future investment in the energy sector.
  • IEF16 delegates are invited to consider how global market shifts and energy transition will shape the future of energy security.
Mar, 16, 2018

India likely to push for dropping ‘Asian premium’ on oil prices

Note4students

Mains Paper 2: IR | Effect of policies & politics of developed & developing countries on India’s interests, Indian diaspora.

From UPSC perspective, the following things are important:

Prelims level: Asian premiumInternational Energy Forum, Oil Producing and Exporting Countries (OPEC)

Mains level: India’s high dependence on oil imports and measures to develop alternative power sources


News

Ending discriminatory premium on oil

  1. India is likely to lobby heavily for an end to the discriminatory “Asian premium” on oil prices and a “responsible” price mechanism
  2. The 16th International Energy Forum Ministerial Meeting will be held in New Delhi, India from 10-12 April 2018

IEF conference

  1. The IEF represents 90% of world consumption and production of oil and gas
  2. Key Oil Producing and Exporting Countries (OPEC) including Saudi Arabia and Iran’s petroleum ministers will attend the conference

What is Asian premium?

  1. IEF countries distinguished consumers in Asia from the U.S. and European countries in deciding oil prices
  2. The demands to abolish it have met with little success

Focus on renewable energy

  1. The thrust of the IEF conference will be on moving away from fossil fuels
  2. The outcomes would revolve around the whole issue of transition: of moving to electric vehicles, or renewables or decarbonization

Back2Basics

International Energy Forum

  1. IEF is the world’s largest recurring gathering of energy ministers
  2. It is unique in that participants not only include IEA and OPEC countries, but also key international actors such as Brazil, China, India, Mexico, Russia, and South Africa
  3. The IEF is promoted by a permanent Secretariat based in the Diplomatic Quarter of Riyadh, Saudi Arabia
  4. The 16th IEF International Energy Forum Ministerial will take place on 10-12 April in New Delhi under the theme “The Future of Global Energy Security: Transition, Technology, Trade and Investment”
Jan, 27, 2018

[op-ed snap] The oil risk

Image Source

Note4students

Mains Paper 3: Economy | Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

From UPSC perspective, the following things are important:

Prelims level: OPEC

Mains level: The newscard discusses the rising crude oil prices and its effects on India.


News

What is the issue?

  1. Crude oil price is about at about $70 a barrel, marking a four-year high and a price increase of close to 6% since the start of the year
  2. The rise in international prices has been particularly sharp given that oil had been selling at below $45 in June
  3. This is an increase of about 55% in a matter of just months

Reason behind this up and down in prices

  1. Oil price dynamics have often been explained by changes in the supply outlook influenced by the decisions of major oil producers
  2. But the recent spurt in oil prices, however, seems to be more the result of a weakening of the U.S. dollar than anything else

Effect of high prices on OPEC countries

  1. Oil trading at $70 should offer some respite to traditional oil producers like the OPEC members, which have suffered the onslaught of U.S. shale producers

Effect of oil prices on India

  1. Consumers in India are already beginning to feel the pinch as petrol and diesel prices have hit multi-year highs
  2. The retail selling price of both petrol and diesel in Delhi, for instance, has risen by close to Rs. 3 a litre since the beginning of 2018

What should be done from the government side?

  1. As rising oil prices put pressure on domestic consumers, the government will have to desist from resorting to subsidies to ease the pain
  2. It should work towards rationalising taxes on petrol and diesel to bring down retail prices
  3. This will help consumers without imposing an undue burden on the oil marketing companies

Effect of oil prices on India’s fiscal

  1. With the fiscal windfall from low oil prices likely to end for now, the government should think for the long term
  2. And make crucial tweaks to its hydrocarbon exploration and licensing policy to expedite oil discovery and production
  3. Simultaneously, it must take a leaf from China’s book and actively support Indian energy firms’ bids for overseas oilfields
  4. Self-reliance is ultimately the best hedge
Oct, 11, 2017

Petroleum ministry to seek Cabinet approval for domestic gas trading hub

Image Source

Note4students

Mains Paper 2: Governance | Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

From the UPSC perspective following things are important:

Prelims level: Government mandated formula for determining natural gas prices in the country.

Mains level: Energy related topics are specially mentioned in the mains syllabus.


News

Seeking approval

  1. Petroleum ministry is seeking approval from the Union Cabinet’s for a domestic gas trading hub
  2. It help India adopt a better mechanism for price discovery of both domestic as well as imported gas

Other plans of the ministry

  1. Ministry is in the process of creating an internal think-tank to assist in priority areas like
    (1) foreign investment
    (2) moving towards gas-based economy
    (3) financing models
    (4) using technology and curbing hydrocarbon imports

How is natural gas prices determined, currently?

  1. Currently, the price of natural gas in the country is determined through a government-mandated formula that links the local price to rates prevailing in gas-surplus nations

Future plans of the government

  1. Currently, India imports almost 60 per cent of its petroleum requirements
  2. India also plans to double its network of pipelines to transport natural gas to 30,000 km within the next three-four years which will help in shifting to a gas-based economy, reduce greenhouse emissions and cut oil import
Nov, 21, 2016

[pib] India’s flagship biennial international oil and gas conference: PETROTECH

  1. Petrotech is Asia’s largest oil and gas event. The theme for this event is “Hydrocarbons to fuel the future – Choices and Challenges”
  2. Petrotech will also include a BRICS Roundtable of Energy Ministers and a Roundtable discussion involving select CELAC countries of Latin America
  3. India will also host the International Energy Forum – International Gas Union (IEF-IGU) Ministerial Forum on December 6
  4. What’s CELAC? The Community of Latin American and Caribbean States is a regional bloc of Latin American and Caribbean states thought out on February 23, 2010
Oct, 19, 2016

Cairn cannot export Barmer crude: Delhi HC

  1. Delhi HC rejects plea of Cairn India Ltd to export crude oil from its Barmer oil field in Rajasthan
  2. The government had opposed Cairn’s plea on the ground that export of the domestic crude oil cannot be allowed as it would be detrimental to India’s energy security
  3. Nearly 85 per cent of required crude in India was imported
  4. The Delhi HC said that domestic crude cannot be exported till India attained “self sufficiency”
Sep, 01, 2016

Shah panel indicts RIL in KG basin case

  1. Justice A.P. Shah committee: Probed a dispute between state-run Oil and Natural Gas Corp. Ltd (ONGC) and Reliance Industries Ltd (RIL)
  2. Dispute: Pertained to the flow of gas between the adjacent fields of ONGC and RIL in the Krishna-Godavari (KG) basin
  3. Finding: The unfair enrichment in RIL’s KG D6 field came because RIL retained the gains of the gas which flowed into its field from adjacent fields of ONGC
  4. The report accused both ONGC and RIL of not bringing to the notice of the regulator, the Director General of Hydrocarbons, information they had about how their fields were connected
  5. ONGC took action six years after it came to know about gas from its field flowing into RIL’s field
Aug, 27, 2016

SC concerned over adulteration of petro products

  1. SC: A criminal-politician mafia nexus run petrol pumps and subsidised kerosene distribution in rural and urban parts of the country have led to rampant adulteration of petroleum products
  2. It is rampant and unfortunate that very powerful people like politicians have petrol pumps
  3. They can tamper with the machine & are the ones who will resist the change
  4. It asked Govt to detail measures taken to stop fuel adulteration and siphoning of subsidised kerosene meant for the poor
  5. It even suggested the possibility of installing equipment which can detect fuel adulteration
Aug, 09, 2016

Reply to CAG report

  1. Ministry of Petroleum & Natural Gas has taken up the issue of significant implication of inclusion of condensate for determination of ONGC’s share of under-recoveries with the Govt
  2. ONGC: Had appealed to Govt that in future only crude oil quantity be considered for determination of ONGC’s share of under-recoveries and quantity of gas condensate may not be included
  3. Why not to include? The gas-condensate is neither crude oil nor is it sold
Aug, 09, 2016

ONGC overstated crude oil output: CAG report

  1. CAG: ONGC had to bear a larger share of subsidy due to overstatement of reported crude oil production by inclusion of condensate and off-gas
  2. The measurement of crude oil production should not include condensates and off-gas (a dissolved gas in crude oil separated during the stabilisation process of crude oil)
  3. Under-recovery: Upstream national oil companies such as ONGC and OIL shared the under-recoveries of oil marketing companies that arose from their having to sell petroleum products at subsidised rates
  4. Subsidy sharing system(since 2012): An upstream company’s subsidy burden is to be calculated on the basis of its total crude oil production
Jul, 04, 2016

India’s biggest oil refinery to come up

  1. India’s biggest oil refinery that state-run IOC, BPCL, HPCL and EIL plan to set up on the west coast will cost US$ 30 billion
  2. The refinery have 60 million tonnes capacity with 3 crude units of 20 million tonnes each for products such as petrol, diesel
  3. IOC has been looking at west coast for a refinery as catering to customers in West and South was difficult with its refineries mostly in the North
  4. HPCL and BPCL have also been looking at a bigger refinery because of constraints they face at their Mumbai units
  5. Reliance Industries has the biggest refinery in India till now with the 33 million tonnes capacity at Jamnagar in Gujarat
Jun, 27, 2016

Creating strategic reserves of fuel

  1. Strategic reserves of fuel being created for the first time in India by the NDA govt
  2. India used to have 5 to 6 days of storage, mostly stocks in transit
  3. Global: China has facilities for storage of crude oil for 20 days and the US has 50 to 60 days of storage
May, 05, 2016

Low inflation shows oil price benefit passed on: Pradhan

  1. What? Oil Minister Dharmendra Pradhan has strongly dismissed the perception that the Govt has failed to pass on the benefits of lower oil prices to Indian consumers
  2. How? He cited reasonable levels of inflation over the past two years as a proof of transferring the benefits of lower oil pries
  3. If Govt had not passed on the crude oil price benefit to the consumer, the transportation sector would not have seen so much rationality in prices
  4. Avoiding shocks: He also defended the high taxation on fuels as a tool to protect people from a price shock when oil prices start to climb up again
  5. There is no developed country that has transferred the benefit of sliding oil prices to the consumers in any real way
  6. Use of savings: Centre has been using the fuel tax receipts to finance critical development programs such as affordable housing, cooking gas connections for the poor and so on
Apr, 30, 2016

Analysts grow more bullish on oil, OPEC poses no threat to rebalancing

  1. What? Analysts are growing increasingly confident that a near-two-year rout in oil has ended
  2. They have raised their price forecasts for a second month running
  3. Reason: Healthier demand and a drop in U.S. shale output to balance the market by 2017
  4. Also, the inability of OPEC and non-OPEC producers to agree to limit oil output is not expected to slow the rebalancing of global demand and supply
Apr, 26, 2016

LPG subsidy goes for high income consumers

  1. Context: Rationalisation of LPG subsidy
  2. Income limit: Oil and Gas Ministry is excluding people earning more than Rs.10 lakh a year from LPG subsidies
  3. Income will be as computed under Income Tax Act, 1961
  4. Change of stance: Last week, ministry had denied the use of Income Tax data for income identification
Mar, 31, 2016

Govt might cut natural gas price by up to 17%

  1. Context: The petroleum ministry might cut domestic natural gas prices by as much as 17%
  2. The Petroleum Planning and Analysis Cell is likely to make a notification of the new price
  3. Why? To align rates with the decline in global prices
  4. Impact: The new price would dent the earnings of state-run explorers and the government’s earnings from the royalty on production
Mar, 28, 2016

Oil prices take toll on remittances

  1. Context: According to RBI data, Indians remitted $15.8 billion during 3rd quarter of 2016, the lowest in 18 quarters
  2. Reason: This reflects the flip side of the sharp fall in global crude oil prices
  3. If prices remain low for an extended period, the fall in remittances could prove to be more than a one-off
  4. Remittance is India’s most stable source of dollar inflows & a big positive for the country
Mar, 25, 2016

Future oil security at risk: IEA

  1. What? We may face an oil shock in future. according to the International Energy Agency
  2. Why? Because the price bust has hammered investment in future supply
  3. Oil firms have cancelled more than $100 billion investments, laid off tens of thousands of workers, slashed dividends and sold assets
  4. If investment doesn’t resume in 2017-18, we can see a spike in oil prices as oil supply can’t meet demand
Mar, 17, 2016

Centre changes tack on LPG subsidy campaign

  1. Context: In Dec 2015, Centre had notified Rs. 10 lakh as the cut-off annual income for LPG subsidy, but urged people earning more to give it up voluntarily
  2. News: The govt has decided to charge the full unsubsidised price of cooking gas to all customers who earn more than Rs.10 lakh a year
  3. It was done with the support of Income Tax department which identified around 3 lakh people with an income of more than Rs. 10 lakh
  4. Reason: The voluntary campaign “Give it up” did not yield the desired results
  5. Statistics: Around 85.24 lakh people have given up their LPG subsidy voluntarily
Mar, 15, 2016

Opec sees lower 2016 demand for its oil, pointing to higher surplus

  1. Context: Falling crude oil prices in global market
  2. News: The Organization of the Petroleum Exporting Countries predicted global demand for its crude oil will be less in 2016
  3. Reason: The supply from producers outside OPEC is more resilient to low prices and they have started cutting production
  4. OPEC sees considerable uncertainty for 2016 in Europe
Mar, 11, 2016

New regime in oil and gas exploration

  1. Context: Govt effected major policy changes in oil & gas exploration
  2. Revenue sharing: Prospective replacement of profit-sharing in hydrocarbon exploration with a revenue-sharing formula
  3. Benefit: It may help prevent future disputes over pricing and cost recovery such as one with Reliance Industries Ltd (RIL)
  4. License Policy: A transparent single license and policy framework for oil, gas and coal-bed methane (CBM) exploration
  5. At present there is a different policy for each form of hydrocarbons
  6. Pricing: Freeing gas pricing from the new blocks and existing discoveries which are yet to commence production
Mar, 08, 2016

First high-octane fuel unit to come up at Mathura

  1. News: Petroleum Minister laid the foundation stone for India’s first Octomax unit at the Mathura refinery for the production of high-octane gasoline.
  2. Importance: Unit will be the first-of-its-kind in India addressing the emerging scenario in petroleum refining
  3. About Octomax: Novel technology developed in-house by R&D Centre of Indian Oil
  4. Involves: conversion of cracked C4 streams to high-octane gasoline blending stock for production of Euro-IV/V equivalent gasoline
  5. Way forward: Mathura refinery will play major role in meeting govt’s target of introducing BS-VI standards in petrol and diesel by 2020
Feb, 10, 2016

North East in Hydrocarbon Vision 2030

North-east India would be a gateway of South-East Asia in future

  1. Govt planning projects totalling Rs.1.3 trillion in public and private investments in the North-East region
  2. Aims to double oil and gas output in the next 15 years
  3. Has an eye on markets such as Bangladesh, Nepal, Bhutan and Myanmar
  4. A strong network of crude oil and natural gas pipelines would be set up as part of the plan
  5. Present production is 223 million tonnes of petroleum products and 33 billion standard cubic metres of natural gas a year
Jan, 23, 2016

India to buy more crude oil from Nigeria

  1. India is set to import more crude oil from Nigeria, already one of the biggest contributors to the country’s oil imports.
  2. Nigeria has now agreed to increase the term contract from 1.7 million tonnes(MT) per annum to 3 MT in 2016.
  3. The benefit of a term-contract is that it ensures quantity as well as a stable price.
  4. Nigeria is the 3rd-largest contributor to India’s oil imports, behind Saudi Arabia and Iraq.
  5. Sudan has offered more oil blocks for exploration and asked for Indian companies’ expertise to raise production from existing fields.
Jan, 20, 2016

Saudi Arabia’s oil premium may force India to tap Africa

  1. India is looking at Africa to spruce up its oil and gas imports as it seeks to diversify its energy basket.
  2. Recently, Saudi Arabia has decided to charge a premium for the oil it sells to Asian customers.
  3. It would be charging Asian customers 60 cents a barrel more for crude oil during February.
  4. The upcoming 4th India-Africa Hydrocarbon Summit will help in moving this forward.
  5. Africa already contributes around 15% of India’s oil needs and Nigeria is one of the top providers of oil to India.
Dec, 18, 2015

Union Cabinet gives nod for development of Underground Coal Gasification

Cabinet has approved a policy framework for development of Underground Coal Gasification (UCG) in unexplored coal and lignite bearing areas in country.

  1. The UCG policy framework has been framed in line with the existing policy for Coal Bed Methane (CBM) development on revenue sharing basis.
  2. Development of UCG has been envisaged to provide for energy security and will be adopted for offering the blocks through competitive bidding.
  3. Central Mine Planning and Design Institute Ltd (CMPDIL) will be the nodal agency for all business related proposals and regulations.
Sep, 05, 2015

[op-ed snap] Welcome step on oilfields

  1. The government has taken a refreshing and progressive approach with respect to the unutilised natural resources locked away in the 69 small and marginal oilfields lying with the state-owned exploration agencies.
  2. Approved the auction of these oilfields to private, and even foreign, companies, and initiated a new approach in the licensing and proceeds-sharing mechanisms.
  3. The first step was to move from a profit-sharing mechanism to a revenue-sharing mechanism.The revenue-sharing approach is simpler, and is likely to earn the government more money and reduces delays and disputes.
  4. Under the new plan, companies will be allowed to sell crude oil or natural gas at market prices, without any interference from the government.
  5. The revenue and royalty-sharing mechanism will be pegged at this market rate.
  6. The other welcome step has to do with the licensing method.
  7. Companies will receive a unified licence for all hydrocarbons, including conventional ones such as oil and gas, and non-conventional ones such as shale oil and shale gas.
  8. This shows  government’s move towards enhancing the ease of doing business.

Let’s Dig out process of formation of crude oil? Shall we?

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