Ahead of his departure for Moscow on Thursday for the annual India-Russia Summit at the invitation of President Dmitry Medvedev, the prime minister said his talks with the Kremlin leadership will also cover multilateral issues, notably on ways out of the global economic slowdown.

“I will discuss mechanisms to further expand our bilateral cooperation, particularly in the trade, economic and commercial fields,” Manmohan Singh said in his statement ahead of his departure on the three-day visit.

“Our relations encompass diverse sectors, including nuclear energy, defence, space, science and technology, hydrocarbons, trade and investment and people-to-people exchanges,” the prime minister said without dwelling on the recent protests over nuclear power plant in Tamil Nadu being built with Russian assistance.

In Moscow, the prime minister he is to hold a summit meet with President Dmitry Medvedev on issues such as nuclear energy and hydrocarbons, apart from overseeing the signing of several pacts covering defence, health and science and technology fields.

Manmohan Singh said India’s bilateral relations with Russia were based on “mutual trust, friendship and shared interests” and encompass diverse sectors, including nuclear energy, defence, space, science and technology, hydrocarbons, trade and investment and people-to-people exchanges.

Bilateral trade amounted to $8.535 billion in 2010, witnessing a 15 percent growth from 7.46 billion in 2009. The two countries in 2009 decided to set a target of $20 billion worth of bilateral trade by 2015 with a focus on the fields of energy, pharmaceuticals, IT, steel, hydrocarbons, aerospace and agriculture.

The prime minister, who will be in Moscow till Saturday, will also hold a one-on-one meeting his Russian premier Vladimir Putin, who is at the centre of a political storm in the country over allegations of rigging in the Duma polls Dec 4 following which protests have erupted on the streeets of Moscow and other cities across Russia.

Manmohan Singh said during his talks with the president he would also focus on increased consultations with Russia in international forums.

“I will discuss with Medvedev how to further enhance our consultations in international forums like the United Nations Security Council, G20, BRICS as well as the East Asia Summit which Russia has recently joined. I am convinced that the India-Russia consultation on global issues is more necessary today than ever before.”

He said he would also hold “in-depth exchange of views with the Russian leadership on the crisis facing the global economy and the political developments in our extended neighbourhood”.

This, the prime minister said, included the situation in the “Gulf and Afghanistan and the impact of all this on peace and stability in the world.”

“The perspectives of our countries on these developments are marked by a high degree of convergence.”
Agencies

The nation produced 37.68 million tonnes of crude oil in 2010-11, which is expected to rise to 38.18 million tonne during the current fiscal, he said in a written reply to a question in the Lok Sabha. The output is expected to further rise to 42.30 million tonne in 2012-13 and to 45.57 million tonne in 2013-14, he said.

India is reliant on imports to meet 79% of its crude oil needs. The biggest contributor is likely to be Cairn India, whose Rajasthan block is currently producing 125,000 barrels of crude per day, or 6.25 million tonne a year. The block is projected to produce 240,000 bpd, or 12 million tonne, by 2013-14.

Reddy said natural gas production will rise by 18% to 61.652 billion cubic metres (bcm) by 2013-14 from 52.221 bcm in 2010-11.

Gas production is expected to drop to 51.671 bcm this fiscal on account of lower output from Reliance Industries’ eastern offshore KG-D6 fields. However, it will recover to 52.276 bcm in 2012-13. What is more, the country’s oil refining capacity is projected to increase to 240.6 million tonne a year by 2013-14 from 193.386 million tonne in 2010-11, he said.

The increase in capacity would primarily come from the 15 million tonne a year refinery Indian Oil Corporation (IOC) is building at Paradip, in Orissa, and the soon-to-be- commissioned, 9 million tonne per annum Bhatinda unit being set up by a joint venture between Hindustan Petroleum (HPCL) and steel baron Lakhsmi Mittal.

Reddy noted that in the current year, a 6 million tonne refinery at Bina, in Madhya Pradesh, has been commissioned by a joint venture of Bharat Petroleum (BPCL) and Oman Oil Co. He also stated: “HPCL has commissioned a study on pre-project activities for a 9 million tonne grassroot refinery at Ratnagiri district, in Maharashtra.”

India, which probably has the largest number of petrol pumps in the world, is likely see the number of fuel retail outlets rise to 45,530 in 2013-14 from 39,430 in 2010-11.

Reddy said the number of LPG consumers is also likely to rise to 15.58 crore in 2013-14 from 12.69 crore in 2010-11. To a separate question, Minister of State for Petroleum and Natural Gas RPN Singh said India’s natural gas demand stood at 262.07 mmscmd in 2010-11. Against this, supply was only 163.36 mmscmd.

Of the 163.36 mmscmd supply, 126.16 mmscmd came from indigenous gas fields and the remaining 37.2 mmscmd was imported in the form of liquefied natural gas (LNG), he said.
Agencies

“OVL [ONGC Videsh Ltd.] is keen to get involved in the development of Sakhalin-3 and they [OVL] are in discussions with Rosneft for this,” Ranjan Mathai said at a news conference. “OVL is also in talks with Novatek to access gas deposits in the Yamal peninsula in the north eastern Siberian region.”

Mathai was briefing the media ahead of Prime Minister Manmohan Singh’s three-day visit to Russia that starts Thursday. Singh will be meeting Russian Prime Minister Vladimir Putin and President Dmitry Medvedev during his visit, Mathai said.

He didn’t say if OVL would sign any deal with Russian energy companies during Singh’s visit. OVL holds a 20% stake in Russia’s east offshore Sakhalin-1 oil and gas field, which is operated by ExxonMobil. Rosneft is exploring Veninsky licensed block of the Sakhalin-3 project, the Russian state oil producer’s website showed.

Independent natural gas producer Novatek’s Yamal LNG project holds the exploration and production license for the South-Tambeyskoye field, which has proved reserves of 418 billion cubic meters of natural gas and 15 million tons of gas condensate, the company’s website showed. Novatek plans to start LNG production in 2016 and eventually reach production of 15 million tons a year.

OVL produced 9.45 million tons of oil and oil-equivalent gas in the year ended March 31, 2011. The New Delhi-based company aims to source 20 million tons a year from overseas assets by 2020, and is looking to pick up stakes in overseas exploration and production assets to realize the target. Apart from its stake in Russia’s Sakhalin, OVL also owns Russia-focused Imperial Energy, which it acquired in January 2009 for $2.12 billion to establish a presence in Western Siberia, one of the world’s largest oil and gas producing regions.

OVL hasn’t been able to ramp up production at Imperial as it seeks tax concessions from Russia to further invest in the field. Mathai said the issue of Imperial’s tax liability is under discussion. “The matter hasn’t been finally settled and will continue to be raised and discussed with the Russian side,” he said.
Agencies

The output comprised 32.94 mmscmd from the D1 and D3 gas fields and 6.86 mmscmd from the MA oilfield. The KG-D6 production is lower than 61.5 mmscmd rate achieved in March, 2010, as a drop in pressure in the wells and increased water ingress has led to a lower per-well gas output.

The report said of the 18 wells drilled, completed and put on production in the D1 and D3 fields, four wells— A2, B1, B2 and B13— had to be shut or closed due to high water cut/sanding issues. The output from KG-D6 is short of the 70.39 mmscmd-level (61.88 mmscmd from D1 and D3 and 8.5 mmscmd from the MA field) envisaged by now as per the field development plan approved in 2006.

While Reliance holds 60% interest in KG-D6, UK’s BP Plc holds 30% and Niko Resources of Canada the remaining 10%. Reliance started natural gas production from the KG-D6 fields in April 1, 2009, with output of about 40 mmscmd.

The MA oilfield currently produces about 12,715 barrels of crude oil per day. In addition, 1,831 barrels of condensate are produced from the field every day. The report said 14.89 mmscmd of the gas output is being sold to fertiliser plants and 22.02 mmscmd to power plants. The remaining 2.89 mmscmd is consumed by other sectors, including those fed by the East-West pipeline that transports gas from the East Coast to consumption centres in the West.

Reliance had projected an output of 39.50 mmscmd of gas during December. As per the status report, out of the 22 wells planned in in Phase-I of D1 and D3 field development, 18 wells have been drilled and completed so far. Of these, 14 wells were put on production, while four wells were kept closed due to high water cut and sanding issues.
Agencies

The DGH in its recommendation to the Oil Ministry has suggested $457 million of the ‘profit petroleum’ accruing to RIL in 2011-12 should be disallowed and another $778 million in 2012-13. Sources privy to the development said top officials of the ministry and DGH discussed the numbers at a meeting yesterday but there was no unanimity.

As per the 2006 field development plan, where capital expenditure in Dhirubhai-1 and 3 fields was hiked to $8.8 billion from $2.47 billion previously, RIL was to produce 61.88 million standard cubic metres per day (mmscmd) of gas from 22 wells by April this year and 80 mmscmd from 31 wells by 2012.

But the Mukesh Ambani-run firm drilled only 20 wells till now, of which it has not put two of the wells on production yet. D1 and D3 fields are currently producing just over 40 mmscmd. Sources said the Solicitor General of India (SGI) had opined that Section 3.2 of the Production Sharing Contract (PSC) that states, “… Amounts paid with respect to non-fulfilment of contractual obligations” can be disallowed for cost recovery.

“…The expenditure incurred which has resulted in excess capacity / underutilisation of asset created on account of failure of the contractor (RIL) to adhere to the field development plan would fall within the provisions of Section 3.2,” SGI had said.

RIL has built facilities at KG-D6 to handle 80 mmscmd of output. Sources said based on the SGI opinion the DGH was asked to carry out an exercise to calculate the amount of investment which should be disallowed for cost recovery.

Since most of the $5.7 billion investment RIL has made on D1 and D3 fields has already been recovered, the DGH has suggested that the investment disallowed should be deducted from its profit share for the current and the next fiscal. Anticipating such a move, RIL had on November 24 slapped an arbitration notice challenging the proposal.

PSC for KG-D6, where drop in pressure in the wells and an increased water ingress lead to lower per-well gas output and halt in drilling pending more studies, allows operators to recover 100% of expenditure on exploration and production before sharing profits from the field with the government. It does not link cost-recovery to output. RIL and its new partner BP Plc of UK say new wells in KG-D6 can come up not before 2014.
Agencies

Dhirubhai-1 and 3 (D1 and D3), the first two of the 18 gas discoveries in the Krishna Godavari basin KG-DWN-98/3 or KG-D6 block in the Bay of Bengal that have been put on production, and MA oilfield in the same area produced 40.35 mmscmd in the last week of November, according to the status report filed by the company with the oil ministry.

The output in the week ending November 27 comprised 33.47 mmscmd from D1&D3 gas fields and 6.88 mmscmd from MA oil field. The KG-D6 production is lower than 61.5 mmscmd rate achieved in March 2010 as drop in pressure in the wells and an increased water ingress lead to lower per-well gas out.

The report said of the 18 wells drilled, completed and put on production on D1&D3, four wells — A2, B1, B2 and B13 — had to be shut or closed due to high water cut/sanding issues.

The output from KG-D6 is short of the 70.39 mmscmd (61.88 mmcmd from D1&D3 and 8.5 mmcmd from MA field) level envisaged by now as per the field development plan approved in 2006. While Reliance holds 60% interest in KG-D6, UK’s BP Plc holds 30% and Niko Resources of Canada the remaining 10%.

Reliance started natural gas production from the KG-D6 fields in April 1, 2009. The MA oilfield currently produced about 12,624 barrels of crude oil per day.

The report said 14.47 mmscmd of the gas output is being sold to fertiliser plants and 22.86 mmscmd to power plants. The remaining 3.02 mmscmd is consumed by other sectors, including by the East-West pipeline that transports gas from the east coast to consumption centres in the west.

Reliance projected an output of 40 mmscmd of gas during December. As per the status report, out of the 22 wells planned in in Phase-I of D1 and D3 field development, 18 wells have been drilled and completed so far. Of these, 14 wells were put on production, while four wells were kept closed due to high water cut and sanding issues.
Agencies

“Reliance says the production has fallen because of geological reasons. It may be true but there are 50% observers who are not fully convinced with the reasoning,” the source said.

RIL was to drill 22 wells on the Dhirubhai-1 and 3 gas fields in KG-D6 block by March 31, 2011 and 31 wells by March 31, 2012, as per the 2006 field development plan. But the Mukesh Ambani-run firm drilled only 20 wells till now, of which it has not put two of the wells on production yet.

The source said failure of RIL to comply with its commitments made the oil ministry seek legal opinion. The SGI in its opinion quoted Section 3.2 of the Production Sharing Contract (PSC) that states, “… Amounts paid with respect to non-fulfilment of contractual obligations” can be disallowed for cost recovery.

“…The expenditure incurred which has resulted in excess capacity / underutilisation of asset created on account of failure of the contractor (RIL) to adhere to the field development plan would fall within the provisions of Section 3.2,” SGI said. RIL has built facilities at KG-D6 to handle 80 million standard cubic meters per day of gas output which was expected by April 2012 but production currently is just 40.6 mmsmcd.

“Excuse of geological uncertainty (for not drilling committed wells) does not wash with everyone,” the source said adding as the ministry contemplated next move, RIL slapped an arbitration notice challenging the proposed move to disallow a part of $5.7 billion expenditure already made in KG-D6 by restricting cost recovery in proportion to production.

PSC for KG-D6, where drop in pressure in the wells and an increased water ingress lead to lower per-well gas output and halt in drilling pending more studies, allows operators to recover 100% of  expenditure on exploration and production before sharing profits from the field with the government. It does not link cost-recovery to output.

RIL and its new partner BP Plc of UK say new wells in KG-D6 can come up not before 2014. Incidentally, 2014 is also the year when the current $4.2 per million British thermal unit gas price for the block comes up for review. Production from KG-D6 field had reached 61.5 mmscmd in March 2010. However, from December 2010, the production started declining.

The government had in 2006 approved an investment of $8.8 billion in two phases in developing Dhirubhai-1 and 3 gas fields in the KG-D6 block (Phase-I: $5.2 billion and Phase-II $3.6 billion).
Agencies

European Union (EU) countries have imposed sanctions on Syria on September 3 after which European countries having contracts with Syria have stopped importing Syrian crude oil since then, Minister of State for Petroleum and Natural Gas R P N Singh told the Lok Sabha.

“EU oil import sanction prohibits only EU countries from importing Syrian crude oil. OVL is pursuing with Indian refining companies the feasibility of lifting of crude oil from Syria,” he said in a written reply to a question. OVL, the overseas arm of state-owned Oil and Natural Gas Corp (ONGC), has stake in AI Furat project in Syria through its joint venture company Himalaya Energy Syria BV.

AI-Furat Petroleum Company (AFPC), the operating company for AI Furat Project in Syria, in which OVL has a stake — had been producing 85,000 barrels per day. However, after the imposition of sanctions by the EU, all the operators in Syria had to cut down their production as evacuation of crude was getting difficult due to non-availability of shipping vessels as most of them are registered either in Europe or in the US.

AFPC had to cut down its production to the level of 70,500 bopd from the middle of September, 2011. Currently, AFPC is producing 70,500 bopd. “The output from oilfields of AI Furat project has been reduced by about 17% from mid-September 2011, on the advice of Government of Syria,” he said adding the European countries having contracts with Syria have stopped importing Syrian crude oil since September, 2011.

Accordingly, Government of Syria has advised management of AI Furat company to cut down production by about 17% due to these trade sanctions. Presently, the project is producing crude oil and condensate at the rate of 70,500 barrels per day.

ONGBV and Fulin Investments Sarl, a subsidiary of China National Petroleum Company International (CNPCI), holds 33.33% to 37.5% participating interest in four Production Sharing Contracts (PSCs) comprising 36 producing onland fields in Syria through a Dutch joint venture company, named Himalaya Energy (Syria) BV, wherein ONGBV and Fulin Investments Sarl, hold 50% shareholding each.
Agencies

Cairn Energy, which had in July sold a 10% stake in Cairn India to Vedanta for about $1.4 billion, got another $4.1 billion from the sale of the remaining 30%, the company said in a press statement.

“Cairn is pleased to announce that the transaction has now completed,” it said. Sesa Goa Ltd, a unit of London-listed Vedanta Resources, had yesterday stated that it has raised its stake in Cairn India to 20% following the acquisition of 28.8 million additional shares, amounting to a 1.5% stake.

Vedanta Group now holds 60% in Cairn India, while Cairn Energy retains about 22%. The transaction was originally announced in August last year, but its completion was delayed as state-owned Oil and Natural Gas Corp, which partners Cairn India in its crown jewel Rajasthan oilfields as well as seven other properties, demanded sharing of royalty it pays before the deal was cleared.

ONGC, being the licencee of the Rajasthan block, pays 20% royalty on not just its 30% share of production, but also on the 70% share of Cairn India. It wanted this payment to be treated like other project costs and taxes and recouped from revenues earned from oil sales, a demand opposed by Cairn India.

Cairn India also felt the Rs 2,500 per tonne oil cess was a liability of the licencee and was opposed to deviating from the signed contract to share any of this burden. The government, however, supported ONGC’s stand and made sharing of royalty and acceptance of cess liability by Cairn India preconditions for giving its nod to the transaction.

Despite Cairn India’s reservations, its current and future promoters — Cairn Energy and Vedanta, respectively — accepted the government conditions, following which ONGC waived its preemption rights over the deal. The Home Ministry also late last month gave security clearance to a Vedanta takeover of the operations of India’s biggest onland oil discovery in more than two decades, besides other properties of Cairn India.

Vedanta acquired 40% of Cairn Energy’s stake at Rs 355 per share. Cairn Energy said it would return $3.5 billion to shareholders from the net proceeds of $5.5 billion from the stake sale in Cairn India. Shareholders would have “an element of choice as to when and in what form they receive cash,” it said.
Agencies

OVL has been since 2006 raising the issue of stake in the Far East Russian oil and gas fields but Moscow is yet to respond favourably. OVL is keen on replicating its 20% stake in Exxon Mobil-operated Sakhalin-1 oil and gas fields in the upcoming Sakhalin-3 project, official sources said.

OVL Managing Director DK Sarraf raised the issue when Oil Minister S Jaipal Reddy met his Russian counterpart Sergey Shmatko on sidelines of the World Petroleum Congress (WPC) in Doha, Qatar.

OVL also showed interest in acquiring stake in some oilfields in East Siberia and north Russia. Sarraf made a case for OVL joining hands with Russian firm Rosneft for exploring and developing the Vankor oilfield in East Siberia. Joint bidding for Trebs and Titov oilfields in the Timan Pechora region of North Russia was also discussed.

Besides, importing at least 2 million tonnes of LNG a year from Russia’s Sakhalin LNG project also figured during the discussions, sources said. Petronet LNG, the nation’s largest liquefied natural gas importer, is raising its Dahej terminal capacity to 15 million tonne and is keen on imports from Russia, which could be doubled to 4 million tonne a year later.

An official statement said Petronet is in close talks with Russia’s Gazprom to jointly develop projects to produce LNG, gas pipelines, its transportation and marketing. “Indian side suggested swapping LNG imports of Japan from Qatar with the LNG that could be available from Russian sources like Sakhalin,” the statement said adding Indian side also proposed participation of Petronet in the projects along with OVL.

Petronet informed that they would be soon finalising the agreement for sourcing LNG from Russia under the pact arrived at with Gazprom. The Heads of Agreement for supply of about 2.5 million tonnes of LNG were signed recently at Singapore.

The LNG is proposed to be sourced from Shtokman field. Petronet further showed interest in importing more LNG as the demand in India was growing rapidly, the statement added.
Agencies