The LNG import and regassificiation facility at Dhamra port will be besides the Rs 4,320 crore terminal IOC is planning to set up at Ennore in Tamil Nadu, the firm’s Director (Business Development), A M K Sinha, said.

“We are looking at the possibility of setting up a LNG import facility at Dhamra port to meet gas demand in Orissa and West Bengal. Our refineries at Paradip (in Orissa) and Haldia (in West Bengal) alone need 2.5 million tons of LNG,” he said.

Situated between Haldia and Paradip, the port at Dhamra will be one of the deepest ports of India with a depth of 18 meters, which can accommodate super cape-size vessels up to 180,000 DWT. Dhamra Port Co Ltd, a 50:50 joint venture of L&T and Tata Steel, has been awarded a concession by Government of Orissa to build and operate the port.

Sinha said IOC has begun work on the proposed LNG import facility at Ennore. “We have awarded the contract for front-end engineering and design (FEED) study Foster Wheeler.” IOC had in 2007 put on hold the 2.5 million tonnes a year LNG import-cum-regassification terminal after huge gas finds off the east coast made the project economically unviable.

But the output from Krishna Godavari basin fields falling short of the target, LNG imports are being talked as an alternative to meet the demand. IOC and its subsidiary Chennai Petroleum Corp Ltd (CPCL) would be the lead promoters of the Ennore project.

Interestingly, Petronet LNG Ltd, the nation’s largest liquefied natural gas importer, too is looking at setting up a LNG import terminal on the east. Petronet, which is expanding its currently operational Dahej terminal in Gujarat to 15 million tons from 10 million and is setting up a 5 million tons facility at Kochi in Kerala by 2013, is looking at sites in Oriss and Andhara Pradesh for its third terminal.

IOC is an equal promoter of Petronet along with GAIL India, Oil and Natural Gas Corp and Bharat Petroleum Corp. Sinha said like Dhamra, Ennore too would have captive users in its refinery at Chennai. “We have an advantage as we have our own captive gas requirement to be met.”
Agencies

The company is hoping to get about Rs 16,000 crore in compensation from the government by early next month to make up for part of the losses it incurred on selling the three fuel in the first half of current fiscal.

Parliament today approved additional spending by the government, including payment of Rs 30,000 crore to state fuel retailers as subsidy. IOC, the market leader, would get about Rs 16,000 crore out of that. Cash subsidy from the government “will give us some respite for next couple of months”, he said.

While crude oil ruling at over USD 100 per barrel and rupee depreciating to its all time low of Rs 53.29 to a US dollar has made oil imports costlier, the government has not allowed oil firms to adjust retail fuel prices in line with the cost. Butola said IOC is estimated to lose Rs 73,605 crore in fully 2011-12 fiscal.

“This should be seen in comparison to the under-recovery (revenue loss) of 2010-11. Last year, the industry (IOC and Bharat Petroleum and Hindustan Petroleum) together had an under-recovery of Rs 78,190 crore while this year IOC alone has an under-recovery of over Rs 73,000 crore,” he said.

Fuel retailers currently sell diesel at a loss of Rs 13.53 per litre, kerosene at Rs 29.99 per litre and domestic LPG at a discount of Rs 287 per 14.2-kg cylinder. The three firms together are projected to lose Rs 137,605 crore in 2011-12 fiscal.

IOC alone is losing Rs 227 crore per day on sale of diesel, domestic LPG and kerosene and had to borrow heavily to meet working capital requirement.
Agencies

This deadline was set keeping in mind the commissioning schedule given by IOC for its 15 million tons a year Paradip refinery in Orissa, official sources said. However, Paradip refinery is running way behind that schedule because law and order problems and issues related to land acquisition and is now expected to be commissioned in September 2013.

Sources said IOC made the request for extension of tax holiday to the oil ministry, which in turn has forwarded the same to the finance ministry for consideration. Currently, refineries commissioned after March 31, 2012, will not be eligible for exemption from payment of income tax on revenues earned in the first seven years of operations. The seven-year income tax holiday for the refining sector ends next year.

IOC plans to sell fuel produced at the Paradip unit in the domestic market, rather than export the products as was earlier planned, due to the rise in fuel demand at home. The refinery was originally planned to export at least 2.05 MT of petrol and 124,000 tonnes of naphtha out of its yearly output of 15 million tonnes. But double-digit growth in petrol and diesel consumption meant there would be very little left for exports.

The Paradip refinery will produce 5.97 MT of diesel, 3.4 MT of petrol, 1.45 MT of kerosene/ATF, 536,000 tonnes of LPG, 124,000 tonnes of naphtha and 335,000 tonnes of sulphur, all of which will be for sale in the domestic market. Some of the 200,000-tonne propylene output of the plant may be exported, the company had earlier said.

IOC had previously stated that the refinery will start producing fuel by March, 2012, when it will commission primary units like the Crude Distillation Unit. Secondary units will be commissioned by July, 2012, and operations stabilised by November, 2012. The Paradip refinery is being configured to process the toughest, heaviest and dirtiest crudes, which are cheaper than the cleaner and more easily processed varieties.

The refinery will have a Nelson Complexity Index of 13, the highest in the world.
Agencies

The proposed Acetic Acid plant would employ BP’s latest Cativa XL technology, while the gasification facilities would utilise petroleum coke feedstock from IOC.

“A joint feasibility study is currently underway to confirm the exact configuration of the project, which would have a targeted start-up date in 2015,” the statement said but did not give details of investment.
Agencies

“We will ask the IOC. They will recommend, though their recommendation is not binding on us,” Director General of Foreign Trade (DGFT) Anup Pujari said.

As per the Foreign Trade Policy, only state trading enterprises like IOC are allowed to import the ATF. However, DGFT has powers to “grant an authorisation to any other person to import any of these goods…On the grounds of genuine hardship”. The DGFT is yet to receive the Kingfisher’s application seeking permission for direct import of Aviation Turbine Fuel (ATF), he said. Kingfisher had said on November 15 that it has made an application to DGFT.

Asked whether government can permit policy relaxation, the DGFT said the foreign trade rules do allow for this. But, the applicant has to prove it is facing “genuine hardship”. Pujari, however, sounded cautious stating “this way, others may also seek similar exemptions…”

They may not be in a crisis situation as Kingfisher, but most of the airlines are in dire financial state. Kingfisher reported a net loss of Rs 468.66 crore for the second quarter ended September 30. It has a debt of over Rs 6,000 crore.

Jet Airlines which has bigger fleet and wider operations also posted a net loss of Rs 714 crore and the Spicejet bottomline was bleeding by Rs 240 crore. It is estimated that jet fuel costs are almost 50 per cent of the total operating expenses of the airline.
Agencies

IOC, which currently controls a third of India’s refining capacity, plans to commission a 300,000 bpd refinery at Paradip in the eastern Orissa state next year.

It is also exploring building a 300,000 bpd plant in western India, Rajkumar Ghosh said in a statement on Wednesday, seeking to meet growing fuel demand as Asia’s third-largest economy expands at about 8 per cent.

IOC plans to boost the capacity of its 274,000 bpd Koyali refinery in Gujarat to 360,000 bpd by 2016-17 and to 460,000 bpd by 2020-2021, the statement said.
Agencies

A tax holiday is currently available to units that are commissioned by March 31, 2012, under section 80IB(9) of the I-T Act (exemption from payment of tax on income earned from refining).

IOC’s 15 million tonne a year Paradip refinery is running behind schedule because of several problems the company has faced in executing the mammoth project in Orissa, officials said.

The biggest of these were law and order problems and issues related to land acquisition, which have delayed the project commissioning to September, 2013, from the previous schedule of the first quarter of 2012.

Officials said owing to issues beyond its control, IOC had asked the Oil Ministry to seek a two-year extension of the tax holiday till March, 2014. The Oil Ministry, in turn, has written to the Finance Ministry requesting the same.

Currently, refineries commissioned after March 31, 2012, will not be eligible for exemption from payment of income tax on revenues earned in the first seven years of operations. The seven-year income tax holiday for the refining sector ends next year.

IOC plans to sell fuel produced at the Paradip unit in the domestic market, rather than export the products as was earlier planned, due to the rise in fuel demand at home.

The refinery was originally planned to export at least 2.05 million tonne of petrol and 124,000 tonne of naphtha out of its yearly output of 15 million tonne. But double-digit growth in petrol and diesel consumption meant there would be very little left for exports.

The Paradip refinery will produce 5.97 MT of diesel, 3.4 million tonne of petrol, 1.45 million tonne of kerosene/ATF, 536,000 tonne of LPG, 124,000 tonne of naphtha and 335,000 tonne of sulphur, all of which will be for sale in the domestic market.

Some of the 200,000-tonne propylene output of the plant may be exported, the company had earlier said. IOC had previously stated that the refinery will start producing fuel by March, 2012, when it will commission primary units like the Crude Distillation Unit. Secondary units will be commissioned by July, 2012, and operations stabilised by November, 2012.

The Paradip refinery is being configured to process the toughest, heaviest and dirtiest crudes, which are cheaper than the cleaner and more easily processed varieties. The refinery will have a Nelson Complexity Index of 13, the highest in the world.
Agencies

IOC posted the second successive quarterly loss because it has not been compensated for selling kerosene, cooking gas and diesel below market rates. This is forcing IOC to buy crude oil with borrowed money, but banks cannot endlessly support this as the company’s borrowings have surged to over Rs 73,000 crore and it is unable to raise prices of fuels.

“We will face problems in raising money after December. Means, we will not have enough money to import crude. We will be forced to shut down some refineries and supplies will suffer,” Butola said. Oil companies are trapped between the government’s political and economic compulsions, which are blocking moves to pay subsidy or to raise fuel prices: The government is under strong political pressure to freeze fuel rates as inflation is already high while the finance ministry, which is struggling to meet its fiscal targets, is looking for ways to raise revenue and reduce expenditure on subsidies.

Brent crude was trading at US $114 on Wednesday, down from the previous day’s high of nearly US $116, but still too high for Indian companies. The International Energy Agency said oil prices would head towards US $150 if adequate investments are not made in the Middle-East and north Africa.

Butola said the company had reported its “worst ever” loss of Rs 7,486 crore in the second quarter of the current fiscal after the government did not pay it a penny to compensate its Rs 11,757-crore revenue loss.
Economic Times

R S  Butola told shareholders at an annual general meeting that the joint venture company–NPCIL-Indian Oil Nuclear Energy Corp.–was incorporated in the financial year ended March 31, 2011, to garner opportunities in the nuclear energy sector in coming years.

He said the joint venture company will build a 1,400 Mw nuclear power unit at the Rajasthan atomic power station at Rawatbhata in northwestern India.
Agencies

The country’s biggest oil explorer may pay about Rs 470 billion (US $9.8 billion) as the state-mandated subsidy this financial year, one of the people said, asking not to be identified because the details are private. The New Delhi-based company paid Rs 248.9 billion as subsidy in the year ended March 31, according to a May 30 stock exchange filing.

ONGC supplies crude at a discount to state-owned refiners to partly compensate them for selling diesel, kerosene and cooking gas below cost and its share of subsidy rises when the cost of oil climbs. The government last week has deferred its plan to sell shares in ONGC, hampering Finance Minister Pranab Mukherjee’s target of cutting the nation’s fiscal deficit to the lowest in four years.

“Increasing the subsidy payout would mean the share sale plan will have to be put off, probably for a long time,” Deepak Darisi, a Mumbai-based analyst with a “buy” rating on the stock at LKP Shares & Securities Ltd., said today by telephone. “An already ad-hoc subsidy-sharing mechanism is becoming more random. The shares would be hit.”

The government last week postponed selling a 5 per cent stake in ONGC, valued at about $2.4 billion, to raise money to build schools, hospitals and roads. No reason was given for delaying the offer, which was scheduled to start today.

The selling price for ONGC’s crude produced in India may fall to about US $42 a barrel if the subsidy bill rises to 470 billion rupees, one of the people said. The subsidy burden is based on current crude oil prices and currency rates, the people said.

Finance Ministry spokesman DS Malik declined to comment on the subsidy. ONGC hasn’t received information from the government on subsidy payments and can’t comment, the company said in an e-mail.
Agencies