Scenario of Natural Gas and LNG and Its Transportation Infrastructure

Agenda Note for the Parliamentary Consultative Committee meeting of Ministry of
Petroleum & Natural Gas to be held on 13.8.2003
"Scenario of Natural Gas and LNG and its Transportation Infrastructure"
Introduction
Natural gas has emerged as the most preferred fuel due to its inherent environmentally benign
nature, greater efficiency and cost effectiveness. The demand of natural gas has sharply
increased in the last two decades at the global level. In India too, the natural gas sector has
gained importance, particularly over the last decade, and is being termed as The Fuel of the 21st
Century.
Natural Gas Production
2. Production of natural gas, which was almost negligible at the time of independence, is
currently at the level of around 89 million standard cubic meters per day (MMSCMD). The main
producers of natural gas are Oil & Natural Gas Corporation Ltd. (ONGC) and Oil India Limited
(OIL). Under the Production Sharing Contracts, private parties from some of the fields are also
producing gas. Government have also offered blocks under New Exploration Licensing Policy
(NELP) to private and public sector companies with the right to market gas at market determined
prices.
3. Out of the total production of around 89 MMSCMDM, after internal consumption, extraction of
LPG and unavoidable flaring, around 75 MMSCMD is available for sale to various consumers.
4. The details of production of natural gas in the country are as follows:
Production (MMSCMD)
ONGC 65.866
OIL 4.436
PVT/JV 18.510
Total 88.812
5. Most of the production of gas comes from the Western offshore area. Assam, Andhra
Pradesh and Gujarat are other major producers of gas. Smaller quantities of gas are produced in
Tripura, Tamil Nadu and Rajasthan. OIL is operating in Assam & Rajasthan whereas ONGC is
operating in the Western offshore fields and in other states. The gas produced by ONGC & the JV
consortiums is marketed by the GAIL (India) Ltd. The gas produced by OIL is marketed by OIL
itself, except in Rajasthan where GAIL is marketing its gas. Gas produced by Cairn Energy from
Lakshmi fields and Gujarat State Petroleum Corporation Ltd. (GSPCL) from Hazira fields is being
sold directly by them at market determined prices.
Natural Gas Allocation & Supply Scenario
6. As against the total allocation of over 119 MMSCMD, the gas supplies by GAIL is of the order
of 63 MMSCMD spread over about 300 major consumers. Around 34% is supplied to the fertiliser
sector, 40% to power, 5% to sponge iron and the balance 21% (including shrinkage) goes to other
sectors.
All India Region-Wise & Sector-Wise Gas Supply By Gail - (2002-03)
(MMSCMD)
Region Power Fertilizer Sponge Iron Others (including I-C) Total
HBJ & ex-Hazira 13.44 14.58 1.35 8.77 38.13
Gujarat (Onshore Gas) 1.61 0.99 - 1.77 4.37
Rajasthan 0.48 0.00 - 0.00 0.48
Uran 3.41 3.19 1.31 1.17 .08
Cauvery Basin 1.02 - - 0.17 1.18
KG Basin 4.80 1.88 - 0.41 7.10
Assam 0.41 0.04 - 0.27 0.72
Tripura 1.23 - - 0.01 1.24
Total (Gail) 26.40 20.66 2.66 12.57 62.31
OIL is also supplying around 3 MMSCMD in Assam against allocations made by the Govt.
7. Around 8 MMSMD of gas is being directly supplied by the JVs/Private companies at market
prices to various consumers. This gas is outside the purview of the Government allocations.
8. Gas produced by ONGC/OIL is allocated to consumers by the Ministry of Petroleum &

Natural Gas on the recommendations of Gas Linkage Committee (GLC) which is an inter-
Ministerial Committee with representatives from the Planning Commission and the Ministries of
Finance, Power, Chemicals & Fertilizers and Steel. This gas is sold at administered prices fixed
by the Government.
9. So far, over 119 MMSCMD of gas has been allocated to various industries in different States
of the country. The sector-wise and State-wise details of the allocations are given below:
All India Gas Allocations:
Sector wise & state wise gas allocations in India
MMSCMD
State Fertilizer Power Sponge Iron Other Int use/ Shrinkage Grand Total
Andhra Pradesh 2.75 13.69 0.00 0.73 0.00 17.17
Assam 1.55 3.68 0.00 3.77 0.35 9.34
Delhi 0.00 2.59 0.00 2.00 0.00 4.59
Gujarat 5.51 8.24 3.11 8.77 1.23 26.86
Haryana 0.00 1.95 0.00 0.00 0.00 1.95
Madhya Pradesh 3.22 0.00 0.00 0.00 2.53 5.75
Maharashtra 6.00 5.00 2.75 2.40 0.45 16.60
Rajasthan 1.76 2.46 0.00 0.00 0.00 4.22
Tamilnadu 0.00 4.22 0.00 0.87 0.00 5.09
Tripura 2.40 4.67 0.00 0.27 0.00 7.34
Uttar Pradesh 8.80 5.36 0.35 2.65 2.63 19.79
Pondichery 0.50 0.01 0.51
Total 31.99 52.36 6.21 21.47 7.19 119.22
Long term Demand and Supply
10. As per a study conducted as part of the India Hydrocarbon Vision - 2025, the share of
natural gas in energy basket is projected to grow from a level of 8% as at present to about 20%
by 2024-25. The demand of natural gas has been projected to increase as follows:-
MMSCMD
Demand
2001-2002 151
2006-2007 231
2011-2012 313
2024-2025 391
11. As per the projection of the Working Group on Petroleum & Natural Gas for the 10th Five
Year Plan, the demand and supply is projected as follows:-
Years Demand Supply Shortfall

2003-04 155 75.73 79.27
2004-05 176 81.53 94.47
2005-06 179 78.89 100.11
2006-07 179 79.80 99.20
12. In order to meet the above potential gas demand, new gas supplies would need to be
organized from domestic resources (both conventional and unconventional) and gas imports
(both as LNG as well as transational gas pipeline). MOP&NG has a dopted multi pronged
strategy for a ugmenting gas supplies and the major policy initiatives include:-
a. Intensification in the exploration through New Exploration Licensing Policy (NELP)

bidding rounds.
b. Intensification in exploitation of Coal Bed Methane resources through competitive bidding
rounds.
c. Encouraging development of projects to import LNG as well as pipeline gas.
d. Bilateral initiatives for LNG supplies as well as transnational gas pipelines.
13. So far, MOP&NG has successfully launched three bidding rounds under NELP and a total of
70 blocks have been awarded for exploration and production. The initial exploration results have
been very encouraging with a number of oil and gas discoveries reported by various companies,
including the world-class gas discovery in offshore KG basin made by Reliance Industries - Niko
Consortium last year. Presently, NELP-IV bidding round is open for 24 blocks, with the bids due
on 30th September 2003.
14. There is a good potential of Coal Bed Methane (CBM) in India and Government have taken
initiatives to exploit this resource. It has been estimated that around 20 MMSCMD of gas may be
available from CBM sources. MOP&NG successfully concluded the first CBM bidding round
during 2002 wherein 5 blocks have been awarded to companies for exploitation of CBM
resources. In addition, 3 blocks have been awarded to ONGC, Coal India Consortium and Great
Eastern Energy Corporation Ltd. In CBM-II Round, 9 blocks for participation have been offered
and the last date of submission of bids is 15th October 2003. With this India has joined a select
group of countries like USA, Australia and UK which are exploiting CBM.
15. Over the last few years, a number of major initiatives on transnational gas pipelines have
been undertaken, covering the Oman-India gas pipeline, Iran- India shallow water gas pipeline,
Iran-India deepwater gas pipeline, Bangladesh- India gas pipeline and Myanmar-India gas
pipeline projects. Almost all the initiatives are through Government to Government bilateral
mechanisms. However, a clear scenario with regard to gas imports through transnational gas
pipelines is still to emerge. Presently the feasibility study for deepwater gas pipeline from Iran to
India is underway and there are major technological, economic and operational issues involved.
This study is expected to be completed during this year. The Govt. of Bangladesh is yet to decide
the cross border gas trade with India. Similarly, a gas pipeline from Myanmar would be contingent
on discovery of more gas reserves in offshore Myanmar. Considering various geo-political factors,
it can be stated that transnational gas pipeline project can only materialize in next 3-5 years
provided enough safeguards are agreed between parties on security of gas supply.
Use of natural aas as Compressed Natural Gas (CNG) for vehicles
16. In recent years use of natural gas for the automotive sector has gained importance as a way
to reduce the chronic vehicular pollution in big cities. Mahanagar Gas Ltd. (MGL) in Mumbai and
Indraprastha Gas Ltd. (IGL) in Delhi are engaged in developing CNG infrastructure in these
metros. In Mumbai, more than 82,000 vehicles are running on CNG mostly three-wheelers, cars,
taxies and few buses. In Delhi, IGL is catering to the needs of around 79,000 vehicles of different
categories. Delhi has gained the distinction of having world's largest fleet of 8,874 buses on CNG
and has been awarded the 'Clean Cities International Partner of the Year Award' by the
Department of Energy, USA. There are plans to extend CNG facilities in some other highly
polluted cities like Kanpur, Lucknow, Agra, Bareilly, Faridabad and Pune.
Natural Gas Pricing
17. The price of natural gas produced by the oil sector PSUs namely, ONGC and OIL is being
fixed by the Government from 1987 onwards. The gas prices were last revised in the year 1997
linking them to a basket of international fuel oils. The parity was progressively fixed at 55%, 65%
and 75% for 1997-98, 1998-99 and 1999-2000 respectively. The corresponding parity levels for
North- Eastern region was capped at 30%, 40% and 45% respectively. The floor and ceiling of
Rs.2150/MCM and Rs.2850/MCM for general consumers and Rs.1200/MCM and Rs.1700/MCM
for the North-Eastern consumers were fixed. The pricing regime was to be effective upto March
2000 when the same was to be reviewed with a view to achieve 100% parity with fuel oil prices in
the 4th and 5th years, i.e., 2000-01 and 2001-02 respectively. It was envisaged that the gas
prices will be fully de-regulated from 1st April 2002. However, no decision has been taken as yet.
The matter had been referred to the Group of Ministers (GOM) and a revised Cabinet Note will be
put up in line with the recommendations of the GOM. It may be mentioned that under the pre-
NELP joint venture PSCs and under NELP the companies are free to sell natural gas at the
market determined prices. Imported gas/LNG will also be available at the market prices.
Liquefied Natural Gas (LNG)
18. Natural gaS at -161°C transforms into liquid. This is done for easy storage and transportation
since it reduces the volume occupied by gas by a factor of 600. LNG is transported in specially
built ships with cryogenic tanks. It is received at the LNG receiving terminals and is regassified to
be supplied as natural gas to the consumers. LNG projects are highly capital intensive in nature.
The whole process consists of five elements:-
1. Dedicated gas field development and production.

2. Liquefaction plant.
3. Transportation in special vessels.
4. Regassification Plant.
5. Transportation & distribution to the Gas consumer.
19. LNG supply contracts are generally of long term nature and the prices are linked to the
international crude oil prices. However, the LNG importing countries in recent times had started
asking for medium/short term contracts with varying linkages.
World Scenario and LNG 'moons in India
20. The LNG trade started in mid 60's and has increased rapidly. In 1992 it was around 80 Billion
Cubic Metres (BCM) per annum and crossed the 100 BCM mark in 1996. World trade in LNG is
currently in the range of 150 BCM. The major exporting countries of LNG are Algeria, Qatar,
Indonesia, Malaysia, Australia, whereas, the major importers are Japan, South Korea, Taiwan and
Western Europe.
21. Geographically, India is very strategically located and is flanked by large gas reserves on both
the east and west. India is relatively close to four of the world's top five countries in terms of
proven gas reserves, viz. Iran, Qatar, Saudi Arabia and Abu Dhabi. The large natural gas market
of India is a major attraction to the LNG exporting countries. I n order to encourage gas imports,
the Government of India has kept import of LNG under Open General License (OGL) category
and has permitted 100% FDI.
22. In India, of the various initiatives to import LNG, as per the present indication three LNG
terminals i.e. Petronet LNG Limited's Dahej terminal for 5 MMTPA is likely to be available by
December 31, 2003, Shell India Limited's Hazira LNG terminal for 2.5 MMTPA and the Dabhol
LNG project may become operational in the next two years time too. The proposed LNG terminal
at Kakinada may also be set up depending upon the base load power project at Kakinada in
Andhra Pradesh. These terminals may expand with build up in gas demand and with attendant
favourable economies of scale.
Dahej LNG Project
23. Petronet LNG Limited (PLL), a JV promoted by GAIL, IOCL, BPCL and ONGC was formed for
import of LNG to meet the growing demand of natural gas. PLL is constructing an LNG terminal at
Dahej in Gujarat for 5 MMTPA capacity.
24. PLL opted for the International Competitive Bidding for import of LNG and selected Ras
Laffan Liquefied Natural Gas Company (Rasgas) of Qatar as the LNG supplier. An LNG Sale and
Purchase Agreement (SPA) between Rasgas and PLL was signed on 31.7.1999 for supply of 5
MMTPA at Dahej. The supply of LNG to PLL would commence from December 2003 at Dahej
terminal.
25. The PLL Dahej terminal is in advanced stage of construction and scheduled for completion in
December 2003. Commissioning activities are planned to be completed between January 2004
and March 2004 and commercia! supplies of R-LNG are scheduled to commence from 1 St April
2004.
26. The price of LNG for the Dahej project is linked to the JCC crude oil price. PLL is negotiating
a floor and ceiling of the crude linkage for a stable price of gas. The regassified LNG available
from Dahej will be sold at the market driven price. It is expected that the delivered price of this
gas will be about $4.0/Million British Thermal Units (MMBTU). This price of gas though higher
than the domestic administered gas price supplied by ONGC/OIL is comparable to the price of
gas supplied by the joint ventures/private companies. Even at the price indicated above, LNG will
be comparatively cheaper than alternative fuels/feedstocks e.g. naphtha, Furnace Oil, LSHS,
Light Diesel Oil, LPG, etc. In fact replacing naphtha for the fertiliser production by LNG will result
in large savings on fertiliser subsidy account to the Govt.
Natural gas supply and transportation infrastructure
27. Unlike petroleum products, the marketing of gas requires development of anchor load
consumers and pipeline infrastructures and therefore, gas projects are not only capital intensive
but also require "lumpy" investments upfront. The Indian gas market is at early stages of
development with only one cross country HBJ pipeline catering the large volume of gas
transportation to different geographical markets. There are regional pipeline networks but with
projected increase in gas supplies the end use market development would need to be given a
thrust. Similarly, an extensive gas pipeline infrastructure would need to be concurrently developed
to connect the gas supply sources to the markets and create a reliable country-wide infrastructure
to ensure uninterrupted gas supplies to the market.
28. Currently GAIL's infrastructure is about 4600 Kms. for transportation capacity of about 100
MMSCMD of gas. Most of the transmission infrastructure is installed in the north west of India for
transportation of gas to shore from the western offshore fields and the transmission of this gas to
end users. By far the largest of the transmission systems is the HBJ (Hazira-Bijaipur-Jagdishpur)
line. This pipeline system (about 2,700 km) transverses the states of Gujarat, Madhya Pradesh,
Rajasthan, and Uttar Pradesh,Haryana and Delhi.
29. In addition to the HBJ pipeline, there also exist regional gas grids of varying sizes, in the
states of Gujarat (Cambay Basin), Andhra Pradesh (KG Basin), Assam (Assam-Arakan Basin),
Maharashtra (Ex-Uran Terminal), Rajasthan (Jaisalmer Basin), Tamil N adu (Cauvery Basin) and
T ripura (Arakan Basin). These regional pipelines are about 1900 Km in length and are utilised to
transport and supply gas to consumers in thirteen states and union territories.
Major Gas Pipelines
Network States Length in Km

HBJ and ex-Hazira Gujarat, MP, Rajasthan, UP, Haryana, Delhi 3054
Andhra Pradesh, Tamil
South 887
Nadu I Pondicherry
Gujarat Gujarat, Rajasthan 456
North-East Assam, Tripura 69
Maharashtra Maharashtra 125
Total 4591
In addition to above, there are some regional pipeline networks by other companies also, such as
Assam Gas Company and OIL have pipeline network in Assam, Gujarat State Petronet Ltd.
(GSPL) and Gujarat Gas Company Ltd. have pipeline network in Gujarat. Indraprastha Gas
Limited (IGL) in Delhi and Mahanagar Gas Limited (MGL) in Mumbai also have local distribution
network of gas pipelines to supply gas as Compressed Natural Gas (CNG) to vehicles and Piped
Natural Gas (PNG) to domestic and commercial establishments.
National Gas Grid
30. GAIL has conceptualized a National Gas Grid for connecting various gas supply sources, i.e.,
domestic as well as LNG/pipeline gas import to various existing and potential markets in the
country. This system also aims at connecting markets to multiple supply sources to ensure an
uninterrupted gas supply. The initial phase of National Gas Grid would involve construction of
6500 -7000 KM of cross-country pipeline system. The National Gas Grid would be developed in a
phased manner as markets grow and gas supplies are organized. Details for this are being
worked out. Based on the preliminary estimates, the National Gas Grid is expected to involve an
investment of Rs.16,000 to 18,000 crore over the next 5-7 years.
The National Gas Grid would operate under the principle of "open access" whereby pipeline
capacities would be made available to various suppliers on a non-discriminatory basis.
31. With a view to catering to the demand of new consumers and augmenting supply of natural
gas in Gujarat/Maharashtra region, GAIL has undertaken Rs.1416 crores Dahej-Hazira-Uran
Pipeline project for supplying re-gasified LNG from the LNG terminal of Shell at Hazira, Petronet
LNG Limited at Dahej as well as natural gas from the Uran block of ONGC. The pipeline, with a
throughput capacity of 17.25 MMSCMD, is scheduled to be completed by July, 2005.
32. GAIL has also undertaken 610 km. long, Rs.2936 crore Dahej Bijaipur Pipeline project for
transportation of re-gasified LNG to be available from the Dahej-LNG terminal of Petronet LNG
Limited to the northern states of Rajasthan, Delhi, Haryana, Punjab, MP, UP etc. This pipeline,
which is having a throughput capacity of 17.50 MMSCMD, is expected to be completed by middle
of 2004.
(Maps showing new discoveries of gas and the existing and proposed pipeline projects of GAIL
are enclosed)
SPEECH OF SHRI RAM NAIK, MINISTER OF PETROLEUM AND NATURAL GAS AT THE
CONSULTATIVE COMMITTEE MEETING OF THE MINISTRY OF PETROLEUM AND
NATURAL GAS AT NEW DELHI ON 13TH AUGUST, 2003
My colleague, Smt. Sumitra Mahajan, Minister of State for Petroleum and Natural Gas, Hon 'hIe
Members of the Consultative Committee, Secretary and the Officers of the Ministry of Petroleum
and Natural Gas, Chief Executives of Oil Sector PSUs and the Officers of the Parliamentary
Secretariat, I welcome you to the 21st Meeting of the Consultative Committee. Before beginning
the meeting, I would like to express deep shock and grief over the accident on 11th August, 2003
where a helicopter of Mesco Airlines Limited carrying 25 passengers (22 ONGC employees and
3 contractor employees) and 4 crew members crashed in the sea near Sagar Kiran Rig in
Mumbai High. Two passengers could be saved. Statutory investigation has been ordered by
Director General, Civil Aviation. Ministry has also decided to hold an independent inquiry, which
would look into the safety and security of life in offshore operations, especially air logistics,
maintenance, repair and renovation of offshore pipelines as also the role of management. The
compensation to
the family of each deceased would range between Rs. 19.3 lakh and Rs. 28.5 lakh including Rs.
5 lakh ex-gratia payment which I announced in Mumbai on 11 th August, 2003. ONGC would also
consider giving job to
one member of the family of each deceased.
I would like to introduce Smt. Sumitra Mahajan who has taken over as the Minister of State for
Petroleum and Natural Gas and for whom this would be the first consultative committee meeting
of this Ministry after she joined on 27.5.2003. I also welcome Shri Lajpat Rai who has been
nominated as a member of this committee. I would also like to introduce Shri Badal Das (lAS :
MP, 72) who has joined the Ministry as Additional Secretary and Financial Advisor.
The topic of discussion for today's meeting is "Scenario of Natural Gas &; LNG and its
Transport Infrastructure". Before initiating the discussion on the topic, I would like to share with
you the recent developments, which took place since the last Consultative Committee Meeting
held on 14th May, 2003 at Mangalore (Karnataka).
(i) The Govemment has communicated to the oil industry broad principles within which guidelines
are to be framed for selection of dealerships/distributorships after the dissolution of Dealer
Selection Boards. Selections will be made by a committee of three officers from the oil company
which is establishing the retail outlet/LPG distributorship. Reservations shall continue as in the,
previous guidelines for all existing categories to the same extent. The corpus fund scheme shall
continue in its present form. There shall be no ceiling on income of the prospective allottee.
Multiple dealership nonns will be relaxed so that only one dealership/distributorship will be
allotted to an individual, his/her spouse and unmarried children. Each oil company shall frame its
own guidelines with the approval of its board of directors within, the above broad principles giving
priority for capability to provide land and infrastructural facility, educational qualification, capability
to provide finance etc.
(ii) Continuing our efforts to attract greater investment in the exploration of hydrocarbon in the
country to enhance hydrocarbon security of the country, the Government has offered 24
exploration blocks (12 deepwater, 11 shallow water and 1 onland blocks) under New Exploration
Licensing Policy (NELP-IV). Earlier three rounds of NELP in the last two years have resulted in
signing of 70 contracts with an estimated investment in exploration of Rs.14,500 crore in three
phases. NELP-IV is of special significance because it comes in the wake of some very significant
successes that India has achieved in the recent past in its search for hydrocarbons. Some of
these discoveries particularly in the Krishna-Godavari basin have been the largest made
anywhere in the world during the year 2002. Reliance Industries Limited (RIL) , the operator for
one of the Krishna-Godavari deepwater block which had announced the largest gas discovery of
the year 2002 has now upgraded their initial in place reserves from 7 trillion cubic feet (about 198
billion cubic metre) to 14 trillion cubic feet (about 396 billion cubic metre) which is more than the
Vasai field which has been supplying gas to the HBJ pipeline network for the past over 15 years.
(iii) In order to mount an effective promotional campaign to attract investors and to highlight
geology and fiscal and contractual
incentives being offered by the Government under NELP-IV, I lead a delegation, which also
included Shri B.K. Chaturvedi, Secretary (P&NG) at Calgary, Houston and Perth and Shri M.S.
Srinivasan, Additional Secretary (P&NG) at London, Dr. Avinash Chandra, DG(H) and Shri J.M.
Mauskar, Joint Secretary (P&NG). The road shows were held at Delhi (20th May), London, U.K.
(5th_6th June), Calgary, Canada (9th_10th June) Houston, USA (11 th-12th June) and Perth,
Australia (26th_27th June).
(iv) The five NELP-IV road shows attracted very good response and were attended by 79
companies at Delhi, 83 companies in London, U.K., 34 companies at Calgary, Canada, 66
companies at Houston, USA and 38 companies at Perth, Australia. The main E&P companies
which attended the roadshows were Exxon-Mobil, Shell, Occidental Oil, Chevron-Texaco,
Marathon, B.G. Group, British Petroleum, BHP(Australia), etc. The bid closing date for NELP-IV is
30/09/03.
(v) In addition the Government has simultaneously offered 9 Blocks for the exploitation of Coal
Bed Methane under the second round of CBM covering the states of Andhra Pradesh (1),
Chattisgarh (1) -(partially in Madhya Pradesh), Gujarat (1), Jharkhand (2), Madhya Pradesh (1),
Maharashtra (1) and Rajasthan (2). The 9 blocks, which are on offer have a CBM resource of
about 500 billion cubic metres. Blocks in Andhra Pradesh, Chattisgarh, Gujarat and Maharashtra
have been offered under the CBM Policy for the first time. Earlier, Government of India has
signed 8 contracts for CBM located in the States of Jharkhand, M.P. and West Bengal. These
have CBM resources of about 400 billion cubic metre. In view of these developments, India has
now joined the select club of CBM countries like U.S.A, U.K., Australia, Poland and China.
(vi) To promote CBM blocks, roadshows were held at Delhi (27th May) and Houston (12th June).
Minister of Coal Shri Kariya Munda also participated in promoting CBM blocks at Houston. As
many as 49 companies at Delhi and 32 companies including major companies, like COX Gas and
Burlington Resources at Houston participated in the roadshows. Many of these companies at
Houston also had one-to-one meetings with the delegation. The bid closing date for CBM-II is
15/10/03.
(vii) On the invitation of the Department of Energy, U.S.A. I also visited the Strategic Petroleum
Reserves at Bryan Mound, Freeport, Texas. A very interesting presentation was made by the
Department of Energy highlighting the low cost and technologically advanced methods used for
strategic storage. The crude oil is stored in natural underground salt cavems. Such reserves at
four sites within the U.S.A. have a storage capacity of 700 million barrels (approx. 95 MMT) and a
drawdown capacity of 4.4 million barrels per day. At full level of this drawdown U.S.A. can supply
as much crude per day as the fourth largest crude supplier in the world. Their plan is to expand
the capacity of this storage to 1000 million barrels (approx. 135 MMT). The U.S. Department of
Energy has offered to support any industry expertise required by India to create its own strategic
reserves. As a follow up of this visit to the strategic petroleum reserves in USA, a technical team
would visit the US shortly.
(viii) On 28th May, 2003, we formally launched Indian Oil Corporation's wholly owned subsidiary
namely, Lanka lac to spearhead downstream petroleum business in Sri Lanka. Lanka IOC will
take over 100 outlets from Ceylon Petroleum Corporation. 150 franchisee retail outlets will also
be taken over. Chennai Petroleum Corporation (CPCL) has started supplying products to Sri
Lanka. Thus, lac became the first Indian company to conduct full fledged oil retail business in an
overseas market. This also marked the beginning of a mutually beneficial partnership between
India and Sri Lanka.
(ix) On 29th June, 2003, the Hon'ble Deputy Prime Minister, Shri L.K. Advani laid the foundation
stone of Bharat Petroleum's (BPCL) Marketing Terminal and Bina-Jhansi-Kanpur Product
Pipeline(BJKPL) at Bina Refinery Complex. BPCL's Marketing Terminal and the BJKPL involve an
investment of about Rs. 463 Crore and Rs. 453 Crore respectively. This also marks the beginning
of construction of 6 MMTPA refinery at Bina by BPCL as all environmental and other clearances
have been obtained.
(x) As you would be aware 9 States and 4 Union Territories were notified for sale of 5% Ethanol
Blended Petrol from 30th June 2003. The States of Maharshtra, Uttar Pradesh, Punjab, Haryana
and Goa and UT of Chandigarh have been fully covered but in view of the present pace of
development of infrastructure in other States and UTs, on 27th June, 2003, a Notification was
issued extending the date for sale of 5% Ethanol Blended Petrol to 30th Sept.,2003.
(xi) On 30th June. 2003, Bharat Gas 5 Kg LPG Cylinder of BPCL was launched at Jabalpur,
Madhya Pradesh. On 17th July, 2003, HPCL's 5 Kg. LPG cylinder was launched at Mandir
Hasaud near Raipur, Chhatisgarh.
(xii) The supply of CNG in Delhi has been streamlined by Indraprastha Gas Limited (IGL) which
has established 113 CNG stations. The first mega CNG station was inaugurated at Rohini in Delhi
on 13th July, 2003. Delhi now has over 80,000 vehicles running on CNG of which 14,000 are
buses and mini buses, which is the largest such fleet in the world.
(xiii) The Planning Commission's Report on Bio Fuel was submitted to the Prime Minister on 11-
07-2003. In this report it has been envisaged that the Petroleum Ministry either through the oil
companies or by encouraging the private enterprises would set up Pipeline(BJKPL) at Bina
Refinery Complex. BPCL's Marketing Terminal and the BJKPL involve an investment of about Rs.
463 Crore and Rs. 453 Crore respectively. This also marks the beginning of construction of 6
MMTPA refinery at Bina by BPCL as all environmental and other clearances have been obtained.
(x) As you would be aware 9 States and 4 Union Territories were notified for sale of 5% Ethanol
Blended Petrol from 30th June 2003. The States of Maharshtra, Uttar Pradesh, Punjab, Haryana
and Goa and UT of Chandigarh have been fully covered but in view of the present pace of
development of infrastructure in other States and UTs, on 27th June, 2003, a Notification was
issued extending the date for sale of 5% Ethanol Blended Petrol to 30th Sept.,2003.
(xi) On 30th June. 2003, Bharat Gas 5 Kg LPG Cylinder of BPCL was launched at Jabalpur,
Madhya Pradesh. On 17th July, 2003, HPCL's 5 Kg. LPG cylinder was launched at Mandir
Hasaud near Raipur, Chhatisgarh.
(xii) The supply of CNG in Delhi has been streamlined by Indraprastha Gas Limited (IGL) which
has established 113 CNG stations. The first mega CNG station was inaugurated at Rohini in Delhi
on 13th July, 2003. Delhi now has over 80,000 vehicles running on CNG of which 14,000 are
buses and mini buses, which is the largest such fleet in the world.
(xiii) The Planning Commission's Report on Bio Fuel was submitted to the Prime Minister on 11-
07-2003. In this report it has been envisaged that the Petroleum Ministry either through the oil
companies or by encouraging the private enterprises would set up Government has sanctioned
500 additional retail outlets to ONGC to be set up in Karnataka, Kerala, Goa and Pondicheny.
(xviii) In appreciation of remarkable performance of the Indian contingent in the Special Olympics
held at Dublin, Ireland, the oil industry has decided to give cash awards of Rs. 1 Lakh to Gold
Medal winners, Rs. 50,000/- to silver medal winners and Rs. 25,000/- to the Bronze medal
winners. In addition Rs. 38 Lakh would be contributed to the Special Olympic Bharat Trust, who
organised the event on behalf of India. This will make a total contribution of Rs. 1 crore by the oil
industry for promoting sports amongst the disabled in India.
(xix) I would like to make a special mention of the sterling performance of oil PSU's in the year
2002-03. The Administered Pricing Mechanism (APM) was dismantled on 1 st April, 2002 and the
oil sector opened up to competition in all its activities like exploration and productio,n, refining,
marketing and pipelines. The year 2002-03 ''''(as a watershed year for the oil sector as it was the
first year after the sector was deregulated.
A chart indicating the performance of the 12 PSUs in the oil sector for the year is enclosed. The
salient features of the performance for the year 2002-03 are that the sector as a whole has shown
profit after tax of Rs. 23,254 crore, which is an increase of 83% over the previous year. Against
the paid up capital in these 12 PSUs of Rs. 5,204 crore, the retum is 4 1/2 times the capital
employed which would be a record for any industry. ONGC has shown a profit of over Rs. 10,000
crore for the first time in India's corporate history. The profit of IOC has increased by more than
100% to Rs. 6,115 crore. These two companies are the highest profit making companies for the
year in India. Another notable feature is turn around of Bongaigaon Refineries and
Petrochemicals Limited (BRPL), which made a loss of Rs. 199 crore in 2001-02 but this year has
made profit of Rs. 178.5 crore.
The higher profits have been made possible due to the policy initiatives of the Government like
deregulating the oil sector,
paying intemational prices for crude produced by the upstream companies, relief on excise duty
to the refineries in the North
Eastern Region and supply of crude oil from Ravva oil field to BRPL. The oil sector has also
improved its efficiency during the
year as the refinery throughput increased from 95.3% to 98.3% and the upstream companies
increased the production of crude oil by 1 Million Tonne (4%) and natural gas by g%.
3. Coming to the subject of today's meeting, natural gas has emerged as the fuel of 21st Century
due to its inherent environmental friendly characteristics, greater efficiency and cost
effectiveness. There has been an upsurge in the demand of natural gas particularly in the last two
decades globally. In India also, the importance of gas as an efficient fuel and feedstock has been
realized and the utilization of gas has increased in the last decade. The gas which was earlier
flared has been put to its optimal utilization. Almost 80% of natural gas in our country is used
forgeneration of power and fertiliser.
The demand of natural gas far exceeds the availability of gas at present. As against the present
allocations of 119 Million Metric Standard Cubic Meter Per Day (MMSCMD), the supply of gas is
limited only to around 66 MMSCMD. Various studies have"brought out that there is a huge gap
between demand and supply of gas. As per the India Hydrocarbon Vision -2025, the demand of
natural gas will increase to 231 MMSCMD by end of the 10th Plan i.e. 2006-07. Demand will
further grow to 313 MMSCMD by the year 2011-12 and 391 MMSCMD by 2024-25.
The Govemment has taken various initiatives to encourage odomestic exploration and production
of gas and has also taken initiatives for import of gas through transnational pipelines and as
Liquified Natural Gas (LNG). To boost domestic exploration and production the NELP and CBM
rounds have been a great success as I mentioned earlier. The Govemment is also pursuing the
import of gas through pipelines from Iran, Bangladesh and Myanmar, in particular. For import of
LNG, the Govemment had constituted a joint venture, namely Petronet LNG Limited (PLL) which
is promoted by four Oil Sector Navratna PSUs viz. IOC, BPCL, ONGC and GAIL. PLL is setting
up LNG terminal for 5 million metric tone per annum (MMTPA) equal to 20 MMSCMD capacity at
Dahej in Gujarat. The project has achieved 85% progress and is scheduled for completion by
December 2003. Commercial supplies will start thereafter. For distribution of regassified LNG
from Dahej terminal, GAIL is laying gas pipelines from Dahej to Bijaipur at a cost of Rs. 2,900
crore and Dahej to Uran, near Mumbai in Maharashtra, at a cost of Rs.1,400 crore.
GAIL has conceptualized a National Gas Grid project linking various gas sources and potential
markets through inter-state high pressure gas pipeline network. This project would help in optimal
and efficient utilization of gas within various parts of the country. The first phase of National Gas
Grid would involve construction of 6,500 to 7,000 KM of cross-country pipelines. Based on the
preliminary estimates, the National Gas Grid is expected to involve an investment Rs. 16,000 to
18,000 crore over the next 5-7 years.
I now invite the Hon'ble Members of the Committee to discuss the

Agenda.
MINUTES 'OF, THE MEETING OF THE CONSULTATIVE COMMITTEE OF THE MINISTRY OF

PETROLEUM AND NATURAL: GAS HELD ON 14TH MAY, 2003, IN THE CONFERENCE HAll,
MANGAlORE REFINERY & PETROCHEMICALS LIMITED (MRPl), MANGAlORE,
KARNATAKA.
List of participants is annexed. (Annexure:l)
The Chairman' welcomed the Minister of State. Mjr!istry of Petroteum & Natural Gas, members of
the Consultative Committee, Secretary and Additional Secretary (P&NG), Chief Executives of the
PSUs, officers of the Ministry of P&NG and the Parliamentary Secretariat to the 20th Meeting of
.the Consultative Committee.'. He ,expressed his special thanks to'ONGC for making
arrangements for the Consultive Committee meeting as also for the function to celebrate the
arrival of the first shipment of crude oil from Sudan.
2. Regarding the developments since last Consultative Committee meeting held on 7th May,
2003, he informed the members that despite the gapof only one week between the two meetings
of the Consultative Committee he had occasion to visit Iran from 11th to 13th May along with
senior officers of the Ministry and some of the Chief Executives of Oil PSU-s. He apprised the
members of the following important decisions taken during the visit:
(i) A package of cooperation in Oil and Gas Sector was developed.Under this firstly, Iran having
surplus gas reserves is facing the problem of marketing whereas we need gas. It was, therefore,
decided to import 5 Million Metric Tonne (MMT) Liquefied Natural Gas (LNG) from Iran in phases,
first being of 2;5, MMT and remaining 2.5 MMT thereafter. Secondly, Iran woutd.offer India
significant sized discovered and semi-discovered oil fields, for which further details would be
worked out by our PSUs and Iran oil companies.
(ii) In view of our successful use of CNG for buses, cars and threewheelers in the city of De[hi,
the Union Territory of De[hi has been selected for an international award in recognition of its effort
to use eco-friendly fuel in the city. CNG is available in abundance in Iran. In view of this, India has
offered to provide technology forvehicular use of CNG to Iran through GAIL.
(iii) Iran is still having first generation refineries which are outdated and obsolete in comparison to
developments at have taken place in India. India has offered to provide ,'ran advan~ technology
for
their refineries.
(iv) India would also help in the field of Information Technology in different sectors of .Iranian Oil
Industry.
The Chairman also apprised the members of his visit to Assaluyeh to see gas field development
in Iran, Abdul Kalam Azad Chowk at Shiraj, the birth place of famous Farsi poet Hafeez and the
Iranian ancient cultural place Perspolis.
The visit. to Iran was successful in many ways to foster a much closer bilateral relation between
the two countries, the ,Chairman mentioned .
3. With regard to the topic of the day, the speech of the Chairman is
annexed. (Annexure-II)
Chairman observed that 1Sttt May, 2003 would be a historic and golden day for oil sector, for two
reasons, (i) restructuring and economic revival of MRPL and (ii) handing over of the first shipment
of foreign equity oil from Sudan to MRPL. He also informed the members that a function would be
organised on 15ttt May, at 11.00 AM, at the Jetty where the Hon'ble Deputy Prime Minister Shri
L.K.Advani would receive the equity oil from Sudan. The Ambassador of Sudan, Chief Minister of
Karnataka would also be attending the function.
4. Before initiating discussion on the subject of the meeting, Shri R.S. Butola, Director (Finance),
OVl made a presentation, covering the Mandate of OVL under India Hydrocarbon vision 2025,
existing projectsof OVL and Greater Nile Oil Project in Sudan. This was follwed by another
presentation by Shri V.K.Sharma, ONGC Director-in-Charge MRPL on the activities of MRPL
covering it historical background, capacity utilisation, production and marketing plans,
environment, safety management, social responsibilities financial status and future plans.
5. The Chairman informed the members that the Ambassador of Sudan who had reached
Mangalore to attend the equity oil handing over function next, day would also be joining the
committee members at dinner on 14th May and then invited the views of the members,on the
subject of the meeting.
5.1 ShriK.S. Sangwan desired to know the present position of MRPL.
5.2 The Chairman informed that MRPL has approximately 7.75 lakh individual investors
who had purchased its equity. After restructuring it would gradually recover from Its
losses by the end 2003-04. Had the remedial measures not been taken by way of its
financial restructuring it would have become a BIFR company by end of2002-03.
5.3 The member further asked the market value of the shares purchased by ONGC from Aditya
Birla Group.
5.4 The Chairman informed that the shares having Rs.101- face values and about Rs.6/- per
share market value, at that time, were purchased from ABG at RS.2/- per share, thereby'
getting the advantage of bulk transfer. ONGC's further investment of; Rs.600 crore, in the
form of equity, has gained public confidence, as a result of which the market value of the
share is now above Rs.10/- .
6.1. be recovered roughly within next 5-6 year period. Recurring cost would also be met out of the
returns. Regarding percentage of reduction In import, he said that it is dependent on the
consumption level and the GDP growth rate. We have yet to cover a
long way to stop oil import, the Chairman added.
6.3 The member further said that Mangalore Refinery was set up in 1987 but the production
started in 1996 and asked the general practice in other private companies and how long it takes
them in installation and commencement of production?
6.4. The Chairman informed that in 1987 it was at the conception/formation stage. There
were some environmental issues to be settled. The construction started in 1993 and it was
commissioned in 1996.
6.5 The member also desired to know as to how the recurring expenditure of the PSUs compare
vis-a-vis that of the private enterprises.
6.6. The Chairman expressed the view that a comparison may not be possible in this
regard as it depends on a number of variables such as the size of refineries, scale of
operations, type of technology and its' locations. PSUs have refineries of varying capacity
of 3MMTPA, 6MMTPA, 9MMTPA etc. while Reliance's refinery Is of 27 MMTPA. Reliance also
gets the benefit of tax concessions while the same benefit mayor may not be available to
PSU refineries depending upon the location/State where these are located. Details of each
refinery would be furnished separately, later on, Chairman mentioned to the Committee.
6.7 Responding to the Chairman, the member stated that PSUs are still having old technology in
comparison to the modem technology used by Reliance. Adopting modem technology would
reduce recurring expenditure and yield more return on investment in shorter time. The size should
not be compared with technology but technology should be used according to the size. He
expected some sincere efforts towards reducing recurring expenditure and higher returns on
investments.
6.8 Secretary (P&NG) explained that IOC has conducted a study in respect of the areas
where our refineries should meet the world standard bench mark The fuel loss, capacity
utilisation, energy consumption for production etc of the refineries is reviewed with
reference to the benchmark, on quarterly basis. In case of Reliance, it has the advantage
of large size and benefits of Sales Tax as well as transportation cost. Because of large size
they use single point mooring whereas our refineries like Haldia cannot do it because it
has problem of port. There are some technologies which are size related and others are
not. Our refinery sector is making constant efforts towards modernisation to achieve the
bench mark. However, in view of the suggestions from the Hon'ble member we would
inform him in writing of the areas for which we have fixed the bench mark.
7. Shri Rasa Singh Rawat thanked the chairman for his successful Iran visit, arrival of equity oil
from Sudan and for re-structuring of Mangalore Refinery and expressed the hope that our
projects in various countries like Russia, Vietnam, Iran, Iraq, Libya, Sudan etc. would make us
self dependent in oil and gas sector. He also wished that we could compete with private sector
refineries. He expressed the view that concerted efforts may be made to achieve the
goals/objectives enshrined
in Hydrocarbon Vision, 2025.
8.1 Shri R.B.S. Varma thanked the chairman for the achievements in oil sector and said that:
(i) In view of the recent incident in Saudi Arabia, the oil prices in the international market had
gone up. Whether this was a
temporary phase?
(ii) Government decision on disinvestment of BPCL/HPCL is sending wrong message to the
public;
(iii) Even in cases where a distributor is not viable, another LPG distributor ;s appointed, as a
result of which both of
them become sick;
(iv) In case of dealership of LPG etc for Scheduled Castes the PSUs have neither provided them
godown nor made any
arrangements for showrooms. Consequently, these are not viable. They are not given facility for
extension counter
whereas others having 15,000-16,000 connections are enjoying this facility and having extension
counters even
outside their territory.
8.2. Chairman desired that the member may send such specific instances to the Ministry so that
these could be looked into.
9.1 Shri Satlsh Pradhan said that in the area of discharge of social responsibilities in oil PSUs,
there is need for further improvements.
9.2 He also said that Petroleum Sport Control Board was earlier encouraging players from
petroleum companies and they were performing well both at national and international forum.
However, the Petroleum Sports Control Board is now recruiting players from outside.
9.3 The Chairman requested that in view of the paucity of time the members may confine only to
the subject of the meeting.
10.1 Shri Rajubhai Parmar congratulated ONGC Videsh Ltd. for its equity oil investments
abroad and desired to know:
(i) the total investments made by OVL in different countries, country-wise and year-wise since
2001;
(ii) whether we have started getting returns on these investments, particularly Block A-1 in
Myanmar, in which Daewoo, who is presently running into loss, has invested 60% against OVL
share of 20% .
10.2 He also mentioned that while making investment, the local situation and political stability in
those countries should also be kept in view.
11.1 Shri Ram Nath Kovind thanked for under1aking overseas projects by OVL and desired to
know the frequency of 80,000 tonnes of Sudan oil for processing at MRPL.
11.2 The Chairman informed that it would be 30 lakh tonnes in a year depending on the
production.
12.1 Shri N.H. Diwathe asked whether the loss of Rs.492 crore incurred by MRPl related to the
year 2001-02 only or it had started incurring losses in the previous years also and what were the
reasons for the loss.
12.2 The Chairman said that the reasons for losses were given in the Agenda Note. But the main
reason was excess loan as
compared to share capital, leading to higher interest cost. As mentioned in the restructuring plan
with the investment of Rs.600
crore, the debt equity ratio has now come down from 15.02:1 to 2.83:1.
13.1. Dr.(Col) D.R. Shandil congratulated for commendable results of foreign equity oil and
asked whether the India-Iran pipeline project would finally get a start in view of the strengthening
of Indo-Iranian bilateral relation.
13.2. The Chairman mentioned that it would not be possible to anticipate a sudden development
on the project since this would depend on political and security consideration. In today's situation,
efforts are being made to get LNG through ships and there is remote possibility of pipeline in the
near future, he observed.
14.1 Shri M.H.Gavit appreciated the acquisition of 51% stakes by ONGC in MRPL and expected
that it would provide job security to the employees of the later.
14.2. Chairman mentioned that the employees Unions also met him.They were happy both on
acquisition of stakes by ONGC in MRPL as also on arrival of equity oil from Sudan.
15. The Chairman invited all the members to the cultural programme at 8.00 PM that day with the
Ambassador of Sudan and at the function at 11.00AM, on 15th May, organised at the Jetty where
the Hon'ble Deputy Prime Minister Shri L.K.Advani would receive Sudan equity oil.
16. The meeting ended with a vote of thanks to the Chair.
SPEECH OF SHRI RAM NAlK, MINISTER OF PETROLEUM AND NATURAL GAS AT THE
CONSULTATIVE COMMITTEE MEETING OF MINISTRY OF PETROLEUM &, NATURAL GAS
AT MANGALORE ON MAY 14, 2003
My colleague Shri Santosh Kumar Gangwar Ji, Minister of State for Petroleum and Natural Gas,
Hon'ble Members of Consultative Committee, Secretary and the officers of the Ministry of
Petroleum & Natural Gas, Chief Executives of Oil Sector PSUs an,d the Officers of the
Parliamentary Secretariat.
I welcome you to the 20th meeting of the Consultative Committee.
The topic of discussion for today's meeting is "Acquisition of 51% stake in Mangalore Refinery &
Petrochemicals Limited (MRPL) by Oil and Natural Gas Corporation Limited (ONGC) and 25%
stake in Greater Nile Oil Project, Sudan by ONGC Videsh Ltd. (OVL)".
As you are aware ONGC is our flagship Company, involved in the exploration and production of
crude oil in the country. OVL, the overseas arm of ONGC, over the years has been involved in
similar activities in the overseas ventures. It has acquired interest in Sakhalin (Russia), Vietnam,
Mayanmar, Libya, Iran and Iraq. "
One of the recent ventures of OVL was a foray in Sudan where it has acquired 25% participating
interest in Greater Nile Oil Project (GNOP) in Sudan from Talisman Energy Inc. (TLM) at a
purchase price of US $ 670 million (Rs.3,220 crore approx.). GNOP is located in the Muglad
Basin; around 700 krn southwest of the capital Khartoum and the nearest oil
export point is Port Sudan on Red Sea. The oil is transported through a 1,504-krn long 28"
diameter buried pipeline from the fields to the Marine Terminal at Port Sudan.The pipeline and the
Marine Terminal are also owned and operated by the Consortium.
The first shipment of Sudan oil, called "Nile Blend", was loaded on tanker M. T. Seafalcon on 5th
May, 2003 and it has arrived today at Mangalore. The Nile Blend shipment of approx. 80,000
tonnes would be processed in Mw1galore Refineries & Petrochemicals Limited (MRPL) refinery .
Nile Blend is one of the most sought after crudes in Far East Asia because it is highly sweet
crude oil. It is a paraffinic crude with a pour point around 33°C and hence it is transported in
heated tankers. The method of transporting Nile Blend using heated tankers has been perfected
during the last three years that Nile Blend has been in production.
I am happy to inform that this is the first shipment of equity oil from abroad to reach our country.
Further, ONGC has also been endeavouring to integrate its operations in the entire value chain of
petroleum, from exploration and production of crude oil to refining and retail delivery of petroleum
products for enhancing value addition to its business, ensuring sustained cash flows by hedging
its vulnerability against the global volatility in the crude oil business. Such integrated ventures are
the globally proven business models in as much as all the major petroleum companies in the
world, Exxon Mobil, Shell, BP- Amoco and the likes have integrated operations. Such an initiative
of ONGC is prudent for the improved financialsofONGC to enable it to take strides in the high risk
prone activities of deep sea exploration, for the improvement in
the oil security of the country.
In the above endeavour of value-chain integration, with the approval of the government, ONGC
has acquired 51% stake with the management control in Mangalore Refinery & Petrochemicals
Limited (MRPL). MRPL was set up in 1987 as a joint venture between Hindustan Petroleum
Corporation Limited (HPCL) and Aditya Birla Group (ABG). MRPL's refinery project with actual
capacity of 3.69 million metric tonnes per annum (MMTPA) was commissioned in March, 1996.
Subsequently, the expansion project of MRPL with 9.69 MMTPA was commissioned in April,
2001.
MRPL is a state-of-the-art, technologically superior refinery capable of producing premium quality

products; is equipped with the most modem equipment like two Hydrocrackers, Reformer,
Visbreaker and Gas Oil Hydro-desulphurization Unit. However, its fnancial position deteriorated
mainly because of high interest cost which was the result of adverse debt-equity
ratio. As a result of the accumulated losses of Rs.799.14 crore as on 31.3.2002, the net worth of
the Company got eroded to Rs.343.21 crore. Had remedial measures by way of financial
restructuring not been taken within the financial year 2002-03, MRPL was likely to become a
BIFR Company by the end of 2002-03.
The Aditya Birla Group (ABG), therefore, expressed desire to quit the project in favour of a
financially sound investor having the capability to inject required capital for the turnaround of
MRPL. Protracted discussions / negotiations with companies in the public and private sector
ultimately materialised in ONGC evincing firm interest in acquiring the equity of ABG and firming
up a suitable financial restructuring package in consultation with the lending institutions. After
protracted negotiations on the basis of financial due diligence, technical due diligence and legal
due diligence, ONGC and ABG settled for transfer of shares from ABG to ONGC at mutually
agreed price.
After obtaining requisite Government approval, ONGC has acquired 51 % stake in MRPL by
acquisition of 37.38% stake of Aditya Birla Group in MRPL at Rs.2j- per share for Rs.59.43 crore
and infusion of additional Rs.600 crore, as part of approval debt restructuring plan. The share
value of MRPL which was about Rs.6/- per share when ONGC decided to invest in MRPL is now
above Rs.l0/- per share benefitting over 7.5 lakh shareholders.
Both the above events are landmarks in the history of oil sector.
I now invite the Hon'ble Members of the Committee to discuss the agenda.
Action Taken Notes on the points raised in the Consultative Committee Meeting of the
Members of the Parliament for Ministry of Petroleum and Natural Gas held in New Delhi on
7th May, 2003.
Para No. 8.5
Shri Rajubhai A. Parmar mentioned that from gas distributors under the corpus fund scheme the
oil companies are still collecting Rs. 2/- per cylinder towards the capital cost of godown even
though the capital investment made by these companies has been recovered. The collection of
Rs. 2/- per cylinder in such cases should be stopped.
Action Taken
Ministry is considering the issue. Decision on it will be taken shortly.
Action taken note on the points raised in the consultative committee meeting by members
of parliament held on 7th May, 2003.
Para No. 9.1: Shri M.H. Gavit mentioned that in his constituency the gas cylinder which were
earlier supplied from Khajura (Should be 'Hazira") were now being supplied from Manmad
resulting in reduction of distance and cost difference. The consumers who had been given benefit
of the cost difference by the regional manager Aurangabad, were asking for this benefit from back
date. He also invited the attention of the Chairman to his letter in this regard.
Comments of Ministry
The matter has been examined. The LPG distributor in Dondaicha market was commissioned
during 1991 when supply as well as pricing point for this market was Surat (Hazira) bottling plant,
based on least rail tariff cost principle. After commissioning of Manmad bottling plant in 1999, the
subject market could have been attached to this plant. This was not done by IOC. However, as
soon as a pricing anomaly was noticed, IOC took necessary action and revised the price structure
for Dondaicha market w.e.f 1.2.2003. It would not be possible to give the benefit of cost difference
to the consumers from back date.
Point No. 9.2
Referring to HPCL, Aurangabad advertisement for land to open petrol pump on National Highway
No. 6 near Gujarat border he mentioned that the company has received only one bid for about
rupees one crore. A tribal land might not cost that much. He, therefore, suggested that if the local
M.P. is also consulted the land could be acquired at reasonable cost. He further said that while
purchasing land SCs/STs land should also be considered which might be cheaper also.
Reply
HPCL, Aurangabad had released and advertisement on 23.8.2002 for procurement of land about
1 acre with a frontage of 200 ft for their COCO outlet at Nawapur in District Nandurbar on NH-6.
In response to this advertisement, three bids/offers were received out of which one bid was
rejected due to non-submission of price bid. After following the due procedures the land owned by
Shri Ramchand D. Rana has been finalised for tanking on lease for a period of 30 years at a
monthly rental of Rs. 11,000/- without any escalation.
Para 9.4 Raised by Shri M.H. Gavit: Appreciating the efforts of the Chairman, in dealing with the
HPCL employees demand and contribution in calling off transporters strike as well as reduction in
oil prices he suggested that the price be further reduced to benefit the farmers.
The prices of petrol and diesel were further reduced by the oil companies effective 16th May 2003
and 1st June 2003 respectively. The retail selling prices of these products in Delhi effective 1st
May 2003, 16th May 2003 and 1st June 2003 are given in the following table:
(Rs. / liter)
Effective Petrol Diesel
01.05.2003 31.49 20.12
16.05.2003 30.40 19.18
01.06.2003 30.30 19.08
Para 10.2 Raised by Dr. Laxminarayan Pandey: In the context of 69% oil import and in view of
the new discoveries under NELP, he desired to know the reduction in import during the last three-
four years.
The following table gives the figures of crude oil imports during the last three years.
(In Million Metric Tonnes

2002-03 82.9
2001-02 78.7
2000-01 74.1
It may be seen that the crude oil imports have increased during the last three years to meet the
increased requirements of domestic refineries to inter alia meet the growing demand for products
in the country.
Para No. 10.3 Dr. Laxminarayan Pandey
He also said that the dealership alloted by the Dealers Selection Board were cancelled after its
abolition. The issue is still pending. But those whose dealership was accepted and were covered
under the marketing plan be considered under the new policy.
Action Taken
The Government order cancelling the allotments of dealerships/distributorships made on the
recommendations of the Dealer Selection Boards since 1.1.2000, contained in the Ministry of
Petroleum & Natural Gas letter No. P19011/4/2002-IOC dated 9.8.2002, was quashed by the
Supreme Court in its order dated 20.12.2002 except in respect of the cases reported in the
media. The status quo ante of all these dealerships / distributorships except those reported in the
media has been restored.
Para No. 10.4 raised by Dr. Laxminarayan Pandey:
He suggested that Euro-II standard fuel be introduced in all the capital cities including Bhopal and
Jaipur.
Bharat Stage-II petrol and diesel quality will be made available at all the outlets all over India from
1.4.2005.
Para 11.2 Raised by Prof. M.M Agarwal: For Strategic storage of crude oil the Ministry should
involve the private parties.
The modalities for setting up of strategic storage of oil are still being worked out and the
suggestion of Hon'ble MP would be considered while taking a final view on the issue.
Para 11.3 Raised by Prof. M.M. Agarwal: Purchase of crude oil and gas should be done by the
Oil PSUs jointly so that it could be procured at better price by negotiation.
Decansalisation of crude oil imports by public sector refineries was approved by the Government
in December 2001 with a view to give freedom to these refineries to import crude oil from various
sources as per their requirements. This was a step taken towards the deregulation of the sector.
Of course, in case the oil PSUs feel that they could bargain a better price jointly, they could do so
in their business interests.
Para 11.5 Raised by Prof. M.M. Agarwal: In future the petroleum and diesel prices be reduced.
The prices of petrol and diesel were further reduced by the oil companies effective 16 th May 2003
and 1st June 2003 respectively. The retail selling prices of these products in Delhi effective 1 st May
2003, 16th May 2003 and 1st June 2003 are given in the following table.
(Rs./liter)
Effective: Petrol Diesel
01.05.2003 31.49 20.12
16.05.2003 30.40 19.18
01.06.2003 30.30 19.08
Para No. 13.1 raised by Shri Prasanna Acharya:
He said that Paradip oil Refinery which was planned years back has been abandoned after
investing about 600-700 crore. In the past, when he raised this issue, he was given to
understand that the problem of Sales Tax and other issues had been sorted out with the State
government by the Ministry, whereas the Ministry is maintaining the stand that the issue is yet to
be settled.
The Orissa State Government had initially granted full sales tax exemption/deferment for product
sales in Orissa for 11 years. The revised package envisaged issue of bonds in favour of Orissa
Government with 7 years maturity period with 5% coupon rate yielding regular return. The revised
package amounts to about 32% of the originally approved incentive (at NPV @ 12%). The matter
is pursued with Orissa Government for restoration of full incentive.
Para 13.3 (a) Raised by Shri Prasana Acharya: To what extent oil import can be reduced and
what are the targets for the next five years in this direction?
It is estimated that during the terminal year of the 10th Five Year Plan i.e. 2006-07, about 107.6
MMT (124.7 MMT, if the product demand grows at a higher rate) of crude oil would need to be
imported against the total requirement of 138 MMT (155 MMTPA, if the product demand grows at
a higher rate) of crude oil by domestic refineries.
13.3 (b):
If 100% oil reserves in the country are explored and utilised what would be its environmental
impact? What steps would be taken to minimize its adverse impact on environment?
Reply
Under New Exploration Licensing Policy (NELP), blocks are offered for exploration and
production of Oil & Gas only after getting clearance from the Ministry of Environment & Forests. A
suitable provision for the protection of the environment has been made in the contracts which
inter-alia provide that in performance of the contract, the contractor shall conduct its Petroleum
Operations with due regard to protection of the environment and conservation of natural resouces
and will restore the site after completion of the Petroleum Operations.
Para 14.1
(Col) D.r. Shandil, MP congratulated the Chairman for the excellent performance of the Ministry.
He suggested that in Himacal Pradesh the lower range of Shivalik should be explored which give
employment opportunities to the local people.
Reply
Hydrocarbon exploration for oil and gas was initiated in the Himalayan Foothills part of the state
of Himachal Pradesh, soon after the inception of ONGC in 1956. The entire area of foothills from
east of Ravi to west of Yamuna encompassing Kangra-Mani-Hamirpur block and Bilaspur-Solar-
Sarahan-Kalka and Nalagarh areas have remained under active exploration.
At present, ONGC hold Two Petroleum Exploration Licenses viz. Kangra-Mandi (under
nomination basis) and HF-ONN-2001/1 (under NELP) in the State
Kangar-Mandi PEL area covers 3800 Sq.km in Kangra, Hamirpur, Bilaspur and Mandi districts.
The exploration activities of ONGC in the state of Himachal Pradesh are focused in this sector in
the form of 2D seismic data acquisition in the Jawalamukhi-Nadaun-Hamirpur area and
exploratory drilling at Sundernagar-1. Another exploratory location, Hamirpur-1 (in southeast of
Hamirpur town) is envisaged to be taken up for drilling after Sundarnagar-1.
Exploration block, HF-ONN-2001/1, in Solar-Nahan sector, falling in the districts of Sirmaur, Solan
and Shimla in Himalayan Foreland, covering an area of 3,175 Sq.km was awarded to ONGC
under the third round of NELP. The PEL for the block has been granted by State Govt. w.e.f
10.6.2003 and preparations are being made to implement the envisaged work programme.
Point No. 14.4
Referring to a case of an R.O. the member informed that in a place called Shogi, close to Shimla,
HPCL has opened a RO inside the bulk depot by violating the norms as the land was for bulk
depot and not for RO. He desired to know:
(a) How the explosive department issued two licenses for the same place?
(b) How a RO was set up within about 100 meter distance from police check barrier as it was
not supposed to be within 1 KM of the barrier?
Reply
(a) & (b): It is reported by HPCL that the Retail Outlet and Bulk Deport are separated by a
boundary wall. The explosive License No. of Depot is as per the approved Plan for POL depot
and a separate explosive license is for Retail Outlet site. Further, the Retail Outlet has been put
up after obtaining all necessary approvals from District Authorities and Ministry of Road Transport
& Highways (MORTH) as well. There exists only a Police Post nearby. Government will verify the
fact further & inform the Committee.
Para 15.1
Shri. Ram Sajiwan congratulating for the first shipment of foreign equity share of oil produced in
Sudan reaching Mangalore of 14th May 2003, as a big success, desired information on the
following points to assess whether investment in foreign equity is beneficial or not:
a) Whether it cost would be less than of the imported crude oil?
Reply
The cost of oil imported by Mangalore Refinery Petrochemical Limited (MRPL) from OVL's Sudan
Project Shall be at par with international prices for similar crude. However, from the country's
perspective as the oil belongs to OVL, the gain shall flow back to the country. Moreover, having
control over crude through an Indian controlled entity provides strategic oil security to the country,
which can be harnessed in line with national priorities.
b) What would be its price as compared to the indigenous crude oil?
Reply
Both the indigenous crude produced by ONGC and other companies in India; and that produced
by OVL's GNOP Sudan Project, are priced on the basis of international prices of similar crude.
Both the prices are therefore market dependent.
Para 15.2
Shri Ram Sajiwan also desired to know the progress of other equity sharing projects and the time
by which oil from them would be available.
Reply
At present, OVL has two producing assets viz. GNOP Sudan and Vietnam Project. Participating
Interest in Sudan was acquired by OVL through its subsidiary ONGC Nile Ganga BV. OVL's share
of oil production in Sudan project (GNOP) is about 3 MMT per annum. In Vietnam project, which
commenced production of gas from December 2002, OVL's equity share would approximately on
a average, be about 1.20 billion cubic meter (BCM) per annum. The Sakhalin project is presently
under development and oil production is likely to commence towards December 2005. OVL's
share of crude oil in Sakhalin project is estimated to be about 2.4 MMT per annum. The Sakhalin
project also has gas reserves and gas production is estimated to commence from 2008 onwards.
OVL's share in gas production is estimated to be about 2.0 BCM per annum. The other projects
viz. Myanmar, Libya, Iraq, etc. are exploration ventures on which exploratory work is being
undertaken.
Point No. 15.3 (a)
At the grass root level the farmers are running their pumps and tractors with kerosene oil without
realizing its adverse effect on the machinery, because it is cheaper to diesel. The distribution of
kerosene oil needs to be restructed on the line of petrol pumps. There should be kerosene pump
dealers and petty dealers should take oil from them.
Reply
1. Kerosene allocated by MOP&NG to various States/UTs for distribution under Public
Distribution System is meant for the purposes of cooking and illumination. Further, use of
Kerosene by the farmers for running their pumps and tractors is not permitted as per the
provisions of the MS/HSD and SKO Control Orders.
2. State Governments/UT Administration undertake distribution of PDS Kerosene to the general
public through fair price shops, hawkers, etc under Public Distribution System. Kerosene
wholesale dealers uplift the product from oil companies supply locations and supply the same to
the retailers under Public Distribution System as per the linkages/directives given by the
concerned State Government/UT Administration. Thus, there is a basic difference in the system of
Petrol pumps and PDS Kerosene supply system. The present structure and arrangement appear
adequate. However, State Governments/UT Administrations are supposed to ensure proper
acccountability of PDS Kerosene so that the same is not diverted for unauthorized purposes.
Para No.15.3(b) Shri Ram Sajiwan
There are complaints against the contractors constructing petrol pumps. This needs to be
investigated. Strict vigilance should be exercised over them.
Action Taken
The Oil Marketing Companies maintain strict vigilance on the quality of work of the contractors
constructing retail outlets. Whenever any specific complaint is received against any contractor, it
is duly investigated for necessary action. Whenever any poor quality of work is detected, it is
rectified through the contractor at his cost.
Para 15.3 Point (iii) raised by Shri Ram Sajiwan: The proposal for setting up refinery at
Shankargarh in Allahabad which has been dropped should be reconsidered and refinery be set
up there.
BPCL has a proposal to set up a 7 million metric tonnes per annum capacity grassroot refinery at
Lohagarha, Allahabad district. The estimated cost of the project along with the related
infrastructure facilities amounts to Rs.6,180 crore. Navaratna Board of BPCL has approved
incurring the initial expenditure required for carrying out pre-project activities like environmental
impact studies, surveys and studies required for environmental and other statutory clearances,
acquisition of land etc. which they intend to complete during the X Plan period. Actual work of
construction of the refinery will be progressed beyond X Plan period.
Para No. 16.3 raised by Shri Rasa Sinih Rawat:
Loss to Barauni Refinery due to non supply of Assam crude oil.
Para No. 25.2 raised by Shri Ram Deo Bhandari:
He said that Barauni Refinery in Bihar has to be brought to profit making position. It is for the
Ministry to think of suitable strategy in this regard.
As on date, it is not possible to supply crude oil from K.G. Basin (Ravva Crude) to Barauni
refinery. In order that Barauni refinery could receive imported crude, a 4.2 MMTP A crude oil
pipeline has been laid from Haldia to Barauni.
The profitability of Barauni refinery is being monitored closely and the, refinery has shown a profit
(before tax) of Rs.236 crore during the year 2002-03. Efforts are being made to improve the
profitability of Barauni further through implementation of crude selection and product pattern
optimization software and Advance Process Control, besides maximization of MS yield.
Para 16.8 Raised by Shri Ram Jeevan Singh: The member also said that, at present oil prices
are frequently increased based on impact cost. In view of the plan for oil security / storage some
alternative mechanism need to be devised to regulate frequent increase in oil prices and to save
the interest of the consumers.
With the dismantling of Administered Pricing Mechanism in the Petroleum Sector effective 1st
April 2002, the fluctuations in the international oil prices are bound ,to get reflected in the
domestic consumer prices of petroleum products. However, it may be noted that while the
domestic prices would tend to go up in case of increase in international oil prices, the consumers
would also benefit from the softening of international oil prices.
Para 17 Raised by Shri N.R. Dasari: The fanners who are facing draught situation in different
states are also suffering from increase in oil prices and, therefore, it needs serious consideration
to formulate a policy for reducing and regulating the oil prices.
Considering the softening in the international oil prices and appreciation of Indian rupee vis-a-vis.
US $, the prices of petrol and diesel were further reduced by the oil companies effective 16th May
2003 and 1st June 2003 respectively. The retail selling prices of these products in Delhi effective
1st May 4003, 16th May 2003 and 1st June 2003 are given in tile following table:
(Rs./liter)
Effective: Petrol Diesel
01.05.2003 31.49 20.12
16.05.2003 30.40 19.18
01.06.2003 30.30 19.08
Point 18.2
For Full capacity utilisation of Assam refineries whatever deficiencies they are facing should be
made up by domestic production of crude-Ravva crude and enhancement of production in North
Eastern region. There are enough crude and gas reserves which need to be explored with
adequate investment so that productivity level is high.
Reply
In order to accelerate the exploration activities and thus enhance the hydrocarbon reserve base
in the North East region, Government of India has offered 23 exploration blocks in North East
region under different exploration bidding rounds including first three NELP rounds. Out of the 23
blocks offered in NE Region, contracts have been signed for 8 blocks and contract for one block
is to be signed. In addition, a number of Petroleum Exploration Licence (PEL) areas have been
given to the National Oil Companies (NOCs) viz. ONGC and OIL where exploratory works are
being taken up as per plan. Under NELP-IV, 4 exploration blocks are under offer in North Eastern
region.
With the exploration efforts, the reserve base of hydrocarbons in the North Region is expected to
improve resulting in higher oil/gas production in that region.
Government of India has signed contract for one medium size discovered oil field in Arunahcal
Pradesh with a joint venture of Geo-Enpro, Jubiliant Enpro Ltd. Geo- Petrol and OIL. Production
of oil from the field is being maintained by the operator though work over, stimulation operations
etc. The oil production from the field is likely to increase with the drilling of in-fill well locations
which have been identified by the JV partners.
Para 18.3
Dr. Arun Kumar Sharma, MP : Some arrangements has to be made to control gas flaring in
Assam and avoid national wastage. In case of Assam Gas Cracker Project, a number of issues
are long pending which need to be settled on urgent basis once for all.
Reply
In order to ensure that there is no flaring of gas other than flaring due to technical reasons,
ONGC has already implemented various gas flaring reduction schemes in the form of low
pressure gas compression systems in major fields of Assam like Lakwa, Geleki and Rudrasagar
in a phased manner. The flaring of gas in ONGC fields in Assam has thus come down over the
years from around 50% in 1992-93 to about 100/0 in 2002- 03. About 55% of the total gas flared
during 2002-03 was due to technical requirements/operational safety, and includes gas flared
from isolated structures due adverse techno-economic factors.
For reducing the gas flaring further, action for installing about 10 additional gas compression
facilities has already been initiated by ONGC and these facilities are likely to come up in early
2005.
As regards Oil India Limited (OIL) the average gas flaring is presently around 0.35 MMSCMD
(7.3% of produced gas) in Assam and Arunachal Pradesh and this is bare minimum technical
flare scattered in 35 oil and gas producing installations. In order to contain flaring at optimum
level, effort is continuously on by way of installation of low pressure gas compressors,
construction of gas evacuation pipelines to new fields, extension of supervisory control and data
acquisition system (SCADA), incorporation of capacity control to stabilize the surging effect,
operation of gas storage scheme etc.
Para No.18.4 Dr. Arun Kumar Sarma
Adoption of Majuli Island by Indian Oil Foundation and request for modification in the existing
norms for adopting the heritage sites.
ACTION TAKEN
The matter of adoption of Majuli Island and modification in MOU has been referred by this
Ministry to the Ministry of Tourism and Culture. Their reply is awaited.
Para 18.5 Raised by Dr. Arun Kumar Sarma: A definite solution is needed for fixation of price of
Raw Petroleum Coke (RPC) which has jeopardised the revival of many industries located in
Assam.
Raw Petroleum Coke (RPC) is a free trade product, the prices of which are fixed by the oil
companies on market considerations. In view of the availability of good quality RPC from the
processing of Assam crude, a number of RPC based industries came up in Assam and around
Barauni Refinery over a period of time. However, with the discontinuation of Assam crude for
Barauni Refinery after 2000-01, Barauni Refinery is now producing RP(: using imported crude.
Thus, as of now, RPC produced by Assam Refineries and Barauni Refinery are of different quality
and priced accordingly by IOC. The Marketing Division of IOC is presently looking into the issue
of striking a proper balance between the selling prices of these two categories of RPC.
Para 18.6 Raised by Dr. Arun Kumar Sarma: 100% excise duty exemption be restored to
Numaligarh Refinery .
The matter has been taken up with the Ministry of Finance.
Point No. 18.8
There is need for immediate modernization of petrol pumps in North Eastern region.
Reply
Oil Marketing Companies are already carrying out modernization of Retail Outlets, in a phased
manner, on all India basis which also includes North Eastern Region.
Para 19 Raised by Shri Rajkumar Dhoot: Expressed his concern over the high prices of petrol
and diesel in the State of Maharashtra because of sales tax rates. He requested the Chairman to
take up the matter with the Chief Minister of Maharashtra so that prices could be reduced.
The matter has been taken up with the Government of Maharashtra.
Para 20 Raised by Shri Daud Ahmed: Congratulating the Chairman for the first shipment of
OVL's share of Sudanese crude reaching Mangalore on 14th May, 2003 and for the efforts made
to handle the oil situation during US- Iraq war said that in view of the prevailing draught situation,
diesel should be supplied to the farmers at subsidized rates.
With the dismantling of Administered Pricing Mechanism effective 1st April 2002, the pricing of
diesel has become market determined. The oil companies are now pricing this product on market
considerations. There is no scheme of the Government under which diesel could be supplied to
the farmers at subsidized rates.
Point No.2l.l
Shri Harpal Singh Sathi commending the performance of the Minister expressed his concern over
HPCL advertisement for land t-o allot petrol pumps. He said that this would benefit only those
who possess land and the poor public would be adversely affected who would not get petrol
pumps. He desired that this be investigated.
Reply
HPCL has been releasing advertisements in the Newspapers for suitable lands for putting up
Company Owned Retail Outlets and inviting bids from the interested parties for offer of vacant
land either on outright sale basis or on long term lease basis. HPCL has not released any
advertisements for land t-o allot petrol pumps to the landlords.
Para 22.2
Prof Rasa Singh Rawat, MP: The oil and gas exploration work in Rajasthan which has been
suspended should continue without interruption.
Reply
ONGC is continuing exploration work in Rajasthan. Currently, ONGC is operating in Jaisalmer
district in two PEL areas namely South Kharatar and Miajalar East, in addition to exploration I
exploitation activities in ML areas. It has a plan to acquire 650 GLK of 2D seismic survey and
drilling of one exploratory well during X plan period.
South Kharatar area is near to international border with Pakistan and on advice of Defence
Ministry; exploration activities in this area were only temporarily suspended. Accordingly, 2D
seismic data acquisition programme during 2002-03 in this area was deferred. However, one
exploratory well Chinnewala Tibba-l, towards North-West of Ghotaru, was drilled, which proved to
be a new gas find in the area. The results are being studied. Defence clearance has since been
received and the deferred seismic programme is also planned for field season 2003-04 to acquire
300 GLK of 2D seismic data to enhance the potential of the new find.
In Miajalar East PEL block, the proposed drill site and approach road were falling within the
Desert National Park (DNP). In view of the prevailing directives by Hon'ble Supreme Court,
permission for work within the DNP was not given by the State Government and they suggested
ONGC to approach the Hon'ble Supreme Court. ONGC has filed a writ petition with the Hon'ble
Supreme Court for permission to work in the DNP. As per the directives of the Hon'ble Supreme
Court, the matter is being jointly deliberated with Ministry of Environment and Forests for an
amicable solution to carry out exploratory drilling.
The exploration and production activities are continuing in operational areas of Oil India Limited at
Rajasthan. The produced gas is being supplied to Ramgarh Power Plant of RSEB without any
interruption. However, the planned seismic data acquisition in one block (NELP II) and work over
operations in the existing gas field could not be taken up due to non receipt of clearance from the
Defence authorities in 2002-03. However, a clearance has recently been obtained and
preparatory work for seismic data acquisition is in progress and work-over will be started in the
3rd quarter of 2003-04. A consultancy study for identifying suitable technology for producing high
pour point, (heavy oil) discovered in Baghewala area of Jaisalmer district by OIL with PDVSA-
Intervep, Venezuela is in progress.
As far as PSC regime is concerned exploration blocks are under operation at present in the state
of Rajasthan. These exploration blocks are RJ-ON-90/1, RJ-ON-90/5, RJ-ON/6, RJ-ONN-2000/1
and RJ-ONN-2001,/l. There has been no suspension of work in these blocks and exploration
work in these blocks is in progress from the effective date of PSCs. Though there has been delay
in schedule activity in the blocks RJ-ON-90/5 & RJ- ONN-2000/1 due to presence of army in the
area and non availability of clearance from Ministry of Defence.
Point No. 22.5
Kerosene be made available in the draught affected areas of Rajasthan.
Reply
Information from Government of Rajasthan is still awaited. The matter is under consideration of
this Ministry.
Para No. 22.6
Prof. Rasa Singh Rawat; MP raised that no action has been taken on the irregularities committed
by IOC bottling plant at Ajmer which caught fire and had a CBI enquiry also
Action Taken
The matter was checked up with IOC and it is informed that a team of CBI officials from Jaipur
visited IOCL's LPG bottling plant at Ajmer on 9.12.2002. CBI, Jaipur has intimated to CVO, IOC
that in view of facts ascertained, no criminal" liability can be fixed on the officers working at the
bottling plant. IOC has also confirmed that there had been no incident of fire at LPG bottling plant,
Ajmer in the recent years.
Para 22.7 Raised by Prof. Rasa Singh Rawat: What has been the progress towards
development of45 days storage for crude oil?
A note on the subject of strategic oil storage has been prepared for the consideration of the
Committee of Secretaries (COS). Further action in the matter would be taken as per the view
taken by the COS on this issue.
Para No.23.2 Shri Kishan Singh Sangwan
In Haryana the Chief Minister of the state has issued oral instructions that 'No Objection
Certificate' (NOC) for new dealership should not be issued without his orders and requested the
Chairman to talk to the CM in this regard.
Action Taken
The Ministry of Petroleum & Natural Gas is not aware of any oral instructions issued by the Chief
Minister of Haryana that 'No Objection Certificates' (NOCs) for new retail outlet dealerships
should not be issued without his orders. However, the Public Sector oil companies have reported
that in certain cases, there is delay in issuing NOCs for retail outlet dealerships by the District
Magistrates in Haryana. In most of these cases, the delay in issuing NOCs by the District
Magistrates was due to the delay in getting clear permission from various statutory authorities like
the Department of Town and Country Planning, the Department of Urban Development, the
National Highway Authority of India, etc. Earlier, in some cases, NOCs were issued conditionally,
advising the oil companies to obtain statutory permissions separately before commencing the
retail outlets. However, this is not done at present.
In case of Retail Outlets on National Highways permission of National Highway Authority of India
is required. But large number of RO cases are pending for permission from NHAI. The Chairman
may discuss this with. the Minister for Road Transport and Highways for early clearance. The
State level Officers should also be authorized to grant such permission.
Action Taken
A meeting was held on 21-2-2003 between the Minister of Road Transport & Highways and the
Minister of Petroleum & Natural Gas regarding the finalization of norms for the setting up of retail
outlets on highways. Thereafter, meetings were held between the representatives of the oil.
industry and the Chief Engineer, Ministry of Road Transport & Highways in March 2003. Based on
the agreement reached, the draft norms were finalized. The draft is undergoing the process of
approval in the Ministry of Road Transport & Highways. Final orders will be issued by that Ministry
after obtaining the concurrence of this Ministry.
Para No. 23.4
Shri Kishan Singh Sangwan raised the issue that old dealers are not transferring connections to
the new dealers despite strict instructions from the Ministry in this regard.
Action Taken
Public Sector Oil Marketing Companies have reported that the process of transfer of connections
among distributors, as per guidelines issued by Govt., has been completed in all cases, except
where stay is granted by Court. However, in view of the issue raised by Member of Parliament,
the position is being reconfirmed: from Oil Marketing Companies.
Para 23.5 Raised by Shri Kishan Singh Sangwan: The present system of announcing
increase / decrease in oil prices is confusing and creates doubts in public mind. He may be
apprised whether some policy is being framed in this regard.
After the dismantling of Administered Pricing Mechanism effective 1st April 2002, the oil
marketing companies have entered into agreements with the domestic refineries as per which the
former pay to the latter the prices of petrol and diesel revised fortnightly on import parity basis.
The oil marketing companies in turn decide to vary the domestic consumer prices on fortnightly
basis. With a view to inform the consumers of changes in prices, the changes are widely
published through electronic and print media by the oil marketing companies at the eve of such
revisions.
There should not be any reservation in allotment of ROs and let competition be increased.
Action Taken.
Consequent on the dismantling of the Administered Pricing Mechanism (APM) in the petroleum
sector with effect from 1.4.2002, the selection of dealers for retail outlets/LPG distributorships/
SKO-LDO dealerships will now be made by the Oil Marketing Companies (OMCs) themselves as
per the guidelines to be adopted by them. The draft guidelines have been received from the
OMCs and are under examination in the Ministry.
24.1 Shri N.H. Diwathe
Expressing concern over 69% dependency on imported oil, he suggested that ethanol blending
be encouraged by subsidising it.
Reply
The Government of India commissioned 3 pilot projects during the year 2001 to examine the
operational, financial, environmental and other related aspects of blending of ethanol in petrol to
the extent of 5%. Encouraged by the success of the pilot projects and on the strength of the R&D
studies and after discussions with all the concerned authorities including State Governments,
Government of India decided to cover the entire areas of 9 States and 4 Union Territories with
supply of 5% ethanol blended petrol by 30th September, 2003, starting from 1st January, 2003.
In order to encourage blending of ethanol with petrol, Government has reduced Special Additional
Excise Duty on ethanol blended petrol to Rs.5,700 per KL against Rs. 6,000 on petrol i.e. an
excise duty relief of 30 paise per litre. Government has also amended the Sugar Development
Act, 1982 in January 2003 enabling financial assistance at 6% concessional rate of interest from
the Sugar Development Fund for production of anhydrous ethanol.
The State Governments have been requested to extend concessions by reducing existing levies
on ethanol and on the blended fuel.
Government proposes to expand this programme in future by covering the rest of States and
Union Territories and also by increasing the percentage of ethanol in petrol to the extent of 10%.
Para No.24.2 Shri N.H. Diwathe
He also suggested that the Ministry should think of reopening of 470 petrol pumps allotted prior to
dealership controversy and providing them some protection.
Action Taken
The cases of 414 dealerships/ distributorships which were reported in the media are under
examination by the Two-Judge Committee appointed by the Supreme Court in its Order dated
20.12.2002. In these cases, those dealerships / distributorships which were commissioned before
9.8.2002, the date' of issue of the Government order canceling the allotments, will continue to be
operated by the respective dealers until further orders of the Supreme Courts.

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Agenda Note for the Parliamentary Consultative Committee meeting of Ministry of

Petroleum & Natural Gas to be held on 13.8.2003

"Scenario of Natural Gas and LNG and its Transportation Infrastructure"

Natural Gas Production

4. The details of production of natural gas in the country are as follows:

Natural Gas Allocation & Supply Scenario

8. Gas produced by ONGC/OIL is allocated to consumers by the Ministry of Petroleum &

All India Gas Allocations:

Sector wise & state wise gas allocations in India

Years Demand Supply Shortfall

a. Intensification in the exploration through New Exploration Licensing Policy (NELP)

Use of natural aas as Compressed Natural Gas (CNG) for vehicles

Natural Gas Pricing

Liquefied Natural Gas (LNG)

1. Dedicated gas field development and production.

World Scenario and LNG 'moons in India

Dahej LNG Project

Natural gas supply and transportation infrastructure

Major Gas Pipelines

Network States Length in Km

National Gas Grid

I now invite the Hon'ble Members of the Committee to discuss the

MINUTES 'OF, THE MEETING OF THE CONSULTATIVE COMMITTEE OF THE MINISTRY OF

5.1 ShriK.S. Sangwan desired to know the present position of MRPL.

16. The meeting ended with a vote of thanks to the Chair.

I welcome you to the 20th meeting of the Consultative Committee.

MRPL is a state-of-the-art, technologically superior refinery capable of producing premium quality

Para No. 8.5

Ministry is considering the issue. Decision on it will be taken shortly.

Point No. 9.2

(In Million Metric Tonnes

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