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Cross Border Fuel

Trade to Nepal and


Fuel Standards

Demand Of Petroleum Products in


Nepal

Products/F.Y.
1999
2000
Petrol
49,994
55,585
Diesel
315,780 310,569
Kerosene
294,982 331,120
Aviation Fuel
55,549
56,849
Furnace Oil
33,860
26,811
Light Diesel Oil
547
3,989
Total
750,712 784,923
L.P.G.(in mt.)
25,019
30,627
* Expected
Average annual growth rate 8%.

2001
59,245
326,198
316,380
63,130
20,934
3,404
789,291
40,102

*2002
67,157
347,970
316,380
76,058
19,866
6,695
834,126
48,900

(1000 KL)

SKO Consumption in Nepal


400
350
300
250
200
150
100
50
0
47/48 48/49 49/50 50/51 51/52 52/53 53/54 54/55 55/56 56/57

Fiscal Year

HSD Consumption in Nepal

(1000 KL)

400
300
200
100
0
47/48 48/49 49/50 50/51 51/52 52/53 53/54 54/55 55/56 56/57

Fiscal year

LPG Consumption in Nepal


60,000

40,000
30,000
20,000
10,000
0
47
/4
8
48
/4
9
49
/5
0
50
/5
1
51
/5
2
52
/5
3
53
/5
4
54
/5
5
55
/5
6
56
/5
7
57
/5
8
58
/5
9

Volume (MT)

50,000

Fiscal Year

Present Storage Capacity of NOC


Location
Petrol
Kathmandu (Thankot)
1,520
Kathmandu (Airport)
0
Amlekhgunj
1,960
Biratnagar
560
Bhairawa
140
Nepalgunj
210
Dhangadhi
30
Pokhara
140
Surkhet
0
Dipayal
0
Dhanusha (Mahendranagar)
30
Total
4,590

Diesel
6,300
0
10,480
5,310
1,914
760
1,660
1,520
0
15
140
28,099

Kerosene
7,060
0
11,200
5,380
1,535
760
830
1,520
45
45
70
28,445

Jet A1
0
6,390
0
280
56
280
45
60
60
0
0
7,171

Total
14,880
6,390
23,640
11,530
3,645
2,010
2,565
3,240
105
60
240
68,305

POL Products Received From


India

Products are received through the various Indian boarder depots


of Indian Oil Corporation.
Siliguri, Forbesgunj, Raxaul, Gorakhpur, Betalpur, Mugalsarai, Allahabad, Kanpur.
Liquified Petroleum Gas (LPG) is received from Haldia/Barauni/Mathura refinery.

NOCs depots at different parts of the kingdom :


Eastern Region
Central Region
Western Region
Mid-western Region
Far-western Region

IOC Depot

: Biratnagar (Products supplied from IOCs Siliguri and


Forbesgunj depots)
: Amlekhgunj and Kathmandu (Products supplied from
IOCs Raxaul and Barauni depots)
: Bhairahawa and Pokhara (Products supplied from IOCs
Raxaul, Betalpur and Mugalsarai depots)
: Nepalgunj (Products supplied from IOCs Allahabad and
Kanpur depots)
: Dhangadhi (Products supplied from IOCs Allahabad and
Kanpur depots)

NOC Depot

NOC Dealer

Consumer

Map of Nepal - 1

Map of Nepal - 2

Mode of Transportation of
Petroleum Products across IndoNepal Border
IOCs Depot

NOCs Depot

NOCs Dealer (Retailer)

Consumer

Entire Transportation of Petroleum Products is done by TankLorries of capacity ranging from 12,000 liters to 25,000 liters
each.
Total No. of Tank-Lorries in operation is around 900.

Quality Control System


Quality Check of Products while receiving from IOCs Depot:
Before receiving the product from IOC, quality is thoroughly checked and recorded.
After receiving the product at NOC depot it is again tested and results will be
recorded with proper sampling.
Before releasing the product to the dealers the quality is again checked and key
parameters like density, temperature and FBP (Final Boiling Point) will be
mentioned in the invoice.

Quality Control and Inspection System at Retail Outlets :


Frequent Q/C inspection is carried out by NOC in the Kathmandu Valley and in the
rest of the country.
Sales will be suspended immediately when a dealer is found guilty of adulterating
the fuel.
A strong action as per Quality Control Regulation of NOC will be taken against the
dealer and the inferior stock will be blended with the fresh one to meet the marketing
specification of the product.
Such action leads to suspension of selling the products from the respective depot for
the period of 6 months or cancellation of the license depending upon degree of
adulteration.
In case of Motor Gasoline marketable FBP range is limited to 200 oC although
international marketing range is 215oC.

Specification for Unleaded MS (Regular)


S.N
Description
1 Copper Cor @50 Deg - C For 3 HRs

Requirements
Not Worse Than No. 1
Orange
g/ml
0.710-0.770
Deg-C

Method (IS)
P:15

REC. @ 70 Deg. C

% Vol Min 10-45

P:18

REC. @ 100 Deg. C

% Vol Min. 40-70

P:18

REC. @ 180 Deg. C

% Vol Min 90

P:18

DP/FBP

Max 215 Deg C

P:18

REC/RES/LOSS

% V Max 1.000

P:18

gm/cu.mtr. Max 40.000

P:29

KP a Min 35.000

XX Max 70.000

7 Lead Content

Grams/Liter 0.013

P:38

8 Potential Gum

gm/cu.mtr. Max 50.000

ASTM D873

Min 88 / Min. 84

P:27 / P: 26 & 27

% Mass Max 0.200

P:34

2 Colour
3 Density at 15 Deg - C
4 Distil. IBP

5 Existing GUM
6 Vapour Pressure @ 38 Deg. C

9 Research Octane No. (RON) / AKI


10 Sulphur Cont. Total
11 Benzene Content % by volume

Max. 5

12 Water Tolerance of Gasolene


Alcohol Blend

Deg - C
0 - 10

Visual
P:16/IP 160
P:18

Specification for Superior Kerosene


S.N
Description
1 Acidity - Inorganic
2 Burning Quality
Char. Value, mg / kg of oil consumed
Bloom on Glass chimney
3 Copper Cor@ 50 Deg - C For 3 HRs
4 Colour (Saybolt)
Incase of Dyed Kerosene
5 Density at 15 Deg - C
6 DP/FBP
Recovery @ 70/200/366 Deg. C
7 Flash Point
8 Smoke Point
9 Sulphur Cont. Total

Requirements
mg KOH/g
NIL

Method
P:2

Max. 20
Not Darker Than Grey
Not worse than
No.1
Min. 10
Blue
g/ml

P:5

Deg C
Max 300.00
%V
Min 20.000
Deg - C
36 (35)
mm
Min 18.000
% Mass
0.25

P:15
Visual
P:16/IP160
P:18
P:18
P:20/21
P:31
P:34

Specification for High Speed Diesel Oil


S.N
Description
1 Acidity - Inorganic

Requirements
mg KOH/g
NIL
0.2

Method
P:2

0.01

P:4

Not worse than no. 1


48 or 46

P:15
P:9 or D:4737

3-15

P:110

% Mass Max. 0.30

P:8

0.8200-0.8600

P:16/IP160

Deg C

P:18

% V Min 90.000

P:18

Min. 35 Deg. C

P:20/21

0.05

P:40

Min 1.8-Max. 5.0

P:25

Deg - C Max 6.000

P:10

0.05

IP:53

15 Total Sulphur, % by mass, Max.

0.05-0.25

P:34

16 Total Sediment, mg/100 ml, Max.

1.6

D:2274

2 Acidity, Total mg of KOH/g, Max.


3 Ash, % by mass, Max.
4 Copper Cor. @ 100 Deg. C., 3HRs
5 Cetane Number or Cetane Index, Min.
6 Power Point, Max.
7 Carbon Residue Ramsbottom on 10% Residue
8 Density at 15 Deg - C, g/ml, (Min. - Miax.)
9 DP/FBP
Recovery @ 70/200/366 Deg. C
10 Flash Point (Abel)
11 Water Content, % by Volume, Max.
12 Kinemetic Viscosity @ 40 Deg-C, cst
13 Pour Point
14 Sediment, % by mass, Max

P:2

Specification for LPG


S.N
Description
1 Copper Corrossion Test @ 38 Deg - C for 1 Hour
2 Density at 15 Deg - C
3 Dryness
4 Hydrogen Sulphide, ppm
5 Odour, Ethyl Mercaptan, ppm
6 Total Volatile Sulphur, ppm
7 Volatility (Evaporation Temp 95% by
Vol @ 76 mm HG pressure), Max.
8 Vapour Pressure at 40 Degree, gauge, Max.

Requirements
Not worse than No. 1
g/ml

Method
D:1838

No free Entrained water


pass
(Not more than 5)
Min. 20

P:74

Max. 150

D:2784, D:3246

2(butane, butane mix)


-38.0 (for propane)
520-butane, 1050 butane
mixture, 1550 propane

D:1837

P-16

P:73
P:75

D:1267

History of NOC-IOC POL Supply


Agreement
First Agreement reached with Indian Oil in 1974.
Renewed after every 5 years up to 1999.
Renewed for 1 year in 2000 (Due to the phased
deregulation policy of India on certain products).
Renewed for 9 months in 2001(Due to further
deregulation policy).
Recently signed on 28th March 2002 for 5 years.

Salient Features of Supply


Agreement
NOC to import equivalent
value of Crude Oil Cargoes against the
various upliftments from IOCs border depots.
Pricing of the products is done on import parity basis.
Ex-depots price of various petroleum products will be advised by
IOC in every month.
IOC is to ensure the demand of NOCs different Petroleum
Products through various IOC Depots.
IOC shall not sell any petroleum products to any other party in
Nepal without the consent of NOC.
IOC can market those products in Nepal not dealt by NOC.

IOCs Cross Border Pricing to NOC


Earlier the pricing was done as per the NOCs actual
weighted average of Bulk Import.
To the weighted average thus arrived, the marketing
margin, profit margin, import wharfage, landing charges,
and railway freight were added to arrive at ex-border
depot price.
Effective 1st April 2002, the base price will be derived on the
basis of actual international market trend and IOCs
components including notional railway freight from Haldia
will be added to derive the cross border depot price.

Monthly Payment to IOC Against NOCs


Upliftments
Based on third last months actual NOC upliftment across
border depots, NOC makes payment to IOC on the 15th day of
every month.
E.g.: to make payment for December 2001s upliftment the actual
uplifted value of September 2001 is paid to IOC on 15th of December
2001.

Total third country import value of NOC at present is around


180 millions USD (considering C & F Haldia Price of USD
250 per mt SKO).
More than 20 millions of USD is paid to IOC annually on
account of IOC margins and railway freights. Around 80% of
this amount goes on railway freight alone.

Scenario After April-2002/Pricing Impact


Govt. of India has deregulated all petroleum products except
SKO and LPG after April 2002.
After de-regulation, various Indian Oil Companies or Oil
Traders will have free passage with their products to enter
into Nepalese market.
With respect to the de-regulation of products in India
Government of Nepal is also closely watching the situation
and is yet to decide appropriate measures to be taken.
The cross border trade of Petroleum Products is expected to
be much more price sensitive.

Third Country (Other than India) Bulk


Import in Million USD
200
180

Import Value in Million USD

160
140
120
100
80
60
40
20
0

1994

1995

1996

1997

1998

1999

2000

2001

SKO

43.14

44.17

33.08

66.87

51.29

60.35

157.02

185.42

HSD

34.61

37.1

43.56

58.83

46.76

39.43

32.82

F. Year

SKO import in 2000


400

365

350
297

300

USD/MT.

250

277 277

269
246

240

258

276
246

270

356
297

273

200
150
100
50
0
Jan Feb Feb Mar Mar Apr Jun

Jul

Jul Aug Aug Sep Oct Nov

NOC's SKO Purchase Rate in 2001

300
274
250

USD/MT

200

255

264
248

263

270

274

257

245

250

248
228

227
239

204

215

150
100
50
0
Jan Feb Mar Mar Mar Apr May Jun Jul Sep Sep Oct Oct Oct Oct Nov

Demurrage Burden to NOC at


Indian Ports
Due to :

Insufficient port facilities


Bunching of vessels
Shortage of ullages in shore tanks
Technical problems
Act of God
Y ear
Million USD
1996

4.07

1997

2.75

1998

2.02

1999

1.97

2000

2.15

2001

0.85

*2002
* For 3 months

A lmost Nil

Demurrage
4,500,000.00
4,000,000.00
3,500,000.00

US Dollars

3,000,000.00
2,500,000.00
2,000,000.00
1,500,000.00
1,000,000.00
500,000.00
Demurrage (USD)

1996

1997

1998

1999

2000

2001*

4,069,831.08

2,749,864.65

2,019,759.56

1,969,427.19

2,153,471.48

850,000.00

Year

* Expected

NOCs Local Pricing Structure


Details of Cost Components
Weighted Average of NOC's Import, USD/Mt.
Conversion Rate (1 USD =) IRs.
Wharfage, Landing Charges, Marketing & Profit
Margins and Railway Freight (Haldia to Raxual), NRs.
Ex-Depot Price (Raxual) Per KL NC (A)
Customs
L.D. Tax 1.5% of A
Special Tax, 1% of (A + 5% of A)
VAT
Transportation
Adm. Expenses
Marketing and Profit Margins
Stock Loss @1%
Interest on Inventory
Demurrage @ 3% of (A)
Ocean Loss @ 0.5% of (A)
Recovery Per Ltr.
Ex-Depot Price
VAT 10%
Shrinkage @ 0.9%, 0.7%, 0.7%
Transportation
D.D. Rate
VAT 10%
Drum Depr., 1% of Ex-Depot Rate
Dealer's Commission @ 3%, 3% & 3%
Working Loss 0.15%
Selling Price Per KL.
VAT 10%
Selling Price Per KL.
Selling Price Per LTR.

MS
255.36
47.50

HSD
235.00
47.50

SKO
255.36
47.50

3180.81
18978.98
10750.00
298.92
199.28
3117.61
224.03
287.50
71.00
30809.71
308.10
569.37
94.89

2009.28
17433.56
2600.00
274.58
183.05
2136.00
224.03
287.50
71.00
21073.72
210.74
523.01
87.17

1181.30
16589.42
300.00
261.28
0.00
0.00
224.03
287.50
71.00
17733.23
177.33
497.68
82.95

7.51

0.46

-3.05

39480.93
3948.09
355.33
760.99
40421.64
4042.16

22543.20
2254.32
157.80
760.99
23286.38
2328.64

1333.91
62.63
41818.18
4181.82
46000.00
46.00

768.45
36.08
24090.91
2409.09
26500.00
26.50

15626.90
0.00
109.39
760.99
16321.67
0.00
163.22
489.65
25.46
17000.00
0.00
17000.00
17.00

RSP Difference between India and Nepal


Border - 1
1. Eastern Sector
Petrol
Diesel
Kerosene Control (PDS)
Kerosene Open
LPG (Per Cylinder)
RSP = Retail Selling Price

Nepal
46
26
17
17
550

India
45.15
28.74
12.74
21.77
416.39

N.Rs/Litre
Difference
0.85
-2.74
4.26
-4.77
133.61

RSP Difference between India and Nepal


Border - 2
2. Central Sector
Petrol
Diesel
Kerosene Control (PDS)
Kerosene Open
LPG (Per Cylinder)
RSP = Retail Selling Price

Nepal
46
26
17
17
550

India
45.05
28.65
12.82
22.42
382

N.Rs/Liter
Difference
0.95
-2.65
4.18
-5.42
168

RSP Difference between India and Nepal


Border - 3
3. Western Sector
Petrol
Diesel
Kerosene Control (PDS)
Kerosene Open
LPG (Per Cylinder)
RSP = Retail Selling Price

Nepal
46
26
17
17
550

India
45
29.3
14.8
22.42
480

N.Rs/Liter
Difference
1
-3.3
2.2
-5.42
70

Subsidy Given by NOC on Kerosene


and LPG
In the last 10, years NOC has borne loss on Kerosene
and LPG around 60 millions of USD in the form of cross
subsidy.
At present NOC is giving a cross subsidy of NRs. 3 per
liter in Kerosene which is around 134 million USD per
annum.
In LPG the subsidy at present is NRs. 60 per cylinder
(14.2 KG.) which is around 2.7 millions of USD per
annum.

Impact of Border Price


Difference on NOC
Around 10% of Total Sales of Kerosene goes
back to India due to cheaper price in Nepal.
In terms of value it is around 9 millions of
USD.
Also considerable amount of Diesel flows back
to India due to cheaper price in Nepal.

Annual Effect on NOC in USD due to


Border Price Difference*
Details
Kerosene
HSD
MS
ATF
LPG in MT.
A) Net Loss

Sales Volume, KL
350,000.00
330,000.00
55,000.00
60,000.00
60,000.00

Recovery Per KL,


N.Rs
(3,000.00)
700.00
8,000.00
2,000.00
(4,219.20)

Million USD
(13.46)
2.96
5.64
1.54
(3.25)
(6.57)

B) Loss Due to Back Flow of SKO to India

9.00

Difference (B-A)

2.43

* Based on USD 240/Mt., SKO's Import Price and NOC's current RSP

NOCs Contribution in
Government Revenues
Around 4 billions of Nepalese Rupees
equivalent to 51 millions of USD is paid
to the government annually in terms of
revenues.

Proposed Joint Ventures with IOC 1


1. Across India Nepal Border Product Pipe Line
(Raxaul Amlekhgunj)
Distance: 36 kms.
Annual transportation of around 0.75 million tons of Petroleum Products.
Merits :
Economically viable.
40% of current transportation bill will be reduced.
Better quality fuel will be received.
Product loss will be reduced.
Operating cost will be minimum.
Reliable and continuous supply irrespective of all disturbances.
Road congestion will be reduced.
Environment Friendly.

Proposed Joint Ventures with IOC 2


1.
LPG Plant:
Currently the total storage capacity with all the private
bottlers is of 835 Mt. which can cover only 5 days
national consumption.
NOC has proposed to establish a 5,000 Mt. capacity
bulk storage LPG Plant which can sustain a months
national consumption.
IOC is ready to assist NOC in all aspects.
Private bottlers will be benefited by taking the reliable
bulk LPG supplies from NOC.
If NOC enters into the retail marketing, the current loss
per cylinder can be reduced.

Blending of Gasoline With Ethanol


Molasses, by-product of 7 major sugar industries of
Nepal, can be utilized to produce Ethanol which can be
blended with Gasoline to offer a better quality fuel called
Gasohol.
Octane rating of Gasoline can be improved and less toxic
emission will be observed.
10-15% import of Gasoline will be reduced and foreign
currency can be saved.
Agro-based industries can be promoted.
A Committee has already submitted a study report to the
concerned Ministry of HMG for the necessary approval
and implementation.

Cleaner Fuels in Nepal


Hydro Power: Total Potential: 44,000 MW
Installed
Details
Capacity (MW)
Existing Hydro Power
381
Generation under testing
144
Total
525
Existing Thermal
Total

51
669

Projects under construction

140

Capacity (Peaking)
Peak Demand
Deficit/Surplus

2001/02
389
440
-51

2002/03
516
472
44

2003/04
527
517
10

in Mega Watt
2004/05 2005/06
601
611
570
626
31
-14

Power Exchange Tariff Across Border


Effective January 1, 1996
For Supply at 33 KV - I.Rs. 1.67 KWH
For Supply at 132 KV- a rebate of 7.5% over 33kV rates
Annual Escalation - 8.5%
Total Exchange points- 21

Current Tariff effective January 1, 2002


For Supply at 33 KV - I.Rs. 2.72 KWH

Current Electricity Tariff in


Nepal-1
CATEGORY A: DOMESTIC CONSUMERS
Min. Charge
A.1 Minimum Monthly
Minimum in terms of
Charges:
Charge
USD
MET ER CAPACIT Y

(NRs.)

Up to 5 ampere
15 ampere
30 ampere
60 ampere
Three phase supply
A. 2 Energy Charge per
unit:
Up to 20 units
21 - 250 units
Over 250 units

80
299
664
1394
3244

1.03
3.83
8.51
17.87
41.59

4
7.3
9.9

0.05
0.09
0.13

Expmt
(KWh)

20
50
100
200
400

Current Electricity Tariff in Nepal-2


Other
Categories:
Temples,
Industrial,
Commercial, Non-Commercial, Irrigation, Water
Supply, Transportation, Street Light, Temporary
Supply, Bulk Commodity: Different Rates Apply

Time of Day (TOD) Tariff Rate:


Pick Time, Off Peak Time, Average Time
Rates are different according to the supply
voltage.

Conclusion
Border Prices between India and Nepal to be
monitored and made equal.
Malpractices on border trade to be minimized through
appropriate policies.
Technical know-how and expertise of the regional
partners to be shared each other.
Greater potential of cleaner fuels in the region to be
harnessed.
Regional resources have to be exploited and utilized
for mutual benefits.
Role of coordinating agencies for the development of
regional co-operation to be increased.

Our Sincere Thanks To

"NEXANT "
FOR ORGANIZING THIS

WONDERFUL WORKSHOP

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