Archive for March, 2014

No Undue Benefits from Gujarat Govt: RIL

March 25, 2014

A lot of allegations have been made with respect to Reliance Industries Limited (RIL), the company’s executives and their personal relationships and associations with certain Ministers in Gujarat.

The most serious allegation is that RIL has unfairly benefited on account of its relationship with these Ministers. At the offset, we’d like to state that the concerned ministers do have a portfolio consisting of energy, oil & gas and other petroleum assets. It’s also true that these Ministers do have a personal friendship with the Ambani family.

Now let’s examine whether these Ministers have helped RIL in any way or that they are even in a position to do so.

The story that RIL executives have a relationship with these afore-mentioned ministers and hence have benefited unfairly has been doing the rounds for some time now. It’s quite shocking. Where RIL is involved in oil exploration and production is in Andhra Pradesh, 1500 km from Gujarat.

Gas comes under the purview of the Union Government and not the State Government. State Government does indeed have the portfolio of petroleum for its boundaries but even this, according to the constitution comes under the authority of the Central Government. The refinery in Gujarat is de-regulated. Anyone can trade and it’s very old. How can ministers possibly have an impact here?

Another critical thing we’d like to address here is that RIL has absolutely no involvement in the mining industry in Gujarat.

All of RIL’s processing units, factories and offices get electricity from Captive Power Plants, i.e., RIL runs an offshore plant to supply all of its industrial entities with power. Hence, the allegation that RIL benefits from their relationships with Ministers is baseless, out of line, politically motivated and most importantly, to demean and tarnish the image of the company in the eyes of the public.

The people of India need to understand that the Ministers concerned have no constitutional authority in the Republic of India and even if they wanted to, couldn’t possibly get things done for RIL.


Mediatek Looks to Join Hands with Reliance Jio, Produce Low cost LTE Handsets

March 21, 2014

With Reliance Jio Infocomm looking to launch 4G services in India, mobile devices supporting LTE networks are set to hit Indian shores. Taiwan’s Mediatek is planning to join hands with Mukesh Ambani’s Reliance Jio for the affordable chipsets that it plans to launch towards the end of fiscal year 2014-2015 that will allow LTE, 3G and 2G technologies to work together even on entry-level smartphones.

The Taiwanese company’s products support all modes including TDD LTE — important for India because Reliance Jio is rolling out a TDD LTE network –FDDLTE, 3G, 2G and TD-SCDMA (for China). The next generation of devices will also see the addition of CDMA2000 capability, a system that’s used in China and USA. Finbarr Moynihan, head of international sales and marketing commented that the company will showcase LTE phones that go from $400 range with premium features down to entry-level, which will be relevant for markets like India. The entry-level phones are expected to cost around $79-80 and will be launched next year.

Many market analysts believe that Reliance Jio will launch entry-level LTE devices with Mediatek. The Taiwanese manufacturer is in the process of qualifying their LTE solutions, both with infrastructure providers and with networks. The company also said that they’re in active discussions to figure out the timing and appropriate testing for Indian operators, who are very anxious to see Mediatek come in. That will happen by middle of the year and will allow launches later this year.

Mediatek rightly sees India as a highly lucrative market. Excluding countries like China, Taiwan, Korea and Japan, India represents the biggest market in Asia. Having enjoyed success in the feature phone market, the South-East Asian phone maker wants to transition to smartphones and tablets. With the expanding market share of local brands, a lot of things going in favour for a year or two. Another reason for the company to focus its strategy on India is that the smartphone market in China is plateauing.

Mr. Moynihan also commented that wearable devices were the new trend and based on a user’s lifestyle, they could present an interesting segment in which manufacturers compete. As biomedical sensors grow in numbers and usability, the primary focus of wearable devices, health and fitness could receive a boost. As a result, more devices tailored in the domain could see the light of day. Google recently announced Android Wear, this is a clear sign that complementary devices for a smartphone could become popular in the future. With the Indian Market now seen as having a high purchasing power, more manufacturers will be willing to launch new, interesting products.


What Every Indian Must Know about KG-D6 Gas Basin

March 14, 2014

The KG-D6 Gas Basin has been in the news lately. Most people know that the basin is a source of highly prizes natural that is of immense value. Also, in an energy-deficient country like India, any source of petroleum or allied products in the same industry are critical to preserve the energy balance and ensure that adequate supply of the same is constant.

Reliance Industries Limited has taken up the mantle of extracting gas from the KG-D6 Basin. Exploration and Production (E & P) is rather uncertain industry domain. While various scientific means are present to evaluate and estimate the output from a well, in reality, things can go wrong. As a result, it’s a risky domain to venture into. To offset the risk, the Government of India partners with various Oil & Gas companies and chalks out a Production Sharing Contract (PSC).

The presentation below showcases all that you need to know about the gas from the KG-D6 Gas Basin. Not only that, it gives you a bird’s eye view of the entire working of the Oil & Gas Industry. In a world where energy resources, especially fossil fuels are perhaps more valuable than gold, it’s imperative to understand where petroleum, gas and other fossil fuels come from and how they’re extracted.

Setting the Record Straight:

Certain bodies acting with perhaps vested interest have leveled dire accusations against RIL and its Managing Director and Chairman Mukesh Ambani specifically about the gas pricing. The presentation addresses this very issue. It’s obvious that RIL has not colluded with any political party and hasn’t interfered in the processes and working of the Oil Ministry.

RIL set to gain as Indo-Iranian ties set to Receive a Boost

March 7, 2014

Iran and India have a long history of trade. However, this relationship hasn’t been in the best possible state since the United States imposed sanctions on Iran and curtailed trade to a great extent. The biggest casualty has been the Oil & Gas sector. However, ties between the two Asian Countries are on the mend. Iranian Foreign Minister Mohammad Javad Zarif traveled to New Delhi recently to revive ties with India and to unravel issues that have constrained Indo-Iranian relationships. Zarif noted on Feb. 28, “The two countries are intent on minimizing wrongdoings and overcoming interferences.” His two-day visit covered various regional and international issues, including developments in Afghanistan, combating extremism and, above all, increasing economic ties and crude oil exports to India.

Iran’s energy supplies to India:

India is the fourth-largest energy consumer in the world after the United States, China and Russia. It is also the fourth-largest consumer of crude oil and petroleum products after the United States, China and Japan. India’s oil imports have increased from 40% of its demand in 1999 to more than 70% in 2011.

Mukesh Ambani’s Reliance Industries Limited (RIL) has been a major supplier of gasoline to the Islamic Republic of Iran for some time now. Iran, a major oil producer in the energy-rich Central Asian belt was a major importer of refined products. In fact, 40% of its refined products were imported, particularly gasoline. Iran would sell its crude oil to RIL, and then would purchase about 25% of its imported refined petroleum products from RIL. This amounted to roughly 10% of Iran’s total gasoline consumption in 2008. Reliance, through its subsidiary, Reliance Petroleum Limited (RPL) has ties with Chevron India Holdings which is owned by Chevron Corp.

In 2009 though, RIL stopped gasoline sales to Iran. This was because the United States imposed sanctions on Iran. This was largely due to the threat and fear of the suspension of the assistance the US Export-Import Bank was supplying to RIL. The bank, which provides supports to US exporters, approved $900 million in loan guarantees to expand the RIL-owned Jamnagar oil refinery.

Energy Demand:

India is growing fast. New industries are coming up and the energy demand is high. As a result, India’s increased energy demands mean that Indo-Iranian ties could be revived. A huge reason for this is the new regime in place in Iran. The largely anti-western Ahmadinejad is no longer at the helm of Iran; a moderate Hassan Rouhani has showed a more conciliatory approach toward the West over its nuclear program. If an agreement is reached with countries like the USA or a large body like the EU, India could benefit immensely. Under these circumstances, Iran not only could have an important role in supplying energy to Indian, but also could be an investment market for Indian energy companies.

Boost for Petroleum:

Indian petroleum companies, particularly RIL could be beneficiaries of trade to Iran. This comes on the back of Iranian officials announcing that they are going to increase their gasoline imports up to three times, about 10 million to 11 million liters per day in the next Iranian calendar year (starting March 2014).

In the meantime, Iranian energy officials are busy revising their investment regulations to increase profit and reduce risks for international investors. They are also traveling and meeting with numerous refinery owners, and seeking new marketing strategies to regain their lost shares in the broader global energy market.


BP says RIL can’t be blamed for dip in output at KG-D6

March 3, 2014

BP’s Investment in RIL:

British Petroleum (BP) has defended Reliance Industries Limited’s (RIL) view that the Mukesh Ambani owned company did not hoard gas. The British company has also endorsed the view that RIL cannot be blamed for the decline in production.

RIL has been in the news of late on account of a continuous vilification campaign from the Aam Aadmi Party. However, the Indian arm of one of BP, one of the world’s biggest oil & gas companies remains optimistic about its involvement with RIL. BP plans to invest $10 billion in the next five years and wants to ensure a smooth, glitch-free relationship with the Government and concerned authorities. Sashi Mukundan, MD of BP India was quoted as saying, “We need to move things forward. We have to find a solution and move on. We must work under an umbrella of trust, like we are on the same side and not adversaries.”

The KG-D6 Issue:

The KG-D6 issue has thrown up a spate of trouble for India’s largest Private Sector Company. In spite of all the recent controversies, BP remains committed to its investment in RIL. Mukundan said that BP was in a long-term commitment in its Indian investment. Mukundan said the current price of gas makes investment in challenging, high-risk deepwater regions unviable.

All of this does nothing but contribute to hindering gas output and encourage import for liquefied natural gas. At the current price, no one would invest in deep water oil extraction according to the BP India head. “If gas is not produced, then LNG imports will rise. Already 30% of India’s gas demand is met from LNG. For BP, it doesn’t really matter whether we sell gas from deepwater in India or bring gas from some other part of the world as LNG. The country has to take a decision,” he said.

BP Backs RIL:

RIL has been penalized by the government over the decline in output. RIL is also waiting for the government’s final go-ahead to raise prices for April 1st. Commenting on the decline in output, Mukundan said it is not fair to blame RIL for the fall in production because across the world, estimated output stipulated in the field-development plan (FDP) often turns out to be different from the actual outcome.

Also, there appear to be many flaws in the production-sharing contract (PSC) developed by the government. There really is nothing in the PST that says that the field development plan (FDP) is a commitment. However, in many cases the actual production has to be equal to FDP. Also, actual production has been better than FDP.

RIL has given a bank guarantee to increase the gas prices to $8.40 from April 1st. It has to furnish guarantees that will be encashed if it is proven that the company hoarded gas, or deliberately suppressed output as the Director General of Hydrocarbons suspects.

BP has been extremely critical of the government’s barrage attacks on RIL. A gas reservoir is a machine that guarantees output of a certain level. Also, there is no way of quantifiably guaranteeing a certain produce upon investment. Regarding the alleged hoarding of gas price, BP has defended RIL by saying that it would not be possible to do this without being found out. The gas field will see a drop in pressure if hoarding was indeed being done. Also, it’s not easy to shut wells as all of them behave differently. It’s a well-known fact the world over that no field across the world produces the exact amount as predicted in early reserve estimates.