Apr Jun12 Petrofed

Contents

S.No. Particulars

1 From the Chairman

2 DG's Report

3 CEO Speakby Mr. Anant Maheshwari, MD, Honeywell Automation India Ltd. (HAIL)

4 Petroleum Pricing Muddle – Way Forwardby Mr. P K Agarwal, Senior Fellow & Director (HR), TERI

5 Why Emerging Markets Really Matter for LNGby Mr. Nikos Tsafos , Senior Manager, PFC Energy

6 Biofuels: The Indian Resource Positionby Mr. Chudamani Ratnam, former Chairman, Oil India Ltd.

7 Globalisation and Challenges of India's DevelopmentBy Prof. Pranab Banerji, Professor of Economics, Indian Institute of Public Administration

8 On the Anvil - India Oil & Gas Upstream Licensing Regimeby Ms. Neetu Vinayek and Mr. Manish Baghla

9 India's POL Consumption in 2011-12: The Year of King Dieselby Mr. Vijay K Sethi, Additional Director (Demand & Economic Studies), Petroleum Planning & Analysis Cell

10 Is Petroleum Refining a Sunset Industry In India?by Dr. Aradhna Aggarwal, Senior Fellow, National Council of Applied Economic Research

11 LPG Transparency Portalby Mr. Jayadevan P, Chief Manager(LPG-Sales), Indian Oil Corporation Limited

12 No liability for Service Tax – But Still Pay Income-Tax On It!by Mr. Shailesh Monani, Executive Director & Mr. Bhavin Sheth, Manager, PricewaterhouseCoopers Pvt. Ltd.

13 Realignment of Petroleum Refineries – Survival of the Fittestby Mr. A. K. Roy, Executive Director (Corporate Planning & Economic Studies) and Mr. Pramod Narang, Dy. General Manager (Corporate Planning & Economic Studies), Indian Oil Corporation Limited

14 The Business of Innovation by Mr. Mohinish Sinha, Leadership & Talent Practice Leader, Hay Group South & South East Asia, Pacific & Africa

15 HPNA Management in High Conversion Hydrocrackersby Mr. Richard K Hoehn, Senior Engineering Fellow and Mr. Soumendra Banerjee, Senior Manger-Process & Product Development, UOP LLC, A Honeywell Company.

16 Strategic Options For Upstream Companies by Mr. Sudipta Das, Advisory Partner & Climate Change & Sustainability Leader (India), Ernst & Young

17 Remote Collaboration: Poised to Deliver Transformational Resultsby Mr. Christophe Romatier, Sr. Strategic Marketing Manager, Honeywell Process Solutions

18 Innovative Strategies to Reduce O & M Costby Mr. Satyajit Dwivedi, Director - Energy (Asia Pacific) & Strategic Initiatives, SAS Institute Inc.

19 Innovative Technology to Improve FCC Flexibilityby Mr. Matthew Lippmann, FCC Technology Group Leader and Ms. Lisa M. Wolschlag, Senior Manager –FCC, Treating and Alkylation Research & Development, UOP LLC, a Honeywell Company

20 Members' News in Pictures

21 PetroFed Awards 2011

22 Events

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Petroleum Federation of India02

Page No.

Petroleum Federation of India 03

From the Chairman

The global economic situation continues to be

precariously balanced with some growth but not without

attendant risks. The World Bank projects a weak base

line forecast expansion of 2.5% of the global economy

this year before picking up to 3 and 3.3% in 2013 &

2014. The annual growth in the United States is

projected to accelerate from 1.7% in 2011 to 2.10% in

2012.

The developing countries GDP is expected to expand

by 6% in each of 2013 and 2014 which is slower than

the 6.3% average pace during the first seven years of

this century. In South Asia, growth is anticipated to

remain subdued, as growth in India settles around 7%

over the 2012-14 period.

The Asia Pacific region is also beginning to emerge as

one of the world's largest energy markets. It is

endeavouring to move from an agrarian economy to an

industr ial ised economy. Domestic mater ial

consumption in the region grew at a compounding

annual rate of 4.9% over the three decades from 1975

to 2005. The corresponding growth rate for the rest of

the world was around 0.5%. During the same period

the share of the region in the total primary energy

supply of the world grew from19% to over 35%, and will

reach 50% by 2028, according to UNEP.

The need for natural gas, which will overtake coal as the

second most widely used source of energy by 2025, will

be the greatest in regions like the Asia Pacific according

to a forecast by ExxonMobil. According to Statoil also

global gas demand is projected to increase by 60% by

2040 against a total energy demand increase by 40%

during the period. The oil demand is expected to

R. S. ButolaChairman

plateau at just about 100 million barrels a day around

2030.

Asia Pacific today has become the world's dynamo of

economic growth and a vast consumer market. It is

also a very unequal market. Almost a quarter of the

people in the region live in extreme poverty, on PPP of

USD 1.25 or less a day. The region is also home to a

major share of the world's population lacking electricity

and modern fuels for cooking. It has a substantial

middle class that aspires to life style changes. Between

the decades 1990-99 and 2000-09, global per capita

household expenditure increased by 18%, while in a

number of Asian countries it increased far more rapidly -

by 48% in Cambodia, for example, 92% in China and

45% in India. At the same time there has been rise in

inequality where the rich are getting richer faster, while

the poor are missing out on most of this rising

prosperity, according to a UNDP report.

At the recent UN Conference on Sustainable

Development, the Prime Minister made it clear that for

developing countries, inclusive growth and a rapid

increase in per capita income levels are development

imperatives. He called for an approach to the problem

globally which should be guided by equitable burden

sharing.

India's emissions to GDP intensity, excluding

agriculture, has declined nearly 25% over the period

1994 to 2007 as a result of our efforts over the last two

decades. A target has been set to further reduce the

emissions intensity of GDP by 20 to 25% between 2005

and 2020. Let us all strive and work for achieving this

goal and conserve energy and fuels. A rationalisation

of fuel pricing, which has been talked about for quite

some time, is expected to aid in this effort and also

reduce subsidy burden of the Government.

The United Nations Conference on Sustainable

Development has re-affirmed 'the principle of common

but differentiated responsibilities'. The UN has also

designated 2012 as the International Year of

Sustainable Energy for All and intends to galvanise

actions that catalyse the attainment of this goal.

According to UNEP's Global Renewables Status

Report 2012 investments in clean energy hit 257 billion

US dollars by December 2011. Renewable energy

markets and policy frameworks have evolved rapidly in

recent years. Renewable energy sources have grown

to supply an estimated 16-17% of global energy

consumption in 2010. In the power sector, renewables

accounted for almost half of the estimated 208

gigawatts (GW) of electric capacity added globally in

2011. Wind energy & solar power accounted for almost

40% & 30% of new renewable capacity respectively.

They were followed by hydropower at 25%. India can

be justifiably proud of the fact that it is among the top

seven countries that have attained threshold in

renewable energy transition, namely China, USA,

Germany, Spain, Italy, India & Japan.

Even the International Energy Agency (IEA), which was

created to monitor and manage global oil markets in the

wake of the 1973 oil crisis, has stated that on our current

investment path, global carbon dioxide emissions are

likely to nearly double by 2050. If the world has any

hope of keeping the average rise in global temperatures

to below 2 degrees centigrade, it needs to double its

rate of spending on clean energy infrastructure

between now and 2020. It goes on to say that if

controlling carbon emissions is truly a priority, the world

DG's Report

A. K. Arora

Director General

needs to spend 36 trillion US$ between now and 2050

on low carbon technologies, on top of the 100 trillion

US$ needed under a business-as-usual scenario. This

is the equivalent of USD 130 per person every year,

according to IEA. It adds that every additional dollar

invested can generate 3 dollars in future fuel savings by

2050. The clean energy technologies we require

already exist and we are not using them. According to

another UNEP report, the shift to a greener economy

can translate into upto 60 million additional jobs across

a range of sectors. Greening the economy also offers

the opportunity to improve social inclusion by

addressing the challenges of energy poverty and of lack

of access to energy.

It is prudent that we increase investment in clean

energy and put in place green policies to switch to a low

carbon economy. This was also stressed during rd

PetroFed's 3 International Symposium on Biofuels and

Bioenergy held at New Delhi during April 2012. It is

covered in the events section of the Journal.

Another significant event was the presentation by a

PetroFed delegation led by Mr. B.C. Tripathi, CMD,

GAIL (India) Ltd. to the Parliamentary Standing

Committee on Finance who offered us an opportunity to

present our views on the 'The Constitution (One

Hundred and Fifteenth Amendment) Bill, 2011'

pertaining to the Goods & Services Tax. PetroFed also

coordinated an Oil Industry Technical Team led by Sh.

P. Kalyanasundaram, Director (IC& CA), MoP&NG to

Islamabad to discuss trade with Pakistan. A

representation has been made to the Ministry of

Shipping on their draft policy for award of ports

waterfront and associated land on captive user basis.

We continue to proactively take up issues of the

Industry with concerned authorities and are in the

process of preparing a paper for the recently

constituted Rangarajan Committee on Production

Sharing Contracts in hydrocarbon exploration.


Globalization is presenting industries with myriad

challenges to growth, sustainability and profitability. Oil

and gas, no less than any other industry, is also

confronted daily with these challenges, while

competing in an increasingly rigorous environment

marked by tighter regulation, growing margin

pressures and an aging workforce, among other

issues.

.

Three key challenges are affecting players along the oil

and gas value chain in a big way:

1. Turning data into meaningful information&

faster decision making: A common theme we

hear from our customers is that they are

struggling under the sheer volume of data their

operations generate. As they strive to make

better decisions, there is a need to integrate

many more systems and applications together,

but the complexities of trying to integrate data

silos can be extremely overwhelming. Further,

leveraging automated decision making systems

for the integrated databases is the next level of

challenge

2. Working in remote environments: Oil and gas

exploration today is based in some of the most

remote places that make them difficult to access.

Multiple production facilities are often spread

over vast geographical distances and, in some

cases, in hazardous environments, making it

difficult to ensure the safety of plant personnel

CEO SpeakEnabling the Digital Plant

Anant Maheshwari

Managing Director

Honeywell Automation India Limited

and production assets, or share valuable

information and best practices. Plus, remote

facilities often operate independently from one

another, making it even harder to share learnings

and to achieve optimal productivity levels across

the whole network.

The challenges are many and no single solution will

encompass them all. However,we believe that

companies that have the following will differentiate

themselves from their peers and build a sustainable

competitive advantage.

i) Work process consistency and an integrated

view of their operations

ii) The ability to communicate and collaborate in

real time

Work process consistency implies understanding

comprehensively how people interact with the object of

their work and ensuring this is properly documented.

This enables to decouple the operator from the process

and move from people driven operations to process

driven operations which is critical whether you consider

operating oil fields in remote locations and harsh

environments or addressing the staffing and

competency requirements in downstream.

The critical next step is the ability to use an underlying

IT platform application that will help implement and

enforce those best practices. An illustration of such an TM application is Honeywell Intuition Executive

launched in May 2012. Such a solution allows industrial

companies to anticipate, collaborate and act with

confidence on data. With its sophisticated data

processing and analytics capabilities, Intuition

Executive anticipates problems and identifies

3. Lack of skilled resource: Oil and Gas is a

specialized domain, as energy demand grows

and more and more capacity comes online there

will be a shortage of skilled and specialized

resources. India is already seeing a shortage and

therefore this is one of the key challenges any

CEO faces today.

So what is the solution to manage these

challenges?


opportunities. It delivers enterprise-wide information

management, decision support, and collaboration

software to help companies make better sense of the

vast amounts of data being collected and achieve

operational excellence.

The ability to communicate and collaborate has many

advantages as well. For example, Honeywell's

Remote Collaboration solution helps customers

share their expertise across remote facilities,

improving safety in hazardous environments, as well

as optimizing production and improving recovery.

Remote collaboration allows oil and gas companies to

monitor and manage operational activities across

multiple facilities from anywhere within a network of

sites, leading to better collaboration between staff and

process optimization across locations. Sites can be

connected to each other, either through a central facility

or via a network of interconnected collaboration

centers, supporting real-time collaboration, resolving

challenges quickly and improving production/yield over

the full lifecycle.

data integration, visualization and

collaboration are integral to the current business

environment. The ability to see, understand and act on

the relationships within critical data is key to creating

competitive advantage, and this can only be achieved

when all applications and underlying data are

amalgamated. Additionally, the increasingly

sophisticated and powerful capability to monitor and

manage operational activities in real time, regardless of

location and personnel, offers O&G Upstream and

Downstream operators the opportunity to create

multiple value streams to their organizations while

achieving transformational results.

In conclusion,

Courtesy: Business India

Estimated lifetime consumption expenditure of an Indian born in 2009, in US dollars: 1,84,556

Estimated lifetime consumption expenditure of an Indian born in 1960, in US dollars: 14,645

Percentage of total consumption expenditure spent on food and housing: 31 & 14

Percentage of total consumption expenditure spent on education/leisure and health: 7 & 5

Number of times printing of ̀ 500 and ̀ 1,000 denomination notes has gone up since 2000: 17 & 9

Average size of one-time withdrawal from ATMs in India presently, compared to `5, 000 three years ago, in ̀ : 7,000

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Obituary

It is difficult to come to terms with the fact that Dr. Abid Hussain is no more. He passed away at London

on June 21, 2012 after a massive heart attack. He was 85 years old and is survived by his wife, two sons

and a daughter.

His ever smiling, zestful and vivacious presence was noticeable at the PetroFed Awards ceremony on

June 8, 2012 at New Delhi. Nattily dressed as always, brimming with ideas and spreading hope and

good cheer, he was a member of the Jury for the annual PetroFed Awards since their inception in 2007.

Dr. Abid Hussain was honoured with the Padma Bhushan in 1988. Born in December 1926, he was a

member of the Indian Administrative Service and served in various capacities at the centre including

Secretary, Ministry of Heavy Industries, Secretary, Commerce and Chairman, IIFT. He was appointed

as Member, Planning Commission in 1985 and was Ambassador to the United States between 1990-

1992.

Dr. Abid Hussain has been described as a 'born diplomat' and an excellent communicator. He was a

soft-spoken person seeped in the best of Hyderabadi secular and cosmopolitan traditions. He is said to

be one of the key persons who set the ball rolling for India's economic liberalisation. He chaired six

committees of which the one's on trade and small scale industries are still important reference markers.

Dr. Abid Hussain was Chairman of a large number of organizations including the Ghalib Academy, the

Lovraj Kumar Memorial Trust and Professor Emeritus at several institutes including Indian Institute of

Foreign Trade and Foreign Service Institute of the Ministry of External Affairs. He was the trustee of

several educational, cultural and charitable institutions in India and abroad.

A liberal in every sense of the term, he would be missed by one and all.

Abid Hussain (1926-2012)


Petroleum Pricing Muddle – Way Forward

P K Agarwal Senior Fellow & Director (HR),

TERI

After independence, for over 25 years the prices of

petroleum products were based on import parity. This

was followed by the Administered Pricing Mechanism

(APM), essentially cost plus, for over 25 years. And now

for nearly a decade we have an era of ad-hocism. If the

past is any indication, this may continue for more time.

Ad-hocism began no sooner the dismantling of APM

was over by the end of 2001-02. While prices of Petrol

and Diesel were de-regulated effective April 1, 2002

and oil marketing companies started revising them on

fortnightly basis, domestic LPG and PDS Kerosene

carried specific subsidies to be phased out over three

years in an equated manner. As per the scheme

announced by the government, for subsidies to stay

specific per cylinder of LPG or per litre of kerosene, the

changes in international prices, ocean freight etc. were

to be passed on to the consumers on monthly basis.

However, in practice, the Govt. did not permit public

sector oil marketing companies to pass on any increase

in price of domestic LPG and PDS kerosene and

compelled them to bear the under-recoveries over and

above the specific subsidies. Interestingly, the Govt.

did not go back completely on the announced scheme

and implemented reduction of specific subsidy by one

third after one year and by two thirds after two years,

whereafter these have remained unchanged. With

increasing international prices of Petrol and Diesel, the

Govt. introduced informal control of prices of these

products in the later part of 2003.

Increasing under-recoveries suffered by oil marketing

companies, placed the Govt. under pressure to take

various decisions, though ad-hoc, such as issuing of Oil

Bonds, sharing of burden by upstream national oil

companies, permitting non commensurate increases in

prices. When the situation became increasingly difficult,

the Govt. appointed a committee on “Pricing and

Taxation of Petroleum Products”, under the

chairmanship of Dr. C Rangarajan. Its report, submitted

in February, 2006, urged implementation of sets of

recommendations as packages. The Govt. selectively

implemented those recommendations which neither

adversely impacted Govt. revenues nor resulted in an

increase in consumer prices. With ballooning under

recoveries the Govt., in June, 2008, again constituted a

“High Powered Committee on Financial Position of Oil

Companies”, under the chairmanship of Mr. B K

Chaturvedi, which submitted its report in August, 2008.

The Govt. did not implement almost any

recommendation of the Chaturvedi Committee. In

August, 2009, the Govt. yet again appointed an Expert

Group on “A Viable and Sustainable System of Pricing

of Petroleum Products”, under the chairmanship of

Dr. Kirit S Parikh. It submitted its report in February,

2010.

It was only in June, 2010, after vacillating for over four

years, that the Govt. announced deregulation of Petrol

prices in addition to an increase in prices of diesel, PDS

kerosene and domestic LPG. The Govt. also

announced its intention to deregulate prices of diesel

from which it later retracted. With mounting pressure of

increasing under recoveries, the Govt., in June, 2011,

took the bold decision of reducing customs duties on

petrol and diesel from 7.5% to 2.5%. In addition,

reduction in excise duty and increase in retail selling

price of diesel was announced. This had a salutary

impact on bringing down under-recoveries on diesel

sales which account for about 45% of the total sale of

petroleum products in the country. The relief was,

however, short lived with international product prices

going north.

During 2011-12, the total under recoveries are placed at

about `. 1,38,000 crore, an all time high for any one

year. While the Govt. deregulated prices of Petrol in

June, 2010 it did not permit public sector oil companies

to raise prices in line with international prices. Thus, oil


marketing companies could neither raise prices as

required nor their under-recoveries were recognized in

selling petrol. With mounting pressure from oil

companies on the Govt. to either once again declare

petrol as a regulated product or deregulate it in the real

sense, the Govt. finally permitted them to increase th

petrol prices effective 24 May, the steepest so far at

any one time. This resulted in widespread

dissatisfaction amongst petrol users. Small price

changes periodically would have caused lesser

dissatisfaction. It is, thus, evident that the Govt. has not

followed a well thought out road map to deal with prices

of key petroleum products.

The myriad ill effects of under-pricing of petroleum

products and hence growing subsidies include not only

inefficient usage, substitution of low value products,

adulteration, and a mounting fiscal deficit but also

deteriorating financial health of oil companies. It is

appreciated that certain sections of the society need

protection against the increasing international prices.

Among the solutions suggested from several quarters

are deregulation of diesel prices and targeted direct

subsidy to identified persons for domestic LPG and

PDS kerosene. All that is required is strong political will.

There is no dearth of people in the Govt. who can

provide innovative solutions. It is the Govt. that needs to

take the bull by the horns and not allow the problem to

drift. The Govt. then needs to create an environment of

appreciation, understanding and cooperation in the

country. Short term and long term measures need to be

agreed upon. Some of the short term measures could

be ensuring surrender of multiple domestic LPG

connections, no subsidized LPG to tax payers and

users of PNG, removal of bogus ration cards, limiting

subsidy for diesel beyond which it should be passed on

to consumers, rationalizing duties for Petrol & Diesel,

persuading states to rationalize VAT/ sales tax on

petroleum products etc. Among the long term

measures, the supply of piped gas should be expanded

to replace LPG, PDS kerosene used as illuminant

should be substituted by solar lighting, and all subsidies

should be directly targeted to individuals who deserve

them.

(Views Expressed in this article are personal)


Percentage of students studying at various Indian Institute of Technology (IITs) who

were women in 2011: 11

Percentage of students studying at various Indian Institute of Technology who were

women five years ago, in 2006: 6

Average percentage of food served in social gatherings in India that is wasted: 15-20

Rank of marriages, seminars and conferences in terms of food wastage: 1/2/3

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Why Emerging Markets Really Matter for LNG

Nikos TsafosSenior Manager

PFC Energy

The proliferation of LNG importers marks the most

important structural change in the LNG market today.

But the importance of having more importers lies

beyond merely creating demand. These markets are

changing the structure of the LNG market; as a result,

grasping the importance of new markets rests not with

merely estimating their LNG import needs but with

understanding how their participation in the LNG

marketplace may alter the structure, composition and

value of the LNG market.

The emergence of new LNG importers marks the

biggest structural change that has taken place over the

past few years and one that will define the market over

the coming decade. In 2003, there were as many

countries importing LNG as there were exporting LNG

(12). By 2011, there were 18 exporters and 27

importers, and by 2020, PFC Energy estimates that 36

countries will be importing LNG and 23 will be exporting

it. The gap between the numbers of importers and that

of exporters will widen further. Europe has been, and

will remain, the region with the most importers. The

Americas has seen much growth due to the entry of

Mexico, Canada, Chile, Brazil and Argentina and will

see little growth out to 2020. The Middle East (from 0 to

5) and SE Asia are among the most rapidly growing

regions for LNG.

The Emergence of Emerging Markets

These new markets are having a big impact. One way to

assess the relative importance of new markets is to

examine LNG imports by vintage: when markets start to

import LNG? Classifying LNG imports that way shows

that importers who started to buy LNG after 2000 had a

19% market share in 2011. In fact, this market segment

was the second largest in 2011 and the one growing the

fastest. We classify the United Kingdom as a country

that started to import LNG in the 1960s. If this country

were marked as a “2000s” country, when imports

restarted, the market share of this grouping would go

from 19% to 27%.


Is this Demand Sustainable?

PFC Energy has identified five main structural drivers

underpinning this LNG surge (we have focused on new

LNG markets but have excluded bigger players such as

China, India, Canada, etc):

Supply Drop.

Geography.

Displace Oil.

Diversification.

Resilience.

LNG imports can either supplement or

replace domestic production. In countries where

domestic production is mature, the LNG import wedge

is driven not just by growth in demand but also by the

decline in domestic production. Argentina, Chile, Israel

(short term), Malaysia (Peninsular Malaysia) and

Thailand belong in this category.

Larger countries tend to have

disconnected sub-markets. In those cases, LNG

terminals can serve markets that are disconnected or

not sufficiently connected via pipeline. Brazil and Chile,

for example, have disparate markets, although Brazil

has made more progress in creating a national grid. In

Malaysia and Indonesia, LNG is meant to connect

demand centers that are not served well because they

are far from domestic supply sources.

Countries with insufficient gas supply

tend to burn (often imported) oil to meet their needs.

LNG in those countries serves as a cheaper power

generation source than oil. Argentina, Chile, Israel,

Indonesia, Kuwait, Singapore and the United Arab

Emirates (Dubai) had or still have significant oil use in

the power sector and where LNG imports are geared to

displacing oil. These countries may also have a higher

ability to pay for LNG given that their alternative is oil.

Countries often turn to LNG to

diversify from a heavy reliance on a few suppliers or to

protect from suppliers whose reliability the importer has

reasons to question. Brazil's LNG push aims to diversify

from Bolivia, Chile from Argentina, Israel from Egypt,

Poland from Russia, Singapore from Malaysia and

Indonesia and Thailand from Myanmar. In each of these

cases, the need for imports goes above and beyond a

mere “balances” question.

Besides overall diversification, countries

are often drawn to LNG to be able to withstand

seasonal, cyclical or other shortages. Argentina faces a

winter gas shortage as the swing in seasonal demand

far exceeds the swing in seasonal supply. Brazil is

interested in LNG to compensate for occasional drops

in hydro-electric output, while Israel has been keen to

ensure that the market can withstand interruptions to

Egyptian supply (which now appears permanent).

Poland, Singapore and Thailand are similarly

interested in creating more resilience in their system


networks given their heavy depend on just a few

sources of supply.

More markets mean more demand for LNG. But the

importance of emerging markets rests beyond a mere

numbers game. These new LNG players are changing

the LNG market in at least three deep structural ways.

More buyers mean

more opportunities for sellers. When demand for LNG

fell in 2009 after the economic crisis, sellers were

looking for markets to place LNG. Turkey, for example,

benefited throughout 2010 and 2011 by a “push” of

Qatari LNG. As more countries enter the LNG market,

the more opportunities there will be for sellers to push

LNG. This means that when demand is sagging, there

are more players that can take in LNG at the right price.

Perhaps the biggest impact of these new LNG markets

is to create a wider floor beneath LNG prices – if the

price falls, there will be more and more prospective

buyers that will be drawn into the market to keep prices

from falling too much.

In OECD Europe and North America, the

competition between oil and gas is almost obsolete,

which is one reason that oil indexation is seen as an

increasingly archaic pricing system. But in non-OECD

markets, oil remains an important fuel for stationary

use. When examining the countries that PFC Energy

expects will be importing LNG by 2020, the non-OECD

countries among them relied on oil for an average 25%

of their power generation needs; by contrast, the share

for OECD countries is just 5% (2009 data for

consistency). The entry of these newer players thus

expands the sphere where gas and oil compete directly

– and thus provides further support for LNG prices to

track the price of oil, not just contractually but also

substantively. It is no accident that in 2011 Thailand,

Brazil, Argentina Chile paid prices comparable to

Japan, Korea and Taiwan.

With few

exceptions, these markets are approaching the LNG

market from a different angle. Some have no long-term

contracts to provide them with a steady supply of LNG.

When they do have contracts, these tend to be with

portfolio aggregators (chiefly BG, Shell or GDF SUEZ)

rather than LNG projects (Poland and Malaysia are

What Do These New Entrants Mean for the Market?

A wider floor beneath LNG prices.

Enlarge the market where gas competes directly

with oil.

Greater demand for flexible services.

exceptions). Many of these countries are also importing

LNG seasonally or using floating regasification vessels.

The growth in emerging markets, therefore, is creating

“demand” for an LNG value chain that is more flexible

and more adaptive.

New markets are therefore altering the way that LNG is

traded – they can act as a support system to prevent

prices from going very low; they are boosting the sphere

where gas competes directly with oil; and they are

creating demand for a different value chain and different

seller strategies. Together, these forces compound the

importance of new players – not only will these

countries import more LNG, but they will import LNG

differently than the established markets.

The historical symmetry between the number of

countries exporting LNG and those importing has

been shaken – by 2020, PFC Energy estimates

that 36 countries will be importing LNG while only

23 will be exporting it.

By 2011, countries that imported no LNG before

2000 accounted for a 19% market share. These

new LNG markets are also the market's fastest

growing segment.

This import demand is strong and is underpinned

by five structural drivers: a drop in indigenous

supply, a geographic need to connect remote

demand centers to supply, a desire to displace oil

use, a quest for diversification and a desire to

increase the ability of a market to withstand

supply shocks.

New markets are altering the way that LNG is

traded – they can act as a support system to

prevent prices from going very low; they are

boosting the sphere where gas competes directly

with oil; and they are creating demand for a

different value chain and different seller

strategies.

Together, these forces compound the importance

of new players – not only will these countries

import more LNG, but they will import LNG

differently than the established markets.

Conclusions

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Oil is not only an important source of energy but is the

main transportation fuel for the whole world, including

India. At present the only available forms of liquid fuels

are derived from crude oil which is largely imported and

as the Indian economy grows the demand for liquid

fuels will grow disproportionately in comparison to

other forms of energy. The long term objective must be

to meet almost 100% of the demand for liquid fuels

permanently from indigenous resources; adding 5%

ethanol to diesel and petrol as is being planned now will

only be a drop in the ocean.

Biofuels are fuels obtained from a variety of biological

sources commonly referred to as biomass such as

wood, vegetable oils sugarcane juice, aquatic plants

including algae, waste plant residues such as bagasse,

straw, etc. Different categories of liquid biofuels are

biodiesel, bioethanol and biomethanol and can be used

in any internal or external combustion engines, with

minor modification. Most of the ongoing national level

discussion on this subject revolves around technology

and cost, but hardly any thought has been given to the

resource base and this is the issue being addressed in

this paper. It should also be noted that biofuels are by

and large carbon neutral and should India be required

to introduce carbon tax, the benefits would be

significant.

Chudamani RatnamFormer Chairman, Oil India Ltd.

Biofuels: The Indian Resource Position

Land Availability

India Land Use: Million Hectares

Total 328.65

Net Sown Area

138.22

Plantation

6.77

Forest

67.00

Grassland, Grazing

8.03

Waste Land/desert

31.54

Scrub land

20.99

Water bodies

8.90

Shifting cultivation 0.26

Snow cover, etc. 4.3

Built up Land 2.06

Rann of Kutch 1.99

The crucial “raw materials” for production of biofuels

are land and water especially the former. It is therefore

necessary to examine land availability. The table below

gives a break up of India's land usage pattern.

While the total land area of India is large, because of

the population size, the amount that can be diverted to

growing fuel crops is limited; possibly no more than 30

million hectares. This will yield about 30 mtpa of

biodiesel, which in future decades will be only a very

small part of India's requirement of liquid fuels. Some

radical approaches may be required. For example, It is

estimated that about half the area under forest is highly

degraded and instead of trying to regenerate the forest, the

land could be used for oil seed cultivation. It should be

noted that a large part of the waste land shown above is

covered by the Thar desert which is truly barren and

cannot support any cultivation. Even the much touted

Jatropha requires a minimum of soil fertility and

adequate rainfall to give an acceptable yield.

The above statistics are official in nature but a more

pragmatic assessment could be as follows. In the last

60 years, India has denuded or severely degraded half

of the 76 m Ha of forest inherited at Independence. Of

this 12.6 m. Ha has been totally denuded and another

25 million Ha. has lost more than 60 per cent of its forest

Oil Seeds

It is estimated that about half the area under forest is highly

degraded and instead of trying to regenerate the forest, the

land could be used for oil seed cultivation.


cover. India has approximately 50 million hectares of

degraded wasteland that lie outside the areas

demarcated as national forests, and another 34 million

hectares of protected forest area, in much of which tree

cover is severely degraded. A massive programme is

needed to develop energy plantations consisting of oil

seed species for biodiesel production and fast-growing

tree crops which can be converted to alcohol.

Keeping the above stated approach in view a detailed

state/district wise reassessment of land availability is

required.

Ethanol, in India is primarily a byproduct of the sugar

industry, but a small quantity is produced from grains for

potable purposes. A point to be aware of is that

sometimes industry quotes “alcohol” production

figures, which contains only about 8% ethanol, the

balance being water. To be used as a fuel it is necessary

to extract anhydrous ethanol. At present in India about 5

million hectares of irrigated land are under sugar cane

cultivation and about 2300 million litres of ethanol are

produced. Roughly 1/3 of this is used industrially, 1/3 is

consumed as liquor and the balance is available for

miscel laneous uses including blending in

transportation fuels. These quantities pale into

insignificance in the national scenario.

Ethanol can also be produced from non-food plant

cellulose (e.g. wood, leaves, bagasse or straw),but the

technology has still to be developed and proved

economically. Research on this topic, which doesn't call

for much capital or revenue expenditure, must be put on

a war footing and every laboratory in the country should

devote some effort towards this project.

Methanol appears be a silver lining to an otherwise

cloudy outlook. Methanol is the simplest form of alcohol

and is somewhat underrated as a transportation fuel. It

has in the past been used in racing cars. The earlier

turboprop aircraft such as the Fokker Friendship which

were comparatively low in power used a mixture of

methanol and water for take off as this gives greater

short term power than conventional aviation turbine

fuel. Though the calorific value of anhydrous alcohols

Ethanol

Methanol

tend to be between half and 2/3 that of petrol and diesel,

because of their superior flammability characteristics

they are equivalent on a volume basis. The main

problem to be overcome is that of corrosion. However

methanol fuel cells may eventually provide the solution.Methanol is typically produced from biomass though

where natural gas is available, methanol is made from

methane, a major component of natural gas Biomass is

converted to syn-gas(synthetic gas), by partial

oxidation, and the syn-gas is then converted to

methanol by a Fischer-Tropsch process. India is

expected to generate annually in the years to come

nearly 900 million tonnes of agricultural residue such as

straw and bagasse, much of which probably just goes

waste or is put to insignificant uses. In addition India

uses about 50 million tonnes of forest biomass and

about 300 million tonnes of fuelwood per annum.

Details are given below.

With present technology one tonne of dry biomass can

produce about 700 litres (550 kg) of methanol. It would

seem therefore that without any disruption of current

land use practices nearly 700 mtpa of methanol can be

produced replacing roughly the same amount of petrol

and diesel.

The main resource that is not available is time. The

worlds resources of crude oil are under severe strain

and there will be a severe shortfall in supplies in about

two or three decades. India must change over to

biofuels well within this time frame. India imported

about 170 MT( million tonnes) of crude oil in the

financial year 2011-2012 and it is anticipated that there

will be a demand for 500 MT per annum within a couple

of decades. The target for biofuels production must be

to restrict future imports of crude to say about 200

MTPA.

Million tonnes

Rice straw 285

Wheat straw

160

Sugar cane tops

118

Sugarcane bagasse 114 Other 213

Total Agri

890

Forest Biomass

50

Fuelwood 300

Total Forest 350

Total Biomass 1240


Globalisation and Challenges of India's Development

Pranab BanerjiProfessor of Economics

Indian Institute of Public Administration

Globalisation is one of the leading issues that have

captured the imagination of thinkers belonging to

various academic disciplines. It has been recognized

as a process of easier and accelerated trans-national

movement of commodities, persons, capital and

knowledge, which includes ideas, techniques and

culture. With technological advances facilitating

transport and communications, the processes of

production, consumption and even waste disposal

have taken global dimensions. Thus, as in the case of

many electronic goods, a technology may be

developed in Europe and put to manufacture by an

American firm in China and exported to various

countries and the waste dumped in Africa!

The growth and inevitability of globalisation was

commented upon by perceptive thinkers, as diverse as

Marx and Vivekananda, even during the previous

centuries. But it is also necessary to note that while

trans-national interactions are inevitable, and most

would agree that it is also desirable, the nature of the

transactions critically depend on institutions and on

ideas and beliefs, which influence national and global

policies.

The current phase of globalisation, which may be

traced for its origins to the 1980s, is therefore distinct

from the previous phases as it is characterized by a

distinctive set of features and influences. Section I

delineates these characteristics with a reference to

India. The consequences of the new global order and

ideas are presented in Section II, while Section III

examines the responses of leading players in dealing

with these consequences. This is followed by an

examination of policy imperatives for India and the

lessons that are emerging from the faltering global

order.

Human history has had many episodes of movement of

people, ideas and commodities across national

borders. The colonial period, as has been extensively

documented, witnessed large movements of persons

and capitaland production processes became trans-

national with increased emphasis on extraction and

foreign trade. The current phase of globalisation can

be traced to the contemporaneous occurrences of the

following events, roughly around the decade of the

1980s.

The early 1980s saw a major setback to the

autonomous path of development embarked upon by

many Latin countries. These countries, after a period of

respectable growth and industrialization of two

decades, ran into a debt-crisis, which made it virtually

impossible to continue with the strategy of self-reliant

development. The capital flows that had occurred in

the decade of 1970s allowed many developing

countries to continue on their path of independent

development but also made them more vulnerable to

external events. The increase in interest rates in the

United States precipitated the Latin American debt

crisis.

The impact of external financial crisis can be evaluated

not only by examining the effects of the crises but also

by taking into consideration the effects of the policy

response. The international financial institutions —

principally the IMF and the World Bank—provided

credit lines to countries in crisis based on a set of

conditionality that went under the broad names of

`stabilization' and `structural adjustment'. In the

decade of the 1980s, scores of developing countries

were provided structural adjustment loans. The effect

of these policies were to reduce the economic role of

governments, expand the space available to the

organized private sector and diminish barriers to entry

of foreign private capital and goods. Thus what began

as the globalisation of bank loans in the 1970s,

crystallized in the 1980s into the globalisation of direct

Section I


and portfolio investment and the consolidation of global

commodity markets.

The role of the state in economic development was to

be further circumscribed, in addition to the effects of the

financial crisis, by the ideological formulations that now

go under the name of 'neo-liberalism'. Whereas the

earlier free-market Economics grudgingly accepted the

role of the state in rectifying 'market failures' arising out

of externalities etc., the new ideas postulated the idea

of 'government failures' following from the self-seeking

behavior of politicians and bureaucrats. The

spectacular collapse of the Soviet Union seemed to re-

enforce the impression that governments may not have

the necessary virtues to deal with the problems of

'market failure'. The neo-liberals therefore went on to

suggest mechanisms which mimicked, or

approximated, markets and set limits to the economic

role of the state. A major consequence of these

influences was the relegation of the idea of economic

equality to the background. Efficiency became the

central objective of policy and it became ̀ glorious to the

rich'.

India entered the present phase of globalisation with

the financial crisis and subsequent structural

adjustment loans in 1991. India's policy adjustments

have been slow and partial. But the fundamental

premises have been the same: namely, reduced role of

the state, de-emphasis on independent or autonomous

development and amnesia of the earlier policy goal of

relative economic equality.

The developed countries may have believed that

globalisation would open up markets for goods and

services and lead to job-creation. In fact, contrary to

expectations, globalisation began to bring greater

benefits to the developing countries from the late

1990s. The erstwhile CIS countries, which underwent a

painful decade of adjustment and decline in incomes,

began to register positive rates of growth in the late

nineties. Latin America and much of Africa, which had

witnessed a lost decade of growth in the eighties, also

started to recover in the late nineties. The East Asian

countries however experienced a major financial crisis

in 1997, but the growth rates for most of the decade was

high.

Section II

But the most spectacular success has been witnessed

by China and India in the last ten years, after a

sustained period of growth of nearly two decades.

Between 2007 and 2011, the developing countries

accounted for 77 percent of the incremental global GDP

(in PPP terms), compared to 23 percent accounted for

by the advanced countries. China's share in the

incremental GDP was 32 percent and India's 11

percent, which was higher than the contribution of large

economies like the USA (8 percent) and the European

Union (7.8 percent). Chinese and Indian companies,

many of them state owned, have grown in size and are

counted amongst the large global players. Both the

countries have now a significant number of persons

figuring in a list of world's billionaires. A robust indicator

of the growing importance of the 'south' is the increase

in south—south trade and the emergence of groupings

like the BRIC(S).

In contrast, the developed countries have fallen into a

deep and prolonged economic mess. The growth rates

of most are minimal, unemployment rates are high

(estimated 40 percent for the youth in Greece), external

indebtedness is high, the size of government debt is at

crisis levels and the stability of the financial systems are

under threat.

The developing countries success story is not based on

weak foundations. Both China and India have

sustained one of the highest rates of domestic saving

and investment over the previous decade. External

indebtedness is low and well within manageable levels.

Investment in infrastructure and education are rising,

though not adequate in India, which shall allow the large

working force in these countries to remain competitive.

Wage rates are also low by international standards.

Finally, the budgetary position is far more comfortable

than in most advanced countries.

The developments over the previous decade raise the

interesting question as to the reasons for the reversal of

economic fortunes of developed and developing

countries. One anticipated contributory factor, of

course, has been the movement of capital to take

advantage of cost differentials. The decade of 1990s,

as stated earlier, was undoubtedly marked by the flow

of foreign direct investment (FDI) to developing

countries, sometimes to take advantage of

Section III


privatisations and mergers and acquisitions. These

capital flows may have helped the processes of fiscal

consolidation, eased the balance of payments

difficulties, created jobs and demand and, thereby,

contributed to higher growth rates. But this does not

explain the reasons for the difficulties faced by the

advanced nations and the overall robustness of growth

in developing countries marked by high savings rates

and good economic fundamentals.

It may appear paradoxical that the problem of the

developed countries and the success of the developing

ones may both be due to the value system dominating

policy in the west, which sees progress as increased

consumption by individuals, without regard to social

goals like equality. In fact, the central theme of the

current phase of globalisation has been higher

consumption in an era of higher inequalities.

Inequalities increased in USA to reach levels equal to

levels prevailing just prior to the great depression.

Between 1940 and 1970, the USA registered steady

and inclusive growth with the median income doubling

in the three decades. Since then, the income of the

bottom 90 percent increased by a mere 5 percent. On

the other hand, the income of the top 1 percent of the

population is reported to have increased by 281 percent

between 1999 and 2007. It is therefore not surprising

that the rallying call of the 'Occupy Wall Street'

movement has been 'we are the 99 percent!'

One of the effects of rising inequalities, in conjunction

with other causes like longevity and rising health costs,

has been the political pressure on the state to spend

more on social sectors. Social sector spending as

proportion of GDP increased, between 1980 and 2007,

from 10 to 21 percent in Greece, from 18 to 25 percent

in Italy and from 13 to 16 percent in USA. These

increases in social sector spending, and other

increases in expenditures, were not accompanied by

commensurate increases in tax revenues. In fact, if

press reports are to be believed, the two wars fought by

America, in Iraq and Afghanistan, were not

accompanied by increased taxes. As mentioned earlier,

neo-liberalism seeks to put a limit to the size of the

state, which practically has meant that raising taxes is

against the current orthodoxy. Also the nature of politics

in most countries has made it extremely difficult to tax

the rich who wield enormous power over the

formulation of public policy. The result has been that

most developed countries have been forced to run large

fiscal deficits. The USA, for example, has an

outstanding public debt of over $ 14 trillion. With

government spending at 24 percent of GDP and taxes

at only 15 percent, the problem is likely to exacerbate.

In many cases, the public debt is not only internal but

also is significantly financed by capital inflows from

abroad. Thus countries like Greece, Italy and Spain

face severe external pressures due to their external

indebtedness arising principally out of public

indebtedness. A large part of the US public debt is

financed by China and other East Asian economies.

The ability of China and other developing countries to

lend to the USA is the also the result of reckless

consumption by US citizens. As the majority of the

population in the US found its income to be nearly

stagnant, consumption was allowed to increase with

the help of easy consumer finance, which included

housing finance. The case of the sub-prime crisis has

been well documented. The crisis only brought to fore

the fact that expenditure financed by debt has severe

limits. As the American financial system, encouraged

by government policy that could not frontally deal with

the problem of rising inequalities, provided easy credit

to both credit and non-credit worthy Americans, US

household debt as a percentage of annual disposable

income rose from 77 percent in 1990 to 127 percent in

2007. The average American household possessed

seventeen credit cards! The rate of savings became

negligible and occasionally even fell into negative

territory. The financial system also benefitted from the

lending to USA by the export surplus countries. The

current phase of globalisation has therefore been

marked by a reversal of capital flows to the advanced

countries from the developing ones.

The current crisis of globalisation has been sought to be

addressed with a mindset that remains rooted in old

ideas that are becoming increasingly irrelevant in a

globalised world. Problems have grown and taken on

international dimensions and they cannot be solved

effectively from perspectives of 'national interests'. To

take an example, the Greek economic crisis cannot be

addressed by imposing greater hardships on the Greek

people alone. The beneficiaries of the single European

Section IV


currency also need to share the benefits with

disadvantaged countries of the Euro zone. The

inequalities,which perpetuate due to lack of movement

of labour and the absence of cross-national fiscal

transfers,do not allow an effective resolution of the

crisis faced by a number of Euro zone countries.

Similarly, it is not possible to sustain debt-driven high

consumption in one part of the world by running export

surpluses and capital outflows in other parts of the

globe for a substantial period of time.

A second lesson that is emerging is that increasing

income and wealth inequalities can no longer be

brushed under the carpet of growth fundamentalism.

The world today produces enough, on a per capita GDP

basis, to meet even an extended basic needs list of

every global citizen. Yet, in country after country,

inequalities are on the rise. Many developing countries,

including China and India, have high growth rates and

worsening Gini-coefficients. We seem to be repeating

the mistakes of the post 1970s western economies.

This could be sustained by exporting to the Western

economies. But with those economies faltering, the

need to address the problem of inequality is not only an

ideal but a practical necessity even to sustain the

growth momentum.

Finally, the 'invisible hand' has not been able to resolve

many of the problems arising out of unbridled pursuit of

self-interest. Devising systems of incentives and

disincentives does not seem to adequately address the

mismatch between personal and social ends.

The financial crisis and the subsequent response have

only highlighted the problems of free-markets and

incentive systems within organizations. There is once

again a call for regulation. But in a globalised world, the

effectiveness of regulation by individual countries is

extremely limited. The problem may be addressed by

agreeing to regulatory measures and systems that are

adopted and effectively implemented by all countries.

But this is extremely difficult to put in place, besides

having doubtful utility. Perhaps we need an alternative

world-view based on equality, justice and cooperation.

Can India contribute towards the building of a new

global vision that more effectively deals with the

inevitable process of globalization?


Percentage of Chinese millionaires who have considered emigrating or have already emigrated,

mainly to USA: 60

Estimated capital flight out of Russian due to stagnation, corruption and political uncertainty, in billion

dollars: 80

Rank of “Technicians' and 'Sales Representatives' among top 10 Jobs employers globally had

difficulty filling due to lack of available talent: 1 & 2

Rank of 'Production Operators' and 'Secretaries, Personal Assistants and Office Support Staff' on

talent shortage index: 9 & 10

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India is witnessing increasing challenges in meeting its

energy requirements. The Oil & Gas sector plays an

important role by contributing approx 45% of total

energy requirements. Net oil imports have grown from

102 million metric tonnes (MMT) in 2006-07 to approx

130 MMT in 2010-11, whereas the value of imports,

over the same period, has grown from US$ 40 bn in

2006-07 to US$ 70 bn in 2010-11. This has led to steep

increase in the import burden of the country including

infrastructure & pricing challenges for the Oil & Gas

industry. To enhance the Energy Security of the country

and to appraise the hydrocarbon potential of the

sedimentary basin in the shortest possible time, the

Government of India (GoI) has been making focused

efforts to accelerate and expand exploration of oil and

gas in the country. GoI also acknowledges the

importance of the role of private sector in development

of domestic resources. This has led to opening up of the

sector and introduction of an investor friendly policy

regime over the years.

Until the beginning of 1990's, wherein National Oil

Companies used to receive the Petroleum Exploration

License (PEL) on nomination basis, GoI started

opening up E&P acreage award process to private and

joint venture companies through various exploration

bidding rounds for exploration and development of

discovered fields.

The New Exploration Licensing Policy (NELP),

formulated with the approval of the cabinet, provided a

level playing field to the private investors by giving the

same fiscal and contract terms as applicable to National

Oil Companies (NOCs) for offered exploration

acreages.

On the Anvil - India Oil & Gas Upstream Licensing Regime

Manish BaghlaNeetu Vinayek

While approving NELP in February 1997, GoI through

the Cabinet Committee of Economic Affairs (CCEA)

had authorized Ministry of Petroleum & Natural Gas

(MoPNG) to prepare a Model Production Sharing

Contract (MPSC) in consultation with relevant

Ministries. MoPNG subsequently finalized the MPSC

with the approval of the Empowered Committee of

Secretaries (ECS) which had also been constituted with

the approval of CCEA, comprising Secretaries in

MoPNG, Finance and Law.

The GoI has awarded more than 200 blocks in nine

rounds of bidding under NELP. Before conducting new

bidding round, MoPNG & Directorate General of

Hydrocarbons (DGH) undertake consultation process

to seek industry inputs on the issues faced during bid

process and implementation of the PSCs. Based on the

recommendations, there have been improvements in

bidding framework in terms of parameters, weightage,

standardization and transparency in bid award process.

On some of the issues which were common to all the

players, the need was felt to adopt a streamlined

procedure of examination of each proposal before

obtaining the approval/decision of MoPNG.

Accordingly, DGH had developed and issued policy

guidelines. These policies provide a transparent basis

for deciding similar issues under various PSCs.

Following are the select policies issued by DGH:

Extension of exploration phases under NELP and

pre-NELP PSCs.

Extension of exploration phases under Coal Bed

Methane Policy (CBM).

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?

?

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Policy for Merger of Exploration Phases of

offshore Blocks under NELP-III & NELP-IV PSCs.

Policy for substitution of Additional Metreage

Drilled against Total Metreage Commitment as a

part of Minimum Work Programme (MWP).

Determination of Cost of Unfinished Minimum

Work Programme (MWP)

These policies provide safeguards which are kept in

view before amending the terms of the contracts. The

ECS has also approved provisions for imposition of

liquidated damages (LD) on the contractors where

necessary to ensure that such dispensations are

sought only by those contractors who are serious about

their exploratory commitments.

Recently, recommendations related to the Upstream

sector were made by the Standing Committee on

Petroleum & Natural Gas in December 2011. Select

comments/recommendationsare listed below:

The Committee is surprised to note that there are

no specific penalty stipulations in PSC in case of

shortfall in achieving the production targets

envisaged in either the approved Field

Development Plan (FDP) or Annual Work

Programme and Budget, thereby giving the

operators an escape route. The Committee would

like to know how this important aspect was

overlooked while framing PSC by the

Ministry/DGH. Keeping in view the large scale

dependence on natural gas as fuel, the

unscheduled cut in its production has adversely

affected the plans of various important sectors of

economy including the priority sector. The

Committee, therefore, desiresthat the

Government/DGH review PSC Contracts entered

into with various operators and incorporate

stringent provisions therein for any breach in

approved plan by the operating companies.

While expressing displeasure on unsatisfactory

performance of public/private companies in

respect of minimum work programme, the

Committee had desired “the Government/DGH

should take necessary steps to ensure that these

upstream companies expedite their exploration

work and make sincere efforts towards at least

completing the MWP assigned to them. The

Ministry in their Action Taken Reply had stated

that the Government/DGH monitor and

periodically review the progress of various

exploration activities through the Management

Committee (MC). If Contractor fails to complete

the committed MWP within the stipulated time,

they are required to pay the cost of unfinished

work programme as per the relevant PSC

provisions and the prevailing Policy Guidelines in

this regard. The Committee is of the view that the

penalty amount that the contractor is required to

pay if he/she fails to complete the committed

MWP is very less and does not act as a deterrent

for not achieving the approved targets. Therefore,

the Committee desires that failure to complete

MWP should be seriously viewed and higher

penalty be imposed in case of shortfall. Moreover,

extension of time to the contractor may not be

given in normal course, rather it should be

granted only in exceptional circumstances.”

Expressing dissatisfaction over the very low CBM

production since awarding of blocks in 2001, the

Committee had desired the Government to make

an indepth analysis to find out reasons for the

same. Though the Ministry in their reply have

informed that by the end of 12th plan period CBM

production is projected at 4 mmscmd in 2016-17

from the present level of about 0.23 mmscmd in

October 2011, the reply is, however, silent if any

analysis has been done on scanty production of

CBM t i l l now and the moni tor ing of

Government/DGH in this regard. In view of the

past record the Committee is not convinced that

the projected target for 12th Plan can be reached

unless effective steps are taken to boost present

CBM production including through application

and import of new technology. The Committee,

therefore, reiterates its recommendation and

desires the Government/Oil PSUs to make an in-

depth analysis of the reasons for scanty

production from CBM reservoirs and take

concrete and corrective action including

application and import of new advanced

exploration technologies and technical knowhow,

if necessary.

?


?After considering the Action Taken Replies of the

Ministry on the recommendations of the

Committee on development of gas hydrate, shale

gas, UGC and hydrogen as alternate sources of

oil and gas, the Committee feels that the various

programmes are not progressing at the desired

pace. Keeping in view the large potential of these

resources in meeting the energy security of the

country, the Committee desires the Government

to make concerted efforts in a time bound manner

to develop these resources.

Recognising the need for comprehensive review of

Upstream Licensing Policy, GoI has constituted a

committee under the chairmanship of Dr C.

Rangarajan, Chairman, Prime Minister's Economic

Advisory Council, to review the existing PSC. The

review would be in respect to current profit sharing

mechanism with the Pre-Tax Investment Multiple and

exploring various contract models. The committee will

also look into a suitable mechanism for managing the

contract implementat ion and governmental

mechanisms to monitor and audit the Government's

share of profit petroleum. It will also structure the

guidelines for determining the formula for the price of

domestically produced gas, and for monitoring actual

price fixation. The Committee will submit its

recommendations by August-end.

In the current environment, petroleum licensing is

expected to be widely debated and will take place in the

full glare of attention from the press and from public

opinion. We hope that the GoI will follow adequate

consultation process to modernize the licensing regime

that will break new grounds in recommending ways in

which GoIand the oil companies may devise best

practices in licensing to serve the interest of all

stakeholders and also an ethical business

environment.


Total number of villages in India: 6,38,588

Chances that a village in India is in Uttar Pradesh, Madhya Pradesh and Orissa: 1 in 3

Average time spent by a CEO in meetings in a 55-hour working week, in hours: 18

Average time spent by a CEO on business meals and telephones in a 55-hour working week, in hours: 5 & 3

Average time spent by a CEO working alone in a 55-hour working week, in hours: 6

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India's POL Consumptionin 2011-12: The Year of King Diesel

Vijay K SethiAdditional Director (Demand & Economic Studies)

Petroleum Planning & Analysis Cell

I can't resist telling you another story as it beautifully

explains the POL consumption picture in 2011-12.

During my childhood I was very fond of drawing. Around

the age of 14 years I grew confident that I could draw an

accurate portrait of a person from his photograph. One

day I decided to draw a picture of Guru Rabindranath

Tagore. I spent three days putting in lot of hard work to

finalize the portrait and hid it from all and sundry in the

hope of giving a surprise to everyone by showing the

final product. On the fourth day my uncle, whom I

respected a lot came to our house. I asked him to close

his eyes for a surprise. When he opened his eyes he

did show surprise, hugged me and said “Cuckoo (my

childhood nick name) you have done a great job. The

portrait looks exactly like Vinobha Bhave. You have a

great future to be a famous artist”. It took me a little

while to realize what my uncle had said but I recovered

soon to say 'Of course, it was Vinobha Bhave's picture

that I had drawn'.

India's petroleum products consumption in fiscal 2012

has a similar surprise as the bottom line consumption

figures are perfectly on expected lines. Against the

revised demand estimates of 147.05 million metric

tonnes (MMT) the actual consumption for 2011-12 as

per provisional data is 147.99 MMT indicating that the

variation in projections and actual figures is just 0.6%.

Any economist could be proud of such accurate

projections. However, once we analyze the data one

finds that it is not the picture you thought it would be.

And the picture was changed mainly by diesel, which

became consumer's darling due to price advantage

over competing fuels.

Diesel: The King

The variation in estimated figures and actual

consumption of HSD is 939 TMT, of which 80% is due to

higher consumption of diesel during fiscal 2012. It is

diesel, which changed the face of consumption as price

of competing fuels remained lopsided during the year

putting undue pressure on diesel consumption giving it

a dubious distinction of becoming the King of

consumption. In the last few years share of diesel in the

basket of petroleum products has been increasing. It

has grown to 43.7 % in 2011-12 from 35.2% in 2002-03

at the time of deregulation. Figure-1 gives the pattern of

diesel consumption in the last 12 years.

The high growth in diesel consumption came mainly

from following factors in 2011-12:

Domestic price of FO remained higher than diesel

price almost through out the year. This resulted in

substitution of FO by diesel, which is not only

cheaper for the consumer but also a superior

product with higher calorific value

Power situation started deteriorating in the

second half of fiscal 2012 leading to use of diesel

in gensets. Figure-2 brings this out quite clearly:

Figure-1: Share (%) of Diesel in POL Consumption

Figure-2: Monthly All India Power Deficits (%)

during 2011-12

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JA

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MA

R

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R

MA

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JU

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AU

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OC

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NO

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?MS price was deregulated in June 2010, after

which preference for diesel cars started

increasing

Ever since the deregulation of petrol in June 2010, its

consumption has been under pressure. People have

begun looking seriously at alternatives like CNG and

HSD. The falling growth in MS with rising selling price

comes out clearly in Figure-3, which gives two years'

data on MS price (Delhi) and monthly growth.

The inverse relationship between MS price and growth

is well established in the last two years. This trend is

likely to become sharper as the price gap between MS

and HSD further increases.

A strange and unprecedented situation has arisen

where MS growth has dropped below HSD this year,

which is against the historical trends. We have tracked

data for 20 years since 1992-93 and Figure-4 makes

this unusual trend clear.

Petrol - Under Pressure

Unprecedented Situation

Figure-3: Retail Selling Price (Delhi) & Monthly

Growth of MS

Figure-4: MS & HSD Annual Growth (%) Trend

The falling growth of car sales did not also help the

cause of MS during the year. Car sales growth was low

at 1.7% in 2011-12. It was Utility Vehicles (UVs) sales,

which brought some cheer as their sales grew at 13.7%.

However, UVs are largely diesel driven vehicles.

Kerosene consumption consists mainly of PDS

Kerosene, which is about 98% of the total quantity. Its

consumption came down by 7.8% in 2011-12 and the

product is receiving the attention from the Government

it deserves. The rationalization process which started

in a small way a few years ago was not only carried

forward in 2011-12 but actually picked up pace. Slowly

but surely Kerosene consumption is reducing, which is

a good sign given the huge expansion of domestic LPG

in the country. Figure-5 shows the declining

consumption of SKO since deregulation of the

petroleum sector:

The rationalization process continues in the current

year also. What needs to be done is an increase in

price of PDS Kerosene, which is ridiculously low. A

bottle of mineral water costs more than Kerosene.

LPG has started making inroads in rural areas with the

domestic LPG customer base reaching a figure of 13.71

crores as on 1.4.2012. Over 122 lacs new customers

were enrolled during 2011-12, half of which are in rural

areas, besides release of 56.6 lacs DBCs. There are

1171 LPG Distributors under Rajiv Gandhi Gramin LPG

VitranYojana (RGGLVY) apart from 1665 other rural

distributors as of 1.4.2012 indicating expansion of LPG

to rural areas. LPG consumption has grown at a robust

Kerosene – Rare Good News

Figure-5: Annual SKO Consumption & Growth (%)

LPG: Moving into Rural Ares


thCARG of 7.2 during the 11 Five Year Plan. What has

been disappointing, however, is poor performance of

Auto LPG. Despite addition to the number of Auto LPG

Stations (ALDS), there are only 652 ALDS as of

1.4.2012 and consumption has slightly shrunk during

2011-12 compared to the previous year. Despite

advantage in price over MS, Auto LPG has really not

taken off. One of the reasons for this is logistics issues.

thATF consumption growth had a dream run in the 10

Five Year Plan growing at CARG of 12%. Even on this th

high base the CARG for the 11 Five Year Plan is robust

at 6.8% with annual growth in the last two years at 9.7%

and 9% respectively. However, with Kingfisher Airlines

falling on bad times last year followed by a strike by Air

India pilots, ATF outlook is quite pessimistic this year.

Since March 2012 monthly growth in ATF is negative.

After a high of 19.9% in 2010-11, cargo traffic actually

declined by -2.9% in 2011-12. The growth in ATF came

mainly from passenger traffic which grew by 13.2% in

fiscal 2012. A sharp increase in airfares and reported

withdrawal of some carriers from certain non-profitable

routes are the reasons for deceleration.

Never has in the last over two decades FO/LSHS

consumption recorded such high negative growth.

Year 2011-12 ended with negative growth of -14.4%.

One of the major reasons was substitution of FO by

ATF: The Happy Days Are Over

FO/LSHS: Sentiments Remained Negative

HSD, domestic price of which remained cheaper

leading to consumers substituting use of FO by HSD.

Large scale substitution process led to absolute

FO/LSHS consumption volumes dropping below 1994-

95 level.

PetCoke volumes have crossed six million tonnes

putting it ahead of products like LDO, Lubes, ATF,

Bitumen and Others. Although it is a low value product,

its growing volume significantly influenced bottom line

growth in 2011-12. PetCoke growth was very high at

23.3% last year, highest among all petroleum products.

This was due to Gujarat refinery upgradation as a result

of which IOC sold major additional volume of PetCoke

during the year. High growth is expected to continue in

next year also.

Oil companies commissioned over 3100 retail outlets

during fiscal 2012 led entirely by OMCs as private

companies' outlets numbers actually shrunk during the

year due to decommissioning. Private oil companies

were not able to sell auto fuels due to price

disadvantage. Their sales volume for diesel declined by

94%, and that of petrol by 10% during 2011-12 over the

corresponding period of previous year.

(The views & opinion expressed in this article are personal of the

author & do not represent those of PPAC or Government)

PetCoke: The Growing Weight in Products Basket

General

Year in which number of deaths exceeded number of births in Japan, for the first time ever: 2005

Year in which Japan's health ministry began turning off its office lights at 4.30 p.m. to encourage

employees 'to go home early and make babies': 2011

Number of American banks that failed in 2011: 92

Number of American banks that had failed in 2009 and 2010: 140 & 157

Snippets

ee



Is Petroleum Refining a Sunset Industry In India?

Dr. Aradhna Aggarwal

Senior Fellow,

National Council of Applied Economic Research

India, which once struggled to keep up with domestic

demand for oil products, currently has a major excess in

refining capacity. As of June 2011, there were 21

refineries in India with a capacity of 193.4 million metric

tonnes (MMTPA) while domestic consumption was

about 148 million tonnes. This implies a fear of lower

future values for operators in this industry. Does that

mean that petroleum refining is a sunset industry in

India? This article addresses this question from four

perspectives:

The national energy security perspective

The economic perspective

The technological perspective

The global perspective

The petroleum refining industry comprises

establishments primarily engaged in refining crude

petroleum into finished petroleum products which are

used to power the residential, transportation, industrial,

commercial and electricity utility sectors. Petroleum

fuels have been the world's largest energy sources 1

since 1952 and are expected to continue to remain so.

In 1990 its share in total energy consumption was

nearly 40% which gradually declined to 33 percent by

2010. By 2035, its share will further decline to 28% but it 2

will still be the largest source of energy (IEA, 2010).

Efficient, reliable and competitively priced energy

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The National Energy Security Perspective

supply is a prerequisite for accelerating economic

growth and human development. For any developing

country, therefore, energy security is an integral part of

the overall economic strategy. In this context, petroleum

refining is one of the most crucial drivers of future

growth prospects of an economy. Any mismatch

between demand and supply of these products can

thus pose serious energy security threats. In India,

about 34.5% of the energy generation capacity comes

from oil. The demand for petroleum products has

increased at an annual average rate of 6.5% over the

period since 1970-71. To meet the growing demand,

refining capacity has also increased, in particular after

1998. Figure 1 shows that at the current level of

demand, refining capacity is in excess of the domestic

demand.

Three observations may be made here.

First, the emergence of surplus capacity is a relatively

recent phenomenon which emerged in the late 1990s.

There has been a thin balance between demand and

supply which may not be tenable in the long run due to

growing demand. According to the demand projections

made by the Working Group on Petroleum and Refining thSector for the 12 Plan, the growth in demand for middle

distillate fuels will accelerate from 5% during 2011-12

to 2016-17 to over 6% during the next five years. The

demand for heavy distillate fuels will also accelerate

while that for low distillates, Naptha and Motor Spirit will

continue to grow at the same rate of around 6%.

Figure 1: Consumption and refining capacity in

petroleum sector in India ('000 bpd)

1 Just as coal had displaced fire wood as the chief source of fuel in the US by the mid-1880s, petroleum surpassed coal by 1951.

2 IEA (2010) World Energy Outlook 2010, International Energy Agency.

Sources: Energy Statistics, 2012; Eleventh Plan Working Group Committee, 2006

Planning Commission


Overall, demand is projected to grow at a rate of 5%

over the next 5 years which will accelerate to 5.9%

during 2017-2022 (Table 1).

While the demand will continue to grow at an

accelerated rate, refining capacity cannot grow

continuously creating mismatch between the two.

There may be a long time lag between planning of a threfinery and its commissioning. The 11 Plan projected

the refining capacity to go up to 240.96 million tonnes

per annum in the terminal year of the Eleventh Plan as

against 148.97 million tonnes per annum in the

beginning of the Plan. However, the actual installation

of capacity is 213 million tonnes which fell about 12%

short of the Eleventh Plan target.

Second, there might be excess capacity in aggregate

terms but at the disaggregated level demand for certain

important products such as LPG, Kerosene, lubricants,

Petroleum Coke and Bitumen still exceeds the capacity

(Table 2).

Finally and most importantly, the difference between

consumption and the total capacity is not a good

Table 1: Demand projections by product: 2011-12 to

2021-22 (MMT)

thSource: Working Group Committee on the 12 Plan, Planning Commission

Source: Energy Statistics, CSO

Table 2: Consumption and production of petroleum

products: 2009-10(MMT)

measure of excess capacity. This is because while the

public sector companies are directed to first meet the

domestic demand before exporting the product to

foreign markets, private companies have no such

mandate. Their business model is to maximize return

on their investment from their sales whether domestic

or international. Irrespective of the domestic demand,

private investors would sell in the international market if

returns on international sales are higher. Thus increase

in exports and domestic shortage may go in parallel.

From the energy security perspective therefore, there is

a need to look at the difference between the public

sector capacity and total consumption. Figure 2 shows

that the former is still smaller than the latter.

Considering that India is heavily dependent on imports

of oil,

given the fact that the country has been facing severe

foreign exchange constraints. The refining capabilities

within the country may counter India's disadvantages in

the domestic availability of oil. Further, heavy reliance

on imported energy may put upward pressures on

prices through supply chains, injecting inflation and

putting the indigenous industry at a competitive

disadvantage in international markets. Indeed, India

has created excess capacity in refining; but this may not

ensure energy security. With a growing demand for oil,

there is a large scope of further expansion in this sector.

There is thus need to push investments into the refining

sector.

The energy security concerns cannot be overstated.

The closure of refineries in developed countries has

raised concerns over energy security issues even

within these countries despite their ability to import an

adequate supply of petroleum products.

Figure 2 : Aggregate Consumption and refining

capacity in the public sector (000 tonnes)

Source: PPAC

import dependence for petroleum products also

can seriously jeopardize energy security in the long run

The argument

is that domestic refineries provide a much greater


degree of flexibility in the product supply chain in the

event of an unexpected supply disruption.

The Economic Perspective

Technological Perspective

The Global Perspective

From the economic perspective, at all stages of the

operat ion—processing, manufactur ing and

distribution—refineries generate jobs, incomes, new

businesses for local firms and communities, and a tax

base. The sector also has potential to contribute

significantly to the national economy through foreign

exchange earnings. The economic impacts of

petroleum refining are broader than those of most other

sectors of the economy. This is because unlike products

from other sectors, alternative petroleum supplies or

substitute products are not readily available in the case

of an emergency. And, if petroleum prices go up, the

effects are felt in the price of food and other essential

consumer goods, the costs of commuting, and the cost

of moving goods to market for businesses throughout

the economy. From the economic perspective

therefore, the promotion of the refinery sector needs to

be an important component of the industrial promotion

policy.

The world crude oil share has been getting both heavier

and sour. Most of the older refineries do not have

adequate upgrading capacity to increase the higher

valued product nor do they have the capacity to process

heavier or sourer crude to take advantage of their lower

prices. Further, over time new technologies have been

introduced in this sector driven by environmental

concerns. Old refineries are not expected to be fully

benefitted by these technologies. Finally, petroleum

product specifications have become increasingly more

stringent in terms of emissions putting further pressures

on old refineries. The technological perspective

suggests that new refineries are in a better position to

address all these issues. They are a channel through

which the latest technologies can come and meet the

demand for cleaner products.

The global consumption of oil has been increasing at

the average annual rate of 1.57 percent since 1994.

Figure 3 shows that since the early 1980s, the demand

for oil consumption has been growing faster than the

capacity.

Note: The actual growth figures have been adjusted using the Hodrick-

Prescott filter.

This points to the need for continuing investment in

refining capacity. Since alternate energy is not ready to

replace the fossil energy, dependence on oil energy is

expected to continue. According to the 2006 World

Energy Investment Outlook of the International Energy

Agency, the world needs to invest $774 billion in real

terms between 2005 and 2030 in the refining sector to

create an addition capacity of 32 million BPD. Asia will

attract the largest portion of this investment at $170

billion as traditional producers namely, the US and

Europe have been losing competitive advantage in this

sector. The most significant expansion of capacity has

occurred in China and India which have had the effect of

pulling the locus of world refining more toward the Asia-

Pacific region. India has the fifth largest refinery

capacity in the world. Reliance Industries' Jamnagar

complex is the largest oil refining complex in the world, 3with a total capacity of 1.24 million bpd . The Special

Economic Zone at Jamnagar refinery has a Nelson 4 Complexity Index of 14.0 and i most

complex India has thus created core

competencies in this sector. This perhaps is an

opportune moment for the domestic refining industry to

leverage these competencies and make India a major

refining destination rather than treating it as a sunset

industry.

Figure 3 : World consumption of oil and refinery

capacity: growth (%)

Source : BP Statistical Review (Online)

s one of the world's

refineries.

3. http://www.ril.com/html/business/refining_marketing.html

4. http://www.ril.com/html/aboutus/manufact_jamnagar.html


LPG for household consumption is nearly 89% of the

total LPG off-take in India. The total LPG consumption

in the country for the year 2011-12 was 16.5 MMT

(Million Metric Tonnes) and is expected to grow at 8-9%

as envisaged in the Vision 2015 document of Ministry of

Petroleum and Natural Gas. OMCs are holding a

customer base of more than 135 million households

currently. More than 11500 LPG distributors home

deliver nearly 3 million domestic LPG cylinders every

day to cater to this mammoth customer base

constituting more than half of the country's population.

LPG for Domestic Cooking is heavily subsidized and

hence LPG is dual priced based on its use. LPG subsidy

for the year 2011-12 is estimated to be more than 30,

000 crore rupees. To restrict the use of subsidised LPG

only for genuine domestic customers, every household

is permitted only one registered LPG connection in the

name of one of the family members as per the LPG

Supply and Distribution Order amended in 2009.

However, every registered customer is entitled to

receive refills as per their domestic cooking need.

LPG is an exceptional fuel. It is considered as a green

fuel and has a wide range of applications. The

environment friendliness and usability for multiple

applications coined with the arbitrage available in its

pricing entice the market players to divert the product

meant for domestic cooking for other applications.

Challenges in LPG Distribution

LPG Transparency Portal

Jayadevan PChief Manager(LPG-Sales)

Indian Oil Corporation Limited

All LPG distribution operations are recorded using

robust software provided by OMCs to distributors. The

information thus generated is captured and made into

meaningful reports providing business insights to

OMCs. Hence, the market players use ways and means

outside the software realm to manipulate and take

advantage of arbitrage available in inherent

vulnerability of Subsidised Domestic LPG Marketing.

Over the years, such trends of diversion have been

facilitated by obtaining more than one LPG connection

per household violating LPG Control Order. This is

achieved through duplicate and/or fake connections.

Multiple connections in the name of existing customers

and/or fake connections in the name and address of

non-existent customers provide enough opportunity to

draw subsidised cylinders and use them for purposes

other than domestic cooking.

LPG cylinders are home delivered. At the time of

delivery, the household identity is manually verified and

the receipt acknowledged by the resident / family

member. Hence, the current process of LPG

distribution to customers has a weak form of verification

and consent from a residential consumer at the time of

acceptance of delivery. Being a manual process, the

system does not have a fool proof re-verification

mechanism. This leaves an opportunity for diversion of

the cylinder by stakeholders in the supply chain to non-

genuine customers for non-domestic applications

without the knowledge of registered customers.

The access to subsidized LPG requires sufficient proof

for local address and identity, with an increasing

migratory population, this becomes a bottle neck. In

addition, in the current system an LPG customer has

his/her connection mapped to a specific OMC

distributor in his/her locality, binding them to the

distributor. In the event of below par service by the

distributor, the customer does not have the freedom to

move to distributor offering better service.

a. Use of Fake Identities to draw subsidies.

b. Lack of strong process to verify receipt by

genuine beneficiary

c. Lack of Portability of Identity & Quality of

Service


Transparency As a Solution to Challenges

The need for transparency in subsidized domestic LPG

supply to the last mile of the supply chain as an effective

social audit mechanism to meet the challenges was first

conceived in the interim report of the Task Force on

Direct Subsidy Transfer set up by the Finance Ministry

headed by Chairman, UIDAI in which Secretaries of

various departments including P&NG were members.

The Task Force detailed a scheme for achieving direct

subsidy transfer to customers with a well-integrated

subsidy management system. It was felt that the same

would ensure to bring about real choice and

empowerment for beneficiaries, without distorting

markets in unacceptable ways. To achieve this, existing

subsidy administration process shall be re-engineered.

The path envisaged include targeting, address

leakages and diversion through transparency with use

of technology, empower beneficiaries with choice in

accessing subsidies, provide a quick and convenient

method to report grievances, a robust electronic

process for identification of beneficiaries, and

electronic transfer of funds into their bank accounts.

At a macro level the team felt that any effective subsidy

regime has to incorporate the following elements:

1. Empowerment and choice for beneficiaries

2. Transparency in subsidy administration and

information visibility

3. One price for subsidized goods

4. Efficiency in production

5. Convenient and effective grievance redressal

6. Support all types of direct subsidy transfer

models

7. Fully electronic service delivery

8. An incentive-compatible solution across

stakeholders

9. Effective MIS Reporting

A subsidy framework that conforms to above broad

elements is expected to limit incentive distortions and

minimize inefficiencies.

Transparency in Subsidy Administration And

Information Visibility

Bridging the information asymmetry is identified as an

immediate implementable area to improve the

effectiveness of any subsidy program. A large section of

the society is often unaware of their rights and the

welfare services offered by Governments. They face

formidable challenges in accessing these services,

understanding their real rights envisaged in the

Governmental orders, its implementation/availability to

all fellow beneficiaries equitably and exercising them.

For example, information about who gets LPG cylinders

at what frequency under public distribution system,

which acts as a powerful social audit instrument, comes

at a great premium. The availability and dissemination

of comprehensive information already collected and

collated by PSU Oil Marketing companies if available in

the public domain can both dramatically empower

citizens, stop distortions by the partners in supply chain

and increase the effectiveness and transparency of

subsidized LPG delivery administration.

Despite tremendous increase in awareness and

changes brought about by reforms like the Right to

Information Act, 2005, in recent years, information

asymmetry is still widespread. Even when such

information is available, in tits and pieces, it can paint a

distorted picture given the leakages and diversion in the

distribution chain.

Hence information, such as the availability of the

domestic LPG, list of beneficiaries, and details of

benefits drawn, among other things, provides a

powerful reconciliation and social audit mechanism.

Performance of appointed LPG distributors who are

servicing beneficiaries on behalf of the Government

also can be rated by the customers and published in the

OMC website. Civil society organizations, activists,

researchers, analysts, and local residents themselves

can use this information to highlight discrepancies and

irregularities in social programs.

Oil Marketing companies have been capturing the

information for better supply chain management,

monitoring performance of their distributors , optimizing

resources, planning equitable distribution etc for more


than a decade. With the basic understanding that if

deployed effectively, information technology has the

potential to serve as a powerful tool to bring about

transparency and accountability of Government

services, efforts commenced immediately after the first

meeting of Task force in March 2011 to channelize and

publish the information. As such, the systems in place of

OMCs have reporting and analytics, data warehousing

and business Intelligence modules. While all possible

metrics cannot be fully conceptualized when the power

of information in LPG was envisaged, casting the net

wide enough and provided in an easy to consume

manner for end-users, was expected to ensure that the

data is relevant and meaningful.

As an immediate step, the OMCs have taken up the

task of setting up a transparency portal that would show

the details of all the customers of LPG who are

receiving subsidized cylinders, distributor wise. This

transparency portal would be accessible to the public

and details of the consumption of subsidized cylinders

of consumers across the country would be viewable.

The information is hosted in www.indane.co.in by IOCL,

w w w . e b h a r a t g a s . c o m b y B P C L a n d

www.hindustanpetroleum.com by HPCL. The website

of Petroleum Ministry has a

direct link to all the three portals of OMCs. The

consumption of subsidized LPG, for more than 13 crore

customers across the country is now published in

Transparency portal and is regularly updated. The

details such as customer number, name, address, the

number of cylinders consumed and subsidy amount

www.petroleum.nic.in

availed with facility to sort and search are available for

all domestic LPG customers in the portal.

As the information is expected to act as a powerful

reconciliation and social audit mechanism and Civil

society organizations, activists, researchers, analysts,

and local residents themselves could use this

information to highlight discrepancies and irregularities,

this is currently making LPG distributors more vigilant

about their deliveries to genuine customers and thereby

acting as a self-correcting mechanism against

diversion.

The portal also has facility to sort and search the

information, get refill wise booking and delivery details,

submit feedback/complaint for all visitors, and rating the

distributor and surrender connection facilities for all

registered customers. The rating of the distributor is on

five parameters including right price, correct weight,

courteous behavior and timely deliveries.

Besides the utilities to check, the portal today is helping

customers to compare their consumption with others

and conserve their cooking and eating habits, besides

adapting to the control order provisions which they were

unaware earlier.

The portal is a true mirror of the subsidy disbursement

to the rich and the poor, the elite and underprivileged,

the urban and rural households of customers and is fast

emerging as a tool for introspection for the customers

and true reflection of activities undertaken by all

interested channel partners and rule makers in the

country.

Number of world's top 10 fastest growing economies between 1980 and 2000 that were in Africa

and Asia: 1 & 9

Number of world's top 10 fastest growing economies between 2001 and 2010 that were in Africa

and Asia: 6 & 4

Number of world's top 10 fastest growing economies between 2011 and 2015 that are projected to

be in Africa and Asia: 7 & 3

Snippets



The oil and gas sector is one of the key catalysts in

fuelling the growth of Indian economy. Most of the

Indian companies, who want to carry out exploration

and drilling activities, require the services of various

foreign service providers. The upstream segment

substantially depends on imported services, and in the

days of peak activities in 2008 and 2009, the services

were in dire shortage and work programs had to be

deferred owing to non availability. Hence it is

imperative that we improve business environment for

service providers and make it attractive enough for

them to prefer India over other countries.

Foreign Service Providers for Drilling and

Exploration Activities

In India, upstream drilling and exploration work is

mostly undertaken by state-owned oil companies. The

leader in the upstream segment, ONGC, as well as

other oil companies, enter into contracts with various

offshore oil and gas service providers for the purpose of

drilling wells and providing various services in

connection with the exploration and extraction of

mineral oil from offshore locations in India.

In this article, we propose to cover the recent

challenges being faced by the foreign offshore oil and

gas service providers (who offer their income under the

presumptive regime provided under the income-tax law

in India)with respect to the service tax amount.

No Liability for Service Tax –But Still Pay Income-Tax On It!

Shailesh MonaniExecutive Director

PricewaterhouseCoopers Pvt. Ltd.

Bhavin ShethManager

PricewaterhouseCoopers Pvt. Ltd.

Provisions Under Income-tax Laws for Taxation of

Foreign Oil and Gas Companies

Finance Act, 1994

Under the income-tax law in India, there is a special

regime of taxability for offshore oil and gas service

providers. Under this special regime, 10% of the gross

receipts for services rendered in connection with

extraction or production of mineral oil, is deemed to be

their income chargeable to tax. For this purpose, the

gross receipts would mean any amount paid or payable

to the foreign company for the provision of facilities /

services or plant and machinery on hire.

The question that arises is whether the amount of

service tax collected by the foreign companies would be

considered as a part of gross receipts for computing

their deemed income under the presumptive scheme.

Further, what would be the position for foreign

companies not having any office in India, hence not

liable to service tax. Accordingly, such foreign

companies do not levy or collect any service tax from

the service recipient and the service recipient is liable

for service tax.

For ease of understanding, we propose to briefly

discuss the provisions of service tax laws in India.

The levy of service tax in India is governed by the

provisions of Finance Act, 1994. Under this law, service

tax is levied on the service provider in cases where they

render the specified services. The Finance Bill, 2012


1. Indian National Shipowners Association v. Union of India (Bombay High Court). The SLP filed against this decision was dismissed by the Supreme Court

2. Techip Offshore Contracting BV (Delhi Tribunal)

3. Islamic Republic of Iran Shipping Lines (Mumbai Tribunal)

4. Siem Offshore Inc.

has introduced a negative list of services, which means

that all services rendered other than those covered

under the negative list would be liable to service tax.It is

the responsibility of the service provider to collect the

service tax from the service recipient by including the

same in the invoice raised by them for rendering the

services and deposit the service tax so collected with

the Government treasury.

However, there is an exception to the above rule

provided in cases where the service provider is a

foreign company which does not have a permanent

office or place of business in India and the services

provided by such foreign company, are received in

India. In such cases, the Indian service recipient is

deemed to be the service provider and accordingly, is

liable to service tax. This is popularly known as the

reverse charge mechanism. Hence, the foreign service

provider is not statutorily required to levy any service

tax in respect of the invoices raised by them for services

rendered.

The above position under the Finance Act, 1994 is also

supported by judicial precedents under the service tax 1

laws.

The presumptive tax scheme under the income-tax law

has been on the statute since April 1, 1983. At the time

when the presumptive scheme of tax was introduced, it

was never envisaged that service tax would be a part of

the gross receipts for computing tax under the

presumptive scheme of taxation. The service tax laws

were introduced in the statute subsequently in 1994.

Since then, there has been no clarity on the treatment of

service tax for computing the income under

presumptive scheme.

In the past, the tax officers have been making an

attempt to consider the amount of service tax collected

by foreign companies as a part of their gross receipts for

computing the presumptive income, without

Position Being Adopted by Tax Officers When

Computing Income Under Special Regime of

Income-tax Law

appreciating the fact that service tax is a statutory

liability and there is no income element.

However, of late, the tax officers have gone one step

ahead and have started including the amount of service

tax in the gross receipts of foreign companies who are

not liable to service tax under the reverse charge

mechanism of the service tax law.In these cases, the

amount of service tax to be added to the gross receipts

is either notionally computed based on the value of the

invoices raised by the foreign companies or is deemed

to be equal to the actual amount paid by the service

recipient ascertained after calling for the details from

the recipient.

Scenario 1: Where service tax is collected by the

service provider

There have been conflicting judicial precedents with

regard to the treatment of service tax for computing

income under the special regime in cases where

service tax is collected by the service provider. In one of 2

the decisions , it was held that the service tax amount

collected by the service provider should be considered

as a part of gross receipts for computing the

presumptive income under special regime.

3However, subsequently, there was another decision,

rendered in the context of computing presumptive

income for shipping companies (where the provisions

are similar to that of computing presumptive income for

oil and gas companies) wherein it was held that there is

no element of profit in the service tax collected by the

service provider and hence the same cannot be

considered as a part of gross receipts when computing

the presumptive income.

In a recent ruling of the Authority for Advance Ruling 4(AAR), it was held that service tax collected by the

service provider should be considered as a part of gross

receipts for computing the presumptive income under

special regime.

Position Under the Income-tax Law


The above position of inclusion of service tax in

computing income under presumptive scheme is

contrary to the clarification given by the Central Board

of Direct Taxes (CBDT) in the context of deduction of tax

at source from the payment of rent. As per this CBDT 5

circular, it is stated that since the service tax paid by the

tenant on the rent paid by them does not partake the

character of income, no tax should be deducted at

source on such service tax element included in the rent.

Though this circular is in the context of tax deduction at

source, the intention of the CBDT is clear that service

tax does not partake the character of income. This

rationale should be applicable even to computation of

income under the presumptive scheme.

Scenario 2: Where service tax is not collected by the

service provider and is liability of service recipient under

reverse charge mechanism

The judicial decisions discussed under Scenario 1,

though conflicting, have been rendered in the context

where service tax was atleast collected by the service

provider and included in the invoices raised by them on

the service recipient. While this view by itself is highly

debatable, the tax officers are going even a step further

and making additions for notional service tax amount

under the reverse charge mechanism, which is never

charged or collected by the service providers. This may

lead to absurdity and is contrary to the law.

Under the income-tax provisions, the tax officers are

trying to include service tax in the income of the service

provider where there is none levied under service tax

law. By doing this, the tax officers are attempting to

introduce new principle of taxation under the income-

tax laws –tax non existent receipt in the form of service

tax paid by service recipient under reverse charge

mechanism.

In cases where service tax is collected by the service

provider, while there are judicial precedents which are

available, the same are either of the Authority of

Advance Ruling or Tribunal. Hence, there would be an

on-going litigation in this regard until the matter is

settled by the Apex Court. Alternatively, the CBDT

should come out with a clarification on the position to be

adopted regarding service tax for computing the

CONCLUSION

income under presumptive scheme.

As regards the second scenario where service tax is

never collected by the service provider, it may be stated

that the reverse charge mechanism under the service

tax laws was introduced to avoid hardship for the

foreign companies which did not have any place of

business in India from compliance requirements of

service tax. Consequently the service recipient is

deemed to be the service provider and hence liable to

service tax.The tax officers are causing undue hardship

and litigation by considering the service tax, for the

purpose of computing income under presumptive

scheme.

As such, the service tax amount cannot be considered

as income in any case, since it is a statutory liability,

where the service provider merely acts as a collection

agent of service tax on behalf of the government.

However, in cases where the service provider is not at

all liable to collect or to pay any service tax, it is grossly

unfair to include such amount when computing their

income for the purposes of income-tax.

It is high time for the CBDT to come out with a

clarification on its position. At the time of making an

estimation of liabilities to bid for contracts in India, the

offshore service providers consider only the contractual

receipts as a part of their income for determining their

tax liability in India. Even in cases where service tax is

collected by them, it is not considered as income since it

is a pass through, where they merely collect the service

tax on behalf of the Government. In cases where

service tax is paid by the service recipient under

reverse charge mechanism, the question of estimating

tax liability on such service tax never arises.

In view of the tax officers treating the service tax amount

as income of the offshore service providers, their

estimation made at the time of bidding for contracts in

India goes haywire and results into substantial

reduction in their margins or possibly even into losses. It

also has an impact on their cash flow. Considering that

Indian oil and gas industry requires the services of the

offshore service providers, it would be advisable for

CBDT to clarify its position by issuing an appropriate

circular. This would give better clarity to the offshore

service providers and enable them to make better and

accurate estimation of their tax liability in India.

5. Circular No. 4/2008 dated April 28, 2008


Pramod Narang

Dy. General Manager (Corporate Planning &

Economic Studies)


The last decade (2000 to 2010) has seen a spate of

petroleum refinery closures, especially in Japan, EU

and the US. Following the golden age of petroleum

refining (prior to 2008), which resulted into a wave of

new projects in various regions, the global crisis of

2008-2009 and a sluggish and uncertain recovery

thereafter, put many refiners out of business. A number

of projects have either been cancelled or put on hold,

prominently in EU, Japan, and Atlantic basin. A glance

at BP Statistics, 2012 will reveal a broad relation

between the demand and the refining capacity in a

region. Globally, in the past 10 years, while the oil

demand has grown at a CAGR of 1.32%, the refining

capacity has registered a growth of 1.10%. This has

resulted in narrowing the gap between oil demand and

refining capacity (Table – I). However, Europe and

Eurasia continue to have surplus refining capacity as

against capacity shortfall in US. Similarly, China & India

became surplus in refining capacity during the last

decade.

Realignment of Petroleum Refineries – Survival of the Fittest

A. K. RoyExecutive Director (Corporate Planning

& Economic Studies)Indian Oil Corporation Limited

Reasons for Capacity Outage

JAPAN

For the global oil market, a key consequence of the

recent downturn was the loss of several million barrels a

day of future oil products demand. Besides, there are a

variety of other reasons for outage of huge refining

capacities. Some of these reasons are general in

nature and others are specific to a country or a region,

as broadly classified hereunder:

The market condition in the local or regional area

(e. g. suppression of oil demand in Japan)

Economies of scale

High operating costs (EU)

Lesser ability to process low-cost raw materials

like heavy crudes

Lesser flexibility and ability to add value as

compared to a modern refinery

Environmental concerns/ statutory norms (US,

EU, Japan)

The following paragraphs carry out an in-depth, region-

wise analysis of the factors resulting into refining

closures in various regions.

One country where closures have been happening and

are set to occur on a significant scale is Japan. Its

demand for oil has declined to 4.4 m bbl/d in 2011 from

5.5 m bbl/d in 2000. There is little growth in population

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Table -1 (kbd)


National Development and Reforms Commission

(NDRC), China is also renewing is efforts to close some

of its local refineries. It has recently announced new

policies to increase the fuel oil consumption tax to $

18.6/ bbl from $ 2.3/ bbl and also the fuel oil import tariff

to 3% from 1%. It is intended to hasten the closure of

refineries that use fuel oil as the feed stock.

Other noteworthy closures in Asia Pacific have been

ExxonMobil's 70000 bbl/ day Port Stanvac refinery in

Australia, PT Humpuss's 63000 bbl/ day refinery in

Indonesia and Chevern Caltex 76000 bbl/ day refinery

in Philippines (Table – 4).

Shell's Clyde refinery in Australia could be another

possible candidate for outage. According to Shell, the

refinery's output of 79,000 barrels a day is too small to

compete with the large new Asian refineries that

produce more than one million barrels of refined

products on a daily basis. Shell's 110,000 bbl/ day

Tabangao refinery in Philippines and CPC Corp's

205,000 bbl/ day refinery in Taiwan also face uncertain

futures.

Despite such a huge outage since the last couple of

decades, the overall refining capacity in Asia Pacific

has grown at a CAGR of 2.83%, which is in line with the

demand growth in the region. However, the difference

between Asian capacity and oil products demand,

Closures in other Asia Pacific Countries

Table -3 (kbd)and an increasing number of people have opted for

electric, hybrid and more efficient cars.

Reportedly, refining capacity of the order of 1425 kbd at

33 sites have either been closed or mothballed in the

country since 2009, prominently by the JX Group,

Cosmo Oil, Idemitsu Kosan and Toa oil (Showa shell),

as briefed below (Table – 2):

In July 2009, Japan's Ministry of Economy, Trade and

Industry (METI) issued an ordinance that requires

meeting a cracking to crude distillation ratio of 13% by

March 2014. (Cracking under this ordinance is defined

as resid FCC plus coking, plus resid hydro-cracking,

which means it excludes vacuum gasoil FCC and

hydro-cracking). To meet this requirement, refiners are

left with a limited choice of either closing down the

distillation capacity and/ or increase resid upgrading.

Considering Japan's outlook for a continued decline in

the petroleum demand and, subsequent to the

disastrous earthquake of March 2011, refiners are

generally opting for closures over investments.

China has been one of the main drivers of oil demand.

Its oil demand has registered a sharp growth at a CAGR

of 6.6% since the turn of this century. The refining

capacity has also grown in tandem at an almost similar

rate. While China is planning to increase its overall

distillation capacity, legislation is expected to have an

overall impact on the capacity build-up. The Chinese

government has raised the minimum capacity limit for

the refineries to around 40,000 bbl/ day (~2 MMTPA).

The targets are small, but have affected numerous

independent refineries.

Year-wise details of refineries with lower capacities,

either moth balled or closed at various locations in

China since 1999 is tabulated in (Table – 3):

CHINA

Table -2 (kbd)

Table -4 (kbd)


which had ballooned to a peak surplus of 1.7 m bbl/ day

in 2009, from a deficit of nearly 1 million bbl / day in

2004, is expected to erode in view of the likely refinery

closures in Japan and China. This is also expected to

result in better refining margins in the next 4-5 years,

before start up of the export refineries in the ME.

European refineries face the combined effect of

overcapacity and falling demand in the region

aggravated by an economic downturn and increasing

competition from more modern refineries in Asia and

the Middle East.

Closures in Europe

A majority of European refineries are old and do not

have enough flexibility to accommodate these rapid

changes. Road transportation fuel, and in particular

gasoline for which Europe has a significant capacity, is

being replaced by Diesel (Chart – I& II). Additionally,

heavy oils, bitumen, waxes and petroleum coke are no

longer in high demand as they used to be a decade

earlier. Rising biofuels supply and a requirement to pay

for a rising share of CO emissions have also been 2

instrumental in stressing the refining margins.

The misalignment between demand and supply

capabilities calls forhuge investments in hydrocracking

capacities, which is an extremely difficult choice for

European refiners at this juncture. Asian and ME

refineries on account of being younger, with big highly

complex plants, lower labour costs and less severe

environmental regulations make the competion tougher

for European refineries.

Therefore, European refiners continue to struggle to

balance their output with demand. As a result, capacity

utilization of European refineries' consistently

decreased from an average of 90% in 2005 to less than

83% in 2010 (Chart – III).Therefore, optimization and

rationalization of the EU refining system appears to be

the best choice for the refiners.

Eight refineries with a combined capacity of 864 kbd

(over 43 MMTPA) have already been closed since

2009 (Table – 5).

Many other refineries (more than 600,000 bbl/ day) are

at risk of closure. LyondellBasell has already

announced its intention to close the 105,000 bbl/day

refinery at Berre (France). Petroplus has also

announced the possible closure of three of its five

refineries – Petit Couronne refinery, France (162,000

bbl/ day), Cressier Refinery (68,000 bbl/ day) in

Switzerland, the Antwerp refinery, Belgium (107, 500

bbl/ day).

Chart –I; Source: ENI

Chart –II; Source: ENI

Chart –III; Source: ENI

Table -5 (kbd)

European refineries - capacity, throughputand utilization

18.0 mbl/d

16.0

14.0

12.0

100%

90%

80%

70%

60%2005 2006 2007 2008 2009 2010

Refining Capacity Refining throughout % Refinery utilisation rates

89.6%

83.2%


While the refiners usually look for a prospective buyer

as the first option, nine refineries (45 MMTPA capacity),

have recently been sold. The details of recent deals and

the probable motive of the buyers is listed below

(Table – 6)

In the US, the scenario is slightly different from that of

Europe. The US refineries are also adversely affected

by various factors such as decreased demand for oil,

higher crude oil prices, increasingly strict

environmental legislation and the competition offered

by new world scale refineries in ME and India.

Increased blending targets for ethanol and Corporate

Average Fuel Economy (CAFE) norms also affect the

demand for refined petroleum products. Ethanol that

accounted for about 7.2% of gasoline blends in 2009 is

likely to reach 20% in the next decade. Similarly, the

stringent sulphur limits of 15 ppm (since 2012) in the

heating oil from the earlier limit of 10,000 ppm have

added to the operating cost of refineries.

Despite the above developments, only a few US

refineries have been closed, mainly the smaller ones,

besides a few others put up for sale. Unlike European

refineries, many US refineries are well depreciated,

highly complex and flexible that can produce products

of advanced speci f icat ions. Technological

breakthroughs achieved in the production of shale gas

were successfully deployed to shale oil plays.

Consequently, rising production of domestic

unconventional oil along with steadily growing oil sands

shipments to US refineries, and the capabilities of

refineries to process these crudes provide the US

economy with the potential for a sustained resistance

towards any downturn.

Increased availability of shale gas has also come to the

aid of refiners as a lower cost alternative to the crude oil.

Closures in the US/North America

US refineries no longer bank on crude oil entirely for

meeting their fuel requirements. This development has

come as an added advantage, as they have been

increasingly exporting finished products to regions

such as Latin America and Europe. As can be seen from

the following table (Table – 7), the US has gradually

transformed itself into a net exporter of the petroleum

products.

Data compiled from various sources indicate that a total

of 1,440 kbd refining capacity has closed down in the

US/ Canada since 2009 (Table – 8).

Some of the other major US refineries that have

announced their intention of either being sold or closing

down include Sunoco's refineries at Marcus Hook

(175,000 bbl/ day) and Philadelphia (330,000 bbl/ day),

and BP's 451,000 bbl/ day refinery at Texas City and

251,000 bbl/ day refinery at Carson City, California.

However, the American downstream renaissance is not

guaranteed. A range of existing and proposed

environmental regulations pose the largest threat to the

competitiveness of the US refining industry. Among the

more important regulatory developments are proposed

gasoline specifications, growing biofuels mandate,

proposed controls on GHG emissions, low carbon fuel

standard and changes in tax treatment of product

inventories.

Table -6

Table -7 (MMT)

Table -8 (kbd)


Recent Trends

Overall, the general outlook for refineries is for severe

competition and is a perfect case for the survival of the

fittest. Small refineries with lesser flexibility have either

been sold or have been closed down. Larger, more

complex and flexible refineries have the best chances

to survive. Therefore, though the global refining

capacity has increased in the previous decade, the

number of operating refineries has come down (Chart –

IV). According to the Oil and Gas Journal, the number of strefineries as on 1 January 2012 stood at 655 with a

combined capacity of over 88,000 kbd.

Database of Thomson Reuters(Table – 9) reveals

another set of interesting information. According to the

agency, the total number of operating refineries stood at

648 as on April 2012 with a gross refining capacity of

94860 kbd (~4743 MMTPA). While the maximum

number of refineries fall in the range of 3 to 6 MMTPA

(167 numbers), they are closely followed by refineries

of size 9 to 15 MMTPA (136 numbers) and 6 to 9

MMTPa (118 numbers). It can be taken as a

coincidence that the number of small refineries (below 1

MMTPA) and mega refineries (above 15 MMTPA), is

almost identical, transforming the data into an almost

bell-shaped curve.

Summary

The closure of refineries in various regions has been

happening, albeit in a limited manner till now. While in

Japan, there are robust chances for further closures,

the threat continues for Europe too. With a strong

imbalance in gasoline and distillate supply-demand,

stringent fuel-quality requirements, and demanding

climate policies; European refiners are facing the most

difficult situation. The phenomenon is likely to be less

severe for the U.S. due to reasons such as local

availability of shale gas and shale oil, availability of the

Canadian oil sands and high complexity of the

refineries. In the Asia Pacific, Russia, Latin America and

the ME, refiners have the opportunity to benefit from

their domestic resources, which is why the closures in

other parts of the globe have been more than offset by

construction boom in these regions. Another

development that is happening is the sale of refineries

due to which, the industry is also witnessing significant

changes in the downstream ownership. A summary of

the refinery closures (or moth-balled), as deliberated

above due to various reasons, in various countries/

regions is placed below (Table – 10)

Acknowledgments:

BP Statistical Review of World Energy; Oil & Gas Journal; FACT Global Energy; ENI –

The future of refining in Europe; World Oil Outlook, 2011/ 2010 – OPEC; Deloitte –

Changing times; Thomson Reuters; In-house support from Technical Services Group of

Refineries Division and International Trade Department of Corporate Office, IOCL

Disclaimer

The data and other information contained in this article is for general information and is

not intended as a substitute for advice to any business, investment or any other

professional and commercial use.

The article contains references to materials from third parties, whose copyright must be

acknowledged while reproducing the same or utilizing it in any form.

Table -9 (MMTPA)

Table -10 (kbd)


The Business of Innovation

Mohinish Sinha Leadership & Talent Practice Leader

Hay Group South & South East Asia, Pacific & Africa

With increasing globalization as a given, one would

hardly need to point out that international competition is

likely to grow fiercer while markets will look to get even

more diversified. The rise of India and China, coupled

with the global economic power shift towards Asia, is

reshaping the world before our very eyes.

The hunger to capture Asia's abundant business

opportunities is challenged by higher expectations,

greater business risks, and stronger market

competition. Meanwhile, the growing scarcity of

strategic resources such as water, minerals, metals and

fossil fuels looks likely to cause price hikes and lead to

social instability.

In this uncertain business environment of rapid and

irrevocable change, innovation is no longer a luxury. It is

a necessity. We believe that the only way for companies

to succeed in the new 'normal' is to innovate. Not just in

new products and services for customers, but also in

the way they treat and motivate employees, groom

leaders and conduct business. Perhaps, some of this

innovation can even be easy – but commercializing it

and building organizational discipline around it is much

more challenging.

Hay Group has conducted a lot of research around the

dynamics of leadership required for disciplined

innovation, especially for companies operating in Asia.

And our landmark study on this, the Best Companies for

Leadership (BCL) Asia, has found that while there is no

silver bullet for success, there certainly are specific

organizational practices that companies can adopt to

enable and encourage innovation.

Leading companies in the BCL survey have recognized

that meaningful innovation requires a strong and

lasting commitment. These are frontrunners that

have taken a disciplined approach to a notoriously fickle

process, and focused their efforts on creating an

environment throughout their organizations that invites

and supports innovation and allows new ideas to

flourish.

This year, Asia's five Best Companies for

Leadership –Samsung Group, Toyota Motors,

Unilever, Nestle and Tata Group – have proved that

there is plenty to learn and benchmark about the

business of innovation. These companies are clearly

driven by future-oriented innovation. Furthermore, our

research finds that employees – and not just the

managers– are constantly involved in addressing

customers' future needs, a key criterion in enabling

future innovation. This ability to translate future trends

into new product offerings has kept Asia's best ahead of

their competition.

Our experience suggests that certain business

practices can help establish and sustain a climate

conducive to meaningful innovation. Take for instance,

the Global top 20 organizations emerging from our BCL

study – which includes General Electric, Procter &

Gamble, IBM Corp, Microsoft, and the Coca-Cola

Company rounding off the top five – are all structured

towards 'organizational agility'. This gives them the

unique advantage of being able to respond to

challenges with speed and flexibility, the primary criteria

for innovation.

Further, smart innovations require a fundamental

understanding of customer needs, and a willingness to

risk rethinking them. The most innovative companies

ensure that employees understand customer needs,

and support new approaches to address them. They

are willing to support unprofitable projects, hence

postponing short-term profits in order to continue

investing in long-term innovation. Let us consider the

Tata Nano, which despite its glitches, remains an

achievement for the Tata Group. It fulfils the need for

safer transportation as Indians travel through the

streets, sometimes with four family members piled atop

a wobbly motorcycle. By all measures, the “one-lakh

car” has been regarded a breakthrough innovation,


making a functional vehicle available to India's masses

at an extremely low cost. Furthermore, no good deed

goes unnoticed. Leaders in Tata Group regularly

recognize and publicly celebrate innovation. This

simple but vital act is a critical part of maintaining

discipline around innovation.

The next precursor to innovation is around 'diversity' –

new and different points of view are essential to

innovation! Even though talent will continue to be at a

premium and retaining employees with key skills will be

a challenge, it is important to accommodate and

motivate the generation that forms our next band of

leaders. Organizations have to encourage and

embrace different cultural and generational

perspectives, and work to broaden the viewpoints of

their employees. Global electronics giant Samsung has

come a long way from being “manufacturer” to

“innovator”. In making Samsung a responsive market

player, CEO Choi Gee-Sung said his job was to re-

orientate the organization for the next generation so

that it is constantly ready to evolve. Not surprisingly, its

culture of top-down management and obedient [1]employees were among the first to go . Today,

Samsung is responding to Chairman Lee Kun Hee's call

by encouraging creativity over obedience.

Finally, our research shows that 'rewarding

collaboration' is a key enabler to innovation. If

innovation is the product of different perspectives,

collaboration is the process that brings them

together! We find that the Best Companies do not

merely preach collaboration; they require and reward it.

Clearly, to succeed in the new normal, Asian leaders

must be game-changing innovators. They will need to

be adept at conceptual and strategic thinking, have

deep integrity and intellectual openness, find new ways

to create loyalty, and relinquish their own power in

favour of collaboration.

Going forward, the ball is in the court of Asian leaders to

set the direction and discipline for innovation, in order to

be able to run globalized companies. Insights on

individual leadership styles, ensuring strong leadership

pipelines etc., have been useful preludes, but they are

no longer enough for sustainable success in the new

economy. Lessons for innovating leadership, in our

experience, bring out the following action points:

Developing an organizational structure that

enables quick communication is fundamental

to organizational agility, its decision-making

frameworks and responsiveness to market

changes.

The Asian tradition of directive leadership will not

work. Everyone is expected to lead, even if they

have no formal position of authority, and Asian

bosses must learn to delegate their authority and

decision-making power. This, we find, will lead to [2]higher employee engagement and motivation .

Creating personally meaningful work is key.

Having an innovation strategy is no guarantee of

success, and the most innovative companies are

interested in discretionary effort. Therefore,

strategies must be decoded vertically and

horizontally so that personal interests are aligned

with corporate and interdepartmental goals.

Analogically speaking, innovation can help

organizations do more than just plant new trees – it will

enable them to weather the seasons and persist

through bad harvests. They must not just grab at low-

hanging fruits, which competitors also do. Instead, the

need of the hour is to balance current prospects with

long-term investment returns, resulting in a willingness

to explore new paths to success.

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[1]Source: Samsung aims to become a global innovation power, Bloomberg News, 5th

September 2010.

[2] Source: 2009 Hay Group study of 1,249 high-profile organizations in India, cited in

Leading Asia: It's time to change the Rules


In today's refining environment, where refining margins

are getting tighter, processing opportunity crudes

becomes ever more desirable. These crudes, however,

tend to have increased levels of contaminants and

usually contain increased amounts of VGO and

residue. Refiners in India see incentives in processing

such heavy feeds in order to maximize profitability from

conversion units. Over the last several years Indian

refiners have seen an increased demand for high

quality distillate fuels and this is expected to continue

over the next decade. Thus hydrocracking becomes

the technology of choice to address this market need.

Processing heavier feed stocks poses many

challenges to the hydrocracker. It is critical to have

detailed characterization of the feed at the molecular

leve lwith a detailed contaminant analysis. Also, as

feeds become heavier and more difficult to process, it is

important to consider various other aspects of the

hydrocracker design to maximize catalyst utilization.

Proper catalyst loading and high performance reactor

internals are always critical but with heavier feeds these

aspects become even more important to fully utilize the

catalyst. As feeds become heavier, feed filtering,

particulate and metal trapping are important

considerations and must be included within the design

of the unit. In a unit designed for high conversion and

processing a heavy, high-endpoint feedstock, attention

must be paid to the fact that a significant amount of

heavy polynuclear aromatics (HPNA) can be produced

and the design of the unit has to account for this so that

cycle limiting catalyst deactivation does not occur. This

becomes important in high conversion maximum

HPNA Management in High Conversion Hydrocrackers

Richard K HoehnSenior Engineering Fellow

UOP LLC, A Honeywell Company

Soumendra BanerjeeSenior Manager - Process & Product Development

UOP LLC, A Honeywell Company

distillate yield units where it is desirable to limit the

conversion per pass resulting in unit designs with

recycle streams of unconverted oil. High endpoint feeds

contain a higher proportion of high molecular weight

multi-ring aromatics which are not easily converted. A

natural consequence of the cracking reactions is to

produce a small amount of HPNA material from these

multi-ring aromatics. They are essentially byproducts of

the cracking reactions and when the unit is operating at

high conversion, tend to build up in the recycle liquid

(Figure 1), unless some means is put in place to limit

their concentration. Left unchecked, these HPNAs will

eventually become coke on the catalyst; with the result

that the cycle length will be shortened beyond what it

would be in the absence of HPNA compounds.

Therefore processing heavy feeds requires good HPNA

management. UOP has been active working since the

1980's in the development of methods to reject HPNAs

from the recycle oil so these compounds do not have a

chance to build up to levels that would lead to catalyst

deactivation.

Figure 1. Typical Polynuclear Aromatics Found in

Recycle Oil


The first technology developed by UOP takes

advantage of the fact that HPNA material is relatively

easily absorbed in a bed of activated carbon. Recycle

oil is passed through a bed of activated carbon before

being routed to the reactor section and this has been

shown to be highly effective in reducing catalyst

deactivation and extending cycle lengths in units

employing this technology. The first application of this

technique was in 1989 and since then at least 6 units

have been upgraded with carbon bed technology, TMcalled the UOP HPNARM technology (Figure 2A and

Figure 2B). Activated carbon bed adsorption has not

gained wider acceptance throughout the refining

industry mainly because of carbon handling and

disposal issues. Where refiners have been able to find

a convenient destination for the spent carbon, such as

at a nearby cement plant or coal fired power station, the

HPNARM technology has proven to very beneficial to

those refiners who practice it.

Largely due to the problems associated with carbon

handling and disposal, UOP embarked on a program in

the late 1990's to develop a method for rejecting HPNAs

which does not require carbon handling. The result of

that effort is shown in Figure 3. It is a variation of divided

wall technology, although unlike divided wall designs,

one end of the inner partition contacts the bottom head.

When that occurs, the name split shell is applied.

Essentially this technique allows a column to produce

more than one bottoms product. The normal recycle oil

stream that is routed to the reactor section in recycle

operation is withdrawn from the bottom of the Product

Fractionator and this corresponds to the left-hand

stream at the bottom of the Product Fractionator in

Figure 3. A small slip stream is withdrawn from this

recycle oil stream and is routed to the HPNA Stripper,

corresponding to the section at the bottom right-hand

side of the Product Fractionator. An appropriate

amount of stripping steam is applied to the HPNA

Stripper section so that the lighter hydrocarbons are

vaporized and they eventually leave with the normal

recycle stream. The material exiting the bottom of the

HPNA Stripper is the heavier fraction of the recycle oil

and contains the non-volatile HPNA material.

According to the properties of the feed, this HPNA

Stripper bottoms stream can be as small as 0.5 vol-% of

fresh feed and still be effective such that catalyst

deactivation due to coke buildup from the presence of

HPNA material in recycle oil is not seen.

UOP currently has two units running with the patented

HPNA Stripper technology and a number of units in

design and construction.

In summary, UOP has been involved in the

development of a number of techniques for rejecting

HPNA material from hydrocrackers in order to

maximize catalyst activity and prolong cycle lengths

and has many years of successful experience in

applying this technology to various units processing

different feed stock.

Figure 2A.Process Sketch with the HPNA RM

Technology

Figure 2B.Process Sketch of the HPNA RM

Technology

Figure 3.HPNA Management via Fractionation

Process Sketch


Strategic Options For Upstream Companies

Sudipta DasAdvisory Partner & Climate Change &

Sustainability Leader (India), Ernst & Young

The oil & gas sector is of prime importance to the Indian 1economy as it constitutes around 15% of India's GDP.

However, crude also represents the key commodity

imported to India and the oil import bill increased by 2

40% to USD 140 billion in FY 12. This is contributing to 3high fiscal deficit which stands at around 5.9% in 2012

and balance of payments deficit at USD 12.8 billion in 4

the last quarter of FY12. Annual fuel subsidies amount

to around ` 110,000 crore annually which come from

the Government's budgetary support and some 5contribution by upstream oil and gas companies. The

country has seen fossil fuel price hikes in recent past at

successive and quick intervals, which is one of the

factors leading to a high Wholesale Price Index inflation

level of 8-9%. India's increased dependency on crude

oil is thus a matter of great concern. If India has to

maintain its growth story and given the likely oil

constrained future, this trend needs to be reversed and

a paradigm shift is needed to switch over to more

sustainable sources of energy.

Although there has been a significant decrease in the oil

intensity of Indian GDP from ~0.5% to~ 0.42% million

tonnes oil (eq) per real GDP (in INR billion) between

1995 and 2008, yet a lot needs to be done to reduce the

high dependency on imported oil and ensure energy 6security for the country. In the first place it is important

to reduce the subsidies for fossil fuel so that demand is

at least partly responsive to price signals. This will

create an impact of rising inflation triggering political

disturbances all over the country and increasing cost of

input materials for industries. However, in the long run

the economy would re-adjust itself in the new normal

situation leading to relatively less fossil fuel demand for

transportation. Moreover, reduction in subsidies for

carbon intensive fuel would also compel other sectors

to re-innovate their processes for improved energy

efficiency and technologies which run on low carbon

fuels and lead to low carbon emissions. For instance, in

the transport sector (highest consumer of petroleum

products in India~51%) – the auto manufacturers would

have to re-design the car engines such that they

become compatible for running on low carbon fuels.

This would in a way bring down Greenhouse Gas

(GHG) emission intensity of one of the highest GHG

emitting sectors in India i.e. transport sector which

contributes to around 7% of India's total GHG 7emissions.

The upstream oil and gas sector is a major player in the

energy value chain, ensuring energy security for the

country. These companies have a major role to play in

order to secure sustainable sources of energy.

Upstream companies need to follow a strategic

approach to ensure secured supply of energy as well as

maintain revenue growth. Some of the options that

could be explored by them include:

(I) Building a balanced and diversified portfolio of oil

and gas assets: Diversification of oil import

options would mean importing oil from oil rich yet

undiscovered destinations in Africa besides

conventional crude exporting countries like Saudi

Arabia, Venezuela, Nigeria, Qatar, Iran and other

Gulf countries. In fact, since these African

countries are in the nascent stage of oil and gas

exploration and production, Indian upstream

companies can also pick up stakes in their oil/gas

fields. This would be a win-win situation since

technology and knowledge transfer would

immensely benefit the African oil exporter while

the Indian upstream companies can ensure

security of oil/gas supply. The recent gas

discoveries in Mozambique and Tanzania are

indicators of the unexplored energy prospects in

Africa.

1. http://www.dnb.co.in/IndiasEnergySector/default.asp2. http://articles.economictimes.indiatimes.com/2012-06-13/news/32215709_1_oil-import-bill-net-oil-oil-prices3. http://timesofindia.indiatimes.com/business/india-business/Rising-fiscal-deficit-disturbing-Reserve-Bank-of-India-governor-D-Subbarao/articleshow/12682972.cms4. http://economictimes.indiatimes.com/news/economy/finance/balance-of-payment-slips-into-red-on-lower-fund-inflows/articleshow/12470135.cms5. http://www.indianexpress.com/news/remove-diesel-subsidy-jairam/876546/6. http://www.ibef.org/download/Indiafocus_28may.pdf7. http://planningcommission.nic.in/reports/genrep/Inter_Exp.pdf


(ii) Cost effective import of LNG (combined stake

with national/international partner): Probably the

best example would be the Joint Venture formed

by Reliance Power, Shell and Kakinada Ports to

set up a LNG import terminal of annual capacity 5

million tonnes by 2014 on the eastern coast.

Upstream companies can form similar

consortiums with the relevant port authority and

International oil & gas company, who have core

competency in building and operating LNG

terminals.

(iii) Monetization of gas/associated gas produced in

remote locations: In many remote parts of India,

gas monetization has been dormant due to

absence of commercial markets, infrastructure

and inter-state and intra-state conflicts. However,

an innovative and flexible approach is to be

adopted which could include technologies for in-

situ gas-to-liquids conversion processes and

bringing the liquefied gas to market through cost

effective mobile infrastructure.

(iv) Value addition to the gas currently flared by

converting them into petrochemicals/fertilizers or

power: In many oil and gas fields, huge volumes

of gas is flared daily. The 'Zero Flare' technology

could be adopted and the recovered gas can be

sold as raw material for petrochemical/fertilizer

plants or transported to be used to generate

power using combined cycle gas turbines.

(v) Venturing into unconventional resource

exploration such as Coal Bed Methane (CBM) or

shale gas: While potential of shale gas is highly

debated and range from 6.1 to 2,000 trillion cubic 8

feet, however the reserve of CBM in India is well 9established at 160 trillion cubic foot. Conversely

development of both CBM and shale gas assets

would require a phased and structured approach,

encouraging policy environment and technology

partners

(vi) Development of gas infrastructure: This would

entail de-bottlenecking key projects to enable

building up India's natural gas resources as well

as setting up extensive pipeline network. An

extensive pipeline system would also facilitate

transmission and distribution of other forms of

gaseous fuel like shale gas and CBM.

(vii) Increasing productivity by drilling with improved

technology combined with Enhanced Oil/Gas

Recovery (EOR/EGR): Typically about 10-20%

additional stock tank oil initially in place can be 10

extracted using conventional EOR methods.

The Microbial EOR technology, which is yet to be

commercialized, is estimated to increase this

percentage to 30%. Upstream oil companies

should invest more in such R&D activities to

commercialize new and innovative technologies.

Strategic alliances and partnerships with foreign

firms to aid technology and knowledge transfer

would enable access to state-of-the-art

equipments and other intellectual property.

In strategic investment areas like projects on biofuels,

LNG terminals, petrochemicals or power, upstream

companies can participate as equity partners and bring

separate operating partners who have operating

capability and technical competency in these areas.

Typically the oil and gas exploration and production

companies are cash rich and have high market

capitalization. Significant earnings which these

companies make during high oil price regime should be

re-invested in such low carbon strategic portfolio to

secure a sustainable energy future, The upstream oil

and gas industry is a key stakeholder in the energy

security and climate change debate, and would play a

significant role in promoting clean and sustainable

energy use all along the entire oil and gas value chain

and even in other sectors like transport and industry.

The dynamic state of business environment and

regulatory/policyenablers would force Indian oil &gas

upstream companies to develop new business models,

adopt strategic approaches and embrace latest

technologies which in a way would facilitate the

transition of the economy to a low carbon sustainable

path.

(Amrita Ganguly, senior professional member with Advisory

services of Ernst & Young also contributed to the article. Views

expressed are their personal)

8. http://www.financialexpress.com/news/new-study-brings-down-indias-shale-gas-potential-drastically/938739/9. http://www.ijcea.org/papers/113-A618.pdf10. http://www.cairnindia.com/KC/Brochures/EOR.pdf


Remote Collaboration: Poised to Deliver Transformational Results

Christophe RomatierSr. Strategic Marketing Manager

Honeywell Process Solutions

During the last century and a half the oil and gas (O&G)

business has produced over one trillion barrels of oil. It

is estimated today that slightly more than one trillion

barrels could still be extracted from known fields, and

some estimate that another three trillion barrels could

be produced with the use of production techniques,

future discoveries and so-called unconventional oil.

However, the era of 'easy oil' is behind us. Current

production rates satisfy existing demand, but with

demand growing by an average of 1 to 1.5 % per year,

producing oil in environments that would have been

almost unthinkable only a few years ago must now be

considered.

In addition there is a growing need for qualified

personnel; the industry has a rapidly aging work force,

resulting in the loss of its most experienced resources

at a rapid rate. The increased geographic spread and

complexity of operations makes it ever more necessary

to incorporate and share best practices and lessons

learned across assets as rapidly as possible.

A key driver of value in this new operating paradigm is

how quickly and efficiently can an organization

leverage expertise and skills spread across

organization and geographies. Over the past decade,

operating companies in O & G have sought to use next-

generation technology to help overcome this challenge.

One such technology that is highly relevant for

operating companies and is witnessing increasing

adoption is Remote Collaboration.

Remote Collaboration

A Broader Context

Improving Work Process Consistency

Remote Collaboration is the ability to manage

operational activities in real-time, independent of their

location.

The ability to communicate and collaborate in real time

delivers several pivotal advantages for problem-

solving, problem-avoidance and productivity

improvement:

Seamless communication enables staff to work

more efficiently across multiple locations

With the right resources focused on a problem,

challenges or problems can be identified and

resolved faster

Decision - making is accelerated

Staff can share expertise and best practices

immediately between individual locations or

across the entire network

Faster access and sharing of more information

helps reduce operational risks and improve safety

Faster, wider knowledge sharing helps better

maximize resource use and return and improve

production and yield.

Honeywell has a long history of working with the

innovators in this space and has seen exciting new

developments in other industries. It believes similar

developments in O&G can broaden the industry's

implementation of remote operations, to great benefit.

Consistency in work processes is a necessary step with

in a remote collaboration implementation for O&G

especially when assets have been run independently of

one another to a large extent as a result of being widely

dispersed both physically and organizationally. Here's

?

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a case study where a major producer of primary and

fabricated aluminum was able to implement work

process consistency and draw significant benefits.

Customer : International producer of primary and

fabricated aluminum

In alumina refining, the business case for optimal

production control is its potential for increasing

production rates and improving process efficiencies by

reducing variability and operating closer to practical

limits. For the refiner in question, reducing variability

alone meant potential savings of US $ 40 million per

year, with process control as a key enabler.

There was also a sense of the opportunity for intangible

savings associated with making real-time process

information available for process improvement and

business decisions throughout the network. Although

this is difficult to qualify and quantify, it is in many cases

the largest benefit that can be derived from such an

initiative.

Prior to the program, developed through Honeywell

collaboration with the customer, the refiner's ability to

improve process control had been constrained by a

lack of skilled resources and availability of funds

required to implement a common infrastructure and a

common application portfolio.

The solution was a program that standardized process

control infrastructure and extended control solutions

across multiple refineries in six countries. The program

generated a variety of key benefits:

Each refinery operates with process controls for

each unit operation

Variability is minimized

Operation is close to the practical limit, with

minimum operator intervention or nuisance

alarms

Alumina Refining Case Study

Opportunity:

Solution:

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?

?

?

?

Production control applications are developed

once, and implemented at many sites

The customer has gained competitive advantage

by capturing critical real-time business data to

optimize unit operations and enterprise resources

The organization has accrued more than $100 million in

benefits through the institution and enforcement of

global standards.

The key enabler for this global success was the

recognition early on that automation, process control

and instrumentation were key business drivers to

achieve a competitive advantage. This vision led to a

strong corporate investment in consistent infrastructure

across the network that in turn enabled the global

consistency and economy of scale that was achieved.

Although this effort was only focused in a specific

discipline of production control, it may seem daunting

and cost prohibitive for O&G given the complexity of

infrastructure. However, innovations such as semantic

technology found in Honeywell's Intuition™ Executive

software for enterprise-wide information integration

and real-time visualization may alleviate this by

inserting a new layer of interoperability to achieve

global scale.

Because remote collaboration programs are still fairly

new, they therefore incorporate an element of risk in

their implementation. Such programs are still highly

customized to the particular needs of an operating

company, and a well-defined, shared representation of

the outcome is usually absent until fairly late in the

program.

A large part of the supplier selection process relies on

trust and proven (and implicitly duplicable) experience.

Once the relationship is established, traditional supplier

/ operator interaction models may lead to obvious

pitfalls, despite both parties' best efforts. However there

Value Delivered:

Learning:

Maximizing Benefits of Remote Collaboration

Through a Supplier Integration Model


are motivations for shared positive outcomes and these

motivations can be further enhanced. Here is an

example of how this has been done.

One of the largest copper

producers in the world was facing a challenge because

of it's aging infrastructure in sites spread over several

thousands of miles through out Chile. Some of these

sites are at altitudes of over 12,000 feet, and staffing

these sites with experts to support their operation as

well as any new infrastructure was also a challenge.

In this particular case, in order to create a

step change in their operations, the company decided

to upgrade the infrastructure at their different sites, then

implement connectivity to Chile's capital, Santiago.

This would allow them to create a collaboration center

there and staff it with experts that could be leveraged

across their multiple sites.

They quickly realized that they lacked a core

competency regarding many of the activities

surrounding the management and support of

infrastructure and the use of advanced tools to provide

on - going optimization of their operations. To alleviate

the burden on their organization while still ensuring

Metals & Mining Case Study

Problem/Opportunity :

Solution :

optimal results, the company entered into a joint

venture with Honeywell, creating an entity that would

take ownership of the optimal operation of the

infrastructure.

This bold step created the right

incentives for both supplier and operator to act in both

companies' best interests, ensuring optimal operations

and effective collaboration throughout the life cycle of

the operation.

The critical benefit of creating this

interdependency was to better ensure the sustainability

of still-exploratory programs such as remote

collaboration. With some thought and planning, good

incentive mechanisms can be put together to foster the

right behavior to maximize continued success for these

ventures.

Remote collaboration programs provide a framework

with tremendous promise for far - reaching solutions.

However, as the different experiences outlined in this

paper demonstrate, there is high potential for

tremendous value and return for those operators willing

to push the envelope.

Value Delivered:

Learning:

Conclusion


Number of feet eastward that Japan's main island was moved by March 2011 earthquake and tsunami

which impacted the country's nuclear installations: 8

Ratio of amount of energy generated by this earthquake to amount of energy consumed by USA each

year: 1:1

Snippets


Energy is one of the most important building blocks in

human development, and acts as a key factor in

determining the economic development of countries. In

an effort to meet the demands of a developing nation,

the Indian energy sector has witnessed rapid growth.

Resource exploration and exploitation, capacity

additions in refineries, and energy sector reforms have

been revolutionized.

However, increased energy demand in India due to high

population growth, rapid urbanization and progressing

economy makes it imperative that oil & gas producing

plants and downstream refineries in India need

minimize disruption of production which would enable

maximization of the use of maintenance resources to

meet operational goals for profitability, safety and

environmental compliance.

Whether attempting to maximize production from

existing, aging assets or navigating the complexities of

finding and tapping into new reserves in more difficult

environments, exploration and production operators

and refiners experience daily production challenges.

Maintenance issues abound as companies strive to

increase production while guaranteeing safety, flow

assurance and equipment reliability.

Optimized, sustainable maintenance strategies—and

improved performance and availability of production

equipment— depend on the detection and diagnosis of

Innovative Strategies to Reduce O&M Cost

Satyajit Dwivedi

Director - Energy(Asia Pacific) & Strategic Initiatives

SAS Institute Inc

the root causes of poor performance and unplanned

downtime and provision of early warnings. Three areas

that large oil and gas companies are using analytics to

ensure ongoing improvements for facility reliability and

integrity:

1. Improving product quality.

2. Resolving tricky situations.

3. Preventing product loss.

As part of comprehensive efforts to maintain its

reputation as a trusted gas feedstock provider, one of the

world's largest integrated, export-oriented oil and gas

producers wanted to improve quality control in its

production process. Leaks, evaporation and mixture

composition involving the key enabling additive glycol

were affecting performance and quality. But where in the

process were these gas corruptions occurring?

To pinpoint and correct the glycol consumption, the

company turned to SAS® Predictive Asset Maintenance

for facility integrity and reliability. The effort prevented

production deferment, generated cost savings, created

new business strategies and improved health, safety and

environmental performance. Glycol is an additive that

keeps gas from liquefying during the production process

for gas feed stocks, but special care must be taken with

its use. In the drying process, too much glycol may

penetrate the gas and decrease quality. Too little adds

humidity and other impurities. Either sends customers

elsewhere in search of higher-quality gas feedstock.

The challenge for oil and gas producers is to identify

process malfunctions and detect leaks. Glycol cannot be

measured during the drying process, but in theory the

amount of glycol added should approximate the amount

extracted. When less glycol than expected is present,

producers must find where the loss occurred by spotting

problems among the valves, vacuum seals, gauges,

pipes and tanks that make up the production process.

Improving Product Quality


That's a difficult, time-consuming chore for consultants

and engineers. And the results are often mixed – and

disappointing.

SAS takes a different approach. Chemical theory –

what goes in must come out in similar quantity – is used

in conjunction with the limited number of data collection

points spread along the production process.

SAS Predictive Asset Maintenance revealed that the

feedstock quality might require adjustments to glycol

levels during the drying process. The solution predicted

where in the process glycol needed adjustment,

depending on other factors.

The glycol adjustment predictions have several direct

benefits to the gas producer. Glycol replacement costs

are reduced. Leaks along the process are quickly

identified using data inputs and in-process

measurements. Meanwhile, by avoiding negative

effects on the environment, the company saves the cost

of penalties and fines. And it maintains its reputation for

higher quality, consistent feedstock production, which

drives demand and, in turn, increases margins.

With SAS, the company learned it can control

production processes using predictive sciences that

integrate data points with chemical theory. Realizing

the value of applied predictive analytics, the company

uses SAS Predictive Asset Maintenance in other

processes and streamlines its energy consumption

rates, finding additional savings along the way.

One of the world's largest integrated, export-oriented,

oil-and-gas-producing companies needed to remedy a

failed steam turbine/air blower complex used to remove

and transform sulfuric acid from hydrocarbons into

hydrogen and sulfur. Failure to separate the sulfur and

transform it into blocks could violate environmental

regulations and increase the likelihood of fines and

penalties. It also prevents opportunities to sell gas and

sulfur.

Resolving Tricky Situations

As the cause remained a mystery, managers worried

about health, safety and environmental (HSE) risks.

They knew that the problem could pose the risk of leaks

or even explosions. Meanwhile, the temporary fix –

using an electric motor to blow air into the process –

was a costly and inefficient remedy.

As expected when a piece of equipment fails,

everyone's attention is focused on that machine. Was it

installed correctly? Was there a malfunctioning part?

Was there a material flaw? Different groups in the

company – process and reliability engineers, operators

and maintenance crews – each had their opinions. Yet

they could not coordinate their assessments to find the

root cause and mitigate the problem. Their siloed

structure prevented them from taking a holistic view.

Using the SAS Predictive Asset Maintenance solution

and the facility integrity and reliability methodology, it

was quickly determined that the process itself was

flawed. Oxygen was being pulled into the recovery unit,

creating water. While the variations in the acid

feedstock were requiring the oxygen variations, the

turbine itself was not designed to match them. This

process flaw was causing the turbine to trip and shut

down.

The ability to gather data from historians and reports,

correlate parameters and capture occurrence

signatures helped to identify potential problem areas

within the process itself. By fixing the process, the

company has improved production uptime rates and

gained better insight into preventive maintenance or

replacement needs.

The company learned that equipment failures might be

the effect of process anomalies occurring separately

from the impact observation. SAS proved that the high

volume of mostly unused historic data could help

diagnose problems holistically, implement predictive

surveillance and improve process automation. Now

realizing the value of applied predictive analytics to

such production processes, the company uses SAS

Predictive Asset Maintenance in other processes at

larger refineries and gas plant locations.


Preventing Production Loss

One of the world's largest integrated, export-oriented,

oil-and-gas producing companies needed to ensure

that the active magnetic bearings that drive

compressors during production function properly. The

bearings rely on sensors that detect signals – up to

15,000 times per second – to measure distances and

thereby keep the shaft and motor in position. Failures in

the sensors, and then the bearings, lead to production

losses or, sometimes, extreme equipment damage.

Any degradation in the sensors or the bearings

themselves can cause the compressor to trip, thereby

stalling production and initiating repair work. Or, sensor

degradation can wrongly inform plant operators,

causing errant process decisions, false alarms and

other delays. Various catastrophic situations can arise.

Replacement is costly and time-consuming.

On the other hand, any planned increase in production

requires additional compressors and sensors that

produce volumes of new data. Manual administration is

not an option, yet failure to appropriately integrate the

new data might trigger alarms or misinform operational

processes.

In view of these challenges, the company applied the

SAS methodology for facility integrity and reliability,

along with the SAS Predictive Asset Maintenance

solution to develop data-driven models that can predict

sensor and magnetic bearing degradation. The models

point maintenance teams to equipment that may fail

given the signals they produce, before any significant

problem or loss of efficiency occurs. Such heightened

understanding of overall facility integrity and reliability

helps oil and gas producers prevent production process

deviations. As a result, they may reduce operating

costs, develop new business strategies for

maintenance and improve health, safety and

environmental performance.

With SAS, the company can assemble data from many

platforms and systems to create a picture of what has

happened and to predict what's going to happen. Such

foresight increases production uptime by informing

smart, timely maintenance decisions.

The company uses SAS to monitor potential weak

points and proactively maintain smooth production

processes by applying predictive sciences that

intersect analytics, physics and mechanical theory.

That's possible because all systems and equipment

have a metering, monitoring or surveillance system that

produces s tagger ing vo lumes of data. a

comprehensive view across all systems and

equipment, taking into account interdependencies to

accurately monitor overall performance.

Seeing the value of applied predictive analytics to such

production processes, the company plans to implement

SAS Predictive Asset Maintenance in other processes

and replicate the success at other locations.

Predictive Asset Maintenance solution providing

early warning and rapid root cause analysis with data

driven models has played a vital role in helping global

innovative oil & gas companies achieve higher asset

utilization and reliability – and ultimately greater

competitiveness. Improving product quality,

resolving tricky situations and preventing production

loss are only a few of the many benefits that these

global companies have realized. They have also

success fully predicted equipment failures,

prevented unplanned shutdowns, improved asset

availability and reduced maintenance costs.

Predictive Asset Maintenance


Innovative Technology to Improve FCC Flexibility

The current refining scenario in India is highly dynamic

and appears to change on a daily basis. India currently

imports approximately 80% of its crude oil while India's

refining capacity is expected to grow by nearly 50% by

the year 2020. Diesel demand is also projected to grow

by 40% over current value. Competitive and affordable

energy prices help drive strong economic growth and

are an important factor in shaping the Government of

India's (GoI) fiscal policies. The rise in international

crude oil prices in recent years has created major

challenges for the GoI, given the high reliance on

imports, and has resulted in a need to maximize the

utilization and conversion of crude oil processed in the

country. UOP's RxCat™ technology allows the refiner

to optimize the catalyst circulation rate in the riser,

independent of the unit heat balance. This capability

enables improved conversion, product selectivity, and

emissions control while simultaneously reducing

operating costs. This paper will demonstrate how

RxCat technology increases the flexibility of the FCC to

shift between different processing objectives while

lowering costs and maximizing product values to meet

the challenges faced by today's refiner.

The basic concept of UOP's RxCat technology is to

recycle catalyst from the FCC reactor stripper back to

the inlet of the riser. Modern catalyst systems are

inherently more coke tolerant than their older

counterparts and can accrue appreciable quantities of

coke and still retain a substantial fraction of base

activity. Hence the recycle of catalyst from the reactor

stripper in modern units represents an additional

activity component being added to the riser. UOP has

adopted the term “carbonized” to describe this catalyst.

To date UOP has six RxCat units in operation with an

additional four units in design. Figure 1 shows the

layout of an FCC RxCat unit.

UOP RXCat Technology

RXCat Process and the FCC Heat Balance

In the traditional FCC process the catalyst circulation

rate is fixed by the heat balance. This means that

catalyst circulation only increases in response to an

increased heat demand by the reactor. Therefore, in a

conventional FCC system, the extent that regenerator

catalyst to oil ratio (cat/oil) increases can be expressed

by the following equation:

Examples of process changes that increase

regenerator catalyst circulation rate and raise the

amount of coke required to satisfy the altered heat

balance are:

Increasing riser temperature

Decreasing feed preheat

Increasing regenerator catalyst cooler duty

Injecting a heat load into the riser (steam, water,

LCO)

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Figure 1: FCC RxCat Layout

Lisa M. Wolschlag

Senior Manager –FCC, Treating and

Alkylation Research & Development

UOP LLC, a Honeywell Company

Matthew Lippmann

FCC Technology Group Leader

UOP LLC, a Honeywell Company

by

Cat/Oil Regen

Coke Yield

CpCatalyst

HRegeneration

(TRegen TReactor )


In contrast, carbonized catalyst recycle from the reactor

stripper via the RxCat standpipe is not constrained by

the heat balance as it does not significantly alter the

total coke yield. Because catalyst is circulated from the

riser outlet, down to the riser inlet, and back up to the

riser outlet starting and ending at the same

temperature, little enthalpy change occurs in the loop,

and there is practically no impact upon the coke yield.

Thus the riser cat/oil can now be expressed as:

The RxCat process impacts the heat balance by

increasing delta coke on the catalyst circulating to the

regenerator. Delta coke is defined as the difference in

coke content between the regenerated catalyst and

spent catalyst. As the RxCat circulation rate is

increased, the delta coke increases due to RxCat

catalyst particles completing additional passes through

the riser prior to regeneration. Because regenerator

temperature is a strong function of delta coke, the

increase in delta coke from RxCat increases the

regenerator temperature and decreases the

regenerator cat/oil ratio as shown in Table 1.

Despite the decrease in regenerated cat/oil, RxCat

technology enables a refiner to increase the overall

riser cat/oil to levels considerably higher than a

traditional FCC unit while simultaneously increasing the

regenerator temperature. Reducing feed contaminants

through severe hydrotreating reduces the delta coke in

the unit, which cools the regenerator and presents a

significant challenge for refiners to keep the

regenerator hot enough to control CO and NOx

emissions below acceptable levels. RxCat technology

Table 1: Reactor/Regenerator Response to Change

in RxCat Cat/oil

provides an alternative solution to traditional methods

of maintaining high regenerator temperatures and

simultaneously enhances unit performance through

increased total riser cat/oil ratio. Table 2 shows an

economic comparison between utilizing the direct fired

air heater (DFAH) and RxCat technology to increase

regenerator temperature by an equivalent amount.

Product Pricing Source: Global Petroleum Market Outlook 2011, Purvin and

Gertz

While both approaches will achieve a higher

regenerator temperature, firing the DFAH will result in a

lower riser cat/oil ratio and consequently a loss of

conversion and margin. On the other hand, RxCat

technology increases the riser cat/oil, resulting in a

conversion increase and ultimately a gain in margin, all

without the need to consume additional fuel gas.In

addition the higher regenerator temperatures improve

burn kinetics and allow the FCC operator to lower the

excess oxygen in the regenerator while simultaneously

reducing CO and NOx emissions.

RxCat technology can also improve product yields. The

catalyst recirculating through the RxCat standpipe TM

enters the MxR Chamber at the base of the riser at

temperatures several hundred degrees Fahrenheit

below the regenerated catalyst temperature. When

these two catalyst streams are properly blended, the

resultant catalyst stream contacting the feed in the

injection zone of the riser is at a significantly lower

Table 2: Evaluation of DFAH vs.RxCat Technology

for Regenerator Temperature Control

RXCat and Dry Gas Yields

8.2

8.2

0.0

0. 6

12 60

7.0

12.0

0.7

0. 7

1300

0.0 5.0 7.5

6.5

14.0

1.2

0. 8

RxCat Cat/oil

Regen Cat/oil

Riser Cat/oil

RxCat Ratio

Delta Coke

Regen Temp 1320

Feed Rate (BPD)

RxCat C/O

Riser C/O

Fuel Gas to Air Heater (Wt-% feed)

Regenerator Temp (F)

Conversion (Wt-%)

Gross Margin ($/BBL)

Gross Margin (MM$/Year)

Case 1 Base

30,000

0.0

8.2

0.0

1260

Base

Base

Base

Case 2DFAH

30,000

0.0

6.2

1.1

1340

(3.0)

(1.35)

(14.4)

Case 3RxCat

30,000

6.2

12.0

0.0

1350

2.1

0.86

8.6

+ Cat/Oil RxCatCat/Oil Riser

Coke Yield

CpCatalyst

HRegeneration

(TRegen TReactor )


temperature, reducing thermal reactions that produce

unwanted dry gas and coke. Figure 3 shows how the

reactor feed injection zone temperature decreases as a

function of RxCat cat/oil ratio while Figure 4 shows how

dry gas decreases in response to lowering the

feedinjection zone temperature, as measured in the

UOP circulating riser pilot plant.

While RxCat technology increases riser cat/oil ratio, the

impact of coke deposition on catalyst activity must be

understood to predict the benefits of the higher catalyst

circulation rate. To determine the relationship between

coke deposition and catalyst activity, UOP conducted

Catalyst Activity Retention as a Function of Coke

testing on several commercial equilibrium catalysts

(ECATs). The physical properties of three catalysts are

described in Table 3.

ACE Pilot Plant runs were then conducted for the three

catalysts to determine activity retention as a function of

carbon content on the catalyst surface. Results are

shown in Figure 5. These data highlight a similar activity

decline for catalysts A and B and a more pronounced

decline for catalyst C.

Significant differences in activity retention as a function

of coke are not always obvious from the catalyst

physical properties. For instance, while ECAT B and C

have similar MAT activities, they do not have similar

activity retention properties. Therefore, it is important to

conduct activity retention tests when optimizing a

catalyst for RxCat technology. This testing enables the

determination of the effective cat/oil response in the

RxCat system which can be defined as:

Table 3: ECAT Physical Properties

Figure 5: Relative Activity vs Coke for Three ECATs

Figure 3: RxCat Cat/Oil vs. Feed Contact Zone Temp

OF

eed C

onta

ctzo

ne T

em

p (

F)

Figure 4: Pilot Plant Feed Contact Zone Temperature

vs. Dry Gas Yield

Dry

GasY

leld

(W

t.%

)

Ace Micro Activity Test (MAT)

UCS (A)

Total

Surface Area (m2/g)

Zeolite Surface Area (m2/g)

Matrix Surface Area (m2/g)

Micropore Volume (cc/g)

V, ppm

Ni,ppm

ZSM-5

ECAT A

74

24.267

150

61

89

0.028

500

520

No

ECAT B

66

24.292

115

40

75

0.019

6620

4160

Yes

ECAT C

64

24.270

149

93

56

0.043

610

970

Yes


where AR is the slope of the catalyst activity retention c

as a function of coke determined in the ACE unit and K

is a constant.

To determine constant K, the three example catalysts

were tested in the UOP circulating riser pilot plant by

increasing RxCat cat/oil and maintaining a stable

regenerator cat/oil. The results are shown in Figure 6.

These data illustrate that the conversion response to an

increase in RxCat cat/oil is best achieved by ECATs A

and B which have better AR properties relative to c

ECATC.

Once the activity retention properties of the catalyst and

operating severity of the unit are understood for the

RxCat application, the remainder of the product yields

can be estimated from the calculated increase in

effective cat/oil ratio. For ECAT A the full product yield

shift in response to a change in RxCat cat/oil is

represented in Table 4. This table highlights the fact that

while riser cat/oil increases purely as a function of the

RxCat valve output and the unit heat balance, the

effective cat/oil is the primary driver of yield shifts on the

RxCat equippedFCC unit.

Figure 6: CRU Conversion Response to RxCat

Ratio for Three ECATS

RXCat Yield Benefits

Table 4: Impact of RxCat on Product Yields for ECAT A

To confirm the theoretical pilot plant data, it is important

to observe the conversion shifts in commercial RxCat

units who have optimized the catalyst formulation to

take advantage of RxCat technology. Figure 7 shows

the conversion response for an increase in RxCat for

three separate commercial units. These data were

filtered for constant feed quality and riser outlet

temperature in order to isolate the impact of RxCat ratio

on conversion. The commercial results are consistent

with the pilot plant yields, demonstrating an

approximate 2.0 to 3.5 lv% yield improvement over the

range of RxCat ratio.

Figure 7: Commercial Unit Conversion Response

to RxCat Cat/Oil

Regen Cat/oil

Riser Cat/oil

Effective C/O

Dry Gas Yield (Wt -%)

LPG Yield (Wt -%)

Gasoline Yield (Wt -%)

LCO Yield (Wt -%)

CSO Yield (Wt -%)

Coke Yield (Wt -%)

Conversion (Wt -%)

RxCat Cat/oil 0.0

8.2

8.2

8.2

Base

Base

Base

Base

Base

Base

Base

5.0

7.0

12.0

9.5

(0.4)

1.6

0.9

(0.8)

(1.3)

0.1

2.1

(0.5)

(1.3)

(1.8)

7.5

6.5

14.0

10.2

2.2

1.1

0.2

3.1

Cat/Oil Effective Cat/Oil Regen Cat/Oil RxCat +K

[1-( Coke |ARc|) ]


without major structural changes or modifying the feed

injector elevations.

UOP's RxCat technology has demonstrated in both pilot plant and

commercial testing a unique ability to manipulate overall riser cat/oil

ratio in order to increase the effective riser catalyst activity gain

outside the traditional limitations of the unit heat balance. This

added flexibility enables today's FCC operator to gain a competitive

advantage by offering improved yield selectivities, enhanced

operational controls, and reduced operating costs. While this

technology has thus far only been primarily available to new grass

roots units, the development of the UOP Double Wye Mixing Riser

design allows Refiners to revamp their existing units to gain the full

benefits that UOP's RxCat technology has to offer.

Figure 9: Revamp Comparison of MxR Chamber vs.

Double Wye Mixing Riser Design

Summary

The UOP Double Wye Mixing Riser™ Design for

Revamps

In the traditional RxCat design, regenerated catalyst

from the regenerator is combined with the carbonized

catalyst from the reactor stripper at the base of the riser

in the MxR™ Chamber, shown in Figure 8.

For new units, the MxR Chamber can easily be

incorporated into the FCC design. However,

incorporating the MxR Chamber in a revamp can prove

challenging due to the difficulty of physically fitting the

chamber within the existing configuration without major

structural modifications due to the chamber's size. To

enable the RxCat technology to be widely available for

revamp scenarios, UOP redesigned the MxR chamber

configuration and created the Double Wye Mixing Riser

design shown in Figure 9. While the MxR Chamber

would extend below grade, the Double Wye Mixing

Riser design fits within the existing configuration

Figure 8: MxR Chamber

Snippets


Number of cases pending in Supreme Court as of 15 march 2012: 59, 368

Number of cases pending in high courts and subordinate courts as of December

2010: 3,735,204 & 22,120,882

Number of cases on trial pending with Central Bureau of Investigation (CBI) since

last 20 years: 384


The Guru Gobind Singh Refinery was 'Dedicated to the Nation' by

the Hon'ble Prime Minister of India, Dr. Manmohan Singh in the

presence of Hon'ble Union Minister of P&NG, Shri S. Jaipal Reddy;

Hon'ble Chief Minister of Punjab, Sardar Prakash Singh Badal;

Hon'ble Union Minister of State - P&NG, Shri R. P. N. Singh; His

Excellency Governor of Punjab Shri Shivraj V. Patil and other

distinguished guests.

Mr. R.K. Singh, C&MD BPCL and Mr. G.C. Chaturvedi, Secretary,

MoP&NG exchange documents of the MOU signed by BPCL and

MoP&NG for 2012-13.

Members' News in Pictures Members' News in Pictures

Engineers India Limited has been conferred the prestigious

commendation certificate of “SCOPE Meritorious Award in

Specialized Fields 2010-11", under the category of Best Practices in

Human Resource Management. The Award was received by Shri

A.K. Purwaha, C&MD, EIL from H.E. Smt. Pratibha Devisingh Patil,

Hon'ble President of India at a ceremony held on April 13, 2012 at

New Delhi.

ONGC received two of the top awards - Best Maharatna PSU &

Leading PSU in the Oil & Gas sector - at the Dun & Bradstreet PSU

Awards 2012 held at New Delhi. Mr. Sudhir Vasudeva, CMD, ONGC

and Mr. K S Jamestin, Director-HR, ONGC with Dr. Veerapa Moily,

Hon'ble Minister of Corporate Affairs, Government of India.


Sh. Lakshmi N Mittal, Chairman and CEO, Arcelor Mittal addressing

the gathering on the occasion of the dedication of the Guru Gobind

Singh Refinery, to the Nation at Bathinda on April 28, 2012

A panoramic view of the Guru Gobind Singh Refinery at Bathinda

Hon'ble Minister, MoPNG, Mr. Jaipal Reddy launching the LPG

Transparency portal, in the presence of Mr. GC Chaturvedi,

Secretary (Petroleum), Mr. SudhirBhargava, Additional Secretary,

Mr. Neeraj Mittal, Jt. Secretary (Marketing), Mr. LN Gupta,

Jt. Secretary (Refineries), MOP&NG, Mr. R S Butola, Chairman,

IndianOil, and CMDs of BPCL and HPCL along with all senior

officials of the Mministry as well as the oil companies

BPCL has been conferred with the AajTak Care Award for its CSR

project 'Economic Empowerment and Income Generation' under

the Livelihood Category. The award was presented by Shri Pranab

Mukherjee, Union Finance Minister, GOI and Mr. Aroon Purie, Editor

in Chief, India Today to Mr. S. P. Gathoo, Director (HR), BPCL, at an

Award Ceremony held on 6th June, 2012 at Delhi.

A landmark MoU for hydrocarbon cooperation was signed between

ONGC and CNPC (China National Petroleum Corporation), the

global energy giants with strong international presence, by Mr.

Sudhir Vasudeva, CMD, ONGC and Mr. Jiang Jiemin, Chairman,

CNPC, at New Delhi.


Deepwater Drilling & Services Pvt. Ltd made its foray into the mid

water drilling segment with the commencement of Noble Duchess's thoperations on the East coast of India on 18 May, 2012 for a three

year contract for ONGC. The 1000 ft Drillship is deployed in KG

Basin G-1 Block for exploratory drilling.

Engineers India Limited (EIL) has been conferred with the BT Star

PSU Excellence Award 2012 by Bureaucracy Today magazine for

excellence in Human Resource Management. Shri A K Purwaha,

C&MD, EIL and Shri P K Rastogi, Director (HR), EIL received the

award from Shri Oscar Fernandes, Hon'ble Member, Rajya Sabha

at a ceremony held in New Delhi. The eminent jury was led by Shri ndTKA Nair, Advisor to the Hon'ble Prime Minister (2 from left). Shri

Nishikant Sinha, former Chairman, PESB (extreme left) was also

one of the jury members.

BPCL's Mumbai Refinery has achieved a unique record of getting

the “Performance Excellence Award” under the Ramkrishna Bajaj

National Quality Awards (RBNQA) consecutively for 5 times in a

row. Dr. Shashi Tharoor, MP & Former Minister of State for External

Affairs presented the award to Mr. P.S. Bhargava, ED I/C, Mumbai

Refinery, BPCL.

The Hon'ble Minister of Industr ies, Govt. of Goa,

Mr. Mahadev Naik(L) visits Chemtrols Industries' manufacturing

facility at Kundaim Industrial Estate, Goa on June 13, 2012. Mr.

Faizi Hashmi, MD, IDC, Goa who accompanied the Hon'ble Minister

commented that Automation processes at Chemtrols are

impressive.


Director (R&D), IndianOil (R), Dr. R.K. Malhotra, was honoured by the International Association for Hydrogen Energy (IAHE) with the prestigious Rudolf A. Erren Award, in recognition of his Leadership for Introduction of Hydrogen Economy in India through Strong Support of Hydrogen Technologies and Extensive Information Dissemination.

Shiv-vani now 'Jacked' with offshore operations.

Mr. S. Sunil – Head, Goa Operations, Chemtrols (extreme left), Mr. Mahadev Naik, Hon'ble Minister of Industries, Govt. of Goa (Centre) and Mr. Gopal – Steam Solutions, explaining the various processes to the visiting team.

Mr. Sutirtha Bhattacharya, Principal Secretary, Infrastructure and

Investment, Government of Andhra Pradesh and Mr. Philip Olivier,

President & CEO, GDF Suez LNG UK exchanging documents after

signing of Project Framework Agreement in presence of Shri S.

Jaipal Reddy, Hon'ble Minister of Petroleum and Natural Gas,

Government of India, Shri N. Kiran Kumar Reddy, Hon'ble Chief

Minister of Andhra Pradesh and Mr. B C Tripathi, Chairman &

Managing Director, GAIL (India) Limited.

Dr. Manmohan Singh, Hon'ble Prime Minister of India dedicating the

2200 km Dahej - Vijaipur - Dadri - Bawana - Nangal / Bathinda

Pipeline Network to the nation during the inaugural session of the

7th Asia Gas Partnership Summit 2012. Also seen are Shri S. Jaipal

Reddy, Hon'ble Minister for Petroleum and Natural Gas, India

(right), Shri R P N Singh, Hon'ble Minister of State for Petroleum and

Natural Gas, India (left) and Mr. B C Tripathi, CMD, GAIL (2nd from

left).



PetroFed Awards 2011PetroFed Awards 2011

The PetroFed Oil & Gas Industry Awards 2011 for

excellence in performance in various categories were

presented by the Hon'ble Union Cabinet Minister for

Petroleum & Natural Gas, Shri S. Jaipal Reddy at a well

attended function at New Delhi on June 8, 2012.

Congratulating the Award winners the Hon'ble Minister

termed PetroFed as 'a unique organisation' which

represents both, the public sector and the private

sector. 'This institution needs to be strengthened and its

process and presentation of awards needs to be

encouraged. I shall do everything in my power to

strengthen PetroFed and the sector as a whole', stated

the Hon'ble Minister while addressing the gathering.

In view of the paucity of time available with the Hon'ble

Minister the formal welcome by Chairman, PetroFed &

Chairman, IndianOil, Shri R. S. Butola and presentation

about the Awards by Director General, PetroFed, Shri

A. K. Arora were dispensed with. The Vice Chairman,

PetroFed and President (Refinery Business), RIL, Shri

P. Raghavendra thanked the Hon'ble Minister for

encouraging the industry and sought an enabling

environment & framework to promote self sufficiency in

oil & gas for the country.

The scheme of Awards is open to all companies

operating in India in the oil & gas sector. The evaluation

is undertaken in line with pre-determined weightages

assigned to various parameters fixed after due

validation. Each award category must receive a

prescribed minimum number of applications for giving

away an award. Each award carries a trophy and a

citation. The Woman Executive of the Year award also

carries a cash prize of ` one lakh. The Innovator of the

Year individual award has a cash component of ` two

lakh while the team award has a prize of ̀ five lakh with

each member of the team getting at least ̀ 50,000/-.

The lessons learnt during awards evaluation every year

are incorporated. The application form for each award

has been carefully designed and validated to minimize

subjectivity while giving benefit of additional initiatives

taken. A significant contribution has been made by

PetroFed knowledge partner and member company,

PricewaterhouseCoopers in conceptualizing the

PetroFed Awards 2011PetroFed Awards 2011

Awards scheme and the preliminary evaluation of

applications.

The Awards Committee is headed by Dr. Prodipto

Ghosh, Distinguished Fellow, TERI and former

Secretary to the Government of India. The members of

the Awards Committee are Shri B. C. Bora, former

CMD, ONGC; Shri P. P. Bagchi, former Executive

Director, Oil Coordination Committee, and Managing

Director, United Carbon (India) Ltd.; Shri P. K. Agarwal,

Director, Human Resources Division & Senior Fellow,

TERI & former Director (Marketing) & Director (HR),

IndianOil; Shri U. K. Dikshit, Director (Programmes),

SCOPE & former ED (HR), IndianOil.

The Jury is headed by Hon'ble Mr. Justice J.S. Verma,

former Chief Justice of India. The other members of the

Jury are Dr. Abid Hussain, former Ambassador to the

United States of America and Shri Naresh Narad,

former Chairman, Public Enterprises Selection Board.

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Leading Oil & Gas Corporate of the YearAwarded toIndian Oil Corporation Limited

Exploration & Production - Company of the YearAwarded to Oil India Limited

Refinery of the Year Awarded to Essar Oil Limited

Oil & Gas Pipeline Transportation - Company of the Year Awarded to Cairn India Limited

Special Commendation Awarded to GAIL (India) Limited

Oil & Gas Marketing - Company of the YearAwarded to Indian Oil Corporation Limited

Project Management (` 500-2000 crore)- Company of the Year Awarded to Hindustan Petroleum Corporation Limited

Winners of PetroFed Awards 2011 for performance during 2010-11


Jury (L-R): Shri Naresh Narad, Hon'ble Mr. Justice J. S. Verma, Dr. Abid Hussain.

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Project Management (above 2000 crore) -

Company of the Year

Awarded to

Indian Oil Corporation Limited (Gujarat

Refinery)

Human Resources Management - Company of the

Year

Awarded to

Oil & Natural Gas Corporation Limited

Drilling Services - Company of the Year

Awarded to

Jindal Drilling & Industries Limited

Environmental Sustainability : Company of the Year

Awarded to


Innovator of the Year - Individual

Special Commendation Awarded to

ArunJayendran, Officer Trainee, Palghat LPG

Plant,

Hindustan Petroleum Corporation Limited

Innovator of the Year - Team

Awarded to

Oil & Natural Gas Corporation Limited - Institute

of Oil & Gas Production Technology

Team led by Mr. Y. R. L. Rao

Team Members: P. K. Bhargava, Deputy General

Manager (Production); B. Mandal, Deputy General

Manager (Production); Sharmila Roy, Deputy

General Manager (Production); Dilip Kumar Sarma,

Chief Engineer (Production)

Woman Executive of the Year in the Oil & Gas

Industry

Awarded to

Arpana Anand, Senior Project Manager,


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Bharat Petroleum Corporation Limited

Chennai Petroleum Corporation Limited

GAIL (India) Limited

Hindustan Petroleum Corporation Limited


Numaligarh Refinery Limited

Oil India Limited


Reliance Industries Limited

PetroFed Awards 2011 Event Partners

Awards Committee (L-R): Shri P. K. Agarwal, Shri U. K. Dikshit,

Dr. Prodipto Ghosh, Shri B. C. Bora.


Seated (L-R): Shri A. K. Arora, Director General, PetroFed; Hon'ble Union Cabinet Minister for Petroleum & Natural Gas, Shri S. Jaipal Reddy; Shri R. S. Butola, Chairman, PetroFed & Chairman, IndianOil; Shri P. Raghavendran, Vice Chairman, PetroFed & President (Refinery Business), RIL.

Seated in first row (L-R): Shri P. K. Agarwal, Director, Human Resources Division & Senior Fellow, TERI & former Director (Marketing) & Director (HR), IndianOil; Dr. C. R. Prasad, former CMD, GAIL (India) Limited; Dr. Abid Hussain, former Ambassador to the United States of America, Shri B. C. Bora, former CMD, ONGC; Shri P. P. Bagchi, former Executive Director, Oil Coordination Committee, and Managing Director, United Carbon (India) Limited; Shri U. K. Dikshit, Director (Programmes), SCOPE & former ED (HR), IndianOil.

Ms. Arpana Anand, Senior Project Manager, IndianOil (Pipelines Division) receiving the 2011 Woman Executive of the Year Award. On the left is Shri V. S. Okhde, Director (Pipelines), IndianOil.

A section of the invitees. In front row (L-R): Shri K. K. Gupta, Director (Mktg.), BPCL; Shri S. P. Gathoo, Driector (HR), BPCL & Member, PetroFed Governing Council; Shri S. Roy Choudhury, CMD, HPCL; Ms. Nishi Vasudeva, Director (Mktg.), HPCL & Member, PetroFed Governing Council; Shri R. S. Sharma, former CMD, ONGC; Shri R. D. Goyal, Director (Projects), GAIL (india) Limited; Shri P. K. Jain, Director (Finance), GAIL (India) Limited.

Hon'ble Union Cabinet Minister for Petroleum & Natural Gas, Shri S. Jaipal Reddy being honoured by Shri R. S. Butola, Chairman, PetroFed & Chairman, IndianOil by presenting the uttaraya.

Shri R. S. Butola, Chairman, IndianOil (3rd from left) receiving the 2011 Leading Oil & Gas Corporate of the Year Award along with his team of Directors (L-R): Shri V. S. Okhde, Director (Pipelines); Shri M. Nene, Director (Marketing), Shri R. K. Ghosh, Director (Refineries).


Shri S. Roy Choudhury, CMD, HPCL receiving the 2011 Project Management Award for projects between ` 500-2000 crore along with Shri Anil Pande, ED (Pipeline & Projects) and Shri Anuj Jain, DGM (Projects). Also seen is Ms. Nishi Vasudeva, Director (Marketing), HPCL & Member, PetroFed Governing Council (2nd from right).

ShriArunJayendran, Officer Trainee, Palghat LPG Plant, Hindustan Petroleum Corporation Limited receiving Special Commendation for 2011 Innovator of the Year, Individual Award.

Shri H. K. Khanna, Advisor, Jindal Drilling & Industries Limited receiving the 2011 Drilling Services Company of the Year Award.

Shri U. L. Dohare, Executive Director (Projects) IndianOil (4th from left) receiving the 2011 Project Management Award for projects above ̀ 2000 crore won by the Gujarat Refinery. Also seen are Shri R. S. Butola, Chairman, IndianOil (5th from left) and Shri R. K. Ghosh, Director (Refineries), IndianOil (4th from right).

Shri Sudhir Vasudva, CMD, ONGC receiving the 2011 Environmental Sustainability-Company of the Year Award along with his team of Directors (L-R): Shri A. K. Hazarika, Director (Onshore); Shri S. V. Rao, Director (Exploration); Shri K. S. Jamestin, Director (HR); Shri Aloke Kumar Banerjee, Director (Finance).

Shri Sudhir Vasudeva, CMD, ONGC (4th from left) receiving the 2011 Innovator of the Year (Team) Award along Shri Ajit Kumar, Executive Director, Institute of Oil & Gas Production Technology (3rd from left) with the award winning team members.


Shri S. K. Srivastava, CMD, OIL (3rd from left) receiving the 2011 Award for Exploration & Production Company of the Year along with his team of Directors (L-R): Shri T. K. Ananth Kumar, Director (Finance); Shri S. Rath, Director (Operations). On extreme left & right are Shri A. K. Arora, Director General, PetroFed and Shri R. S. Butola, Chairman, PetroFed and Chairman, IndianOil.

Shri Rahul Dhir, MD & CEO, Cairn India Limited (L) receiving the 2011 Award for Oil & Gas Pipeline Transportation Company of the Year along with Shri Jagdeep Chhaya, Head Pipelines, Cairn

Shri R. D. Goyal, Director (Projects), GAIL (India) Limited (2nd from left) receiving the Special Commendation for Oil & Gas Pipeline Transportation Company of the Year. Also seen in the picture is Shri P. K. Jain, Director (Finance), GAIL India Limited (2nd from right).

Shri C. Manoharan, Director (Refinery), Essar Oil Limited (L) receiving the 2011 Refinery of the Year Award.

Shri M. Nene, Director (Marketing), IndianOil receiving the 2011 Award trophy for Oil & Gas Marketing Company of the Year along with Shri R. S. Butola, Chairman, IndianOil (L).

Shri Sudhir Vasudva, CMD, ONGC (3rd from left) receiving the 2011 Human Resources Management Company of the Year Award along with his team of Directors (L-R): Shri S. V. Rao, Director (Exploration); Shri K. S. Jamestin, Director (HR); Shri A. K. Hazarika, Director (Onshore); Shri Aloke Kumar Banerjee, Director (Finance).


Shri P. Raghavendran, Vice Chairman, PetroFed & President (Refinery Business), RIL proposing a vote of thanks A group photo of the winners of PetroFed Awards 2011 with the

Hon'ble Union Minister.

The awardees with the Chief Guest.Hon'ble Union Cabinet Minister for Petroleum & Natural Gas, Shri S. Jaipal Reddy addressing the gathering.


Events

'India's refining capacity will exceed 310 million tonnes

per annum by the end of March 2017'. Stating this while

inaugurating a two-day international conference on

'Refining Challenges & Way Forward' organised by the

Petroleum Federation of India in association with the

World Petroleum Council and with the support of

Ministry of Petroleum & Natural Gas on April 16, 2012 at

New Delhi, Shri G. C. Chaturvedi, Secretary, MoP&NG

emphasized the need for continuous technology

improvement and energy efficiency to meet the growing

demands of the country. Complimenting PetroFed for

the initiative taken he pointed out that India has

emerged as a net exporter of petroleum products since

2001-02.

Delivering the keynote address Shri Prabh Das,

Managing Director & CEO, HPCL-Mittal Energy Limited

called for a favourbale policy regime to encourage the

petroleum refining industry in the country.

Dr. Pierce Riemer, Director General, World Petroleum

Council during his address drew attention to the fact

that over 95% of the growth in energy consumption is

expected in non-OECD countries during the next two

decades and that China and India will lead the growth in

energy consumption.

Shri Dependra Pathak, Member-Congress Programme

Committee, WPC stated that this was the second event

organised by PetroFed in association with the WPC and

expressed the hope that more events would be

organised in India since the region will lead energy

consumption in the world.

Earlier Shri A. K. Arora, Director General, PetroFed

while welcoming delegates called for upgrading the

bottom of the barrel and executing projects to establish

global benchmarks.

The conference witnessed 35 presentations in eight

technical sessions with nearly a fifth of the

presentations by international experts from abroad. Of

the nearly 140 participants about 10% were

international delegates. Besides Industry members

there were representatives from technology providers,

engineering firms, consultancy, academia and R&D

and the Government.

Refining Challenges & Way Forward The sessions focused on challenges in opportunity

crude processing, upgradation of bottoms, advances in

catalysts & FCC, product quality and reliability

improvement as well as environment protection.

The session chairpersons included CEOs and MDs of

leading organisations, besides functional directors.

Mr. A. K. Arora welcoming participants.

Mr. G. C. Chaturvedi delivering inaugural address.

Dr. Pierce Riemer delivering opening address.


Mr. Prabh Das delivering keynote address.

Mr. Dependra Pathak, Member-Congress Programme Committee, WPC and Director (E-I), MoP&NG proposing a vote of thanks during inaugural session.

Mr. B. K. Datta, Director (Refineries), BPCL delivering opening remarks while chairing Session-2 on 'Technology Options for Bottom Upgradation'. Others (L-R): Mr. Jean Paul Margotin, Managing Director, Axens India; Mr. Soumendra Banerjee, Sr. Manager (Process & Product Development), UOP; Dr. Girish Chitnis, Licensing Manager, ExxonMobil Research & Engineering; Mr. D. Bhattacharya, CRM, IndianOil (R&D).

Dr. R. K. Malhotra, Director (R&D), IndianOil delivering opening remarks while chairing Session-3 on 'Advances in Catalysts'. Others (L-R): Dr. Girish Chitnis, Licensing Manager, ExxonMobil Research & Engineering; Mr. Laxmi Narasimhan, General Manager, Shell; Mr. Vikas Sankalia, Process Specialist, Technology Services, UOP; Mr. Mohan Lal, Executive Director (Technical), Axens India; Dr. Ujjwal Manna, Conversion Technologies Lead (East), Shell; Mr. Alex Pulikottil, Research Manager, IndianOil (R&D).

Mr. Anand Kumar, Director, Perotech Society & former Director (R&D), IndianOil (centre) delivering opening remarks while chairing Session-1 on 'Challenges in Opportunity Crude Processing'. Others (L-R): Mr. S. K. Handa, General Manager (Process), EIL; Mr. Thomas Ting King Lu, Industry Development Manager (Refinery), Nalco; Mr. J. Rajaraman, Sr. Vice President, RIL; Dr. Purandar Chakravarty, General Manager (Technical), Essar Oil Limited.

A section of the participants.


Mr. Anand Kumar, Director, Petrotech Society and former Director (R&D), IndianOil (2nd from right) delivering opening remarks while chairing Session-4 on 'Developments in FCC'. Others (L-R): Mr. Martin Evans, Vice President of Engineering Technical Services, INTERCAT; Mr. Vipan Goel, Director of Sales, Grace Davison Refining Technology; Dr. Asha Masohan, Chief Scientist, IIP, Dehradun.

Mr. K. Govindarajan, CEO (Projects), Essar Oil Limited (2nd from right) delivering opening remarks while chairing Session-6 on 'Reliability Improvement & Environment Protection'. Others (L-R): Dr. Anshu Nanoti, Sr. Principal Scientist, IIP, Dehradun; Mr. J. K. Joshi, Head (Environment), EIL; Mr. Keshav Kishore, DGM (Applied Metallurgy), IndianOil (R&D).

Dr. M. O. Garg, Director, IIP, Dehradun (centre) delivering opening remarks while chairing Session-5 on 'Technologies for Improved Product Quality'. Others (L-R): Dr. Bettina Sander-Thomsen, Catalyst Specialist-Technical Support, Haldor Topsoe International A/S; Mr. Ravi Srinivas, Technology & Business Development Manager, Clean Technologies, DuPont; Mr. Michel Dorbon, Global Market Manager (Naphtha & Distillates Hydroprocessing), Axens; Mr. Sarvesh Kumar, SRM, IndianOil (R&D).

Mr. Dipak Chakravarty, Managing Director, NRL (centre) delivering opening remarks while chairing Session-7 on 'Experience Sharing' along with the Co-Chariman, Mr. P. Sur, Executive Director, Gujarat Refinery, IndianOil (4th from left). Others (L-R): Mr. Rabinder Nath Patel, SPSE, IndianOil; Mr. Jayanti Vagdoda, Jt. General Manager (Mech.), Essar Oil Limited; Mr. Dhananjoy Gosh, General Manager (Ops.), NRL; Mr. B. V. N. Prasad, Vice President (Business Consulting & Sales Ops.), AspenTech; Mr. S. K. Goel, GM (Tech.), BPCL Mumbai Refinery; Mr. Ruchir Kacker, Dy. Manager (Process), IndianOil Mathura Refinery; Mr. Jaikishen C. Nath, Sr. Manager (Electrical), BPCL Kochi Refinery.

Mr. P. Mahajan, Director (Technical), EIL delivering opening remarks while chairing Session-8 on 'Novel Approaches' along with session Co-Chairman, Mr. S. Ventakaramana, Managing Director (I/C), CPCL (3rd from left). Others (L-R): Mr. Tapash Pramanik, Vice President (Technical Services), HMEL; Mr. Prashat Dube, Sr. Process Engineer, IndianOil; Mr. T. Sudhakar, DMPS, IndianOil Mathura Refinery; Mr. A. S. Sahney, SPNM, IndianOil

A growing economy like India aiming at double digit growth in GDP

would need increasing amounts of energy. Biofuels and alternative

sources of energy have, therefore, to be appropriately encouraged,

said Mr. B. K. Chaturvedi, Member (Energy), Planning Commission

while inaugurating the 3rd international symposium organised by

PetroFed on 'Biofuels & Bioenergy' at New Delhi on April 19, 2012.

Delving into its genesis Mr. Chaturvedi, complimented PetroFed for

its perseverance on this important subject.

Biofuels & Bioenergy – International Symposium


Delivering the keynote address at the 1½ day conference Dr. James

Rekoske, Vice President (Renewable Energy & Chemicals), UOP

LLC, Chicago sharply brought out the imperative need to focus on

biofuels and bioenergy for global energy security.

In his address at the inaugural session Dr. R. K. Malhotra, Director

(R&D), IndianOil dwelt on the developments taking place on the

subject in India and abroad and the R&D initiatives being taken in

this regard.

Welcoming participants earlier Mr. A. K. Arora, Director General,

PetroFed drew attention to the fact that the growing Indian economy

is likely to account for about 15% of the global increase in energy

demand by 2035. A WWF report, he added, presents the technical

feasibility of meeting 95% of the planet's energy requirements from

renewable sources in 2050.

The symposium witnessed 17 presentations during five sessions

spread over 1½ days. There were seven international speakers

sharing not only technologies but also country experiences in their

progression towards biofuels & bioenergy. Four expert panelists

and an eminent moderator at the concluding session gave their

perspective on the way forward. Almost 10% of the 125 participants

were international delegates. Besides participation by members of

the oil & gas industry there were substantial number of technology

providers, NGOs, policy makers, R&D, academia and foreign

diplomats.

Inaugural Session in progress.

Dr. James Rekoske delivering keynote address.


Mr. A. K. Arora welcoming participants.

Dr. R. K. Malhotra delivering his address.


Mr. B. K. Chaturvedi delivering inaugural address.

Mr. A. M. K. Sinha, Director (P&BD), IndianOil (centre) delivering opening remarks while chairing Session-I on 'Biofuels in India – Achievements and Learnings'. Others (L-R): Mr. Sandeep Chaturvedi, President, Bio Diesel Association of India; Mr. Anil Dhussa, Director, Ministry of New & Renewable Energy, Govt. of India; Mr. Abhay Chaudhari, Executive Vice President, Praj Industries; Mr. Rahul Pruthi, Asstt. Manager (Business Development), Tata Power Limited

Dr. M. O. Garg, Director, IIP, Dehradun (2nd from right) delivering opening remarks while chairing Session-II on 'Biofuels: Developments in Asia'. Others (L-R): Dr. Dadan Kusdiana, Head for Bioenergy Programme Division, Directorate General of New Renewable Energy and Energy Conservation, Govt. of Indonesia, Jakarta; Prof. Jong Moon Park, Distinguished Professor, Pohang University of Science and Technology, Korea; Dr. Loh Soh Kheang, Head Energy & Environment Unit, Malaysian Palm Oil Board, Kajang, Malaysia.

Dr. James Rekoske, Vice President (Renewable Energy & Chemicals), UOP LLC, Chicago (centre) delivering opening remarks while chairing Session-III on 'Feedstock: Options for Scale and Viability'. Others (L-R): Mr. Prabhakar Nair, Vice President (Business Development), Lanzatech, Chicago, USA; Mr. Prayas Goel, Director, Concord Blue Technology; Dr. D. K. Tuli, Executive Director, IndianOil (R&D); Dr. V. Sivasubramanian, Associate Professor (Plant Biotechnology) & Director, Vivekananda Institute of Algal Technology.

Dr. R. K. Malhotra, Director (R&D), IndianOil (centre) delivering opening remarks while chairing Session-IV on 'Conversion Technologies for Novel Fuels'. Others (L-R): Mr. Partik Lowertz, Vice President (Markets), ChemRec AB, Stockholm; Mr. David Cepla, Managing Director, Envergent Technologies, Chicago, USA; Dr. Arvind Lali, Professor & Head DBT-ICT Centre for Energy Biosciences, Mumbai; Dr. Sanjukta Subudhi, Fellow, TERI.

Mr. Anand Kumar, Director, Petrotech Society & former Director (R&D), IndianOil (centre) delivering opening remarks while chairing Session-V on 'Biofuels and Bioenergy: Sustainability and Global Perspectives'. Others (L-R): Mr. Vineet Raswant, Senior Technical Manager, International Fund for Agricultural Development, Rome; Dr. Dheeban C. Kannan, Fellow, TERI.


Dr. Anjan Ray, Regional Commercial Director, UOP India Pvt. Limited proposing a vote of thanks.

Moderator, Dr. Renu Swarup, Advisor, Department of Biotechnology, Govt. of India (centre) giving her perspective during Session-VI on 'Panel Discussion'. Others (L-R): Dr. M. O. Garg, Mr. Anil Dhussa, Dr. James Rekoske, Dr. D. K. Tuli.

The meeting of the Energy Think Tank at New Delhi on

May 1, 2012 deliberated upon and debated a

presentation made by Shri Suresh Mathur, Director,

GSPC and former MD & CEO, Petronet LNG and Dr. C.

R. Prasad, Chairman, Everest Power and former

Chairman & Managing Director, GAIL (India) Limited on

natural gas.

The deliberations of the day were converted into

recommendations for submission to Government and

discussed at another ETT meeting on June 5, 2012 at

New Delhi.

ETT Meetings

Both meetings were facilitated and hosted by PetroFed.

The presentation and recommendations focused on

shifting customers on liquid fuels to natural gas,

augmenting and optimizing gas infrastructure,

reviewing gas pricing and changing mindset.

The ETT is expected to deliberate further and seek

additional inputs before finalising recommendations to

be put up to the Government.

Chairman, Energy Think Tank & former Secretary, MoP&NG, Shri T. N. R. Rao delivering opening remarks. Others (L-R): Dr. I. B. Gulati, former Director, IIP, Dehradun; Shri M. A. Pathan, former Chairman, IndianOil and Tata Petrodyne; Shri J. S. Oberoi, Convenor, Energy Think Tank; Shri V. S. Jain, former Member, PESB & Chairman, SAIL; Shri Y. Sahai, Director (Comm. & Mktg.), PetroFed.

Dr. I. B. Gulati sharing his view point. Others (R-L): Shri A. K. Arora, Shri Suresh Mathur, Dr. C. R. Prasad, Shri B. D. Gupta, Shri S. K. Manglik, Shri G. K. Pandey, Shri J. L. Zutshi, Shri C. Ratnam, former CMD, Oil India; Shri P. Dasgupta, Shri J. S. Oberoi, Shri T. N. R. Rao, Shri M. A. Pathan.


Shri V. S. Jain (2nd from left) giving his perspective. Others seated (L-R): Shri J. S. Oberoi, Shri Y. Sahai, Shri P. Dasgupta, former MD & CEO, Petronet LNG.

The changing dimensions of natural gas availability as

compared to that of oil were brought out by Mr. S.K.

Manglik while chairing a session on 'Challenges in

Natural Gas' organised by PetroFed in its series of

Guest Lectures and Though Leadership Programmes

on May 18, 2012 at New Delhi.

Delivering the lecture Mr. Suresh Mathur, Director,

GSPC and former CEO & MD, Petronet LNG Ltd.

pointed out that globally there were 250 years of

reserves of natural gas and because of its relative

abundance even a 20% conversion in India from oil to

gas would result in saving of about 6 billion USD per

annum. He called for a change in mindset,

augmentation of infrastructure, review of pricing and a

few bold initiatives to encourage investment to enable

India to take advantage of this situation.

In an exhaustive analysis, drawing parallels from

developments taking place in China and other South

East Asian countries, Mr. Mathur called for an

awareness campaign and national consensus on the

issue of promoting a gas based economy.

The presentation evoked intense debate and several

senior industry members voiced their opinion including

Challenges in Natural Gas

Mr. Anil Razdan, former Secretary, Power, Mr. R.S.

Sharma and Mr. BC. Bora, former CMDs, ONGC, Dr.

C.R. Prasad, former CMD, GAIL and Dr. Avinash

Chandra, former DG, DGH.

Both meetings were facilitated and hosted by PetroFed.

Mr. S.K. Manglik delivering opening remarks.

Mr. Suresh Mathur making his presentation.



The visit of Indain oil industry technical team led by

Shri P. Kalyanasundaram, Director (IC&CA), MoP&NG

to Islamabad for meetings with the Pakistan oil industry

officials on May 28-29, 2012 was coordinated by

PetroFed. The Indian delegation comprised Shri

Rakesh Mehra, Executive Director (International

Trade), BPCL; Shri S. Thangapandian, CEO (Mktg.),

Essar Oil; Shri Mahesh Advani, Head (Director Sales),

Essar Oi l ; Shr i Rajesh Pathak, Manager,

Petrochemicals (Exports), IndianOil; Shri Tapas Kumar

Bishayi, Sr. Manager (Lube Exports), IndianOil; Shri

Rahul Bhardwaj, DGM (Commercial), IndainOil; Shri

Ashok Dhar, President (Industrial Mktg.), RIL; Shri C. S.

Sanalkumar, DGM (DistributionHPCL; Shri Suprabhat

Paul, General Manager (Commercial), HPCL; Shri Y.

Sahai, Director (Comm. & Mktg.), PetroFed; Shri S. S.

Ramgarhia, Director (Policy & Planning), PetroFed.

The Pakistani delegation was led by Shri Shabbir

Ahmad, Joint Secretary, Ministry of Petroleum &

Natural Resources, Islamabad. The joint meeting on

May 28, 2012 was also addressed by the Federal

Secretary, Ministry of Petroleum & Natural Resources,

Pakistan, Shri Muhammad Ejaz Chaudhry and the

Hon'ble Federal Minister for Petroleum & Natural

Resources of Pakistan, Dr. Asim Hussain.

On the first day after the opening remarks by the

leaders of both delegations and introduction of

delegation members a short presentation was made by

the Director (Comm. & Mktg.), PetroFed, Shri Y. Sahai.

The two-day deliberations discussed product

specifications and requirements of Pakistan and a

record note of discussions was signed by the leaders of

the delegations. It was agreed to hold an expert

committee meeting at New Delhi in the first fortnight of

July 2012.

The Indian delegation also met during their visit

members of the Islamabad Chamber of Commerce and

the Pakistan Chamber of Commerce.


Mr. Anil Razdan, former Secretary, Power sharing his perspective in Q&A Session.

Mr. Suresh Mathur addressing participants.

Oil Industry Technical Team to Islamabad


The importance of the Revised schedule VI to the

Companies Act 1956 and the Revised Guidance Note

on Accounting for Oil & Gas Producing Activities was

sharply brought out by Shri B. Mukherjee, Director

(Finance), HPCL while inaugurating a workshop

organised by PetroFed on the subject at Mumbai on

May 31, 2012 in association with member company

KPMG.

Delivering the theme address, Shri Arvind Mahajan,

Executive Director & ENR Sector Head, KPMG dwelt

on the ramifications of the changes proposed in the

Exposure Draft and the Companies Act.

Welcoming participants earlier, Shri S. S. Ramgarhia,

Director (Policy & Planning), PetroFed pointed out that

the workshop had been organised pursuant to requests

from member companies after a similar workshop last

year at New Delhi. It focussed on Revised Schedule VI

The Indian oil industry technical delegation at Islamabad. (L-R): Shri C. S. Sanalkumar, DGM (Distribution), HPCL; Shri S. Nambiar, First

Secretary Indian High Commission, Pakistan; Shri Tapas Kumar Bishayi, Sr. Manager (Lube Exports), IndianOil; Shri Rahul Bhardwaj, DGM

(Commercial), IndianOil; Shri Suprabhat Paul, GM (Commercial), HPCL; Shri S. S. Ramgarhia, Director (Policy & Planning), PetroFed; Shri

Ashok Dhar, President (industrial Mktg.), RIL; Shri Y. Sahai, Director (Comm. & Mktg.), PetroFed; Dr. Asim Hussain, Hon'ble Federal Minister

for Petroleum & Natural Resources of Pakistan; Shri Rakesh Mehra, Executive Director (International Trade), BPCL; Shri P.

Kalyanasundaram, Director (IC&CA), MoP&NG; Shri Muhammad Ejaz Chaudhry, Federal Secretary, Ministry of Petroleum & Natural

Resources, Pakistan; Shri Shabbir Ahmad, Joint Secretary, Ministry of Petroleum & Natural Resources, Pakistan; Shri Mahesh Advani,

Head (Direct Sales), Essar Oil; Shri S. Thangapandian, CEO (Mktg.), Essar Oil; Shri Rajesh Pathak, Manager, Petrochemicals (Exports),

IndianOil.

Guidance Note on Accounting and the Companies Bill

to the Companies Act 1956 and Exposure Draft:

Guidance Note on Accounting for Oil & Gas Producing

Activities (Revised) as well as certain salient features of

the Companies Bill, 2011.

The first session on the Revision of the Guidance Note

on Accounting for Oil & Gas Producing Activities was

comprehensively covered in detail by Shri Kaushal

Kishore, Chartered Accountant, KPMG. At the end of

the day he gave an overview of the salient features of

the Companies Bill, 2011 and also touched upon other

regulatory developments in the field of corporate

governance.

The key requirements of the Revised Schedule VI to the

Companies Act and the manner of their implementation

with specific reference to the oil & gas sector were

delineated by Shri Vijay Mathur, Chartered Accountant,

KPMG.

The workshop witnessed intense floor participation

from over 40 industry executives present.


Seated (L-R): Shri S. S. Ramgarhia, Session Chairperson Shri B. Mukherjee, Shri Arvind Mahajan.

Session Chairperson Shri B. Mukherjee delivering inaugural

address.

Shri Arvind Mahajan delivering theme address.

Shri Kaushal Kishore, Chartered Accountant, KPMG making his

presentation.

Shri Vijay Mathur, Chartered Accountant, KPMG making his presentation.



In consonance with the theme of the World

Environment Day 2012 PetroFed organised a lecture

on 'What Each One of Us Can Do To Protect the

Environment?' by the eminent Dr. Prodipto Ghosh,

Distinguished Fellow, TERI and former Secretary,

Ministry of Environment & Forests on June 5, 2012 at

New Delhi in its continuing series of Guest Lectures &

Thought Leadership Programmes. The theme for the

World Environment Day 2012 was 'Green Economy:

Does it Include You?'

The Green Economy has been defined as one that

results in improved human well-being and social equity

while significantly reducing environmental risks and

ecological scarcities. Most simply put, it can be one

which is low carbon, resource efficient and socially

inclusive. And all these issues, pointed out Dr. Prodipto

Ghosh, can be addressed by citizens in their daily life at

home, at work, while commuting , and even by children

when at school. Dr. Ghosh, through examples and

easy to follow steps, elaborated on the contribution that

each one of us can make for a greener earth.

The presentation spurred a host of suggestions from

over three score participants present. There were

suggestions to mandate CFLs or LEDs and keep ACs at

25O C as in Japan. Only energy efficiency labelled

appliances should be permitted to be sold and

equipments using water should be labelled for water

efficiency like the labelling for energy efficiency.

Similarly, use of solar heating and rain water harvesting

in new constructions should be mandated. Even office

timings of an office cluster should be essentially

staggered to eliminate fuel wastage due to traffic jams.

The suggestions made deserve serious consideration.

The Director General, PetroFed, Shri A. K. Arora in his

closing remarks expressed the hope that the

conservation messages conveyed and discussed

during the session would not only be implemented but

also promoted by participants.

World Environment Day


A point being made by Shri Suresh Mathur, Director, GSPC and former MD & CEO, Petronet LNG.

Dr. Prodipto Ghosh making his presentation.


The PetroFed Governing Council at its 28th meeting on

June 8, 2012 welcomed Shri T. K. Ananth Kumar,

Director (Finance), Oil India Limited as a member of the

Governing Council and placed on record its

appreciation of the services rendered by Shri P. N.

Baruah, Group General Manager (T&D), Oil India

Limited during his tenure as a member of the Governing

Council.

It approved and welcomed the induction of M/s Haldor

Topsoe India Private Limited as the 67th member of the

Society.

The Governing Council expressed its appreciation on

the events conducted in the recent past by the

Secretariat, particularly the international conferences

on 'refining challenges' and 'biofuels and bioenergy'

and the role played in coordinating the visit of the oil

i ndus t ry techn ica l team, led by Shr i P.

Kalyanasundaram, Director (IC & CA), MoP&NG to

Islamabad.

It noted the events and activities planned during

2012-13.

Dr. Prodipto Ghosh replying to a query. Also seen in the picture is Shri A. K. Arora.

28th Governing Council Meeting

Shri P. Raghavendran (4th from right) making a point. Others (L-R): Shri S. P. Gathoo, Director (HR), BPCL; Ms. Nishi Vasudeva, Director (Mktg.), HPCL; Shri M. A. Pathan, Honorary Member, PetroFed; Shri R. S. Butola, Shri A. K. Arora, Shri A. K. Hazarika, Director (onshore), ONGC; Shri T. K. Ananth Kumar, Director (Finance), OIL.

Shri A. K. Arora, Director General, PetroFed (R) briefing the Governing Council. Others (L-R): Shri R. S. Butola, Chairman, PetroFed & Chairman, IndianOil; Shri P. Raghavendran, Vice Chairman, PetroFed &President (Refinery Business), RIL.

The shale gas story has almost turned the United

States from a major prospective LNG market to a

potential exporter of LNG. Stating this, Shri R. S.

Butola, Chairman, PetroFed and Chairman, IndianOil

recounted his personal discussions at various levels

over the years in the US during this transformation. He

was delivering the opening remarks while chairing a

CEO/Top Management Interaction with Ms. Antonia

Bullard, Senior Director & Head of Corporate Advisory

The US Unconventionals Revolution


Practice, PFC Energy who elaborated on 'The US

Unconventionals Revolution and Implications for India'

on June 20, 2012 at New Delhi.

Ms. Antonia Bullard, who advises clients on corporate

strategy, strategic communications, investor relations

and international Government relations recounted the

process of proving, optimizing, industrializing and

rethinking in the shale gas development strategy. She

explained the implications of the unconventionals

revolution for the US and how it can lead to crude oil

flow shifts in the world besides the prospect for

replication in other economies.

Her lecture was followed by an intense interaction with

more than 90 participants including existing and former

senior bureaucrats, CEOs, academicians etc.

Session Chairman Mr. R. S. Butola delivering opening remarks. Seated (L-R): Mr. A. K. Arora, Ms. Antonia Bullard.

Ms. Antonia Bullard making her presentation.


A query being raised by Dr. Avinash Chandra, former DG of DGH & CMD, Petrobiz Consultants.

Session Chairman Mr. R. S. Butola delivering concluding remarks.


The economic woes of several developed countries is

one of the reasons for the economic slowdown in

developing countries said Dr. B. Mohanty, Senior

Economic Advisor, Ministry of Petroleum & Natural Gas

while chairing a guest lecture on 'Post Recession

Outlook & Current Scenario' by Prof. Pranab Banerji,

Professor of Economics, Indian Institute of Public

Administration at New Delhi on June 26, 2012.

Organised under the PetroFed series of Guest Lectures

& Thought Leadership programmes, the lecture traced

major changes in economic thought globally which

have landed the world in the current economic

quagmire.

Prof. Banerji in a lucid manner tracked the current

economic downturn of the PIIGS countries (Portugal,

Ireland, Italy, Greece and Spain) to the genesis of the

sub prime crisis in the 1980s which resulted in the

global economic slowdown in 2008. Economic

inequalities and global financial transactions in trade

were highlighted by Prof. Banerji.

The lecture witnessed intense floor participation and

lively interaction.

Post Recession Outlook

Session Chairman Dr. B. Mohanty (centre) delivering opening remarks. Others (L-R): Prof. Pranab Banerji, Shri A. K. Arora.

Prof. Pranab Banerji making his presentation.

Session Chairman Dr. B. Mohanty delivering concluding remarks.

A query being raised by Shri Rajan Kapoor, General Manager, Prize Petroleum Company Limited.


Name Designation Organisation

Mr. R. S. Butola Chairman Chairman, Indian Oil Corporation Limited

Mr. P. Raghavendran Vice-Chairman President (Refinery Business), Reliance

Industries Limited

Mr. S.P. Gathoo Member Director (HR), Bharat Petroleum Corporation

Limited

Mr. T. S. Ramachandran Member Director (Technical), Chennai Petroleum

Corporation Limited

Mr. Prabhat Singh Member Director (Marketing), GAIL (India) Limited

Ms. Nishi Vasudeva Member Director (Marketing) , Hindustan Petroleum

Corporation Limited

Mr. Dipak Chakravarty Member Managing Director, Numaligarh Refinery Limited

Mr. T. K. Ananth Kumar Member Director (F), Oil India Limited

Mr. A. K. Hazarika Member Director (Onshore), Oil & Natural Gas

Corporation Limited

Mr. M. A. Pathan Honorary Member

Mr. Sarthak Behuria Honorary Member Group President, Modi Enterprises

Mr. A. K. Arora Member Secretary Director General, PetroFed

Governing Council

Our Member Organisations

S.No. Organisation

Adani Gas Ltd. Mr. Rajeev Sharma

2. Adani Welspun Exploration Ltd. Mr. Atul Sathe

3. Axens India Pvt. Limited Mr. Jean Paul Margotin

4. Bharat Petroleum Corp. Ltd. Mr. R. K. Singh

5. BP India Services Pvt. Ltd. Mr. Sashi Mukundan

6. British Gas India Pvt. Ltd. Mr. Walter Simpson

7. Bharat Heavy Electricals Ltd. Mr. B P Rao

8. Bharat Oman Refineries Limited Dr. B. K. Das

9. Cairn India Ltd. Mr. Rahul Dhir

10. Chennai Petroleum Corp. Ltd. Mr. S. Venkataramana

11. Chemtrols Industries Limited Mr. K. Nandakumar

12. Deloitte Touche Tohmatsu India Pvt. Ltd. Mr. Udayan Sen

13. Deepwater Drilling & Services Pvt. Ltd. Mr. S. M. Malhotra

14. Engineers India Ltd. Mr. A. K. Purwaha

15. Ernst & Young Pvt. Ltd. Mr. Rajiv Memani

16. Essar Oil Ltd. Mr. Lalit Kumar Gupta

17. ExxonMobil Gas (India) Pvt. Ltd. Mr. K S Kim

18. East India Petroleum Pvt. Ltd. Mr. K. Sharath Choudary

19. GAIL(India) Ltd. Mr. B.C. Tripathi

20. Great Eastern Energy Corporation Ltd. Mr. Yogendra Kumar Modi

21. Gujarat State Petroleum Corporation Limited Mr. Tapan Ray

22. Hindustan Petroleum Corp. Ltd. Mr. S. Roy Choudhury

23. HLS Asia Ltd. Mr. Rajeev Grover

24. Honeywell Automation India Ltd. Mr. Anant Maheshwari

25. HPCL Mittal Energy Ltd. Mr. Prabh Das

26. Haldor Topsoe India Pvt. Ltd. Mr. Dilip K. Dutta

27. IMC Ltd. Mr. A. Mallesh Rao

28. Indian Oil Corp. Ltd. Mr. R. S. Butola

29. Indraprastha Gas Ltd. Mr. M. Ravindran

30. Industrial Development Services Pvt. Ltd. Mr. R. K. Gupta

31. IHS CERA Mr. James Burkhard

32. IOT Infrastructure & Energy Services Limited Mr. Jayanta Bhuyan

33. Jindal Drilling & Industries Limited Mr. Raghav Jindal

34. Jubilant Oil & Gas Pvt. Ltd. Mr. Ajay Khandelwal

CEO

1.

Contd...2

35. KPMG Mr. Russell Parera

36. Kellogg Brown & Root Engineering & Mr. Vinayak PaiConstruction India Pvt. Ltd.

37. LanzaTech-NZ Limited Dr. Jennifer Holmgren

38. Lanco Infratech Ltd. Mr. L. Madhusudhan Rao

39. Mangalore Refinery and Petrochemicals Ltd. Mr. U. K. Basu

40. Mitsui Chemicals India Private Limited Mr. Shingo Shibata

41. Mitco Labuan India Pvt. ltd. Mr. Roney Zaidell

42. Naftogaz India Pvt. Ltd. Mr. Bava Mahdoom

43. Nagarjuna Oil Corp. Ltd. Mr. S. Ramasundaram

44. Niko Resources Ltd. Mr. Larry Fisher

45. Numaligarh Refinery Ltd. Mr. Dipak Chakravarty

46. Oil & Natural Gas Corporation Ltd. Mr. Sudhir Vasudeva

47. Oil India Ltd. Mr S. K. Srivastava

48. Petronet LNG Ltd. Dr. A.K. Balyan

49. PFC Energy Mr. J. Robinson West

50. PMI Organization Centre Pvt Ltd. Mr. Raj Kalady

51. PricewaterhouseCoopers Pvt. Ltd. Mr. Deepak Kapoor

52. Prize Petroleum Co. Ltd. Mr. M.R. Pasrija

53. Punj Lloyd Ltd. Mr. Atul Punj

54. Reliance Industries Ltd. Mr. Mukesh Ambani

55. Santos International Operations Pty. Ltd. Mr. Mark Shimmield

56. SAP India Pvt. Ltd. Mr. Peter Gartenberg

57. SAS Institute (India) Pvt. Ltd. Mr. Sudipta K. Sen

58. Schlumberger Asia Services Limited Mr. S. Ramamurthy

59. Shell India Pvt. Ltd. Mr. Vikram Singh Mehta

60. Sud-Chemie India Pvt. Ltd. Ms. Arshia A. Lalljee

61. Shiv-Vani Oil & Gas Exploration Services Ltd. Mr. Prem Singhee

62. Tata Petrodyne Ltd. Mr. Prasad Menon

63. Tecnimont ICB Pvt. Ltd. Mr G.Sathiamoorthy

64. Total Oil India Pvt. Ltd. Mr. B. Vijay Kumar

65. Transocean Offshore International Ventures Ltd. Mr. Sanjaya Sood

66. University of Petroleum & Energy Studies (UPES) Dr. S.J. Chopra

67. UOP India Pvt. Ltd. Mr. Mark S Turowicz

68. World L. P. Gas Association Mr. James Rockall

Journal Coordinators

Ms. Marianne Karmarkar BPCL

Mr. S. Vaidyanathan CPCL

Mr. Jignesh Vasavada GAIL (India) Ltd.

Ms. Radhika Ojha IOT Infrastructure & Energy Services Limited

Mr. R.G.Sreeram IOCL

Mr. H K Nath NRL

Mr. Pramode Seth ONGC

Mr. P.N. Barua Oil India Ltd.

Mr. Deepak Mahurkar PricewaterhouseCoopers Pvt. Ltd.

Editorial Board

No part of this journal shall be reproduced in whole or in part by any means without permission

from PetroFed.

The views expressed by various authors and the information provided by them are solely from

their sources. The publishers and editors are in no way responsible for these views and may not

necessarily subscribe to these views.

Editor : Y. Sahai

Member : A. K. Arora

S. L. Das

S. S. Ramgarhia

O. P. Thukral

Biren Das

Edited, Designed & Published by:

Petroleum Federation of IndiaPHD House, 3rd Floor, 4/2, Siri Institutional Area, August Kranti Marg, New Delhi - 110 016

Phone : 2653 7483, 6566 4067 Fax : 2696 4840, E-mail: [email protected], Website:www.petrofed.org.

Printed by : PRINTEMPS INDIA Ph. : 98101 44481, E-mail : [email protected]

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