Major Conversions in Petroleum Industry

Crude

1 US Gallon= 3.785 Litres

1 US Barrel= 42 US liquid Gallons or 159 Liters

1 Metric Tonne= 7.33 Barrels (Pertains to Specific Gravity)

1 Cubic Meter= 6.29 US Barrels

LNG

1 MMSCMD=35,700 MMBTU
(MMSCMD:Million Metric Standard Cubic Meters Per Day, MMBTU: Million Metric British Thermal Unit)

1 MMTPA= 4 MMSCMD
(MMTPA: Million Metric Tonne Per Annum)

Energy

1 kWh= 3412 BTU
( BTU: British Thermal Unit)

PS: A few conversions may not be precise (as it depends upon on various factors like specific gravity, atmospheric pressure, temperature etc)  and for general information purpose only

Auto shares plunge on excise hike threat

As suggested by the Oil ministry, government is mulling over hiking the excise duty on diesel cars.

As the difference between diesel and petrol prices is around Rs. 30, more and more people are rushing for the diesel variants.  The stocks of M&M, Tata motors and Maruti Suzuki were down by 1.84%, 2.31% and 3.31 % respectively.

For small cars proposed excise duty could be as high as Rs. 1.7 lakh while for big cars it might be Rs. 2.5 lakh. Small cars fall under Rs. 6 lakh and if excise hike is implemented then the rates will be around 25-28 %.

In India, around 15 % of diesel is consumed by the privately owned diesel cars. As raising diesel prices will result in higher headline inflation, going for the excise hike seems suitable for the government.

S&P, one of the top global rating agencies, has already threatened to downgrade India’s investment rating for failing to implement the policy reforms.

Diesel Under-recoveries have been piled-up around Rs. 1 lakh crore ($ 18 billion).

Is excise hike will be viable ?

This step could be detrimental when IIP manufacturing growth is hovering around zero-level and Indian industries are on the back foot owing to the higher inflation regime.

This shall only discourage the new sales but old diesel cars shall continue to avail the subsidized diesel. Auto companies which have subscribed heavy loans for raising diesel car-manufacturing setup shall be affected on the profitability front and thus affecting their loan repayment ability.

Banking sector which has funded the auto industries for the above-mentioned setup shall face the higher risk of CDR (corporate debt restructuring).

What is the right solution?

Raising the price of diesel by Rs. 1 only could fetch the government around Rs. 7800 crore per year while this excise hike shall fetch at the most Rs.6000 crore (considering possible sales decline after the hike) that too endangering the economy.

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Gold Crude-Oil Ratio

There had been an evident relationship between Gold and the Crude-Oil price. Rising Crude oil induces inflation and Gold is considered as the best hedge against the inflation.

Apart from this, revenues collected by Crude-Oil sales end up getting invested in Gold and thus imparting upward pressure on Gold price.

Gold Crude-oil price ratio is the price of one ounce of Gold in dollars divided by the price of one barrel of Crude-Oil in dollars.

In simple words, the ratio tells us how many barrels of Crude one ounce of Gold can buy.

When this ratio rises above 15, this means Gold is getting dearer (or Oil getting cheaper) and the vice versa.

 
If we plot Gold-Crude oil ratio since 1946 we find this ratio tends to settle at 15.

Many times there were wild swings on either sides but ratio ultimately retraced to 15.

While writing this, Gold price (1493 $/ounce) and Crude-Oil price (97 $/barrel) gave the ratio 15.39, which indicates both Crude and Gold are fairly priced.

This ratio gives pretty clear idea how expensive precious metal presently is.

Oil and Natural Gas sector of India- Demand & Production mismatch

Due to higher economic growth rate over 8% and very high population which is about 15% of the world population, India is the fourth larger consumer of oil in the world after USA, China  & Japan.

Oil demand is increasing due to burgeoning vehicle sales in India.

Oil accounts for the 24 % of total energy consumption in India, while natural gas demand is just 6%.

India produced approximately 8, 80, 000 barrels per day of total oil in the year 2009 while consumption was 30, 00, 00 barrels per day.

The gap between demand and production is widening day by day.

This widening gap between demand and production has made India, the sixth largest importer of the crude, with imports around of 21, 00, 000 barrels per day that is 70% of India’s oil demand.

US EIA (Energy Information Administration) expects India to be the fourth largest oil importer in the world by 2025, behind the USA, China & Japan.

Sector Organization

Upstream Sector

Major Upstream companies (companies which do the exploration and production of  the crude oil) in India are ONGC (Oil and Natural Gas corporation of India), OIL (Oil India Limited),IOL (Indian Oil Limited) & GAIL (Gas Authority of India Ltd),all  are state-run companies.

Private players are Reliance Industries, Cairn India Limited and BG Exploration.

Downstream Sector

Major downstream companies (companies which do the refining of the crude) are mainly state-run companies like IOC, HPCL and BPCL.

Private players are Reliance and Essar oil.

Crude reserves

In India most of the crude resources are located offshore, in the west of the country in Arabian Sea and in the Bay of Bengal which is in the east of the country.

Onshore reserves are in Rajasthan and the North East states.

 

Natural Gas 


India had approximately 38 trillion cubic feet (Tcf) of proven natural gas reserves as of January 2010. The EIA estimates that India produced approximately 1.4 Tcf of natural gas in 2009.

 The bulk of India's natural gas production comes from the offshore regions, especially the Mumbai High complex and Krishna-Godavari (KG) fields in the Bay of Bengal.

 The onshore fields in Assam, Andhra Pradesh, and Gujarat states are also significant sources of natural gas production.

In 2009, India consumed roughly 1.8 Tcf (trillion cubic feet) of natural gas.  Natural gas demand is expected to grow considerably, largely driven by demand in the power sector. The power and fertilizer sectors account for nearly three-quarters of natural gas consumption in India.

Despite the steady increase in India's natural gas production, demand has outstripped supply and the country has been a net importer of natural gas since 2004. India's net imports reached an estimated 445 tcf in 2009.