The Central Asian Factor in India’s Energy Security (Ajish P Joy, Research Assistant – ORF)

or all those who follow the Indian energy scenario, the year 2006 has so far been quite momentous. There were a number of events that took place this year, which can have major repercussions for India’s energy security. The Russians demonstrated, through their stand off with Ukraine in early January, the vulnerability of energy dependent countries like India. There was also the visit of the Saudi monarch, King Abdullah bin Abdul Aziz who offered India unprecedented guarantees regarding our energy security. After the visit, India decided to further enhance its crude oil purchase from Saudi Arabia. Besides, the Americans are around as usual, nudging us to be happy with the Saudi offer and stay away from all initiatives involving those countries in the US blacklist like Iran and Syria. There has been a change of guard in the Petroleum Ministry and consequently, we can anticipate some changes in our energy policy.

It is in this context that Central Asia becomes important for India as a new destination from where energy can be sourced. Central Asia came into focus as a new source of energy after the disintegration of the Soviet Union. States like Kazakhstan, Turkmenistan, Uzbekistan and Azerbaijan are rich in hydrocarbon resources.  India could not make proper use of the vast Central Asian potential despite many historical and political factors being in our favour. We were late to start with, and also had to face stiff competition from China. In the region, India has so far been focussing mainly on Kazakhstan and Turkmenistan for energy partnerships.

Indian quest for energy stakes in Kazakhstan started in 1997 when ONGC Videsh Limited (OVL) received a five-year license for oil exploration in the Pavlodar region of north Kazakhstan. Unfortunately, the project did not shape up well. Since 2005 there were concentrated efforts to acquire assets in the country. OVL’s alliance with the Mittal Group to bid for PetroKazakhstan was a step in this direction. However, the Indian combine lost to China’s National Petroleum Corp (CNPC) in its bid, despite quoting the highest amount. Adding insult to injury, the OVL-Mittal combine was not even permitted to rebid. India accused the U.S. investment bank Goldman Sachs of lack of propriety and transparency and alleged that the rules were changed mid-way through the bidding, which helped CNPC win control of PetroKazakhstan.

Another major project in the region of India’s interest is the pipeline from Turkmenistan, popularly known as the TAP (Turkmenistan-Afghanistan-Pakistan) pipeline. India is an observer in the Ministerial group overseeing the TAP project. However, TAP, like the Iran-Pakistan-India (IPI) pipeline is yet to find real backing in India.  Most strategic experts in India are reluctant to rely on gas from a pipeline crossing the territory of Pakistan as well as Afghanistan which faces a resurgence of the Taliban. Moreover, the pipeline will also have to cross volatile areas like Balochistan and many Balochi rebels have declared that they will not let the pipeline to be built in their territories. The supporters of the pipeline call for the creation of an Asian gas grid linking together the IPI (which can be boosted by supplies from Turkmenistan and even Kazakhstan) with the Kazakhstan-China pipeline. Discussions are on to acquire oil from the Baku-Tbilisi-Ceyhan pipeline through the Suez Canal or through the Ashkelon-Eilat pipeline in Israel. There are also proposals to bring Central Asian gas and oil to Iranian ports and then ship it over to India. There is also palpable American pressure on India to opt out of the IPI deal.

India will also have to take into account the resurgence of Russian influence in Central Asia. The Russians have finally woken up to the realities of the leverage they possess, given the control they wield over gas supplies globally. Russia is in the process of putting in place an energy cartel in the region à la OPEC by sewing up the major reserves in Central Asia through state-owned firms like Gazprom. It has already signed accords to take over Dauletabad fields in Turkmenistan which is supposed to provide gas for the TAP pipeline. Russia also has entered into a major agreement with Kazakhstan with huge financial implications (ranging from $10 billion to $20 billion). In Uzbekistan, Lukoil has secured 90 percent share in the major gas fields. India will have to ensure Russian cooperation if its Central Asian projects are to succeed.

China too is actively engaged in acquiring stakes in the region and has always outbid India whenever the two countries had a face-off. Moreover, China has the advantage of sharing borders with Kazakhstan, one of the hydrocarbon-rich countries in the region. China has already completed the construction of an oil pipeline from Atasu in Kazakhstan to Alashankou in Xinjiang. To add to India’s discomfiture, Beijing has got Moscow’s approval to purchase Russian oil through this pipeline till Kazakhstan is able to ensure maximum supplies. China is also negotiating with Kazakhstan to construct a gas pipeline along the same route. The United States is also aggressively pushing its agenda in the region despite the setbacks it had to face of late. Despite a few setbacks it had to face, the successful commissioning of the BTC and its strategic presence in the region further demonstrates American significance in the ‘great game’.

India will have to keep all these in mind, should get it priorities right and its game plan in place if it wishes to diversify and enhance its energy sources. It should realize that a ‘great game’ is already being played out in Central Asia, primarily between the US and Russia, with the Chinese rendering a formidable third angle. If we continue to play with lousy game plans, obsolete strategies and a frugal mindset, we are bound to lose. As far as the pipelines are concerned, the financial viability of both IPI and TAPI is still not clear and it remains to be seen how far India will hold out against US pressure. The change in the Petroleum Ministry is ominous for the pipeline projects. With a timely Saudi angle thrown in, in the form of “assured supplies” and “evergreen contracts”, the economic feasibility of pipelines is bound to attract lots of questions. Even the acquirement of stakes in Central Asian fields, depends a lot on Russian indulgence, Chinese competition and of course the American meddling. Needless to say, in the Central Asian minefield, India has its task cut out.

 

Import of Coal during the last five years

 

                (Quantity in MT)

 

Steady Growth in Production in Coal Sector

 

(In million tones)

Source: Coal Vision March 2006

 

The Role of Asian Companies:

In the Development of Sudanese Oil/ Energy Sector

 

Introduction

udan, the largest country in Africa, with good land and water resources, is seen as a potential to secure food and agricultural products for the Middle East and compete with other countries for such market. To tap this potentiality, Sudan needs financial resources and capable energy sector.

The development of oil/energy sectors during the last ten years is remarkable and injected life into many other sectors attracted and boomed the investment opportunities. The major role of Asian oil companies and contractors, at this historical junction of development in Sudan, cannot be missed.

With oil prices hitting record highs, major energy consuming countries are in an increasingly heated competition for energy resources. Africa is emerging as one of the competition stages. The low sulphur crude of west and east Africa (including Sudan) makes it of further strategic importance.

Asian’s predominance in Sudan is a result of Asia’s search for energy supplies and the willingness of Sudan to fill the vacuum created by the withdrawal of Chevron and by the embargo and deterioration of relations for unsubstantiated reasons. This created a good opportunity for mutual interest-environment, which has been successfully utilized.

Historical Background

The exploration for hydrocarbons started in the early fifties in the Red Sea area. Not until the early seventies two small gas/condensate fields were discovered in the Red Sea. From mid-seventies to mid-eighties American & European oil companies concessioned large areas in Sudan interiors and commercial oil fields have been discovered by Chevron.

Chevron was reluctant to going into development stage and suspended all exploration activities without relinquishing the concessioned areas. In the early 1990’s Chevron was asked to choose either to resume operations or relinquish the area. By then all Sudanese basins were relinquished, some contain commercial discoveries.

Huge investment, and extensive exploration and development program started after mid nineties when Asian national oil companies entered Sudan; namely CNPC of China and Petronas of Malaysia. By 1999, Sudan became an oil exporter.

Mutual Interest of Asian Companies and Sudan

As global demand for energy continues to rise, major consumers (US, Europe, Japan) are facing new competition from emerging and growing markets (China, India, Asian Tigers) These growing markets have crafted their policies to secure their required energy to sustain the rapidly growing development. China, the most populated country on the globe, with its booming economy, once the largest oil exporter in Asia, became an importer and is projected to depend on imported hydrocarbons for about 40% of its needs.

In general, the growing Asian economy – and the need for energy resources – is crafting its own geopolitics and do not want to fall victims to strategies of outsider. Sudan is becoming one of the countries from which Asian are locking some of their crude oil needs. This created an excellent environment for mutual relation and cooperation.

West and American Role in Sudanese Oil Sector

As mentioned earlier, all exploration activities up to the mid eighties were carried by Western and American oil companies.

American oil companies have been officially banned by their Government (in 1997) not to invest in Sudan.

Some of the European and Canadian oil companies and contractors joined the Asians and participated in oil development (Canada, Swiss, England, France, Germany, Italy….). Latest technology has been adopted in the projects. This is realized through subcontracting hi-technology contractors like Alcatel, Siemens, Rolls Royce, Metso, Man, Atlas Copco.

Oil Projects & Contractors

(A)          Exploration and Production

 

 

(B)          Foreign Services Contractors: -

 

 

Oil Infrastructures

(A)          Greater Nile Development Projects

v  A 1610 Km, 28” pipeline from Heglig to Port Sudan and a marine terminal.

v  Upstream facilities which include trunk and connection pipeline, power stations and transmission lines, tanks and processing facilities.

It took the Asian contractors – mainly Chinese – less than two years to complete the construction of all the facilities and the pipeline to handle a production up to 300,000 bbls/Day.

This by all means a remarkable and a record achievement.

70% of the funding was from CNPC and Petronas and 25% from Talisman of Canada, which later – under political pressure – farmed out to ONGC of India.

The Chinese played a major role in the construction of the facilities and the pipeline by providing equipments and construction engineers.

The completion of the project transformed Sudan from a net importer to a net exporter of a “sweet crude Nile Blend”, the most easily refined and desirable.

(B)   Petrodar Development Project (Block 3/7)

About 1400 Km “32 inch” pipeline, marine terminal and upstream facilities, including power plants and transmission lines.

The Asian construction contractors are playing a major role. Oil at the marine terminal (Red Sea) is expected soon which will make Sudan total production about half a million bbls a day. The equity of the Chinese and Malaysian oil companies in Block 3/7 is 86%.

The Agenda to stop Sudanese Oil project and production

The western media made Sudan to be known to the outside world for civil war, human rights abuse. The media intensified such approach targeting the stoppage of Sudanese production which majorly goes to Asian markets. The media approach succeeded to force Talisman – the only non-Asian company – to withdraw.

Refineries and Petrochemicals

In 2001 the Chinese completed the construction of a 50,000 bbls/Day refinery near Khartoum. In addition to exporting crude oil, Sudan started to export surplus production through an existing pipeline from Khartoum to Port Sudan.

The capacity of the refinery is increased to 100,000 bbls/Day.

Petronas and the Ministry of Energy & Mining signed an agreement to construct a one billion USD complex 100,000 bbls/Day refinery at the Red Sea to handle high tan crudes. The completion of the project is expected in 2008, which is going to meet the growing demand for petroleum products in the region.

CNPC of China and the Ministry of Energy & Mining established a 15,000 tons petrochemical plant to use the by-product gas of Khartoum Refinery. The production is covering Sudan needs of polypropylene which is becoming instrumental in the development of Sudanese petrochemical industry.

Energy Sector

A part of oil industry, Chinese companies are active in power projects. Harbin Power Company built the Qarrie Station – 50 km North of Khartoum – to produce 330 MW.

Chinese also are participating in the construction of Merowe Dam of more than USD 1.5 billions costs. This dam will triple Sudan’s electricity – generating capacity and eventually increase the irrigated and cultivated area by about 50%. In support, China is also building more than 1500 Km power transmission line and transform stations, the longest ever built in Sudan.

In 2006, India further expanded its investment in Sudan with an agreement for a USD 392 millions power plant. BHEL Company will be involved in the setting up and construction of the project. The plant will add 500 MW to the national grid.

On February 12^th, 2006 the Sudanese Minister of Energy & Mining and the Indian Minister of Heavy Industries and Public Enterprises has laid the foundation stone for this mega thermal power plant at Kosti, White Nile State.

Conclusion

These large and proven petrolofic Sudanese basins, the good and friendly Sudanese investment environment, the vacuum created by the withdrawal and embargo by US and West, and the need of Asian countries to secure and lock their needs of energy resources, all this prompted the Asian companies especially Chinese to heavily invest in Sudanese petroleum and energy sectors.

The Chinese construction contractors proved to be capable and completed mega projects in a record time. Since they are already in Sudan, the Asian contractors are in a best position to look and compete for new projects.

Petroleum Pricing in India:

Brief History, Current Developments and the Way Forward (Part – III)

Dr. Samir Ranjan Pradhan*

The government did introduce a price band, from 1 August 2004, within which oil marketing companies (OMCs) would be free to respond to international price changes. As per this mechanism, retail prices of petrol and diesel were to be based on the previous fortnight’s average international price (in line with the import parity principle), subject to the condition that the exchange rate adjusted C&F (cost and freight) product price was within the band of plus or minus 10% around the mean of the previous three months rolling average price and previous one year’s average price. In case of breach of this band, the OMCs were to approach the Ministry of Finance through the MoPNG (Ministry of Petroleum and Natural Gas) to modulate the excise duty rates to ensure that the spiralling prices prevailing in the international markets do not cause undue hardships to the consumers. However, with increasing crude oil and product prices in the international market, the band was crossed within the first fortnight itself, and any further price increases were stalled due to reluctance on the part of the government to let the OMCs pass on the crude oil prices even partially to consumers. While the price of Dubai crude shot up by a staggering 47.32% between November 2004 and June 2005, the retail prices of both petrol and diesel remained static and were revised only on 20 June 2005 after a gap of almost seven months.

However, another price revision was announced by the government on 6 September 2005 bring out the significantly higher price that consumers pay for petrol and diesel as compared to their international trade price, highlighting the huge duties/taxes levied on these products. The line graphs indicating price indices, however, reveal that domestic prices have not increased at the same pace as international prices. The MoPNG has proposed what they call ‘an equitable burden sharing’ between the government, companies, and consumers to ride the price roller coaster. Under the arrangement, consumers were asked to pay higher prices for the transportation fuels, with 3 rupees/litre and 2 rupees/litre increase in the prices of petrol and diesel respectively. The central government would be issuing oil bonds to the OMCs worth 12 000 rupees crore. Upstream companies ONGC and OIL have also been asked to share the burden providing crude oil to these companies at discounted prices. Standalone refineries like MRPL, KRL, and private refinery Reliance have been asked to supply LPG and kerosene to these OMCs at discounted rates. The discount is expected to be around 5000 rupees crore. This discount offered by the refiners to the OMCs is over and above the discounts given by them in supply of petrol and diesel. The upstream companies such as ONGC, GAIL, and OIL are expected to contribute towards meeting about one-third of the losses, which is equal to 13 000 rupees crore to 14 000 rupees crore. (The likely profit to the upstream oil companies on a 32 MT production per annum due to IPP is at least about 34 000 rupees crore at an international price of 45 dollars/bbl.) The frequent policy changes by the government, and often ad-hoc reactions to international developments, have rendered the pricing process opaque: at least to the common citizen. This distortionary pricing mechanism has led to many puzzling questions: So, who will be able to absorb how much of the price increases? Who are the beneficiaries of the current pricing regime? What are the implications for increasing efficiencies?

Therefore efforts should cater towards a rational pricing policy. In a democratic polity like India, that with coalition government, the pricing of petroleum is bound to be ticklish. However there are mechanisms that can be developed for a rational pricing of products so that a truly competitive environment develops. This would help not only in ensuring energy security but also integrated development of the sector in a coherent manner. The key should be to judiciously balance the issues and concerns of all stakeholders. There is certainly an imperative to develop a rational pricing policy which is revenue neutral as suggested by the Planning Commission.

Towards a Rational Petroleum Pricing Policy

The present pricing system is inadequate and hence failed to infuse competition in the sector. Therefore the issues should be dealt carefully while devising a rational pricing policy. Petroleum prices in India depend on four critical factors that need a careful examination for delineating a rational pricing policy: (i) prevailing international prices, upon which the government has no control, (ii) government’s source of revenue through customs and excise duties, (iii) cost of refining and marketing, and (iv) state level sales taxes. Each of these factors needs coherent policies through restructuring in order to have a rational petroleum pricing policies. There are broadly three pressing issues that need policy related outcomes:

·          A rational approach will be to equalise customs duty on crude and products

·          Besides arriving at a reasonable fixed excise duty regime for petrol and diesel

·          And, finally, to remove cartelisation of prices among the three retailers

There several policy directions which can be taken into account for rational petroleum pricing in India. Some of the policy directions are as follows:

·          There should be a fixed revenue target and fixed subsidy ceiling mechanism. Fixed revenue target would allow tax rates to float as per the prevailing prices. This would be valid for both consumers as well as excise duties. Moreover, time-bound fixed quantum of subsidies would also entail price movement either way, and it won’t be anymore subject to political maneuvering.

·          Equalize customs duty on crude and products to arrive at a reasonable fixed excise duty regime for petrol and diesel.

·          The marketing and refining companies should be allowed to fix their own prices as long as it confirms to a formulae based on the cost of import basket of crude oil. Thus the retail prices would be linked to global prices.

·          There is also need to free the marketing networks and allow other players to the arena. Moreover, individual retailers should be allowed to source their supplies thus ensuring that oil prices will remain competitive.

India’s Energy Security: Major Challenges  (Part – VII)

(Brainstorming Session)

Chair: I agree with you:  merchant plants, expansion of captive capacities, expedition of hydro must continue.  One of the most important basic issue is that private sector generation has not happened during last ten years though it started in 1992.  You would recall the days when in every minister’s statement there use to be lot of interest in saying that the private sector will set up 94,000 megawatt capacity.  But nothing happened, the reason being very simple that the customer was bankrupt.  I see on paper that unbundling has been done in most of the states but unbundling does not make it efficient and financially healthy.

How to expedite the health of distribution utilities is something so vital in the expansion of power sector generation capacities. When I go into a little more detail, I find that the most important issue is the system of management of utilities. In my comments to Parikh I had written that if you go to a SEB you still find - why in SEB, even in CEA -  designation such as Chief Engineer (Power), Chief Engineer (Accounts), Chief Engineer (Personnel) and then you have Chief Engineer (Legal). This is the concept of management without professionalism.  Unbundling has been followed by overstaffing.

Comment: No Sir, I respectfully submit that we need not depend on electricity boards.  World over we can see that there is going to be a direct contact between the producer and the consumer. The intermediation body called the utility was there when you had to take it along the wire, which was controlled by them. Now the wire need not be long. We are getting everyday on an average nearly half a dozen large enquiries as to how go about setting up captive power - from 25 megawatts to 200 megawatts. It can be coal based power generation, in the range of Rs 2.50 to Rs 3 comfortably and if you have your own coal mine it is Rs 2.

Chair: But what recommendations should we make in order to ensure that the distribution utilities become financially healthy? If that happens generation capacities will automatically come up even under the present regime.

Comment: Sir, that aspect has been really taken care of.  If I put up my power stations and if he were to carry it (the power), I’m going to pay the surcharge which is what he is charging to that class of consumers.  We have also said within a few years cross subsidy should be taken off.  I have done calculations for 12 states in India that if they keep increasing the tariff at an average of 5 to 8% per year, in seven to eight years many of them be able to reach the target levels without subsidy meanwhile there has to be a subsidy.

Sir, very simple issues which we have to tackle is that as long as the power demand for industry is going through a utility you will always have uncertainty of demand because there are different consumers.  Industry will have to look after it’s own requirements for which plenty of funds are available. If an industry wants to put up a 200 MW power station and share with the other units and he wants to raise money there will be no problem at all. What is stopping him is the coal supply or fuel supply. Now, earlier, at least there was a possibility of other fuels now it has come to a situation in this country that only coal is available, either imported coal or Indian coal. Both can be done at least on a ten year fixed price or an index price contracts with upper bound and lower bound that banks prescribe which is not possible in the case of others. Industry wants that kind of assurance from us. Industry does not say that you must give it at a fixed price. It says that it must know the certainty about the price levels.

Comment: In Surat Gujarat Refinery, GSPP and others like GSFC have put up power plants.  In Andhra you have got the case of equity gas. I am sure that the industry can take care of itself provided we have a pragmatic captive power policy. That is very clear, but the question is what do we do beyond that?

NEWS BRIEF

OIL & GAS

Videocon ropes in Oilex for NELP blk bids

April 4, 2006. Videocon Industries and Australian oil major, Oilex NL, have decided to jointly bid for oil and gas blocks under the NELP VI. The combine was also working out a plan to bid in coal bed methane (CBM) III. Under NELP VI, 55 exploration blocks will be awarded, which include 24 deepwater blocks, 6 shallow water and 25 onshore blocks. The government has presented 10 CBM blocks on offer under CBM III. Both companies are working together in the upstream sector for long. Apart from these, Videocon had won exploration rights for one block in Nigeria. Videocon is looking at increasing its presence in the West Asian and African countries. Videocon was bidding for 2 blocks in Jordan and the result was expected in 3 months. Videocon-Oilex combine with a few consortium partners (GAIL (India) Ltd, HPCL and BPCL) had won a block in South Oman Salt basin. The consortium will invest Rs 2000 crore ($449 mn) in 5 to 7 years for the production of oil and gas in Oman. GAIL, Oilex and Videocon have 25 per cent participating interest each in the consortium. Oilex Australia is the operator group for Oman block. Oilex has 30 per cent participating interest in production sharing contract covering the Cambay field located onshore Gujarat with Gujarat State Petroleum Corporation and Niko Resources. Oilex is the operator. Oilex is an oil and gas exploration company with a portfolio of exploration permits in the Surat, Eromanga, Otway Basins.

Reliance Energy seeks partner for oil hunt

April 3, 2006. Reliance Energy is scouting for partners with experience as operators in oil and gas exploration for striking a strategic alliance to bid for blocks under the NELP VI. As Reliance Energy does not have any experience in the exploration sector, it will have to be a non-operator in consortia due to NELP VI regulations. The company has started talks with global exploration and production majors. Most of the global oil majors — including Shell, Exxon Mobil, Chevron and BG — which had approached Reliance Industries for joint venture explorations.

RIL to foray into Mexico for E&P

April 2, 2006. RIL is in advanced negotiations with Mexican oil giant Petroleos Mexicanos (Pemex) for co-operation in exploration and development of oil and gas fields in shallow and deep- waters of the Gulf of Mexico. RIL is also pursuing refining and LNG opportunities in Mexico. Pemex is the world’s third largest oil producer and operates Cantabell, the second biggest oil field. India imports $400 mn (Rs 17.82 bn) of Mexican crude annually. Discussions are underway with Pemex for RIL’s participation in the Chicontopeck oil field, which contains 40 per cent of Mexican oil reserves. Pemex is keen on getting technical expertise from RIL in deep-sea oil and gas drilling. The two sides have already agreed to sign a non-commercial technology contract for co-operation. While Pemex is a currently a monopoly in Mexico with virtually no competition, the declining crude oil production and lack of technical expertise in deep sea and shallow water drilling has led the Mexican government to consider opening up its oil sector to private companies. Mexico is keen to participate with RIL and other Indian/foreign companies through multi-service contracts (MSCs). These contracts may eventually lead to equity participation in exploration and production in Mexico. The third round of bidding for MSCs, which will involve a blend of oil and gas field offerings is also on the anvil.

Petrobras, HPCL to jointly bid for NELP

April 1, 2006. Brazilian oil and gas major Petrobras has signed an MoU with HPCL to jointly bid for the 55 oil and gas exploration blocks being offered under the sixth round of the New Exploration and Licensing Policy. Indian petroleum minister, Murli Deora, presently in abroad for the road show to showcase the NELP-VI blocks. Many international oil and gas companies have already attended the road show. This includes BP Plc, Royal Dutch Shell, Total, Statoil, Chevron, BG, Repsol, Cairn Energy, Woodside, Petrobras, Maersk, Devon, ENI, Burren, BHP, Ensearch, Goepetrol and Premier oil. The road show comprised extensive and detailed presentations and one-on-one meetings with the companies. Major US oil companies like Exxon Mobil Corp. and ConocoPhillips are also interested in the latest round.

GAIL got 10 pc stake in Myanmar’s A-3 blk

March 31, 2006. Myanmar has formally approved GAIL’s proposal to pick up 10 per cent stake in A-3 block awarded to Daewoo International Corporation of Korea in 2004. GAIL had signed an assignment agreement for equity participation in the off-shore block last year. As per the production sharing contract, the assignment agreement required formal ratification of the Myanmar government. Drilling of the first exploratory well in A-3 block which completed recently has resulted in gas discovery. Appraisal of the discovered prospect and further exploratory drilling is likely to commence by the year-end. GAIL will be the preferred buyer to buy the Daewoo’s share of natural gas from the block. GAIL has commissioned detailed feasibility study for an onland gas pipeline route via north-east India.

Numaligarh Refinery to set up hydro-cracker, H₂ unit

April 3, 2006. Numaligarh Refinery Ltd (NRL), a BPCL subsidiary, is planning to set up a hydro-cracker and hydrogen unit to enhance production of Euro-III fuel and high-end distillates. The over Rs 300-crore ($67.5 mn) proposed project would also help the company to improve capacity utilisation. The pre-feasibility study is over and the detailed feasibility report (DFR) is expected next month. NRL currently utilises a little over 70 per cent of its rated capacity. Apart from crude availability, low rate of crude cut resulting into production of very high percentage of heavy end products restricts the company from improving capacity utilisation. The unit if implemented will help NRL extract higher refining margin as well as enhance capacity utilisation up to 110 per cent. The project will produce 167,000 tonne Euro-III motor spirit (MS). NRL previously had a negligible 5,000 tonne MS production capacity. The project is expected to boost capacity utilisation to over 80 per cent.

Oil firms' under-recoveries pegged at Rs 13 a litre

April 1, 2006. Oil Marketing Companies blended under-recoveries for auto fuels are currently estimated at Rs 3.5-4 a litre (prior to subsidy-sharing by upstream players such as ONGC), compared with 80-90 paise a litre levels in the December 2005 quarter, analysts said. Again, their blended under-recoveries for auto fuels were pegged at Rs 1.5-1.8 in mid-February 2006. Meanwhile, international prices of kerosene have reached $75 a barrel levels from $71-72 levels at the end of the third quarter of FY06. As a result, OMCs’ under-recoveries are estimated to have reached Rs 13 a litre (prior to subsidy-sharing by upstream players) over Rs 12 a litre levels in the December 2005 quarter, analysts said. However, in the case of LPG, under-recoveries are estimated to have dropped to Rs 160-165 a cylinder (prior to subsidy-sharing by upstream players) compared with Rs 175 a cylinder levels in the December 2005 quarter. This fall is being attributed to a decline in global LPG prices, which are currently hovering around $530-540 a tonne levels against $600 a tonne levels at the end of the third quarter of FY06, analysts said. LPG prices have declined largely owing to a gradual fall in heating oil requirements from consumers in the western countries. According to analysts, the total subsidy burden of the domestic oil industry for FY06 is pegged at Rs 38,000-39,000 crore ($8.52 bn- $8.74 bn). In the previous financial year, the burden of under-recoveries was estimated at Rs 20,100 crore ($4.51 bn).

CNPC may buy into Reliance refinery

March 31, 2006. Chinese oil giant China National Petroleum Corporation (CNPC) is believed to have joined the race with US energy majors Chevron and Exxon to pick up a stake in the Rs 27,000-crore ($6.06 bn) Jamnagar refinery project of Reliance Petroleum Ltd (RPL). CNPC's overseas operations include exploration and development of oil fields, pipeline transportation, refining and terminal marketing. Reliance and CNPC may be looking for a tie-up in any of these areas and there can be an equity participation also. 

IOC for first phase of Paradip refinery

March 31, 2006. The IOC has started work on the first phase of its proposed refinery at Paradip. IOC intended to build a Rs 25, 000 crore ($5.61 bn) petro-chemical complex at Paradip which included construction of a 15 mt crude oil refinery. The first phase of the project envisaged setting up of single point mooring (SPM), crude storage and pumping facility, transportation infrastructure and laying of Paradip-Haldia pipeline. The proposed complex will explore all available opportunities for export of finished products to countries in the Asia Pacific region and earn foreign exchange for the country.

Haldia refinery eyes record refining volumes

March 30, 2006. The Haldia refinery of Indian Oil Corporation Ltd expects to refine the highest-ever volume of crude this year.  It has already refined crude to the tune of 5.418 mt, surpassing last year's figure of 5.430 mt. The unit is waiting for the government's clearance on land for its Rs 2,000 crore ($450 mn) hydro-cracker unit that would enable the refinery to produce Euro-IV diesel. The project will be completed in 36-39 months' time. The new plant would also enhance the installed capacity to 7.5 mt from the current level of 5.5 mt.

ONGC eyes HP stake in MRPL

March 30, 2006. ONGC is eyeing Hindustan Petroleum Corporation’s 16.97 per cent stake in its subsidiary, Mangalore Refinery and Petrochemicals Ltd. With this, ONGC’s stake in the refinery will climb up to 88.57 per cent and the public sector major will become its sole promoter. The company had put up the proposal with the government. This is the second attempt of the public sector oil major to acquire the stake. The earlier one was thwarted when the disinvestment plan for Hindustan Petroleum was put on hold in 2003. ONGC has now revived the proposal, even as it plans to pump in Rs 8,000 crore ($1.8 bn) as investment to expand the refinery’s capacity to 15 mtpa. The current capacity of the Mangalore Refinery stands at 9.69 mtpa. The expansion is to be completed by 2009. 

Bina refinery set to get $1.35 bn loan

March 29, 2006. Bharat Petroleum Corporation Ltd has lined up Rs 6,000 crore ($1.35 bn) from a consortium of 14 banks for its much-awaited Bina refinery project. The project will be commissioned by 2008-09. The financial closure of the project will reach by April. The Bina refinery, jointly promoted by BPCL and Oman Oil Ltd with a 26 per cent stake each. The project would cost Rs 9,000 crore ($2.02 bn).

IOC, Gujarat Chemical Port pipeline soon

April 4, 2006. Indian Oil Corporation Limited plans to export surplus naphtha from its 13.7 mtpa Gujarat Refinery through Gujarat Chemicals Port Terminal Company Limited (GCPTCL) terminal located at Dahej in South Gujarat. IOCL said, the pipeline connecting Gujarat Refinery to Dahej GCPTCL will soon be completed. However, with limited avenues to dispose off naphtha in the domestic market, the product pipeline is expected to be used for transferring the surplus naphtha to Dahej GCPTCL terminal. At present Gujarat refinery transports its surplus naphtha through tankers and train to Kandla port and then exports it. With the new arrangement on commissioning of pipeline, IOCL’s flagship refinery will have major cost advantage with the commissioning of the pipeline. The Gujarat refinery to Dahej pipeline project consists of laying an 14-inch diameter, 112 km long 2.6 mtpa capacity product pipeline from Koyali near Baroda to the proposed Dahej terminal. The approved cost of the project is Rs 90.50 crore ($20 mn). The pipeline will provide for an assured means of evacuation of surplus products from land-locked Koyali refinery for further coastal movement and export. The pipeline is expected to be commissioned during the middle of the current year. The company is aiming at strengthening its product position capability in central India after commissioning the pipeline in December 2006. 

Amongst other projects, the company will construct a 160 km long pipeline from Lasariya on Sidhpur-Sanganer product pipeline to Chittaurgarh and will also set up depot facilities with an investment of Rs 127.68 crore ($28.64 mn). The project is anticipated to be completed by August 2006. IndianOil is also executing the Paradip Haldia crude oil pipeline project at a cost of Rs 1178 crore ($264 mn) in the eastern part of India. The project is likely to be completed in May 2006. The company is also planning to lay a petroleum product pipeline from Chennai to Bangalore in the financial year 2005-06.

Iran pipeline: Security issues worry oil cos

March 29, 2006. Public sector oil companies have raised energy security issues over transportation of gas from Iran through pipelines traversing Pakistan. All the public sector oil/gas companies have cited the dispute between Russia and Ukraine as an instance, in raising energy security concerns with the Government. Russia's Gazprom, early this year, had cut gas supplies to Ukraine over a pricing dispute. Ukraine, in turn, had removed gas meant for Europe for its own consumption. This resulted in supply shortfalls in large parts of Europe. Similar situation could not be ruled out with Pakistan, especially in view of the tense bilateral relations. Therefore constructing a pipeline through that country was likely to compromise energy security. Besides the proposed route passed through some of the volatile regions in Pakistan that could lead to supply disruptions. The current proposal envisages pipelining of gas from Iran's Pars gas fields to India with the supply point at either Barmer or Jaisalmer in Rajasthan, through a 2,775-km-long pipeline via Pakistan. The project estimated to cost at least $7 bn (Rs 312 bn) and is targeted to begin supply of 5 mt of gas per year for the country's power and fertiliser plants from 2010 onwards. Besides Pakistan would also be in a position for altering the right of way charges leading to a considerably escalated cost of the gas to users in India, mostly power utilities and fertiliser companies. These issues came to the forefront in the Russia-Ukraine dispute and had resulted in making such transnational pipelines redundant, unless it was between two neighbouring States. The oil majors said the preference was through sea-based transportation, through specialised ships. Petronet LNG already imports gas to its terminal Dahej from Qatar by ship. A similar operation is expected for gas imports to Kochi.

BPCL, MMTC tie-up for global petro trading

March 29, 2006. Bharat Petroleum Corporation Ltd has tied up with MMTC for entering international trading in petro products in a big way. BPCL, currently exporting certain products such as furnace oil and naphtha to neighbouring counties, sees great scope for global trading in petro products using the MMTC's international marketing network. The company has signed an MoU with MMTC under which both companies haves agreed to jointly operate in international trading in products such as LNG, bitumen, furnace oil, paraffin wax and base oil. Besides selling BPCL products and buying crude for its refineries, the plan is to buy and sell third party products. The companies may also explore setting up a joint venture in the future. BPCL's exports currently amounts to only about Rs 500 crore ($112 mn). BPCL will be using MMTC's Singapore subsidiary for buying and selling crude and petroleum products, chartering of ships and other trading activities.

Vat fuels up petroleum prices in Gujarat

April 4, 2006. With the implementation of value added tax (Vat) in Gujarat from April 1, the prices of petrol and diesel have increased by Re 1 per litre and 80 paise per litre, respectively. Petrol prices have been fixed at Rs 48.11 per litre in Saurashtra and Rajkot, while for diesel it is Rs 35.74 per litre. Private sector refiner Reliance Industries has increased the prices by 22 and 13 paise in petrol and diesel respectively. In spite of the hike the prices of petrol and diesel, distributed by the company, are lower than prices charged by the dealers in the region. The state government has imposed 26 per cent and 14 per cent tax on petrol and diesel respectively despite the direction given by the government of India to spare these fuel products from additional taxes. In states where Vat was implemented last year, a 12 per cent tax was levied. While in Gujarat it was as high as 26 per cent and 14 per cent for petrol and diesel respectively. This has made these petro-products costly as compared to other states. Though the petrol prices have been increased by 95 paise per litre and 79 paise per litre for diesel, the dealers rounded it off to Rs 1 per litre for petrol and 85 paise for diesel.

Gujarat urged to extend Vat benefit to fuel

April 1, 2006. The Federation of Gujarat Industries (FGI) has demanded that government should take decision in the interest of industry in the state to extend the benefit of value added tax (Vat) to the fuel used for captive power plants having capacity to produce 1,200 MW of electricity. Furnace oil, LDO, diesel and coal etc are used as fuel by these power plants. The demand has been raised after the government made it clear that any fuel used by captive power plants will not be given relief under Vat. Apparently, unit owners will not be reimbursed taxes paid for fuel, as it is not covered under Vat. As a result of this, production costs will increase.

SCI, domestic oil majors in JV talks

March 31, 2006. Shipping Corporation of India is in talks with domestic oil majors for setting up joint ventures for ferrying incremental tonnage, arising apart from the contract of affreightment (COA). COA is the contract for ferrying crude for oil majors while incremental tonnage is freight movement required apart from contract specifications. The company is also in dialogue with international owners of tankers and bulk carriers. Crude oil requirements are shooting up owing to increased refining capacities. Oil companies such as IOC, HPCL and BPCL would be required to ferry more crude. With the proposed joint venture, the oil majors would get shipping expertise while SCI would get assured business. Though joint venture model is not profitable for SCI, this would be the best option as vessel acquisition is delayed due to long government procedures.

GAIL, HPCL seek level-playing field

March 28, 2006. With petroleum sector companies increasingly feeling the need to acquire oil and gas assets abroad, both GAIL (India) Ltd and Hindustan Petroleum Corporation Ltd are pursuing the Government for a level playing field with other oil companies for equity investments overseas. GAIL has been seeking from the Government a special mechanism for overseas investments beyond Rs 300 crore ($67.36 mn). Currently, ONGC Videsh Ltd (OVL) and the Indian Oil Corporation-Oil India combine enjoy the special mechanism for overseas participation through an Empowered Group of Secretaries (EGS), which ensures single point approval for these companies on overseas investments beyond Rs 300 crore.

DGH accuses Cairn of breach of trust

March 28, 2006. The Directorate General of Hydrocarbons (DGH) has charged Cairn Energy (India) Ltd with “breach of trust” for not getting the total oil in-place reserve estimate in its Rajasthan block RJ-ON-90/1 validated by the DGH or its management committee. Cairn has claimed that the in-place reserves were in excess of 3.5 billion barrels against its earlier estimate of 2.2 billion barrels. Cairn’s letter to DGH management committee had provided a break-up of oil in place reserves. The letter described that the oil in place reserves are around 2.2 billion barrels and the remaining have been allocated to discoveries which are either not proved commercial or are yet to be appraised.

POWER

Satna Power to set up power plant

April 4, 2006. Satna Power Co Pvt Ltd has proposed to set up a 250 MW power plant in Madhya Pradesh. The firm is promoted by KSK Energy Ventures Ltd. Under the first phase, the company will set up two units of 125 MW, and later it will set up three units of 77 MW, all in Satna. The investment would be Rs 1,000 crore ($224 mn). This will be the first project that will take come up on the basis of a short-term renewable power purchase agreement (PPA). The company has reportedly signed a power purchase agreement with the Madhya Pradesh State Electricity Board and the state government may consider taking 11 per cent equity, with the balance remaining with KSK. The first phase of the plant will come up in 36 months from the date of the signing of the MoU. It will be a coal-linked plant and coal supply will be from the Bramhapuri mines of Chhindwara. The power will be supplied at Rs 2.20 per unit. The company has also sought support for obtaining coal from Chakha in Jharkhand or Chhattrasal in Madhya Pradesh. 

LNJ Bhilwara plans thermal foray

April 3, 2006. The Rs 2,000 crore ($450 mn) LNJ Bhilwara Group plans to foray into thermal power sector and would set up more hydroelectric plants as part of its business plan to expand total generation capacity to about 2,500 MW in 10 years from 450 MW now. It plans to set up a 300-500 MW coal-based power plants. It has already applied for a coal block in Madhya Pradesh through group flagship HEG Ltd. The group, which has two hydro power projects in Himachal Pradesh in joint venture with Norway-based S N Power, plans to set up more hydro projects in the state as well as neighbouring Uttaranchal.

NTPC plans to expand

April 3, 2006. NTPC Ltd is planning a capital expenditure of Rs 13,000 crore ($2.92 bn) during the current fiscal. The money will be used for expansion of its existing power projects and also to add few new projects. The company plans to expand capacity at its 1,000 MW Vindhyachal Power Project in Madhya Pradesh, the 1,500-MW Kehalgaon in Bihar and the 1,000-MW Sipat Super Thermal Power Project in Chhattisgarh. The company said that 70 per cent of the capital expenditure will be raised through debt and the remaining will come from the company's cash flow.

BHEL in talks for nuclear tie-up

April 1, 2006. Power equipment major Bharat Heavy Electricals Ltd (BHEL) is in talks with global nuclear players, including Alstom, GE Energy and Siemens, for possible tie-ups to enhance its nuclear capabilities. BHEL, which already supplies equipment to Nuclear Power Corporation of India Ltd (NPCIL) projects, is exploring the possibilities of a technical tie-up for high-end nuclear equipment. BHEL has also initiated talks with a Russian and three other leading global nuclear equipment suppliers firms. The proposed tie-up of BHEL with a foreign partner would mainly be for manufacturing equipment of 700 MW and 1000 MW capacities. BHEL has the capacity to manufacture equipment of up to 500 MW units.

NTPC signs pact with Petronet LNG

March 31, 2006. NTPC Ltd has signed an MoU with Petronet LNG Ltd for arranging liquefied natural gas for its stations. The LNG would be used to overcome shortage of gas at the existing gas power stations of the company. Its fourth unit at Rihand Super Thermal Power (STP) Project will commence commercial operation from April 1. After commissioning operations of the 500 MW unit IV, the total installed and commercial capacity would increase to 2,000 MW at the Super Thermal Power Project.

Govt plans 7 ultra mega power projects

March 30, 2006. Buoyed by the overwhelming response by the private developers for the Sasan and Mundra ultra mega power projects and forced by the shortage situations, the government is expanding plans for the 4000 MW plus ultra-mega power projects from an initial 5 to 7. Andhra Pradesh will be home to the seventh ultra mega power project. After Orissa, the Power Finance Corporation, the nodal agency for the groundwork on these projects, is looking at Andhra Pradesh. These projects are being set up in Sasan (Madhya Pradesh), Akaltara (Chattisgarh), Mundra (Gujarat), Ratnagiri (Andhra Pradesh), Orissa and Tadri-Karwar (Karnataka). The 7 projects will account for a capacity addition of 28,000 MW and would mean an investment of Rs 1,05,000 crore ($23.62 bn). The government is hoping that competitive bidding will result in a tariff of Rs 1.60 to Rs 1.80.

Agra set to get pollution-free power

March 29, 2006. The Uttar Pradesh Power Corporation Ltd (UPPCL) will be shortly setting up a natural gas-based power house for supplying up to 500 MW of pollution-free electricity to Agra and the rest of the cities encompassed in the Taj Trapezium Zone (TTZ). The powerhouse will come up between Agra and Mathura, and the company has deputed the Agra-based power discom, Dakshinanchal Vidyut Vitran Nigam Ltd (DVVNL), to work out the details and prepare a project report on the feasibility of setting up the power house in either Agra or Mathura. The initial capacity of the gas-based power house would be fixed at around 500 MW, though the actual amount of generation would be entirely dependent on the possibilities of ensuring a continuous gas supply to the power plant.  

Ukraine firm eyes Himachal

March 29, 2006. Petrovich, a top company of Ukraine, is keen to invest in the huge hydro-power and bio-technology sectors in Himachal Pradesh. It has a long experience in the hydro-power exploitation and would also proposes to invest in bio-technology in Himachal. Petrovich led a delegation from Ukraine to meet power officials in Himachal.

Actis to invest in pvt power projects

March 28, 2006. UK-based private equity firm Actis is set to actively invest in the domestic private power sector through its sister concern Globaleq. An emerging markets power operating company, Globaleq is focused on Africa, the Americas and Asia. The firm is bullish about private power generation projects in India and would be picking up stake in a few such projects. Globaleq already has one investment in India. The private equity firm, which has raised about $475 mn (Rs 21.16 bn) funds for the Indian market, is looking to invest actively in the infrastructure and FMCG sectors.

Gujarat to produce more power

March 28, 2006. As part of its efforts to enhance the power generation capacity of the state, the Gujarat government has planned to operationalise 112.5 MW gas based power plant at Dhuvaran in Khambhat by June 2006. The state government is also in the process of developing 250 MW lignite based power plant at Ghogha in Bhavnager district, to be jointly developed by Gujarat Power Corporation Limited and private sector capital investor, for which the state Government has accorded its approval to share holders agreement of the project. Many other power projects, including Pipavav power plant, are under different stages of development.

Sujana ties up with Deepak Cables

April 3, 2006. Sujana Metal Products Ltd and Deepak Cables Ltd have agreed to collaborate for bidding for large power transmission projects being put up by Power Grid Corporation of India Ltd and various State transmission companies. Sujana Metal is implementing the country's largest single location greenfield facility for manufacture of 0.1 mtpa of galvanised steel towers for power and telecom transmission projects.

PM launches Barh transmission work

March 29, 2006. Emphasising the need for a robust power system to achieve desired economic expansion and providing electricity to all, prime minister Manmohan Singh would soon convene a meeting of chief ministers for evolving a political consensus on various issues. He said this while launching work on the Rs 3,780 crore ($848 mn) Barh Transmission system to be developed by Powergrid Corporation Limited (PGCIL). Barh Transmission system has been planned to transfer power from Barh generation project of NTPC to the beneficiaries in Eastern, Northern and Western regions.

PSEB projects $718 mn for power import

March 28, 2006. Punjab State Electricity Board (PSEB) has projected a total expenditure of Rs 3200 crore ($718 mn) in the next fiscal for purchasing power from various sources to meet the growing demand for electricity in the state. This expenditure is up by Rs 700 crore ($157 mn) from last year's expenditure. The Board has tied up with Power Trading Corporation and other states' electricity boards for procuring 2600 MW power during April and October this year.

CIL gross profit jumps 75 pc

April 4, 2006. Even as the country faces coal shortage with several core sector industries resorting to imports, the state-owned Coal India Limited (CIL) has posted a record gross profit of Rs 8,388 crore ($1.88 bn), a 74.71 per cent jump over previous year’s Rs 4,801.52 crore ($1.08 bn). Net profit figures is understood to be close to Rs 5,000 crore ($1.12 bn), which is over 100 per cent increase over previous year’s net profit of Rs 2,424 crore ($544 mn). After a long gap, all the CIL subsidiaries, including Eastern Coalfields Ltd and Bharat Coking Coal Ltd have made profits during the last fiscal. The CIL has also paid an interim dividend of Rs 1,263 crore ($283 mn) to the government. The company’s productivity during the year under consideration has increased to 3.30 tonne per manshift from a level of 3.05 tonne per manshift during the previous fiscal.

India, US sign pact for FutureGen project

April 3, 2006. India signed an agreement with the US for participating in the $950-mn (Rs 42.25 bn) `FutureGen' project, which aims at producing electricity from coal without any carbon emission. Indian government will contribute $10 mn (Rs 445 mn) in the project. The FutureGen project is a public-private initiative to build and operate the world's first coal-based power plant in the US that removes and captures carbon dioxide while it produces electricity. The project, expected to be commissioned by 2012. Participation in the project would entitle India to full membership on the FutureGen Government Steering Committee to provide guidance on the project, relating to scope, design, objectives, testing and evaluation. India would also have access to reports and other project related information, access to Indian scientists and engineers for visiting project facility and a royalty-free licence in all countries to translate, reproduce and distribute reports arising from cooperation under the agreement. The FutureGen project is being touted as the first plant in the world to produce both electricity and commercial-grade hydrogen from coal simultaneously. The project will emit virtually no airborne pollutants, solid wastes would be converted to commercially valuable products and carbon gases would be captured before they escape into atmosphere.

Govt to rope in ADB for ultra power plants

April 2, 2006. The government plans to rope in the Asian Development Bank for financing 5 ultra mega power plants of 4,000 MW, each of which will require investment of Rs 15,000 crore to 20,000 crore ($3.37 bn- $4.49 bn), to boost the confidence of private developers and achieve faster financial closure. The power ministry held talks with ADB to involve the Manila-based multilateral funding agency in the ambitious programme for funding and other help for effective implementation of the projects. The Asian Development Bank is likely to approve a $300-mn (Rs 13.37 bn) loan to the Uttaranchal power sector project, which would augment the state’s power generation capacity and create exportable surplus by 2010.

Model schemes to boost rural electrification

April 2, 2006. In order to encourage large scale investment in the otherwise unattractive area of rural electrification, the Centre proposes to evolve model schemes in consultation with Reserve Bank of India (RBI) and National Bank for Agriculture and Rural Development (Nabard). Besides, to ensure revenue sustainability and improve services to consumers, the draft rural electrification policy has made a strong case for deployment of franchisees for management of local distribution in rural areas. Franchisees could be non-government organisations, users’ associations, cooperatives or individual entrepreneurs. The policy has suggested that the state government would also consider giving the responsibility to panchayat institutions if these have developed to the extent that they can undertake contractual obligations, raise resources from market and discharge associated legal responsibilities. The Centre is also mulling the option of an annuity-based approach for provision of capital subsidy for decentralised generation systems to ensure enforcement of performance guarantees, efficient operation and maintenance along with repairs and reliable power supply. The extent of such capital subsidy to these systems would be determined to achieve parity in consumer tariffs between remote villages yet to be electrified and adjoining grid connected villages. The policy aims at providing access to electricity to all households by 2009 and minimum lifeline consumption of 1 unit per household per day as a ‘merit’ good by 2012. The draft policy emphasises the need for seeking least cost options after taking into account full life cycle costs and explicit and implicit subsidies in different delivery options and mechanisms.

Energy PSUs may get Navratna status

March 31, 2006. Some energy Companies have been short listed for Navratna status, including Power Finance Corporation, Rural Electrification Corporation, Power Grid Corporation and the National Hydroelectric Power Corporation. The ministry of heavy industries and public enterprises, which sets parameters for Navratna aspirants, is inclined to include turnover as a criterion to allow only companies with a minimum size to qualify. Navratna status accords additional financial and managerial autonomy to a public sector company. At present, the financial parameters for Navratna status are primarily linked to a company’s profitability, such as the ratio of net profit to net worth.

MoP sets up task force to restructure APDRP

March 30, 2006. Learning from past experiences, the power ministry has preferred to hold consultations with states to restructure the accelerated power development and reform programme (APDRP) instead of releasing it after deliberations with the Planning Commission. The ministry may allocate the funds under the APDRP directly to utilities instead of routing it through state governments to avoid delays. The ministry has formed a task force chaired by former power secretary P Abraham to examine the issues related to APDRP including its achievements and short comings, problems of implementation and offer suggestions for its improvement. It has asked the task force to submit its report within three months. The Planning Commission had expressed its desire to prepare an action plan for restructuring APDRP in consultation with the power ministry. The ministry’s move to involve states and other stakeholders is crucial as it came under severe attack from various states on the draft tariff policy prepared in association with Crisil. Subsequently, the ministry had to amend its draft and hold talks with states before making the final draft. The task force, which comprises representatives of state utilities and regulatory commissions, will hold a series of consultations with states and other stakeholders before preparing its report. Under APDRP, 583 projects costing Rs 19,182.33 crore ($4.32 bn) have been sanctioned and an amount of Rs 5,934.34 crore ($1.34 bn) was released under the investment component besides Rs 3,700.27 crore ($832 mn) under the loan component provided by financial institutions. Nearly Rs 1,516.64 crore ($341 mn) have been released under the incentive component. So far 28 projects have been completed and more than 50 per cent work has been completed in 200 projects.

Uranium mining may be opened up

March 30, 2006. The Department of Atomic Energy (DAE) is contemplating outsourcing uranium exploration and mining under the ambit of Atomic Energy Act. Opening up uranium mines for private parties is the policy decision of the government, but DAE is exploring the possibility of exploration of uranium in-house as well as through outsourcing mode. Data interpretation and data collection could be part of the activities that DAE is contemplating to outsource. The Indo-US nuclear ties will open up avenues for the uranium industry and would open access to international uranium market for India. This would also enable the best utilisation of India's uranium resources and would add value to the available resources. The nuclear-energy programme of India was based on the fact that uranium resources in the country were modest as compared to others in the world.

Coal linkages for core sector hiked

March 28, 2006. The government has increased coal linkages for the core sector power, steel and cement sectors by about 5 mt to 90 mt for the first quarter of next fiscal year. Coal ministry said this has been done keeping in mind the growing requirements from core sector industries that have started facing acute coal shortages lately. As per the coal linkages approved by the government for the first quarter period, cement, steel and power sectors would get 91.2 mt of coal at notified prices, an increase of 4.8 mt. Of the approved linkage the power sector would be given the bulk of coal to the tune of 78.66 mt. This is about 3 mt more than linkage approved for the same period of current fiscal year. The captive power plants have been approved coal linkages of 5.4 mt, captive power plants of cement units 0.87 mt, captive power plants of steel units 2.16 mt. Country’s prime coal producer Coal India Limited (CIL) plans to increase coal under linkage to power sector to 271 mt during 2006-07. This is a marginal jump from current year’s CIL production of 254 mt for the power sector.

OIL & GAS

Eastern gas production at 150 bcm by ’30

April 3, 2006.  Russia forecast that Natural gas production from deposits in the east of the country could reach 150 bcm by 2030. The forecast was based on a program for the development of regional deposits, including anticipated growing demand for natural gas from China, the Asia-Pacific region, and domestic regional consumers. Natural-gas giant Gazprom and China National Petroleum Corporation signed a memorandum March 21 on Russian natural gas deliveries to China.

Gas exports to China are expected to come from West Siberia during the first stage of the project to build a gas pipeline system to meet the energy-hungry Asian country's needs, and later from East Siberia. A gas pipeline to China could be commissioned in 2011, with exports amounting to 30-38 bcm of gas a year at each stage by 2020. These projects would contribute to Russia's and therefore global energy security, which Russia has declared the No.1 issue for its presidency of the G8 in 2006.

Dolphin in pact with Ukraine's NaftoGaz

April 3, 2006. Oilfield services provider Dolphin Offshore Enterprises Ltd had inked a preliminary pact with Ukranian state-run firm NaftoGaz to jointly bid for projects in India and the Gulf. It may provide outsourcing services to NaftoGaz for projects in the Black Sea and other parts of the world.

Malaysia to invest $11.9 bn in E&P

April 1, 2006. Petronas is to invest $11.9 billion during the term of the 9 Malaysia Plan, of which 30 per cent will be dedicated to oil and gas exploration as well as development and production projects to boost long-term oil and gas supply. The remaining $8.3 billion would for upgrading oil and gas supply infrastructure. Malaysia's crude oil and condensates reserves stood at 5.3 bbbl in 2005 and were projected to last for 19 years. Crude oil and condensates production would be raised to average 826,600 b/d during 2006-2010 plan period from 718,200 b/d in 2001-2005. This would be a significant increase in the Malaysian national depletion policy, which has limited production to maximize revenue earnings and stretch domestic oil supply from indigenous sources.

Uzbek, S. Korea sign E&D agreement

March 31, 2006. Uzbekistan, South Korea signed an agreement for joint exploration and development of oil and gas fields in the central Asian country. Under a MoU signed among South Korea's National Oil Corp. (KNOC), Korea Gas Corp. (Kogas), and Uzbekisan's state-run Uzbeknefgaz, the South Korean firms have the exclusive right to explore and develop two oil fields and two gas fields. KNOC and will carry out preliminary exploration for 6 months in Chust-Pap and Namangen-Terachi in the eastern part of the country together with Uzbeknefgaz, while Kogas will cooperate in developing Surgil and Uzunkui gas fields.

 

California LNG offshore terminal proposed

April 4, 2006.  Texas-based Tidelands Oil & Gas Corp. may build a deepwater offshore liquefied natural gas (LNG) off Southern California, most likely within 12 miles of Long Beach. There is no date set for the opening of the offshore receiving terminal nor has its capacity for taking LNG been set. California consumes about 6.4 billion cubic feet per day of natural gas, half of that used to fuel power plants.No projects have been approved so far for offshore or onshore California, but Baja, Mexico has approved two ports, one by Chevron and another by Sempra Energy. San Diego-based Sempra is building an $800 million Energia Costa Azul terminal under constructions in Baja, Mexico. This project is the furthest along and should be completed in 2008 to be the first receiving LNG terminal on the West Coast. The company is contemplating rising its capacity to 2.5 billion cubic per day from 1 bcfd.

Frontier to build oil pipe to Wyoming refinery

April 4, 2006. Frontier Oil Corp. signed a transportation agreement on a crude oil pipeline that would relieve bottlenecks and allow expansions at its refinery in Wyoming. Frontier signed the agreement with Rocky Mountain Pipeline System LLC, a subsidiary of Pacific Energy Partners L.P., to support construction on the line from Guernsey, Wyoming, to Frontier's 52,000 barrels per day of crude processing in Cheyenne.

The $59 million line will be designed to transport 55,000 bpd of heavy crude and would be expandable to 90,000 bpd. It is expected to open in the second quarter of 2007, shortly after Frontier's planned expansion of its coker at Cheyenne from 10,000 bpd to 13,500 bpd. Frontier agreed to a 10-year commitment to ship 35,000 bpd on the pipeline and will lease about 300,000 barrels of storage capacity in the Rocky Mountain tank farm.

NEGP cost $10.5 bn to build  - Gazprom

April 4, 2006.  Energy giant Gazprom estimated the construction cost of the North European Gas Pipeline at $10.5 billion. The overland section of the North European Gas Pipeline (NEGP), connecting Russia and Germany along the Baltic seabed, would cost roughly $6 bln, and the underwater part $4.5 bn. The construction plan includes two parallel gas pipeline legs, each 750 miles long. The first stage will see construction of one leg with capacity of 27.5 bcm, and the second phase will double the NEGP's capacity to 55 bcm of natural gas per year.

The NEGP is designed to create a direct route for natural gas deliveries from Russia to its biggest market in Western Europe, bypassing transit countries Ukraine and Poland. Gas deliveries to Turkey via the 16 bcm Blue Stream pipeline in 2005 amounted to 5 bcm, since the Turkish infrastructure was unable to deal with pipeline's overall capacity, adding that the Turkish authorities are planning to invest in improving infrastructure. Blue Stream-2 may also be built, as Gazprom is considering gas deliveries to southern European region via this route. The 757-mile pipeline was constructed under a 1998 agreement for sales of Russian natural gas to Turkey. It comprises a 222-mile land section in Russia from Izobilnoye to Dzhugba on the Black Sea coast, a 235-mile along the Black Sea floor connecting Dzhugba to Samsun on the Turkish coast, and a 300-mile link from Samsun to Ankara.

Gazprom mulls $3 bn pipeline repair until ’10

April 3, 2006. Energy giant Gazprom would have to invest $3 billion annually in the reconstruction of natural gas pipelines in 2007-2010. Reconstruction will help Gazprom increase supplies by 24 bcm a year, including to foreign customers. In 2006, Gazprom's investment will total 310.1 billion rubles ($11.2 billion), including 278.42 billion rubles ($10.05 billion) of capital investment.

Russia works for foothold on LNG market

April 1, 2006. Russian gas monopolist, Gazprom, intends to join forces with key players on the market of liquefied natural gas (LNG) for operations in the North American LNG market. The company is establishing partner relations with a number of major players in this field. Gazprom intends to participate in all stages of this work. Gazprom also plans to win 10 per cent of the US gas market by 2010 and subsequently to double its share. There is no global market for natural gas so far due to high transportation outlays, depending on the distance. Besides, producers and consumers are tightly linked to each other by the policy of agreements and pipelines. As of now, Gazprom depends to a large extent on the existence of pipelines and on the attitudes of transit countries.

LNG is a positive alternative to pipeline gas and is winning a growing share of the market. In 2004, its share in the volume of global natural gas exports was more than 25 per cent. It is produced by cooling natural gas to 1620 C (323.60 F), which decreases its volume by 600 times, making for efficient transportation and storage. Today, LNG accounts for about 6 per cent of the global consumption of natural gas.

The International Energy Agency has calculated that LNG’s share of the market will grow to 16 per cent by 2030. Though spending on LNG production remains high, it is quickly approaching natural gas production costs. Compared to natural pipeline gas, the delivery of LNG does not depend on transit countries, which is a great advantage. The recent problems with gas transportation to Europe created by the conflict between Russia and Ukraine in early 2006 are playing into the hands of LNG producers.

Until recently, Russia relied on stable gas deliveries to Europe, postponing the creation of LNG production facilities and the choice of new routes for the delivery of gas. This has endangered Gazprom’s monopoly in Europe and is hindering its expansion in Asia and North America. But judging by Gazprom’s recent statements, the situation is gradually changing in its favour. The main projects for the creation of LNG production facilities in Russia are connected with the possible deliveries of LNG to the US and East Asia, where Russian natural gas could not be delivered by pipeline in the foreseeable future. Gazprom plans to produce LNG for deliveries to the North American market at the Kharasoveiskoye and Shtokman fields, while independent LNG producer, Novatek, is working on the Yamal Peninsula. Another liquefaction plant is slated to be built in Ust Luga in cooperation with Petro-Canada.

SG-Trans, Russia’s biggest transporter of liquefied gas, plans to build a terminal for 0.6 million metric tonne of LNG there. The development plans of the Shtokman field provide for the delivery of gas to the LNG plant, which should turn out about 20 million metric tonne annually. About 90 per cent of it is to be sold in the US and Canada and in northern Europe.

Russia’s LNG projects in the Far East are meant to provide fuel to the country’s East Asian neighbours, namely Japan, South Korea and China. The pipeline delivery plans there are lagging behind LNG prospects, primarily the Sakhalin projects organised by transnational companies. Two LNG production lines are being built under the Sakhalin II project.

Until recently, the development of Russia’s raw materials base lagged behind its proclaimed export ambitions. The current price situation on the fuel market is favourable for the growth of investment into the gas sector. But Russia should decide what would suit its national interests better - the construction of new pipelines or conversion to LNG production and the advancement to new markets. The former plan stipulates the simultaneous expansion of the national gas transportation grid to areas that lack gas now, as well as the use of the national construction industry capacities. But the latter plan looks promising, too, because of the advance to new markets and the adjustment to the global trends of technical progress and energy consumption. It is apparent that Russia, despite its unique gas resources, will be unable to simultaneously cope with both tasks - build gas pipelines in all directions and create major LNG production facilities. However, the production of LNG is a highly promising sphere of development in the Russian gas sector that deserves close attention.

SSGC, Tuwairqi Steel sign gas sales agreement

March 31, 2006. Sui Southern Gas Company (SSGC) and Tuwairqi Steel Mills Limited have signed the Head of Terms (HOT) that would lead to a General Sales Agreement (GSA) between the two companies for supply of natural gas over a 10-year period, with the option to extend the arrangement for another 10 years. The HOT provides for the supply of 45 mmcfd of piped natural gas from SSGC to Tuwairqi Steel Mills over a period of 10 years, with the option to extend the arrangement for another 10 years. Only 5 mmcfd of natural gas will be used as fuel, whereas the remaining will be used in the processing of iron ore, using an advanced Direct Reduced Iron (DRI) technology for the production of steel billets.

WPS sells interest in Guardian Pipeline

March 30, 2006. WPS Resources Corporation has sold its one-third interest in Guardian Pipeline, L.L.C. to Northern Border Partners, L.P. for $38.5 million, which should result in an after tax gain for WPS Resources of approximately $3.7 million. The purchase is expected to close by the end of April 2006, subject to receipt of all necessary approvals.

Gazprom Seeks 30 per cent of Europe's Market

March 30, 2006. Gas monopoly Gazprom wants to boost its share of Europe's gas market to 30 percent from 25 percent by buying into gas storage, gas marketing and power firms. The world's largest gas producer has previously said it would only try to maintain its existing share in the growing European market and try to expand in Asia and the United States, mostly by supplying liquefied natural gas. The news comes with memories fresh in Europe of a pricing dispute between Gazprom and Ukraine, the transit route for 80 percent of Russia's gas exports to Europe, that sparked major concerns over energy supply security and led to disruptions in supplies to European consumers such as Italy and Hungary. The gas crisis thrust energy security to the top of the agenda for Russia's Group of Eight presidency, while the European Union has called for a broad energy partnership to stabilize the situation. Gazprom has been trying to acquire gas marketing firms, underground gas storage and power companies in countries including Germany, Italy, Belgium, Hungary and Britain.

Petrobras to more than double exports by 2010

March 29, 2006. Brazil's state oil company Petrobras, which plans to meet all the country's oil needs with its own output next month, plans to more than double oil exports by 2010 to 550,000 barrels per day. Petrobras should also be producing more than 400,000 bpd abroad by 2010, up from about 160,000 bpd now, which means total foreign sales of around one million bpd then. The company produced a record 1.76 million bpd of mainly heavy crude in February and the planned entry in operation of its P-50 offshore rig in the Albacora Leste field in April should guarantee oil self-sufficiency which now consumes around 1.8 million bpd. The company is also planning to boost the Pasadena, Texas, refinery capacity to process 150,000 bpd of heavier crude.

Sakhalin I budget set at $1.6 bn for ’06

April 3, 2006.   The 2006 expense budget for the Sakhalin I project has been set at $1.6 billion. Preliminary estimates, Sakhalin I oil exports will begin in the summer of 2006 and reach a projected output capacity of 1 million metric tons per month by 2007. The Sakhalin I project, the largest foreign direct investment project in Russia, is an international consortium comprised of operator Exxon Neftegas (30 per cent), Russia's Rosneft (20 per cent), India's ONGC (20 per cent), and Japan's SODECO (30 per cent), to develop the Arkutun-Dagi, Odoptu, and Chaivo deposits on the island's northeastern shelf. Their recoverable reserves are estimated at 2.3 billion barrels of oil and 17.1 trillion cubic feet of natural gas.

Ukraine, Turkmenistan settle gas differences

March 31, 2006. Ukraine's national oil and gas company had ironed out all its problems concerning natural gas supply obligations with former Soviet stable-mate Turkmenistan. They signed an agreement on bilateral settlements on natural gas shipments to Ukraine in 2003-05. Under the agreement, the $88.34 million pre-payment that Ukraine made for 2006 gas deliveries will be counted toward its 2003-05 gas debt to Turkmenistan, thereby clearing the hard currency part of the Ukrainian company's debt and recognizing a $68 million commodities debt that it pledged to discharge before August 10, 2006. The agreement also said that in the second half of 2006, Ashgabat will supply natural gas "at prices acceptable to Ukraine." Under an intergovernmental agreement last year, the Central Asian republic was to deliver 40 bcm of gas to Ukraine at $50 per 1000 cu m in the first half of 2006 and at $60 per 1000 cu m in the second half.

Oil companies sign transition pacts with Venezuela

March 31, 2006. Seventeen oil companies operating in Venezuela signed accords agreeing to convert operating service agreements to state majority joint ventures. The Venezuela administration last year declared the 32 operating agreements illegal as part of efforts to wrest control of the oil industry from private companies. ompanies that signed the transition accords included oil majors such as U.S. based Chevron, and Spain's Repsol, as well as smaller companies like Harvest Natural Resources. The operating agreements, signed during the 1990s as part of a push for private investment in the oil sector, functioned as subcontracting agreements in which foreign and private companies pumped around 500,000 barrels per day (bpd) of oil on behalf of PDVSA. The agreements were overly generous to private companies and did not allow the government to reap the benefits of oil profits. For nearly a year, operators have been engaged in complicated negotiations with energy authorities to convert to the new businesses. Companies last year signed similar transition accords, but could not complete the migration because the legislature had not approved the model contract.

Petronas reports 5-year spending plans

March 31, 2006. Malaysia's state-run Petronas reported plans to invest 43.8 billion ringgit ($11.9 billion) during the country's ninth 5-year plan, which will run 2006-10.  The Malaysian government said about 13.1 billion ringgit will be spent on oil and gas exploration, development, and production. It said the remaining 30.7 billion ringgit will be used to upgrade the oil and gas supply infrastructure, to increase the number of retail outlets, and to expand petrochemical operations. The government estimated the country's crude oil and condensate reserves at 5.3 billion bbl in 2005. It forecast production of crude oil and condensates to average 826,600 b/d during the new 5-year plan, compared with 718,200 b/d in 2001-05.

Norway to restrict offshore oil exploration

March 31, 2006. The Norway government said oil exploration in promising Arctic coastal areas would be restricted until at least 2010 to protect the environment and fisheries. The long-awaited plan covers the Norwegian sector of the Barents Sea, and the region around the Lofoten islands of northern Norway. The coalition government's plan bars or restricts oil activity in a zone ranging from 35 kilometers (21 miles) to 65 kilometers (40 miles) from the mainland and islands in the Arctic.

The area is believed to be rich in offshore oil and natural gas, but also has bountiful fishing stocks. The harsh and cold weather of the Arctic also make the region's ecology especially vulnerable to oil spills. Some of the waters covered include exploration blocks that have been highly sought after by oil companies, but are in areas where environmentalists and fishermen have opposed petroleum development.

Norway has been looking to the Arctic, especially the Barents Sea, for new reserves to maintain production that make it the world's third largest oil exporter, after Saudi Arabia and Russia. Arctic oil development has been a sore point within the three-party center-left government, which was split on how to proceed. As a compromise, the plan says the areas will not be opened in the current parliamentary term, which lasts through 2009.

Environmental groups condemned the plan, while the fishing industry applauded it.It bars all oil activity within 35 kilometers (21 miles) of coasts of the northernmost provinces, Troms and Finnmark, and new drilling with 50 kilometers (30 miles) of the coast. It also bans drilling with 65 kilometers (40 miles)of the coast from March through August. The plan declares key fishing banks around the Lofoten and Vesteraalen islands, just of the northwestern coast, as petroleum free until 2010.

Korea, Uzbekistan agree on oil, gas plans

March 30, 2006. Korea and Uzbekistan signed an agreement to jointly explore and develop oil and gas fields in the energy-abundant Central Asian nation. The National Oil Corp. Korea Gas Corp. and Uzbeknefgaz signed the memorandum of understanding giving Korea exclusive rights to explore and extract from two oil and two gas fields in the former Soviet country. The KNOC will begin its preliminary exploration in Chust-Pap and Namangen-Terachi in the eastern part of Uzbekistan along with state-run oil and gas company Uzbeknefgaz for six months. Based on the outcome of the exploration, the KNOC will decide whether to sign development contracts sometime around Dec. 2006.

SSGCL & SNGPL seek gas tariff hike

March 29, 2006. The two gas utilities SSGCL and SNGPL have sought a further increase of Rs30 and Rs14 per unit, respectively, in the natural gas tariff for all consumers with effect from July 1, 2006. The Oil and Gas Regulatory Authority (Ogra) has formally admitted petitions filed by the Sui Southern Gas Company Limited (SSGCL) and Sui Northern Gas Pipelines Limited (SNGPL) for public hearing early next month.

The two utilities had together estimated a shortfall of about Rs19.2 billion in revenue during the first six months (July 1 to December 31, 2006) of the next fiscal year and wanted to bridge this shortfall to ensure 17.5 per cent and 17 per cent guaranteed rate of return. Both the companies have quoted increase in wellhead price of gas owing to its indexation with the international oil price, inflation and operation and maintenance cost as reasons for the proposed increase in tariff.

China needs plan to meet energy target

March 29, 2006. China's government must produce concrete plans to curb energy demand growth and pollution emissions before oil markets can judge how serious the country is about meeting its targets. China's target to cut the energy intensity of the economy by 20 percent over five years and pollution emissions by 10 percent, represented a 4 percent-plus annual reduction in energy demand growth versus Gross National Product growth. Surging energy demand in China and other developing economies has been cited as a major factor pushing oil prices higher and pinching spare global production capacity. But CS cautioned that skeptics of China's ability to hit its targets should note that the country's government often puts its intentions in the arena before it releases concrete plans to meet targets. CS expects the Chinese government to try and shift the focus of economic growth away from continued high investment in heavy industries like steel, cement, aluminum, autos and construction and onto a more consumer-led model of expansion.

Canada won't derail Alaska gas pipeline

March 28, 2006. Canada will not stand in the way of a $20 billion natural gas pipeline along the Alaska Highway, because its construction is vital to the economies of Alberta, the Yukon Territory and British Columbia. The proposal calls for a pipeline to carry the 35 trillion cubic feet of known natural gas in Alaska's North Slope through western Canada to the lower 48 U.S. states.

Energy companies call for solutions to natural gas supply issues

March 28, 2006. Anadarko Petroleum Corp., along with several of the nation's largest independent natural gas producers and industrial consumers, held a news conference in Washington D.C. to call for immediate action to address dwindling U.S. natural gas supplies. The ad hoc alliance of CEOs urged Congress and the Bush Administration to open up offshore waters of the U.S. where oil and gas exploration and drilling is currently banned.

These include portions of the Eastern Gulf of Mexico, the East and West coasts and offshore Alaska. The companies also urged action to reduce permitting backlogs and to accelerate the processing of applications by oil and gas companies to explore and drill in onshore federal lands. Minerals Management Service studies indicate there are 1,040 trillion cubic feet of gas waiting to be discovered, yet can’t get access to much of this resource because of various government restrictions.

Tajikistan, Gazprom to sign gas joint venture

March 28, 2006. Tajikstan and Gazprom would sign a memorandum on creating the joint venture. Under the deal, Gazprom will develop four gas fields - Sarikamysh and Rengan in the west, and Sargazon and Olimtoi in the south. Proven gas resources in Sarikamysh and Rengan total 40 billion cubic meters and Sargazon 30 billion, while the Olimtoi deposit has yet to be prospected.

Power

FP&L to build another nuclear plant

April 3, 2006. Florida Power & Light Co. plans to increase its power generating resources about 27 per cent over the next 10 years to meet anticipated customer growth and increasing customer electricity needs. Some of that generation may come from nuclear resources. Beyond the 10-year horizon, FP&L to build a new nuclear power plant and it notified the Nuclear Regulatory Commission of its intent to submit a license application in 2009 for a new nuclear power plant in Florida.

Russian-built reactor at NPP in China soon

March 31, 2006. A power unit built using Russian know-how at a nuclear power plant in China will start generating electricity in the near future. The construction delays were due to the unique nature of the unit. The generator would be at commercial generating capacity by yearend. The second unit will become operational in the fall of 2006 and will start producing electricity in the beginning of 2007.

Tianwan NPP, located in Jiangsu Province in Eastern China, is a major link in China's nuclear program, with an estimated annual electricity output of 14 billion KWh. The plant is running the Russian ASE-91 unit, an advanced model based on the older WWER-1000/320 series. Russia and China signed a contract for construction of two reactors at the Tianwan NPP in December 1997.

PG&E to supply 1,780 MW in gas plant

April 4, 2006. Pacific Gas & Electric Co., California's largest utility will add 1,780 MW of power supplied by four new gas-fired plants by 2010 in a $1.5 billion venture. One of the new power stations will be owned by the utility, and the rest will be owned by others with long-tern contracts to provide power to PG&E.

Australia, China sign uranium trade deal

April 4, 2006. Australia and China signed a nuclear safeguards deal that set the stage for huge uranium exports to Beijing for its power industry. They signed the nuclear safeguards deal “Given China’s high projected growth in electricity demand over the coming years, there are clear environmental benefits in diversifying from fossil fuels to low greenhouse-emission technologies such as nuclear power.” China is expected to build 40 to 50 nuclear power plants over the next 20 years and needs steady supplies of uranium. Its own uranium stocks are dwindling, not very rich and difficult to extract.

Australia has about 40 per cent of the world’s known uranium reserves, but it will only export to countries that have signed the UN Nuclear Non-Proliferation Treaty (NPT) and who also agree to a separate bilateral safeguards deal. India also wants to buy uranium from Australia, but has not signed the NPT and Australia, not planning to change his strict uranium trade policy just because New Delhi signed a nuclear technology deal with the United States. The US-India deal agreed last month requires New Delhi to separate its military and civil nuclear facilities and open civilian plants to inspections in return for US nuclear fuel and technology, but still needs approval from the US Congress. Australia only has three operating uranium mines, owned by BHP Billiton, Rio Tinto and General Atomics of the United States. Big uranium exports to China were unlikely to start until 2010. China’s predicted uranium consumption was estimated at 20,000 tons a year, while Australia currently produced only about 10,000 tons a year from its existing three mines. Extra capacity would be needed to supply China. Australia has 19 bilateral nuclear safeguard agreements covering 36 countries, including the United States, France, Britain, Mexico, Japan, Finland and South Korea.

German Utilities to invest $36.4 bn in power plants

April 4, 2006.  E.ON AG, RWE AG and other German utilities plan to spend 30 billion euros ($36.4 billion) on new power plants as Chancellor Angela Merkel seeks to ensure secure and cheaper electricity supplies for Europe's biggest economy. Utilities plan to invest the money into power stations and power grids by 2012. Renewable energy suppliers plan to invest as much as 40 billion euros in the period. Power prices in Germany more than tripled in five years and cost 0.4 percentage points in growth each year. Utilities' request to extend the lifespan of their nuclear-power stations will continue to be discussed. Utilities including E.ON, RWE, Vattenfall Europe AG and Energie Baden-Wuerttemberg AG had already said they plan to invest 40 billion euros in new plants by 2020 and the same amount in networks.

Korea to help Indonesia develop nuclear power

April 4, 2006. South Korea, one of the world's biggest oil and natural gas importers, wants to help Indonesia develop nuclear power. Nuclear power plays an important role in providing an alternative source of energy in South Korea, which imports all of its oil and liquefied gas. South Korea currently has 20 nuclear reactors providing some 40 percent of the country's electricity. The joint commission will meet at the foreign minister-level once every two years and the annual meeting of the commission will be held at the level of senior officials. The commission is intended to promote consultation and cooperation between the two countries in fields where they have a mutual interest.

Taiwan uranium sales approved by China - Australia

April 4, 2006. Two Australian mining companies recently entered contracts to sell uranium to Taiwan. Australia signed a deal setting the stage for uranium exports to China. Energy Resources of Australia Ltd. and BHP Billiton Ltd./Plc. had contracts to sell uranium to Taiwan.  Australia which has a "one-China" policy - negotiated arrangements with the United States in 2002 that made it possible to export Australian uranium to Taiwan via the United States, although contracts were only entered into during the past year.

Hydro thinks coal as power runs short

March 30, 2006. B.C. Hydro threw open the doors to public debate about a radical reshaping of the province's electricity mix by acknowledging that a coal-fired generation plant could be on the horizon. The Crown corporation is "neutral" on the types of energy projects it will accept as part of its effort to restore B.C.'s independence from imported sources of electricity. B.C. could be importing as much as 45 per cent of its electricity from spot-trading markets in Alberta and the U.S. Pacific Northwest within 20 years leaving the province's residents and industries increasingly vulnerable to price volatility and supply risk. The document shows that B.C. has been in an electricity deficit position for five years and projects that deficit to increase as the province grows - unless strong measures are taken to avert it.

World powers to discuss next steps in Iran crisis

29 March 2006. Six world powers were gathering in Berlin to discuss the next steps in dealing with Iran's nuclear programme, with Russia and China looking for assurances that there are no plans to use force against Tehran. The U.N. Security Council unanimously adopted a "presidential statement" calling on Iran to freeze its uranium enrichment programme, which can produce fuel for atom bombs. It also requests a report in 30 days from the U.N. nuclear watchdog in Vienna on Iran's cooperation with the agency's demands. The Council statement was the product of weeks of negotiations among the five veto-wielding permanent members of the Security Council - Britain, France, China, Russia and the United States. The final text was softened to remove language Moscow and Beijing feared could lead to punitive measures.

Bangladesh to float power firms this year

March 29, 2006. Bangladesh plans to partly privatise its power industry this year, its biggest sale of government assets and a potential boost for the nation’s tiny $3 billion stock market. Stakes of 25 per cent in Power Grid Company of Bangladesh (PGCB), a bulk transmissions firm, and Dhaka Electric Supply Company (DESCO), which distributes power in the capital, will be sold to investors by mid-May.

MSPL 1^st domestic firm to have 0.1 GW wind cap

April 4, 2006. MSPL Ltd, the largest producer of wind energy in the country, commissioned a 20 MW wind energy project at Dhule to become the first domestic firm to have over 100 MW of installed capacity in the wind energy sector. At present, it is operating three wind farms located in Karnataka and Maharashtra with total installed capacity of 85.6 MW.  The Dhule wind energy project comprising of 16 turbines of 1,250 kilo watt (kW) each has been set up at a capital investment of Rs 100 crore ($22.43 mn) and the plant has been sourced from Suzlon Ltd.

EcoSecurities in pact with Amruthakrishna to buy CERs

April 3, 2006. EcoSecurities Group Plc, the originator of carbon credit projects, and Amruthakrishna Power Generation Ltd, a power solutions and industrial consultancy provider, have signed a purchase agreement to buy certified emission reductions (CERs) from 4 different biomass power projects across Andhra Pradesh with generation capacity ranging between 6 MW and 15 MW. EcoSecurities would provide Amruthakrishna Power Generation with greenhouse gas mitigation services. Both companies have agreed to work together closely in order to develop further carbon reduction projects, particularly in the field of biomass.

GE to promote rural electrification

April 1, 2006. US Agency for International Development (USAID), in alliance with General Electricals (GE), have identified several villages in India for promoting rural electrification, using renewable energy technologies like bio gas. The consortium has already started conducting the feasibility analysis of a bio gas plant in a remote village in Tamil Nadu called Gandhigram. Some sites in Maharashtra and Karnataka have also been taken under consideration. USAID hopes to identify three more potential sites within a few months. USAID is heavily counting on the electricity generation from the bio gas, as there would be no power wheeling costs in the process. The plant capacities would be from 330 kW and above, depending on the needs and location of the villages. USAID will contribute up to $0.6 mn (Rs 26.76 mn) to the programme, while GE and its worldwide network of experts and partners will invest up to $2.7 mn (Rs 120 mn) in direct and indirect funding. The consortium has been in talks with the power ministry and the state energy development authorities for long, which has yeilded positive results. For the rural electrification program, the GE Global Research Center in Bangalore has developed an integrated hybrid technology model, which combines various forms of renewable energy, and provides customised power solutions based on availability of local fuel resources. GE’s Jenbacher engines operate on a variety of alternative or specialty fuels including biogas, crop residue, municipal solid waste, landfill, coal mine methane and industrial waste gases.

Sharp to sell solar heating systems

March 31, 2006. Consumer electronics major Sharp is planning a foray in the solar heating system market in the country. The company is currently studying the Indian market for its solar energy systems and may introduce solar panels by September 2006. A world leader in solar technology, Sharp currently exports solar panels to southeast Asia, Europe and other markets. 

IL&FS will manage Maharashtra energy fund

March 29, 2006. Infrastructure Leasing & Financial Services (ILFS) will manage the Maharashtra government's seed fund for non-conventional energy, called Urja Ankur Nidhi which will come into existence from the beginning of the next financial year. Last year the state government had announced its intention to set up a fund for promoting non-conventional energy in the state. The size of the fund will be Rs 418 crore ($93.72 mn), of which the state government will invest Rs 218 crore ($ 48.88 mn) over a period of three years and IL&FS will in bring remaining part. IL&FS has also been given the complete responsibility of managing the fund.

CHS  & US BioEnergy  marketing  joint venture

April 4, 2006. CHS Inc., one of the nation's leading energy and grain-based foods companies, and US BioEnergy Corporation, an ethanol production and management company have entered into a joint ownership of an ethanol and biodiesel marketing company. The joint venture includes current CHS wholesale ethanol and biodiesel marketing, "spot" sales and related storage and rail car transportation arrangements and combines US BioEnergy's current ethanol marketing contracts of over 200 million gallons annually through United Bio Energy Fuels, LLC, ("UBE Fuels") wholesale storage and rail transportation contracts and the marketing of ethanol and biodiesel from all current and future US BioEnergy plants for a limited term. CHS has marketed ethanol-blended fuels for more than 25 years and currently is one of the nation's largest suppliers of blended fuel products at 500 million gallons annually, distributed through 64 terminals. US BioEnergy currently has two ethanol plants under construction, US Bio Albert City, a 100 million gallons/year (mgy) plant in Iowa and US Bio Woodbury, a 45 mgy plant in Michigan.

Petrobras to cooperate with Indian, UK firms

March 31, 2006. Bharat Petroleum Corp. Ltd. (BPCL) signed a MoU with Brazil's state-owned Petroleo Brasileiro SA and Foresight Oil Ltd. of the UK to cooperate in upstream, midstream, and downstream activities in India, Brazil, and elsewhere. BPCL would participate with Petrobras and Foresight on blocks offered in the sixth round of India's New Exploration Licensing Policy bidding.

Renewable energy target needs more wind power

March 31, 2006. The New Zealand Wind Energy Association said the Government could still meet its renewable energy targets for 2012 if it allowed network companies to develop wind farms. The Government announced earlier this week that it would need to update the national energy and efficiency strategy because its targets looked unlikely to be met.  The Wind Energy Association said that wind energy development would be a major contributor to the original target for 2012, but the target could still be met if network companies are allowed to build wind farms in their own right. If more farms were built in some of the remote areas in New Zealand, the nation could reduce transmission costs and add to the local security of power supply. The Association was very disappointed that Eastland Network had been recently prohibited by the Commerce Commission to build a wind farm in the Gisborne area. Many of the network companies are community owned and this would enable the people in the area to feel more involved in wind generation. The Wind Energy Association believed that any network company investing in a wind farm should have full governance control. The New Zealand Wind Energy Association supported the work carried out by the Energy Efficiency and Conservation Authority but noted that they were restricted from achieving a number of targets by current Government polices. The NZWEA has more than 60 members including some of New Zealand’s largest electricity generators and lines companies.

RWE plans 1 bn euro carbon-free coal power plant

March 30, 2006. RWE plans to invest 1 billion euros ($1.20 billion) in a new coal-fired power plant that will not emit carbon dioxide, the first of its kind in the world. The company aims to have the 400-450 MW plant ready in 2014. The total investment included the power plant and the transport and storage of carbon dioxide (CO2), a greenhouse gas linked by scientists to global warming. Germany is among the leading developers of so-called carbon sequestration and storage technologies to contain CO2. The European Union launched a mandatory CO2 emissions trading scheme in January last year as part of its obligation to meet Kyoto Protocol targets on cutting greenhouse gas emissions. German power utilities plan to announce 13 billion euros worth of investments in generation plants to replace ageing equipment. And want Chancellor Angela Merkel's government to provide generous CO2 quotas to cover the production of the new power plants, which are mostly coal-fired, in a new national allocation plan which EU members must soon present to Brussels.

Xcel seeks bids for large solar power plant

March 30, 2006. Xcel Energy Inc. asked for bids to build a massive solar power plant converting the rays of the sun to electricity capable of supplying power to as many as 1,800 homes when the sun shines. Initial capital costs are expected to be around $50 million to $60 million and ultimately borne by Xcel customers in Colorado. Xcel requested bids for companies to build, own and operate the solar plant and sell the electricity to the utility for the next 20 years. Xcel is based in Minneapolis; it's Colorado's largest utility, with about 1.3 million electricity customers in the state. The plant is to be built in the San Luis Valley, about 20 miles north of Alamosa along State Highway 17, and generate about 13,700 MW hours of electricity a year, which will buy the land and rent it to the successful bidder for $1 a year. That's roughly akin to about eight megawatts of power when the sun shines. Construction is expected to begin this year. Xcel wants the plant operational by the end of 2007 in order for the successful bidder to take advantage of 30 percent federal investment tax credits for solar power facilities.

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