8Energy News Monitor I Volume VIII, Issue 28

2012: Will It be an Eventful Year for Energy?

Lydia Powell, Observer Research Foundation

he year began with bench mark crude prices reaching a 26 month high of over $ 92 per barrel in January 2011 and the year is ending with bench mark oil prices of over 103 per barrel, in line with predictions that oil price will cross $ 100 per barrel by the end of 2011. What is interesting is that the key driver of crude price was not global economic revival and growth as was anticipated but rather the growing demand for democracy around the world! NATO strikes and oil export embargoes imposed by thriving democracies were driving up oil prices rather than willful dictatorships and radical theocracies as one would have presumed!

On the domestic front India continued to struggle with its futile effort to insulate itself from global shifts in crude prices. The effort to protect the consumer from global oil price increases was reappearing in bloated form as large holes in public finances! The desperate effort of the Government to tie up one hole in the balloon just opened another one usually much bigger than the first! Let us hope that in the New Year the Government will safely tie up all holes and the balloon stays afloat!

2011 was a great year for consumers of natural gas around the world (less so for those in India) with the increasing possibility of a permanent de-linking of the price of natural gas from the price of oil. In the past 20 years, the average real price of natural gas remained at about 3.8 per gigajoule and the average real price of oil at 5.9 per gigajoule. The ratio between the real price of oil and the real price of natural gas varied between 1 and 2 with the long term average stayed at 1.6 on an energy equivalence basis. In monetary terms, the ratio between the price of oil and the price of gas which was historically at about 10 started increasing dramatically since the shale gas revolution began in North America in 2009 to reach 26 by the end of 2011. Many countries capitalized on it to switch to natural gas for power generation! The dramatic fall in the price of natural gas is even threatening the revival of nuclear power in the United States. For those who remember the history of nuclear energy in the United States it was economics rather than politics that killed the nuclear industry and it looks like it will happen again! For India the question is whether it will capitalize on this economic opportunity to orchestrate a dash for gas! Experts point out that LNG at $ 14/mmbtu is $ 3.5/mmbtu lower than the price of crude oil on a heating value basis and a substitution of gas for oil in industrial consumption along with increased penetration of CGD has the potential to reduce India’s oil import bill by over $ 100 million per day by 2030!

2011 tsunami in Japan took a toll on the global ‘nuclear renaissance’ that climate change mitigation action was expected to hail in. Germany closed itself to nuclear energy while many others started re-evaluating their plans. In India it revived questions over safety and re-kindled doubts over provisions in the Civil Liability for Nuclear Damages Act passed in 2010. The notification of Civil Liability for Nuclear Damages Rules in November 2011 just days prior to the Indian Prime Minister’s meeting with the President of the United States in Bali only reinforced people’s suspicion over the Government’s true interest. Legal opinion on the new rules announced in 2011 is almost the same as that of the provisions on the 2010 Act – provisions are not air tight and so will neither protect the victim nor the equipment supplier! Ultimately it all depends on who can afford the better lawyer and we have no doubts over who that will be!

The question that the government must confront squarely as it begins a new year is how long it can afford to sustain its current strategy of serving short term interests! If India had the single aim of securing the cheapest and cleanest possible source of energy for India it would be making a dash for gas rather than signing away the lives of 1.2 billion Indians in a Nuclear Liability Bill!

POWER

Power Struggle – An Everlasting Tug of War: Year 2011

Ashish Gupta, Observer Research Foundation

ower sector has shown many of its shortcomings in the year 2011. The important ones were shortages, outages, load shedding, poor quality supply, delays, financial owes, subsidies, inadequate revenue, inadequate investment, land acquisitions problems, environmental hurdles, problems in captive mine allocation, go – no go area classifications, price of imported coal and the worn out issue of transmission & distribution losses. Despite these problems, India managed to show tremendous growth and added at least 15,000 MW a year. This may compare poorly with China’s ability to add 100 GW a year but for India it was above the historic annual average of 8000 MW which is an achievement. About 80 percent of the power sector requirement is met through Coal India but the company’s production has remained flat at 430-431 MT in the last two years. Logistics issues, heavy rains and Coal India workers strike a few months back the affect the coal supply badly. Power sector which was struggling with domestic supplies looked for imported coal as the viable option for reducing demand supply gap. Many of the power producing companies went for acquiring assets abroad specially Indonesia, Australia and South Africa. But the initiatives of the private sector companies to buy coal mine in Australia and Indonesia to source coal have also encountered problems as these countries have changed their pricing policies and increased the price of the fuel. If price pass through is not allowed many projects based on imported coal will not materialize. The government’s promise to unleash a revolution in the coal supply by allocating coal blocks to the private sector and other PSU’s has also failed miserably. Going by the government estimates out of 192 blocks only 26 are in operation. But surprisingly out of these 26 blocks 14 are for power generation and have produced 25.74 MT as against the target 24.90 MT from 30 blocks set by the government. It is very unfortunate that coal resources lye unexplored on the one hand and while on the other hand, power sector is struggling with shortages. Land acquisition poses a major challenge as it has become the norm in India. There is a need to make the mechanism of the acquisition more transparent and quick. The industry is also to be blamed in this regard as they want to seek rents outside mining or power generation through speculation on land. Taking on some social responsibilities such as providing housing and employment for project affected people may be in the long term interest of investors. This will create a sense of trust among people and they will be more willing to part with their land. The “Go – No Go” policy in the forest area is not very consistent and is opposed by the Coal & Power ministry and the Industry. According to the MoEF, mining in the forest areas will destroy the bio-diversity of the forest makes a little sense as forest area released for mining form a part of the total area and the loss of diversity due to tree cut can be make up through regenerated forest. Environmental clearance is being granted mine wise till now. It is suggested that the maximum environmental destruction per coal field should be assessed and clearance should be given for the entire field. The non-operationality of coal blocks leaves a large quantity of coal to lie idle and unused. India is set to miss even its lowered target of adding 62,734 megawatts (MW) of generation capacity in the 11th Five-year Plan period (2007-12). Coal production from nine mines of Eastern Coalfields was stopped after power supply to the units was disconnected over alleged non-payment of dues. Power companies are thus making headlines for all the wrong reasons: fuel scarcity, rising interest cost, lower tariffs and deteriorating finances of the state electricity boards.

We have also seen in the year that while there is enough imported coal is available, power procurers are not willing to buy costly power as generation become two and half times costlier compared to domestic coal. The rising cost of imported coal coupled with weakening of rupee, could force some Indian power projects to default on their debt obligations. The SEB’s which are saddled with a loss of ` 78,000 Cr in the financial year 2011 will not find electricity from imported coal affordable. Analyzing the reasons behind the losses clearly indicates that these are due to unacceptably high aggregate technical and commercial losses, inability to raise tariffs and cross subsidies that are not compensated by the respective state governments. Many of the discoms are looking for bailout plan from the government in order to save themselves from license suspension. The government is said to be taking the matter very seriously and is said to be trying to ensure that the tariffs reflect costs and the revenue realization is at least as much the as the cost of supply. Interest rates which are frequently changing also affect new power projects. RBI has raised key interest rates 12 times this year to control inflation and this poses a major hurdle for bringing investments for the new power projects. The interest rates which crossed the 13% mark forced many companies to revise their investment plans as the same has impacted the profitability of the proposed projects. In this rather gloomy scenario, there is nothing to look forward to in 2012 other than more of the same – power shortages, SEB losses and faltering power projects.

RENEWABLE ENERGY

2011 Green Energy in Retrospect

Sonali Mittra, Observer Research Foundation

ith 2011 nearing its end, sketch of the renewable energy development in India seems to have laid down its skeleton structure ambitiously on ground. Despite the fact that no substantial reforms occurred in 2011, the amendments in the previous years were seen to be making impact on the renewable energy market and sector development. With private players showing interest in the renewable energy market, Ministry of New and Renewable Energy (MNRE) rolled up its sleeves to support and incentivize their participation. India being the 5^th most active country in the renewable energy segment already kept in pace with the global momentum to tap on its clean energy potential.

Cumulative capacity addition of 1152 MW from renewable resources is almost half of the target set for FY 2011-12. This not only puts pressure on the coming year to meet additional targets but also strains the bankability of the future projects. Banks were sceptical on financing such projects and developers continued to face challenges in getting financial closures. This of course forms a part of the vicious circle and requires government intervention if it wants to realize the targets set for 2012.

Nevertheless, 2011 stroked upon potential of the Indian renewable market with the 25% increase (Accounting for about $7.2 billion) in the new financial investments from abroad. FDI of about $400 million each for solar, biomass and waste to energy has been attributed to the policies which as mentioned earlier was seen to be reaping the benefits. Many of the investors rushed into markets to exploit the accelerated depreciation tax break for wind projects before it gets reformed in 2012. Interestingly, the fear of the new and unknown has made market decisions in favour of the Indian renewable energy sector.

It is predicted that the targets set for the coming year would require capital investment of the size of Rs 29,000 cr, with wind and solar bagging the lion’s share. Given the lessons that can be disseminated from this year, challenges faced by the industry would need to be tackled by the Government through infrastructure development, policy reforms and innovative incentive schemes.

Another important policy intervention, Generation Based Incentives Scheme introduced for Independent Power Producers was seen to be making good sense for its objectives, despite the underlying challenges faced by the sector. It not only attracted more private investors but it also made the renewable energy sector more competitive than it was expected by the industry experts. Conversely, it has not been able to make the competition fierce enough to compete in the global market (with the exception in wind manufacturing industry) or make renewable energy achieve grid parity. The latter however, may be too ambitious to expect at this stage given the limits of technology and demand-supply dynamics.

Directives under section 86 1 (e) of the Electricity Act 2003 to all States for fixing a minimum percentage for purchase of electricity from renewable energy sources was debated and discussed through out the year for having a mandatory ‘penalty clause’ for not meeting the obligatory percentage of the share of renewable energy. Many states have RPO in the range of 10-13% of the total energy procured, to be executed till the 2011. Hence, evaluation of the effectiveness of RPO would be revealed only in 2012, suggesting that next year needs to be closely observed to make suggestive recommendations for policy restructuring, if required.

Preferential tariff for grid interactive renewable power in most potential States under the National Electricity Policy 2005 and National Tariff Policy 2006 was set up through uniform guidelines by CERC. Unfortunately, fixing of preferential tariff each technology has been reported to be a difficult task. Besides, the surplus states not being able to absorb renewable power produced at preferential tariff added to the partial failure of the objectives of the feed-in tariff incentive schemes. Also, it was only in 2011 that Renewable Energy Certificate mechanism slowly picked up velocity, after the first amendment of REC regulations in Sept 2010. Despite being in its juvenile stage of implementation, REC market has experienced a surge in activity in 2011 with selling rate at double the floor price set by the government. Solar power traded separately had the traded floor price set 6 times higher to account for higher capital costs. The increased activity can be perceived as market’s concern over future energy price increase (estimated to touch 18% hike in 2012).

Jawaharlal Nehru National Solar Mission invited developers to the auction of the solar projects in August, 2011 to award licences for the phase I, Batch-2 projects. Providentially, the auction was taken aback by the extraordinary bidding quotes as low as ` 7.49/kWh. The most plausible reason presumed for such stumpy bids were the falling module prices and China’s ‘dumping’ strategy. However, there might be a startling disconnect amongst the batch 1 project performances, funding flows, bureaucratic imperatives and technical back-boxing, which will only be evident once the batch 1 evaluation reports are available by the end of 2012.

Wind Energy, on the hand, has shown tremendous success in the development of local as well as global market. Being the world’s fifth leader in wind energy, companies like Suzlon were seen advancing successfully in 2011, despite the issues related to land acquisition, evacuation facilities and other technical constraints that still plague the wind energy sector. Constant restructuring by MNRE has been boosting the wind sector although mainly for the small scale projects. The 2002 rule which permits wind installations at sites with a minimum wind power density of 200Q/m² at a hub height of 50 m was removed in 2011. Yet, another announcement by the Government to axe the accounting rule that provides a federal tax break for wind farms has prompted a rush into building projects in 2011, which may not be the best bet for achieving a sustainable level of growth. Notwithstanding, the sector acquired largest private equity investment with Goldman Sachs buying majority of the stake in ReNew Wind Power, an Indian reneable energy producer for ` 10 billion.

Other renewables, namely biogas, small hydro, waste to energy, unfortunately moved at a turtle’s speed. With all the attention given to solar and wind yet faced with similar challenges, these renewables struggled throughout the year for specific government interventions as well as market development. However, in order to boost biomass-based power generation in the country, the Government is preparing a national bioenergy program which will be launched in the 12th Five-Year Plan (2012-17). The Government has allocated INR34 billion (€1b) for the biomass mission and it is hoped the national initiative will replicate some of the success of the National Solar Mission (if however, it is successful).

In perspective, it is evident that nothing drastically changed in 2011 and the year ended on a peaceful and uneventful note. Uncertainty in the global market with the raging trade disputes between China and U.S.A, Solyandra ‘flu’ and China fuelling protectionism, India will need to move extremely strategically to grow and sustain its renewable energy market. 2012 is going to be a lot more crucial for renewable energy development with most of the projects due in that year to design and plan the future of renewables in India.

Rising Powers and Climate Change: The Case of India

Lydia Powell, Observer Research Foundation

t is widely believed that the future of global governance depends on the behaviour of countries such as China, India and Brazil, part of the class of states labelled ‘rising powers’. Opinion is divided on the outcome of such a development: at one end we have the optimistic view that rising powers will contribute to the emergence of a stable, rule based multi-polar, multilateral world-order while on the other we have a rather pessimistic view that rising powers would remain pre-occupied with narrow domestic interests and thus destabilize the evolution of a multilateral world-order.[1] The recent ‘failure’ in consolidating multilateral governance mechanisms for trade at the Doha round of the World Trade Organization and for climate change mitigation measures under the United Nations Framework Convention on Climate Change (UNFCCC) at Copenhagen and Cancun seem to support the latter view.[2]

This paper will argue that both views are ‘over-simplifications’ drawing primarily from India’s positions in climate negotiations in the last three decades. The divergence in the articulation of the climate issue and the contradictions in the fair allocation of the carbon mitigation burden in the current negotiating framework have led to a fragmented climate regime allowing the formation of climate blocks in much the same way as it has in global trade negotiations. The non-cooperative outcome in climate negotiations is in essence the rational result of an inadequate negotiating framework. This development is consistent with the provisions in the Kyoto Protocol which acknowledges differences among groups of countries and allows for proportional responsibilities.

The fault lines in the framework of ‘capping’ and ‘trading’ Green House Gas (GHG) mitigation were evident right from the start at Kyoto. The ‘great divergence’ in income per capita along with the momentous transformation in the distribution of world population in the last two hundred years has created a divided world with a small but homogeneous and advanced industrialised group and a large, heterogeneous and ‘yet to industrialise’ group.[3]

Chronic inequalities between the two groups mean that GHG mitigation is valued more by rich countries than by poor countries. GHG mitigation as a public good has built-in ‘free rider’ (non-cooperative) incentives and consequently poorer countries prefer that richer countries do more. India uses the perfectly rational strategy of exploiting ‘free rider’ incentives to maximise benefits and minimise costs partly because it ‘can’ under the current negotiating framework but also because it ‘must’, given its limitations such as size and poverty levels. Industrialisation and economic growth fuelled by massive inputs of energy is seen by India as the primary means to overcome poverty. The pursuit of rapid industrialisation links India’s climate policy to its energy policy which are among areas where India’s internal and external ‘logics’ overlap and often contradict each other. India thus plays ‘two-level’ games with conflicting goals and a cooperative multilateral agreement can be achieved only under a framework that allows India’s internal and external ‘wins’ to overlap.[4]

The current negotiating framework ignores this reality and assumes that scientific and moral persuasion would be sufficient to overcome ‘free-rider’ incentives.[5] Negotiating outcomes from Kyoto to Cancun have clearly demonstrated that the pursuit of ‘national-interest’ which in reality is nothing more than a respectable term for ‘free-riding’ will not falter under moral and scientific ammunition. Cooperation is likely only when the current framework is re-designed to accommodate incentives for ‘national interest’ along with incentives for ‘global interest’.

India as Victim: Geneva to Copenhagen

Since the early 1990s, India has consistently portrayed itself as a hapless victim, not just of climate change but also of global climate mitigation measures that condemn its fossil fuel driven growth paradigm. At the second meeting of the Intergovernmental Negotiating Committee in Geneva in June 1991, India drafted a proposal for a convention that suggested a per capita approach to the handling of national carbon-dioxide emissions. India also consistently maintained the distinction between developed and developing nations under Article 3 of the UNFCCC ratified in 1994 which stated that:

‘The parties should protect the climate system for the benefit of the present and future generations of humankind, on the basis of equity and in accordance with their common but differentiated responsibilities and their respective capabilities’[6]

Under the principle of ‘common but differentiated responsibilities,’ developed nations were expected to take the lead in combating climate change and its adverse effects giving adequate space for the development of underdeveloped countries. At the First Conference of Parties (COP 1) of the UNFCCC in 1995, India presented a green paper that called for a 20 percent reduction in emissions from rich countries.[7] At COP 3 in 1997, India endorsed the Kyoto Protocol as an Annex II member which carried no responsibility towards emission mitigation.[8] In 2002, India hosted COP 8 and emphasized the need for financial resources to help developing countries adapt to the adverse impacts of climate change.[9] The so-called Delhi Ministerial Declaration reflected India’s position that adaptation is as important as mitigation and focused on ways to help developing countries to adapt to climate change.

to be continued…

Views are those of the author

Courtesy: Paper presented at a conference on Rising Powers & Global Governance on 3-4 October 2011, São Paulo, Brazil

DATA INSIGHT

All India Household Energy Consumption (2009- 2010): Rural, Urban Disparity

Akhilesh Sati, Observer Research Foundation

Household in per cent	All India	Urban	Rural
Primary Source of Lighting
Kerosene	25.06	4.85	33.54
Other Oil	0.05	0.02	0.07
Gas	0.07	0.1	0.06
Candle	0.24	0.41	0.17
Electricity	73.94	93.83	65.61
No Lighting Arrangement	0.36	0.54	0.28
Others	0.27	0.25	0.28
Total	100	100	100
Primary Source of Cooking
Coke, Coal & Charcoal	1.3	2.24	0.87
Firewood and Chips	58.68	17.56	75.92
LPG	27.61	64.6	12.09
Gobar Gas	0.12	0.01	0.17
Dung Cake	4.71	1.38	6.11
Kerosene	2.44	6.38	0.79
Electricity	0.12	0.26	0.06
No Cooking Arrangement	3.02	6.55	1.53
Others	2.01	0.92	2.46
Total	100	100	100

Source: NSS 66^th round, Ministry of Statistics and Programme Implementation.

Households by Primary Source of Lighting

Households by Primary Source of Cooking

NSS 66^th round shows significant improvements over previous round (64^th) in terms of:

a) Rural households using electricity for lighting has increased around 6% while for urban it is almost stagnant.

b) Penetration of LPG for cooking both among rurals as well as urbans has increased by around 3%.

NEWS BRIEF

NATIONAL

OIL & GAS

Upstream

Gas output from RIL's KG-D6 block falls to fresh low

December 27, 2011. Reliance Industries' eastern offshore KG-D6 gas field production has fallen to a fresh low of 38.66 million cubic metres per day, as the company has shut down five wells due to water ingress. Natural gas production from the Dhirubhai-1 and 3 fields, the first two of the 18 gas discoveries in the KG-D6, block that were brought to production, was 31.83 mmcmd in the week ending December 18, according to a status report filed by the company with the Oil Ministry. The MA oilfield in the same block produced another 6.83 mmcmd of associated gas, taking total production from the area to 38.66 mmcmd. Total output from the field stood at 39.8 mmcmd in the previous week. The current rate of KG-D6 production is lower than 61.5 mmscmd achieved in March, 2010, as a drop in pressure in the wells and increased water ingress has led to a lower per-well gas output. The report said of the 18 wells drilled, completed and put on production in the D1 and D3 fields, five wells -- A2, A10, B1, B2 and B13 -- had to be shut or closed due to high water cut/sanding issues. The number of shut wells has gone up by one from four in the previous month. The output from KG-D6 is short of the 70.39 mmcmd-level (61.88 mmcmd from D1 and D3 and 8.5 mmcmd from the MA field) envisaged by now as per the Field Development Plan approved in 2006. While RIL holds 60 per cent participating interest in KG-D6, UK's BP Plc holds 30 per cent and Niko Resources of Canada the remaining 10 per cent. RIL started natural gas production from the KG-D6 fields in April 1, 2009, with an output of about 40 mmcmd. The MA oilfield, where one out of the six wells drilled and completed has been shut down due to high water cut, produces 12,634 barrels of crude oil per day. In addition, 1,836 barrels of condensate are produced from the field every day. The report said 14.95 mmcmd of the gas output was being sold to fertiliser plants and 20.49 mmcmd to power plants. The remaining 3.22 mmcmd is consumed by other sectors, including industries fed by the East-West pipeline that transports gas from the East Coast to consumption centres in the West. RIL had projected an output of 38.40 mmcmd of gas during the rest of December. As per the status report, all of the 22 wells planned in Phase-I of D1 and D3 field development have been drilled, but only 18 wells have been drilled and completed so far. Of these, 13 wells were put on production, while five wells were kept closed due to high water cut and sanding issues.

Varun Industries sells 51 pc in Madagascar oil block to China's Da Qing for ` 7.5 bn

December 27, 2011. Mumbai-based Varun Group said it has agreed to sell 51% of its stake in its onshore oil block at Madagascar to China's Da Qing Oilfield Company for $150 million, or about. Varun said it has formed a special purpose vehicle where it will own 49%, for developing the oil block and will also part of the proceeds from the stake sale to fund "previously programmed" capex needs. Varun had recently announced discovery of 266.8 million tonnes of heavy minerals - which includes critical rare earth used by the technology industry and titanium minerals - from 10 blocks in Madagascar. The company has exploratory and mining rights over the rare earth blocks in the African country. Varun's onshore oil block comprises Besalampy, Barevo and Tambohorano areas in the Morondava basin of Madagascar, spread over an area of about 6,884 sq km. The block has been audited and certified by Bayphase Ltd of UK, and as per the certified report, it has prospective resources of around 3,067 million barrels.

ONGC, DGH nod for oil production from Cairn's Bhagyam field

December 26, 2011. ONGC and the Oil Ministry's technical arm, the DGH, have given Cairn India the go-ahead for commencement of production from the Bhagyam oilfield, the second-largest find in the prolific Rajasthan block. Cairn, which was recently taken over by London-based mining group Vedanta, will begin oil production from Bhagyam at the level of 20,000-25,000 barrels per day sometime next month and it will reach the approved peak output of 40,000 bpd by April. Oil and Natural Gas Corp (ONGC), which holds a 30 per cent stake in the Rajasthan block, had asked for third party certification to ascertain if Cairn's production plan will prudently exploit the reserves and if the surface facilities are capable of handling oil and water from the field.

ONGC to buy Cairn India's 10 pc stake in gas-discovery block

December 21, 2011. ONGC said it will buy 10 per cent stake of Cairn India in a gas-discovery block that sits next to Reliance Industries' prolific KG-D6 area in the Bay of Bengal. Cairn India had made four discoveries in the Krishna Godavari basin block KG-DWN-98/2 and in 2005 wanted to sell 100 per cent of its stake in the area to ONGC. But ONGC bought only 90 per cent as it wanted to utilise Cairn India's expertise and knowledge in exploiting the resource in the block. But the two firms have not been on agreement on issues like the optimum way of developing the four pre-2005 discoveries and six subsequent finds. There was a big gap in understanding of the resource with Cairn India feeling ONGC's estimates of the blocks holding an in-place volume of 25.61 million tons of oil and 197 billion cubic metres of natural gas were grossly over-estimated. It felt the large programme that ONGC was drawing was not justified and choose to exit the area. ONGC will pay whatever past cost Cairn India had invested in the block as past cost. Cairn's share of past cost comes to $47 million. ONGC proposes to invest over $7.3 billion to produce up to 30 million standard cubic metres per day of gas. Before selling 90 per cent out of its 100 per cent stake and giving away operatorship of the block, Cairn made four discoveries in the area -- Padmavati, Kanakdurga, N-1 and R-1 (Annapurna). Subsequently, ONGC made six significant discoveries -- E-1, A1, U1, W1, D-1/KT-1 and the first ultra-deepwater discovery UD-1 at a record depth of 2,841 metres. The block is divided into a Northern Discovery Area and Southern Discovery Area. The NDA comprises discoveries like Padmawati, Kanadurga, D, E, U, A, while the ultra deepsea UD find lies in SDA. Even ONGC has acknowledged that the NDA discoveries are small to marginal and cannot be developed on a standalone basis due to high deepwater development costs.

Downstream

Punjab sets off on a hydrocarbon revolution

December 27, 2011. In a year where the politics ahead of an election dominated most of the key events in Punjab, the state has also reached an industrial landmark by setting up its first refinery, and a mega one at that. The Guru Gobind Singh Refinery in Bathinda sent its first commercial supplies to Hindustan Petroleum. It was a consignment of kerosene but the refinery’s eventual output will include 8mn tonnes of a variety of petroleum products, including 4mn tonnes diesel and 1mn tonnes petrol a year, all of it environment-friendly, and which will address much of the demand not only in Punjab but elsewhere in northern India. The ` 19,000-crore refinery, the single largest investment in any project in Punjab, involves a 49 per cent stake for Mittal Energy Limited, besides 49 per cent for HPCL. It was processing crude on trial since August, with most of its 35 units commissioned, before sending its first commercial consignment. The project includes a 1,016-km pipeline. From Mundra in Gujarat, crude oil sourced from docked vessels is put into the pipeline and sent to Phulokhari near Bathinda, with an elaborate security system monitoring every inch of the distance.

Transportation / Trade

BPCL buys Nigerian oil via tender

December 22, 2011. Bharat Petroleum Corp has bought two cargoes of West African crude oil from Exxon Mobil for loading in February. BPCL bought a 950,000 barrel cargo of Qua Iboe and a 950,000 barrel cargo of Yoho. In the last tender, BPCL bought one million barrels each of Erha and Qua Iboe crude from Vitol for loading in the first half of January.

Policy / Performance

ONGC sells Sudan Nile Blend crude for January at a record premium to Arcadia

December 27, 2011. ONGC sold 620,000 barrels of Nile Blend crude for January loading at a record premium for the grade after a dispute between the Sudanese governments over pipeline transit fees reduced supplies. The cargo to load on Jan. 16-31 was sold to European trader Arcadia at a premium of $3 a barrel to the Minas Indonesia Crude Price (ICP). Strong demand for direct-burning crude from Japanese utilities also underpinned Nile Blend's price. Sudan blocked landlocked South Sudan's exports in a transit fee row since Nov. 28, stepping up a row between the former civil war foes over how to untangle their once-integrated oil industries. The two governments have agreed to include international oil companies in talks to resolve a dispute over how much the new African nation should pay to use Khartoum's oil export facilities. South Sudan has sold Dar Blend crude exports for January, but it did not offer any Nile Blend cargoes. It last sold a Nile Blend cargo for December loading at the highest premium in at least four years.

Oil Ministry to cap RIL's spend on developing new KG-D6 gas fields

December 26, 2011. The oil ministry plans to impose cost limits on the development of new KG Basin gas fields by Reliance Industries, and has deferred its decision on the critical issue of allowing the company to fully recover previous costs, giving a new turn to the choppy relationship between the conglomerate and the government. The oil ministry is keen to call a meeting of the Management Committee of the D6 block in a few days to consider Reliance's long-pending plan to develop satellite discoveries in the block and reverse the fall in D6 output, but it will approve the plan on the condition that costs should not exceed original estimates by 10-15%. RIL had estimated expenditure of about $1.5 billion in developing the smaller discoveries in the block on the basis of 2006 prices. While efforts to approve fresh investment would be a positive signal for the company, industry officials say Reliance's bigger worry is the oil ministry's move to penalise the firm for the fall in gas output, which has dropped below 40 mmscmd from over 60 mmscmd. The company has initiated arbitration proceedings following reports that the government would not allow Reliance to recover all the costs in D6 from gas sales because the output was lower than expected. The government wrote to Reliance seeking one month's time to respond to the arbitration notice, prolonging the uncertainty over cost recovery.

CNG may cost ` 2 more as rupee devaluation has pushed up input cost

December 26, 2011. Price of Compressed Natural Gas (CNG) may be hiked by up to ` 2 per kg in the next few days as rupee devaluation has pushed up input cost. City gas retailers including Indraprastha Gas Ltd, which supplies CNG to automobiles and piped cooking gas to households in the national capital, are likely to announce fuel price revision over the weekend. IGL had last raised CNG in Delhi by ` 2 per kg to ` 32 per kg from October 1. The hike was necessitated because IGL and other city gas firms were being forced to buy expensive imported LNG as supplies from Reliance Industries' eastern offshore KG-D6 gas field have dried-up due to fall in output. Also, the rupee depreciation has made raw material -- that is, natural gas from Reliance, state-owned GAIL and imported LNG -- even costlier. Rupee was at about ` 49.50 to a US dollar at the time of last price hike and it is close to ` 53 to a US dollar.

GAIL to construct RLNG terminal in K-G basin

December 23, 2011. The Gas Authority of India Limited (GAIL) would take steps to establish a Re-gasified Liquefied Natural Gas (RLNG) terminal in the Krishna-Godavari basin in Andhra Pradesh. Initially, an FSRU (Floating storage, Regas and Unloading) terminal is being planned and subsequently, a land-based terminal will be set up in the state through the Andhra Pradesh Gas Distribution Corporation. The Chief Minister had already written a letter to Union Petroleum Minister S Jaipal Reddy, seeking the establishment of RLNG terminal. The RLNG terminal in the state is expected to ensure uninterrupted supply of natural gas to industries to fill the shortfall in gas supplies. Besides, a 974-km coastline, AP also has a huge natural gas pipeline infrastructure. Ceramic and glass industries, which have started their projects in the state, are ready to consume RLNG. The Petro-Chemical, Petroleum Investment Region that is proposed along the Visakhapatnam-Kakinada corridor, is expected to be one of the major consumers of RLNG. The Government of Andhra Pradesh has been extending support to establish the LNG terminal by providing technical support, land and other clearances.

Govt to rejig priority list for KG-D6 Gas

December 23, 2011. The government is overhauling its priority list for selling domestic gas to help more households get cheap piped gas, and cut supplies from Reliance Industries' D6 block to some fertiliser units as it seeks to optimally use the scarce resource and help retail consumers. It has also accepted the recommendation of the Comptroller and Auditor General (CAG) to strictly monitor the use of natural gas. It will ask sectoral ministries to certify that customers have used the scarce resource only for the specified unit, and not diverted the gas, which costs $4.2 per unit, or about onefourth the cost of imported liquefied natural gas. Oil ministry aid gas should be supplied to city gas distribution (CGD) networks before committing fresh supply to fertiliser and power sectors, which are currently on top of the priority list in the government's Gas Utilisation Policy. The decision on the new priority list is expected in the next meeting of the Empowered Group of Ministers on gas pricing and utilisation. EGoM decisions are final and its decisions do not require ratification by the cabinet. For the fertiliser sector, the government wants to supply cheap domestic gas to only those units that make urea, but not to plants making phosphorus and potassium (P&K) fertilisers.

Govt told not to completely free pricing of petroleum products

December 22, 2011. A Parliamentary panel has asked the government to "refrain" from completely freeing the pricing of sensitive petroleum like diesel but advocated compensating oil firms for losses incurred on selling fuel below cost. The Standing Committee on Petroleum and Natural Gas in its report tabled in Parliament said in most countries the prices of petroleum products are being regulated to contain the inflationary impact of high oil prices and give relief to their people. While petrol price was deregulated in June last year, the government continues to control retail rates of diesel, domestic LPG and kerosene. State-owned oil firms currently lose ` 12.95 per litre on diesel, ` 29.99 a litre on kerosene and ` 287 per 14.2-kg LPG cylinder.

India plans three-fold rise in emergency oil stockpile

December 22, 2011. India plans to nearly triple the size of an emergency oil stockpile that it is building as insurance against supply disruptions. The nation which is 79 per cent import dependent to meet its crude oil needs, is building under-ground storages at Visakhapatnam in Andhra Pradesh and Mangalore and Padur in Karnataka to store about 5.33 million tons of crude oil. This is enough to meet nation's oil requirement of 11-12 days. The stockpile will essentially be used during supply disruptions but may also come handy in case of high price fluctuations. The storage at Visakhapatnam, with a capacity to store 1.33 million tons of crude oil in underground rock caverns, will be completed early next year. A similar facility in Mangalore will have a capacity of 1.55 million tons and would be mechanically completed by November 2012. A 2.5 million tons storage at Padur, near Mangalore, would be completed by December 2012. Padur would have another 5 million tons of storage in the next phase and possible sites in Gujarat state and Rajasthan's salt caverns are being explored. India will join nations like the US, Japan and China who have strategic reserves. These nations use the stockpiles not only as insurance against supply disruptions but also to buy and store oil when prices are low and release them to refiners when there is a spike in global rates. However, the storage India is currently building is very small compared to the 90-day strategic stockpile in the US. The expansion would cover for 40 days requirement. India currently has 11.08 million tons of crude oil storage capacity in refineries and 14.41 million tons of petroleum products, which is enough to cover for 74 days of supplies. Stating that the cost of filling the 5.33 million tons strategic storage would be about ` 18,000 crore, Chaturvedi said the government is exploring options of leasing out capacities in the storage depots to foreign firms for a fee. India Strategic Petroleum Reserves Ltd is building the strategic stockpile. It is a wholly-owned subsidiary of Oil Industry Development Board (OIDB) - a government body that lends money to energy projects. Like the US, the government may buy crude oil when rates are low for stockpiling. It may release it to refiners during times of spike in global crude rates like those witnessed in July 2008 when prices touched an all-time high of $147. This may cause problems with the U.S. and the International Energy Agency, who have a longstanding policy that strategic oil reserves should only be drawn on in times of physical shortage, and not be used as a hedge against price moves. Mr. Chaturvedi said India will need ` 180 billion ($3.41 billion) to fill the current crude reserves that are under construction. India relies on imports for 75% of its crude needs. He didn't forecast how much the extra oil would cost but as this would be "substantial", the government may let overseas oil companies utilize the reserve. IEA member South Korea allows some foreign oil companies to use its SPR tanks as trading depots, but in turn they have an obligation to ensure supplies if the government needs to draw on the SPR. India's decision to expand its SPR comes just as China is increasing its buying of crude for its reserves. China has already completed and filled 103 million barrels of storage in the first phase of its SPR plan. It is now working on a second phase of 169 million barrels of storage by 2013 and by 2016 will build a final phase of 228 million barrels of storage. India's state-run Strategic Petroleum Reserves Ltd. is building storage tanks in the southern cities of Visakhapatnam, Mangalore and Padur. Oil Minister Jaipal Reddy said that the government is considering establishing new storage facilities in the southern state of Karnataka, in western Gujarat state, in eastern Orissa state and in Rajasthan in the northwest. Mr. Chaturvedi said five million tons of the additional 12.5 million tons of SPR crude could be held in rock caverns in Padur and that the government is also looking at Rajasthan's salt caverns as a possible depot.

PNGRB pushes for deregulation of gas prices

December 22, 2011. The Petroleum and Natural Gas Regulatory Board (PNGRB) is aggressively pushing for deregulation of gas prices to encourage private investment and lure oil companies to invest in exploration and ramp up production from existing fields. The government has fixed the price of natural gas at $4.2 per unit for most of the domestic output, less than a third of the price of imported liquefied natural gas, creating a wide disparity in the market.

RIL plans maintenance work of KG-D6 wells

December 21, 2011. Reliance Industries plans to do maintenance work on some wells in its KG-D6 block which may help increase natural gas output from the flagging block. RIL had to shutdown five wells in the eastern offshore KG-D6 block due to drop in pressure and water ingress. Latest figures show gas production from the Dhirubhai-1 and 3 fields in the Krishna-Godavari Basin in the Bay of Bengal falling to a fresh low of 32.94 million cubic meters per day this month, down from the 54 mmcmd peak hit in March 2010 before well pressure dropped and water incursion began. According to the original RIL's development plan approved by the authorities, output should have reached 61.88 mmcmd. Associated gas production from the MA oil field in the same license area was 6.86 mmcmd, for a combined total of 39.8 mmcmd, versus the expected 70.39 mmcmd. RIL has so far drilled 22 wells on D1&D3 but has not put four wells on production due to insignificant volumes. Of the 18 wells connected to production system, four had been shut due high water cut. One well on MA oilfield has also been shutdown. RIL is planning workover on these shut wells. Oil Minister S Jaipal Reddy said that RIL has to drill all 31 wells outlined in the original development plan by March 2012 and had blamed the production decline on the failure to do so. His ministry is readying a note for disallowing $1.235 billion of the original costs on the grounds the drop in production has left some of the 80 mmcmd production facilities unused. RIL opposes any move to restrict cost recovery, now 100 per cent in proportion to production and has slapped an arbitration notice on the ministry. Of the 18 wells drilled, completed and put on production in the D1 and D3 fields, four wells -- A2, B1, B2 and B13 – had to be shut or closed due to high water cut/sanding issues. While RIL holds 60 per cent interest in KG-D6, UK's BP Plc holds 30 per cent and Niko Resources of Canada the remaining 10 per cent. RIL started natural gas production from the KG-D6 fields in April 1, 2009, with an output of 30 mmscmd from eight wells. This quickly rose to 40 mmscmd within 90 days.

ONGC to spend $5.9 bn on capital expenditure in FY13

December 21, 2011. Oil and Natural Gas Corporation (ONGC) expects to spend ` 310 billion ($5.9 billion) as capital expenditure in the financial year starting April 2012. The expenditure will be funded through internal accruals.

Govt hasn't yet asked for share buyback: ONGC

December 21, 2011. Oil and Natural Gas Corp (ONGC) said it has not heard from the government on share buyback but hastened to add that all of its liquid cash is tied up in capital expenditure that would rise by 11 per cent to ` 31,000 crore next fiscal. Stock repurchase or share buyback is the reacquisition by a company of its own stock. The government is asking cash-rich public sector firms to buyback shares so as to meet its disinvestment target. ONGC, however, said it was a myth that ONGC had a cash surplus of ` 27,000 crore. After accounting for the dividend it has to pay and ` 8,200 crore set aside in a site restoration fund with State Bank of India, the liquid cash with ONGC was only ` 14,000 crore. Site restoration programme is for properly plugging and abandoning orphan oil or gas wells and to restore sites to approximate pre-wellsite conditions suitable for redevelopment.

No malafide intent in Reliance KGD6 decision, open to correction: Oil Ministry

December 21, 2011. In the backdrop of the CAG severely criticising its decisions on RIL's KG-D6 gas block, the Oil Ministry said none of its actions were taken with malafide intentions, but it may have erred in certain cases where it was open to a course correction. The Comptroller and Auditor General (CAG) had in its September report sharply criticised the ministry for not exercising adequate oversight and control over procurements done by RIL and allowing the private firm to retain the entire 7,645 sq km block in the Bay of Bengal in violation of the contract.

POWER

Generation

Reliance Power leads hydel projects in Himachal Pradesh

December 22, 2011. Reliance Power has bagged five hydropower projects in Himachal Pradesh in the past three-and-half years, the most by any company. A total of 23 companies have been allotted hydro-projects of above 5 MW from March 2008 to November 2011. Reliance Power's five projects are 300 MW Purthi, 94 MW Teling, 44 MW Shangling, all in Lahaul and Spiti district, and 130 MW Sumte Kothang and 104 MW Lara Sumta projects in Kinnaur district. Other companies are ABG Shipyard Ltd (three projects), L&T Power Development Ltd (two), Moser Baer Projects Private Ltd (two), BLA Industries Private Ltd (two) and Tata Power Company Ltd (one).

Reliance to fund new generation nuclear reactor along with Gates, Vinod Khosla, ex MS Honcho

December 22, 2011. Reliance Industries has joined hands with Bill Gates, Vinod Khosla and Nathan Myrvhold - the former Microsoft tech honcho, maths whiz and master French chef - to fund the development of a nuclear reactor with the potential to revolutionise power generation. Reliance Industries has bought a minority stake in Terra Power LLC, based in Washington, US, and founded by Myrvhold's Intellectual Ventures. Gates is the primary investor and chairman in the company, and Khosla and Charles River Ventures are investors. Terra Power is developing an ultra-modern reactor using the 'traveling wave' technology. Traditional reactors need to be refueled every few years, generate enormous amounts of waste and feed on enriched uranium. Traveling wave reactors, on the other hand, use depleted uranium and don't need to be refueled for at least 40-60 years.

NTPC may form long-term coal import tie-ups for capacity addition

December 21, 2011. Country's largest power producer NTPC, which aims to generate about 70,000 MW by 2017, is looking at long-term coal import tie-ups and excavation of its own mines to meet the shortfall from domestic sources. NTPC has a current power generation capacity of over 34,000 MW, of which a lion's share is contributed by coal-based thermal power plants. The company aims to ramp it up to 70,000 MW by 2017, for which it would require more domestic coal.

Madras Cements expanding thermal capacity to 115 MW

December 21, 2011. Madras Cements, the flagship company of the Chennai-based Ramco Group, is expanding its captive power capacity and expects to cater 100% of its internal requirements, as per a research report. MSFL Research has said Madras Cements is currently working on setting up a 43 MW captive thermal power plant, which would take its total thermal capacity to 115 MW (from 72 MW now) by FY13. The company also has wind power capacity of 159 MW. The report further said the company is looking at optimum cost saving.

Transmission / Distribution / Trade

Energy deficit may rise up to 15 pc as weak rupee hurts coal imports

December 26, 2011. Electricity generation by plants running on imported coal is likely to drop in the coming months following a sharp depreciation in the value of the rupee, tripping one of the few drivers of India's flagging industrial production. The near-20% rupee depreciation in the last six months has substantially increased generation costs of many power utilities that were forced to use imported coal because of stagnant domestic production, forcing them to cut generation.

Amid huge losses, new panel looks at restructuring discoms

December 25, 2011. Against the backdrop of mounting losses in the power distribution segment, a new government panel is working on financial restructuring of discoms in Tamil Nadu and six other states. Headed by Planning Commission Member B K Chaturvedi, the panel on financial restructuring of discoms is expected to finalise its report by early next year, according to a Power Ministry. The high-level Shunglu Committee on Financial Position of Distribution Utilities report came with a slew of suggestions, including setting of a Special Purpose Vehicle to absorb the losses of discoms. The new committee, set up recently, is focusing on restructuring of power distribution companies (discoms) in seven states -- Tamil Nadu, Uttar Pradesh, Rajasthan, Madhya Pradesh, Andhra Pradesh, Haryana and Punjab.

ABB wins $900 mn Indian transmission system deal

December 22, 2011. ABB has booked an order worth more than $900 million from India's Power Grid Corporation to supply a transmission system with the highest converter capacity ever built. The group has been contracted to supply an ultra-high voltage direct current transmission system to deliver hydropower from northeast India to Agra. When completed, the transmission system will have a converter capacity of 8,000 megawatts and will be able to supply 90 million people with electricity, based on current average consumption in India. The system will be the world's first multi-terminal ultrahigh-voltage link and will have three converter stations.

FDI proposal in power exchange ignites debate

December 21, 2011. A private equity fund, based in Mauritius and promoted by an Indian, has shown interest in investing in a power exchange in India, sparking off a debate on whether the government needs to clarify rules on foreign investment in such enterprises. Multiples Private Equity, has sought government approval for acquiring a minority stake in Indian Energy Exchange (IEX), promoted by Financial Technologies (India).

Policy / Performance

Adani Power puts 6.5 GW expansion plan on hold

December 27, 2011. Indian utility Adani Power has put on hold its plans for capacity expansion of 6,500 megawatts because of a lack of clarity on coal supplies, but is confident of having 6,000 MW of operational assets as planned by March. The company, which currently operates 3,300 MW, is waiting for the federal government to allocate coal to three of its planned projects. Coal India, which supplies coal to power companies and other users after approval from the federal government, is unable to meet its annual targeted growth in production, forcing power producers to look overseas. As generation projects face a shortage of coal, pricing uncertainty is forcing companies to refrain from inviting bids for long-term power purchase contracts. Land and water supply agreements are in place for Dahej and Bhadreshwar projects in Gujarat and the Chhindwara project in Madhya Pradesh. Environmental clearance is in place for two of the projects. The company is awaiting approval for the 1,320 MW Chhindwara project from the Environment Ministry.

NTPC to invite Expressions of Interest for coal import

December 27, 2011. NTPC will invite expressions of interest next month for importing coal on a 10-15 years contract from foreign coal producers. The largest power generator hopes to start imports within the next financial year and will start with about 16 million tonnes. Striking long-term import contract will help NTPC source coal at a price which is less than spot market prices. It will also offer the company some sort of hedge against coal price fluctuation in the short term. This initiative will, however, go in tandem with its effort to acquire coal bearing assets in foreign countries.

Coal supply to power stations has increased tremendously: CIL

December 26, 2011. Dismissing reports that Coal India (CIL) is not dispatching adequate coal to power plants, the public sector firm has claimed that supply of the fossil fuel to power stations has increased "tremendously". Coal Minister Sriprakash Jaiswal had also said there was no crisis at power stations due to short supply of the fossil fuel and assured that no station would be shut down for want of coal. In October, inadequate supply of coal to power stations had resulted in acute power cuts in many parts of the country, including North India. Subsequently, the government swung into action and asked coal companies, including CIL, to step up supply to stations facing a shortage of the dry fuel. Dispatch of coal to power firms suffered a setback in August and September due to heavy rains in all the coalfields, adversely affecting production and transportation of coal from mines to railway sidings.

Delhi govt to extend financial assistance to BSES

December 26, 2011. Delhi Government decided to extend financial assistance to Reliance Infrastructure-backed discom BSES which has defaulted on payment of around ` 3,000 crore to various power generating and transmission firms. The decision to offer the help to the beleaguered company was taken at a Cabinet meeting presided over by Chief Minister Sheila Dikshit. Dikshit, however, did not give details about the financial assistance but officials said government is likely to infuse fresh equity to the tune of around ` 500 crore into the company on the condition that the discom would also infuse the same amount. Delhi government holds 49 per cent share in BSES. The Chief Minister had apprised Prime Minister Manmohan Singh, Finance Minister Pranab Mukherjee and Union Power Minister Sushil Kumar Shinde about the looming crisis facing the city arising out of BSES failure to pay the dues to the transmission and generation companies.

Energetic Lighting in carbon credit finance deal with C-Quest Capital

December 21, 2011. Energetic Lighting India has entered into a carbon credit finance agreement with US-based C-Quest Capital to supply compact fluorescent lamps to Indian government. Energetic Lighting India, a joint venture of US-based Energetic Lighting and China's Yangkong Group, has bagged ` 130 crore order to supply 13 million CFLs under the Indian government's Bachat Lamp Yojna scheme. The company has designed CFLs with extended life of 10,000 hours for distribution in Punjab Haryana, Andhra Pradesh, Delhi and West Bengal. Carbon credits earned through the programme would accrue to C-Quest Capital.

Reliance Power can't use Sasan Coal for other projects: Power Ministry

December 21, 2011. The power ministry has recommended cancellation of permission to Reliance Power to use surplus coal from mines attached to the 4,000 MW ultra mega power project at Sasan in Madhya Pradesh at another group power plant in the state, as it is concerned about CAG's views. If the recommendation is accepted by the Empowered Group of Ministers (EGoM), it would hurt the company's planned 4,000 MW Chitrangi project, where it plans to use surplus coal from Sasan. The power ministry wants to hand over surplus coal from Sasan to a subsidiary of Coal India at a price the government would determine.

The ministry, which was involved in the 2008 decision to allow Reliance Power to use surplus coal from Sasan for another project, quietly made this recommendation to the EGoM but has not publicly stated its views. The EGoM has sought the attorney general's views on the matter. The power ministry's recommendation could mean revoking permission to divert 4 million tonnes of coal a year to Chitrangi from Moher and Moher Amlohri Extension mines, which together can produce 20 million tonnes against the UMPP's requirement of 16 million tonnes; and casts a shadow on the mining licence for Chhatrasal block that can produce 5 million tonnes a year. Government auditors have estimated that the benefit of surplus coal amounts to ` 42,000 crore over 25 years.

INTERNATIONAL

OIL & GAS

Upstream

Ukraine to invest $1 bn to develop 3 Iranian oil fields

December 25, 2011. A Ukrainian company will invest $1 billion to develop three Iranian oil fields. Iran's Petroleum Engineering and Development Company and Ukraine's Inter Naft Gas Prom Pars will sign the contract by the end of the current Iranian year (March 20). Under the comprehensive development plan of the three oil fields, Koohmond, Boushkan and Kouhkali, 10,000 to 12,000 barrels of oil are expected to be produced per day in the first phase, and about 25,000 barrels per day in the second phase.

Shell shuts Nigeria’s Bonga on possible worst leak in decade

December 22, 2011. Royal Dutch Shell Plc, Europe’s largest oil company, shut its 200,000 barrel-a-day Bonga field off Nigeria after a leak during a tanker loading caused what may be the country’s worst offshore spill in more than a decade. An export line from the field’s floating production, storage and offloading vessel was probably the cause of the leak, estimated at below 40,000 barrels of crude, Shell said. The oil flow has been halted, it said. The leak is expected to be the worst since a January 1998 Exxon Mobil Corp. spill dumped an estimated 40,000 barrels into the sea from its Idoho platform, with slicks reported as far west as Lagos. Shell, the largest foreign oil producer in Nigeria, has been criticized by some local people and foreign groups for spills of crude from its onshore fields. The Anglo-Dutch company, operating in Nigeria since 1937, says most spills occur because of pipeline sabotage and oil theft and it has set up a website to disclose data on leaks.

Transportation / Trade

Turkey, Azerbaijan sign deal for Trans Anadolu pipeline project

December 26, 2011. Turkey and Azerbaijan signed a deal for the construction of a new joint gas pipeline project, the Trans Anadolu pipeline, which will stretch from Turkey's eastern border to its western border, with the aim of exporting Azerbaijani natural gas to Europe. The deal was signed by Turkish Energy Minister Taner Yildiz and Azerbaijan's industry and energy minister, Natiq Aliyev. Yildiz was asked how the Trans Anadolu Pipeline project would affect the proposed Nabucco pipeline project, which is slated to transport natural gas from the Caspian and Middle Eastern regions to central Europe through Turkey. Socar, Azerbaijan's state oil company said it would build a 16 billion-cubic-meter standalone gas pipeline across Turkey to cater to the fast-growing economy's growing energy needs. Socar also stressed the new pipeline wouldn't mean the end of the European Union-backed Nabucco pipeline project.

Enbridge's Bakken pipeline gets Canadian approval

December 23, 2011. Canadian regulators have approved Enbridge Inc's plans to build a new C$180 million ($176 million) pipeline to move oil out of the underserved but prolific Bakken and Three Forks oilfields. The National Energy Board said it decided there was enough commercial interest to support construction of the 123-km (76-mile) Bakken pipeline project, which will carry 145,000 barrels of oil a day from Steelman, Saskatchewan, to a link with the company's mainline system at Cromer, Manitoba. The U.S. portion of Enbridge's Bakken project, which has yet to receive final approvals, will ship oil from North Dakota and Montana north to Steelman.

China's pipeline project short on gas

December 22, 2011. The Second East-West Gas Pipeline, designed to deliver 30 billion cubic meters of gas annually, will travel 8,653 kilometers through 15 provinces and regions from Xinjiang's Horgos in the west to Shanghai in the east, and to Guangzhou and Hong Kong in the south. Despite not yet being completed, China's Second East-West Gas Transmission Pipeline project, the world's longest natural gas pipeline, is already suffering from an insufficient supply stream. Imports of natural gas from central Asia have declined. To meet domestic consumption demands, China National Petroleum has been forced to sharply cut the supply of natural gas for industrial use. The oil company has directed one of its oil fields to allocate almost 1 million cubic meters per day to liquefied natural gas factories in cities along the Shaanxi-Beijing gas pipeline. The operation rate of the company's liquefied natural gas facilities has dropped to 60% since Dec. 12 and could decline further. China National Petroleum has directed its main oil fields to expand production and reduce the ratio of sales for industrial use. The state petroleum company has asked China Petroleum and Chemical (Sinopec) to increase its gas supplies and sales in eastern parts of China to ease the petroleum provider's pressure to supply gas to those areas. The national petroleum company has begun construction of the C section of the natural gas pipeline in central Asia. Since the second pipeline has been put into production, the pipeline's supply of gas has not met the monthly supply volume level set by a regional committee.

Spectra, AEP, Chesapeake to link Texas Eastern to Ohio gas supplies

December 21, 2011. Spectra Energy Corp's Texas Eastern Transmission, LP (Texas Eastern), American Electric Power and Chesapeake Energy Marketing, Inc., a wholly owned subsidiary of Chesapeake Energy Corporation, announced their intention to advance the development of the Ohio Pipeline Energy Network (OPEN) project, a proposed expansion of the Texas Eastern pipeline system that will connect Ohio's Utica and Marcellus shale gas supplies with the fast-growing markets attached to the Texas Eastern system, in particular natural gas-fired power generation. The OPEN project brings together the largest producer and leaseholder in the Utica shale play, the largest power generator in the region and the premier pipeline company with over 60 years of safe and reliable operational history in the state of Ohio. The project will involve approximately 70 miles of new pipeline and create an additional 1 billion cubic feet per day (Bcf/d) of transportation capacity to serve local distribution companies, industrial users and gas-fired power generators in the Ohio market, as well as markets along the Texas Eastern system.

Policy / Performance

Iran to block oil through Hormuz if sanctioned

December 27, 2011. Iran will block oil shipments through the Strait of Hormuz if sanctions are imposed on its crude exports. About 15.5 million barrels of oil a day, or a sixth of global consumption, flows through the waterway between Iran and Oman at the mouth of the Persian Gulf. Iran’s navy started a 10-day exercise east of the passage that involved the use of submarines, ground-to- sea missile systems and torpedoes.

NIOC to replace PGNiG in Lavan gas project

December 25, 2011. The national Iranian Oil Company (NIOC) is slated to sign a contract with a domestic company on the development of the giant Lavan gas field in the Persian Gulf. After long surveys and negotiations, the NIOC eventually choose the Iranian Sepehr Energy Co. affiliated to Iran's Saderat Bank for the Lavan Gas Field Development Project. The offshore Lavan natural gas field, which was discovered in 2003, has reserves in place of around 9.5 trillion cubic feet. The NIOC announced that it had dropped the Polish Oil and Gas Company (PGNiG) from Lavan gas field development project for repeated delays, and said it would replace the polish firm with a consortium of Iranian companies.

Chevron, Conoco ensnared in post-BP Govt crackdown on oil slicks

December 24, 2011. Brazil’s threatened indictment of Chevron Corp. and Transocean Ltd. executives after offshore oil leaks shows that regulators from the North Sea to the Indian Ocean are stepping up scrutiny after BP Plc’s 2010 disaster. Brazilian authorities have said they may prosecute employees, shut operations and exact more than $10 billion in fines after the leaks at the Frade field 230 miles (370 kilometers) off the coast of Rio de Janeiro. The spill occurred 19 months after an explosion in the Gulf of Mexico killed 11 workers and triggered the biggest offshore U.S. oil spill. Governments around the world are paying closer attention to how energy explorers drill into high-pressure deposits of crude and natural gas as much as 8 miles beneath the sea surface. Chevron’s Brazil incident took place after a ConocoPhillips leak in China and prior to what may be Nigeria’s biggest spill in a decade at a Royal Dutch Shell Plc facility.

Libya says oil output tops one million barrels a day as industry recovers

December 24, 2011. Libya, holder of Africa’s biggest oil reserves, is now pumping “more than a million” barrels a day as the oil industry recovers from months of armed conflict. The country will resume normal oil production by the middle of next year. The North African nation was pumping about 1.6 million barrels a day in January, before the armed uprising began in February that eventually ousted leader Muammar Qaddafi. The country is seeking to raise its production to 2 million barrels a day in three-to-five years’ time. Libya is a member of both OAPEC and OPEC. There is a “gentleman’s agreement” within OPEC to accommodate the return of Libyan oil. OPEC set a new production ceiling for the first time in three years at its meeting. The agreement to raise the group’s official output target to 30 million barrels a day underscores how some members are concerned oil at about $100 a barrel may sap demand amid signs Europe’s debt crisis is driving the world toward a recession.

Saudi Aramco drilling rigs count to jump 12 pc in 2012

December 24, 2011. Saudi Arabian Oil Co plans to increase its drilling-rig count by 12 percent to 145 to boost natural-gas and oil output from its Manifa field. Most of the expansion is for gas development. Saudi Aramco will drill for gas onshore in northern Saudi Arabia and near the Shaybah oil field in the Empty Quarter desert, as well as offshore in Hasbah field in the Arabian Gulf. The company will have 50 drilling rigs for oil, 50 for gas, 15 exploration rigs and 30 workover rigs to maintain existing wells. The oil drilling is mainly to replace capacity declines that result from ongoing production and will not add new capacity, except for the Manifa drilling. Saudi Aramco increased the number of drilling rigs this year to 130, more than figures given out by rig contractors. The nation currently pumps around 10 million barrels a day of crude.

Gazprom gets $193 mn approval to drill 10 gas wells

December 23, 2011. Cabinet Purchase Committee approved a proposal of the Energy Ministry to appoint Russian Gazprom to drill 10 gas wells across the country. As per proposal, the Russian state-owned petroleum exploration and production company will dig 10 gas wells in the existing gas fields at a contract value of $193.52 million. The Cabinet body, with Finance Minister AMA Muhith, also approved four more proposals, 2 placed by Local Government Division and 2 placed by Industries Ministry.

Fracking opens fissures among states as drillers face many rules

December 23, 2011. Pennsylvania regulators ordered Chesapeake Energy Corp. to install pressure gauges costing as little as $600 on 114 of its wells after natural gas contaminated drinking water. Officials rejected a call from environmental groups to order safety devices for all similar natural-gas wells, a requirement in neighboring Ohio. A boom in gas production using hydraulic fracturing, or fracking, has led to a patchwork of local drilling standards. Now, several states are revising or formulating rules, and the U.S. Environmental Protection Agency is studying the effects of fracking on drinking water and weighing nationwide regulations. States are moving more aggressively as gas extracted from shale has expanded to a third of total U.S. production, up from 2 percent in 2001.

Shale boom heralds fifth year of gas declines

December 22, 2011. Booming U.S. natural gas production from shale formations and slowing demand from households, factories and power plants are poised to send prices down for an unprecedented fifth year in 2012. Gas may tumble 8.2 percent from its 2011 average, as output rises 2.8 percent to a record 67.72 billion cubic feet a day. Demand will probably climb 1.7 percent, after a 1.8 percent increase.

U.S. joins EU in push for Iran oil embargo in effort to stop nuclear plans

December 22, 2011. The Obama administration and European governments are seeking help from Arab and Asian allies to reduce Iran’s oil revenue in the dispute over its nuclear program, while trying to avoid causing a surge in prices that may threaten the global economic recovery. The most wide-ranging effort to date to target Iranian income, the strategy includes a push by France and Britain for an embargo as soon as next month on imports of Iranian oil by the 27 European Union countries. EU nations, the U.S. and Asia- Pacific allies discussed possible measures in Rome and vowed to increase pressure on Iran, the world’s No. 3 crude exporter in 2010, to abandon a suspected nuclear weapons program. The Obama administration sent high-ranking officials to Saudi Arabia and Israel to discuss targeting Iran’s energy exports, and is developing plans to implement congressionally mandated sanctions on its central bank that complicate the international purchases of crude. The U.S. is also urging Japan, the No. 2 buyer of Iran’s oil, to reduce its reliance on imports from the country and discourage refiners from buying the crude by imposing tariffs, according to diplomats and analysts who are in consultation with the administration. The prospect of a European embargo of Iranian crude helped push oil prices higher. Oil is Iran’s main source of income, earning the country $73 billion in 2010 and supplying more than 50 percent of the national budget. The second-largest producer in the Organization of Petroleum Exporting Countries after Saudi Arabia, Iran exported an average of 2.58 million barrels a day in 2010.

POWER

Generation

Shenhua to build Asia’s biggest coal-fired power station in southern China

December 27, 2011. Shenhua Group Corp. plans to build Asia’s biggest coal-fired power plant in China’s southern province of Guangxi to help reduce electricity shortages in the region. The parent of Hong Kong-listed China Shenhua Energy Co. signed an agreement with the local government to build an 8- gigawatt plant at the port city of Beihai. Construction will take about five years. China, the world’s biggest polluter, relies on coal to generate about 80 percent of its electricity. The plan to build the thermal station in Guangxi comes after the province suffered power shortages in recent years because drought reduced supply from hydroelectric plants. The coastal province has deep ports that will allow ships to deliver coal to the plant. Guangxi will need to build docks to receive coal delivered from Shenhua’s mines in Indonesia and Australia. Shenhua is China’s biggest coal producer. China, the fastest-growing major economy, produces more greenhouse gases blamed for global warming than any other nation. The government wants to cut carbon dioxide emissions by as much as 17 percent per unit of gross domestic product in the five years through 2015.

Transmission / Distribution / Trade

Basin Electric seeks approval to build $300 mn transmission line in North Dakota

December 27, 2011. Basin Electric Power Cooperative is seeking regulatory approval to build a $300m electric power transmission line in western North Dakota, US. The 200-mile line will start at Basin Electric's Antelope Valley power station near Beulah and connect to the west to a substation near Grassy Butte. The proposed line from there would run northwest to Williston, then back northeast to Tioga. Furthermore, Basin as part of the project aims to build two new electric power substations. The high-voltage line will help serve the growing electricity needs of western North Dakota's oil industry. Basin Electric expects to start construction on the transmission line in 2014

Policy / Performance

South Korea names two possible sites for new nuclear reactors

December 23, 2011. South Korea named two possible locations for new nuclear reactors, Korea Hydro & Nuclear Power Co., which operates 21 reactors for the nation. The state utility plans to choose between Samcheok and Yeongdeok, east of Seoul, by the end of 2012.

U.S. clears another hurdle toward nuclear renaissance

December 22, 2011. U.S. regulators moved a step closer toward clearing the country's first nuclear reactors since the Three Mile Island accident in 1979, even as the industry struggles against plunging natural gas prices and safety fears after Japan's Fukushima disaster.

The U.S. Nuclear Regulatory Commission (NRC) approved the latest version of Westinghouse Electric's AP1000 reactor, stirring supporters hopes that a true U.S. nuclear power revival -- first discussed a decade ago when as a cheaper, cleaner alternative to fossil fuels -- may yet come. Next up for the NRC is to decide whether to approve plans by U.S. power companies Southern Co and Scana Corp to build AP1000s in the U.S. Southeast. Both firms have started limited construction on two units each, which would be the first reactors built in the United States in more than 30 years. The Obama administration has painted the resurgence of nuclear power as an important step toward cutting U.S. dependence on greenhouse-gas-emitting power sources like coal. However, public and political opposition over the AP1000 design and nuclear power in general has swelled following the accident at the Fukushima nuclear plant in Japan after a massive earthquake and tsunami in March.

Andritz gets EU107 mn euro hydro power order from Egypt

December 22, 2011. Andritz AG, the world’s No. 2 maker of hydroelectric turbines, said it received a 107 million euro order from Egypt’s energy and water ministries to help rebuild a dam on the River Nile.

Hitachi, Lithuania to sign preliminary nuclear deal

December 21, 2011. Japan's Hitachi is expected to sign a preliminary deal with Lithuania on investing in a new nuclear plant in the Baltic state. The document should define how big a stake Hitachi is willing to take in a plant that is to be built by 2020. Hitachi is also to provide one 1,300-megawatt ABWR reactor for the plant in alliance with U.S. General Electric.

Renewable Energy / Climate Change Trends

National

Tata Power to buy BP Alternative Energy Holdings' 51 pc stake in Tata BP Solar

December 27, 2011. Tata Power Company is in pact to buy BP Alternative Energy Holdings' 51% stake and preference shares in their joint venture Tata BP Solar India. Post acquisition, Tata Power would own 100% in the solar power company. The stake sale is a part of BP's decision to exit solar business over the next few months because it has become unprofitable.

French solar major Solairedirect to invest ` 40 bn in 5 yrs

December 25, 2011. Solar power producer Solairedirect Energy India plans to invest around ` 4,000 crore to fund its target of becoming a 400 MW company in the next five years. The company, a subsidiary of the French solar major Solairedirect, which entered the country last year, provides end-to-end solar energy solutions for turnkey projects, including project development and engineering, construction and installation, financing, operation and maintenance.

Solairedirect, which has already won a 5-mw project in Rajasthan under the Jawaharlal Nehru National Solar Mission (JNNSM), is planning to make an investment of nearly ` 4,000 crore over the next five years to fund its plans. The company has won the Rajasthan order for a rate as low as ` 7.49 a unit.

Suzlon bags 166.3 MW worth orders in Q3

December 23, 2011. Leading wind turbine maker Suzlon said it bagged 166.30 MW of cumulative orders in the third quarter so far in the country. Orders worth ` 935 crore have been bagged between the period beginning October 22 and December 22 covering PSUs, large corporates and SMEs, the company said.

Suzlon's orders, which include a product mix of primarily S82-1.5 MW and S88-2.1 MW turbines, were bagged from the Maharashtra-based Malpani Group, Rajasthan Gums, Gujarat Power Corporation and Sterling Agro Group among others. Currently, the installed wind power capacity in the country is over 15,000 MW and as per the new and renewable energy ministry estimates, the potential is over 50,000 MW.

Power Grids to get 400 MW solar power

December 21, 2011. The ministry of new and renewable energy expects that 400 MW solar power will flow to the grid by the end of this financial year as many projects awarded last year are nearing completion. The ministry has so far achieved 183-MW generation capacity since the solar mission was launched in January last year with a thin generation base of 3 MW. The solar power tariff, which was as high as ` 17.91 per unit in November 2010, has dropped by over 58% at ` 7.49 per unit, the bid offered by French company, SolaireDirect SA, in the latest auction earlier this month. The Central Electricity Regulatory Commission (CERC) limits solar power tariff and bidders quote rates below that price. Developers say that the declining tariff is a natural consequence of significant reduction in project cost. The company recently bagged two solar projects of 35 MW. Companies active in solar power projects include Mahindra Solar, Gail and Welspun group. In 2010, more than 400 companies had bid in the first round for allocation of 150 MW of grid-connected plants.

Global

First Solar outspent BP in California while cultivating political support

December 27, 2011. First Solar Inc., the maker of thin- film solar panels that cut jobs and lowered its profit forecast this month, has won government aid while cultivating political relationships from California to the White House. First Solar is eliminating 60 jobs at a California research center after receiving $3.43 million in state sales-tax credits. The federal government provided $3 billion in loan guarantees to the Tempe, Arizona-based company, the most of any recipient.

Connecticut announces 20 year deals with pair of solar projects

December 24, 2011. Connecticut selected two 5-megawatt solar projects to sell electricity for 20 years to Northeast Utilities and UIL Holdings Corp. at a price the state’s governor said was among the lowest in the country.

The average cost of electricity from projects that will be built in the cities of East Lyme and Somers will be 22.2 cents a kilowatt-hour. Smaller solar projects in Connecticut producing as much as 250 kilowatts sell power for about 40 cents a kilowatt-hour and electricity from nuclear and fossil fuel-powered plants goes for about 8 cents a kilowatt-hour.

A123 says batteries for Fisker have potential safety issue

December 24, 2011. A123 Systems Inc., the maker of batteries for electric vehicles, said it found a “potential safety issue” in batteries it supplies to Fisker Automotive Inc. A123, which also sells batteries to automakers such as General Motors Co. and Daimler AG, said hose clamps that are part of the internal cooling system of its batteries supplied to Fisker were “misaligned” and may cause coolant to leak. Such a leak could lead to an electrical short circuit.

Fisker, based in Anaheim, California, is ramping up U.S. deliveries of $102,000 Karma plug-in hybrid sedans. Shipments have begun with 225 sent to dealers and 1,200 units “in the pipeline”. Karma production is now 25 units a day and may rise to 60 a day, said Fisker, a vehicle designer who has styled cars for Aston Martin and Bayerische Motoren Werke AG’s BMW. A123 will supply battery packs for Detroit-based GM’s Chevrolet Spark electric subcompact going on sale in 2013. The company has reported losses in every quarter since 2008 and went public in September 2009.

BP keeps Australia solar venture as it exits business globally

December 23, 2011. BP Plc, Europe’s second-largest oil company, said it is sticking with a proposed A$923 million ($937 million) solar project in Australia after deciding to exit the business globally amid a glut. While London-based BP is proceeding with the plan, the company and its partners in the proposed 150-megawatt solar plant in Australia’s New South Wales state have yet to sign power-supply agreements needed to advance with the project and failed to meet a Dec. 15 deadline to reach a financial close. The companies expect to start construction of the venture in the second half of 2012, later than previously estimated.

BP will exit the solar business after 40 years because it has become unprofitable. The industry faces oversupply and price pressures after Chinese competitors increased production. BP, Fotowatio Renewable Ventures and Pacific Hydro Pty won A$306.5 million in Australian government funding to build the Moree solar farm. The companies aim to build one of the world’s largest plants using photovoltaic panels to turn sunlight into power. The partners had expected to begin building the solar farm in the first quarter of 2012. BNP Paribas, Banco Santander SA and National Australia Bank Ltd. were among eight banks that initially agreed to help finance the venture. Australia, which has set a target of generating 20 percent of its power from renewable energy sources by the end of the decade, also said in June it would provide A$464 million to a solar project in Queensland led by a unit of Paris-based Areva SA. That venture proposed a 250-megawatt solar thermal and gas hybrid power plant, according to the government. BP, an early entrant into the solar business, quit manufacturing entirely in July. The company plans to sell stakes in the more than 158 megawatts of projects it’s developed with local partners in countries including Italy, Spain, Germany, Britain and the U.S. Its solar equipment venture in India with Tata Power Co. is conducting “business as usual”.

U.S. delays decision in China solar case until Feb

December 23, 2011. The U.S. Commerce Department is giving itself an extra month to investigate charges of unfair Chinese government subsidies in a case brought by the U.S. unit of German solar energy company SolarWorld. The department will issue its preliminary decision on countervailing duties on February 14, instead of around January 12 as originally scheduled. The high-profile case has further strained U.S. trade relations with China, with Beijing slamming any move by Washington to impose duties on Chinese-made solar panels as "protectionist."

Total merges solar units, ups SunPower stake

December 23 2011. U.S. solar panel maker SunPower Corp, a unit of French oil major Total, said it had agreed to buy Total-owned Tenesol for $165.4 million in cash in an expected deal that will regroup the French group's solar business under one umbrella. Total announced the $1.3 billion takeover of SunPower in June. Philippe Boisseau, Total's head of gas and power, told Reuters at the time that Total was planning a merger of its photovoltaic subsidiary Tenesol with SunPower.

Foxconn’s solar bid may cut industry margins

December 23, 2011. Foxconn Technology Group’s decision to start making solar power modules may speed the rate at which margins are narrowing for Chinese manufacturers, another blow for an industry already coping with a plunge in prices. The Taiwanese company that’s the world’s biggest contract maker of electronics including Apple Inc.’s IPhone started work on a solar-module plant in China’s eastern province of Jiangsu near the headquarters of Suntech Power Holdings Co., the largest silicon-based module manufacturer. Prices for solar cells have skidded 62 percent this year as Chinese companies led by Suntech boosted production and won market share from European and Japanese rivals. Foxconn’s gross margin of 5.6 was less than half Suntech’s in the third quarter.

U.K. third-quarter electricity share from renewables rose to 9 pc

December 22, 2011. U.K. renewable power sources generated 9 percent of the country’s electricity in the three months through September, up from 8.1 percent in the third quarter of 2010, the Department of Energy and Climate Change said. Power generated by offshore wind turbines rose by 30.5 percent in the quarter from the same period last year, while electricity from hydropower gained 41.3 percent as a result of higher rainfall, the department said. Onshore wind power declined 2.4 percent due to lower wind speeds, it said.

EPA’s changes to air-toxics rule fail to sway American Electric

December 22, 2011. Utility companies criticizing a proposed new U.S. cap on power-plant pollutants say they aren’t swayed by the Obama administration’s decision to grant two of their requests for more flexibility in complying. Representatives for the largest coal-fired power producers, Southern Co. and American Electric Power Co., said the administration is underestimating the costs of the plan, which was released by the Environmental Protection Agency in Washington.

South Korea’s power utilities pledge to raise renewable energy portfolios

December 22, 2011. South Korea’s 13 power utilities pledged to increase the use of renewable sources for electricity generation as the government plans an alternative-energy quota in 2012 to reduce emissions. The generators signed contracts with the government to cooperate the mandatory quotas and to install renewable-energy power generators at all their sites by 2013. The generators, each with more than 500 megawatts of capacity, include six units of state-run Korea Electric Power Corp., Posco Power Corp., GS Power Co. and Korea District Heating Corp. Korea Energy Management Corp. will provide technical and other aid as an accredited approval organization for the renewable portfolio standard.

Airlines lose challenge to EU expansion of carbon cap-and-trade system

December 22, 2011. International airlines must comply with the European Union’s carbon-emission limits, the region’s highest court said in a final ruling that may inflame trade tensions between Europe and the U.S. The EU Court of Justice confirmed the validity of EU rules that include aviation in the emissions-trading system, known as the ETS. U.S. airlines said the judgment would “isolate” the region from the rest of the world. United Continental Holdings Inc., AMR Corp.’s American Airlines and the Air Transport Association of America challenged the EU’s attempt to extend the world’s largest carbon cap-and- trade program beyond its borders. The Luxembourg-based court’s ruling, which can’t be appealed, means the rules will be imposed on any flights to and from EU airports starting next year. While the U.S. is not a party to the case, the government has been monitoring it closely. At a court hearing in July, the airlines said the plan to extend the EU carbon market to flights to and from EU airports was unlawful. They argued the rules violate several principles of customary international law and international agreements, including the Chicago Convention, which governs international civil aviation. The EU decided in 2008 that aviation should become a part of its carbon cap-and-trade program.

U.K. to push ahead with solar subsidy cuts after court ruling

December 22, 2011. The U.K. government vowed to press ahead with cuts to subsidies for solar power after the High Court and a panel of lawmakers voiced opposition to the plan affecting as many as 29,000 jobs. The High Court in London ruled the government’s decision to cut a feed-in tariff for solar energy starting on Dec. 12 was “unlawful.” Two Parliament committees comprising lawmakers from the main parties said the incentive reductions may have a “fatal impact” on the industry.

Six men guilty of tax evasion in Deutsche Bank CO₂ trades

December 21, 2011. Six men were convicted of tax evasion by a German court following a fraud linked to the sale of carbon-emission certificates to Deutsche Bank AG. The six helped to start a chain of trades with the sole purpose of evading value-added tax, Presiding Judge Martin Bach said at a hearing as he sentenced them to as long as seven years and 10 months in jail. Deutsche Bank, which bought the securities, should have known the trades were illegal, he said. The case is part of the biggest crackdown on emissions- related tax crimes since Europe began its cap-and-trade system in 2005. German authorities enlisted assistance from 10 countries last year and froze 100 million euros in funds as part of the probe. Frankfurt prosecutors are investigating a total of 170 people, among them seven Deutsche Bank employees. The men in court worked at small trading companies that bought certificates from suppliers overseas and resold them. Each sale generated VAT which the buyer could reclaim from the tax authorities as a refund. Deutsche Bank, which bought the allowances, set aside 310 million euros in October in case the government seeks the return of the money. An internal investigation by an outside law firm has so far shown no sign of criminal involvement by the bank’s employees. Germany became the center of that form of tax evasion in mid-2009 after France, the Netherlands and the U.K. changed their tax laws to block illicit trading, Bach said. Germany changed its rules in 2010 to end the practice, the judge said.

EON gets green light to build pump storage plant

December 21, 2011. EON AG, Germany’s largest utility, received permission from local authorities for a 250 million- euro ($328 million) expansion of an underground hydro pump storage plant. The utility plans to add a 300-megawatt pump turbine to the Waldeck 2 facility. A final investment decision will be made next year. EON said it will invest 7 billion euros in renewable energy projects in the next five years as the country abandons nuclear power. Pump storage plants pump water at hydropower plants from a lower reservoir to a higher elevation during times of low demand. The water is released when demand is high, plunging through a turbine to generate electricity.

EU carbon law likely to raise air fares to Europe

December 21, 2011. The continent's highest court upheld a European Union law that will charge airlines for carbon emissions on flights to and from Europe, beginning January 1. Carriers are certain to want to pass that cost on to consumers and some industry watchers forecast airfares between the United States and Europe could rise $50 to $90. Trans-Atlantic ticket prices could rise $70 to $90, based on current oil prices, as a result of the EU carbon law. Airlines for America, the U.S. airline industry group that challenged the EU law, said it was reviewing its legal options, but its members would "comply under protest" for now. The group has estimated that the emission law could cost the U.S. airline industry $3.1 billion from 2012 through 2020.

Court ruling on EU carbon airline law dismays U.S.

December 21, 2011. The United States said it is disappointed by a ruling from Europe's highest court backing a European Union law to charge airlines for carbon emissions on flights to and from Europe, saying it wanted the issue dealt with in the International Civil Aviation Organization.

Bosch buys Conergy unit as part of $2 bn solar drive

December 21, 2011. Robert Bosch GmbH, the world’s biggest car parts supplier that’s pursuing a 1.5 billion-euro ($2 billion) push into solar energy, bought Conergy AG’s Voltwerk Electronics GmbH unit. The purchase marks Bosch’s entry into solar inverters, devices that connect electricity generated by panels to the transmission grid. Voltwerk generated sales of 68 million euros in 2010.

NextEra, Iberdrola get U.S. approvals for wind, solar farms

December 21, 2011. The U.S. Interior Department approved plans from NextEra Energy Inc. and Iberdrola SA to build renewable-energy projects on public lands. NextEra’s 300-megawatt Sonoran Solar Energy Project, located in Maricopa County, is the first solar project to be built on public lands in Arizona. It may cost about $1 billion.

JA Solar announces high-efficiency solar cells

December 21, 2011. JA Solar Holdings Co., the world’s largest solar-cell maker, announced a product that converts as much as 18.5 percent of the sun’s energy into electricity. The company is producing Maple multicrystalline cells “in large volume production”. Maple’s conversion efficiency tops the industry average of 16.8 percent for multicrystalline cells, JA Solar said. SunPower Corp., the second-largest U.S. panel manufacturer, makes the most efficient solar cells. Its products convert at least 22.4 percent of the energy in sunlight into electricity and have reached 24.2 percent in lab tests. Conversion rates matter more for residential projects, where efficient panels can generate more power in less space, than for large, utility-scale plants.

[1] Snyder, Q Z. ‘Rising Powers & International Politics: A Liberal Systematic Perspective’

[2] Emerson, M. Tocci, N & Youngs, R. 2011. ‘Global Matrix: A Conceptual & Organizational Framework for researching the future of global governance,’ CEPS Working Document

[3] Maddison, A. 2008. ‘The West and the Rest in the World Economy: 1000-2030: Maddison and Malthusian Interpretations,’ World Economics, Vol 9, No 4, October-December 2008

[4] Putnam, R D, 1998. ‘Diplomacy & Domestic Politics: The Logic of Two-Level Games,’ in ‘International Organization,’ 42, 3, 427-460

[5] Cramton, P & Stoft, S, 2010. ‘International Climate Games: From Caps to Cooperation,’ Global Energy Policy Center, Research Paper No 10-07

[6] UNFCCC available at http://unfccc.int/essential_background/convention/background/items/1355.php

[7] Documents of the Conference of Parties available at http://unfccc.int/cop5/resource/cop1.html

[8] Documents of the Conference of Parties available at http://unfccc.int/cop5/resource/cop3.html

[9] Delhi Ministerial Declaration available at http://unfccc.int/cop8/

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