8Energy News Monitor I Volume VIII, Issue 29

De-control of Hydrocarbon Prices in 2012?

Lydia Powell, Observer Research Foundation

f anyone were to ask executives from the oil, gas or coal companies, the most important wish in the New Year for their respective sectors, they are likely to say that they wish that ‘the government gets out of business so that they can get on with their business’. The Government, both at the State level and the Federal level, is present where it should be absent and is absent where it should be present. Put differently the Government is absent where it should be present precisely because it is present where it should be absent. The Government is absent in the provision of public goods such as education, health care, clean-air, rule of law, institutions, infrastructure and governance precisely because it is ever present in the commercial world. The Government’s constant intervention in the commercial world prevents the generation of wealth which is necessary for the provision of public goods. The Government therefore imposes its responsibility of providing public goods back on commercial entities. The ability of commercial entities to generate wealth deteriorates under the burden of providing social goods. The government ends up with tattered fiscal status, commercial entities with illiquid balance sheets and the people with pathetic public goods. Will the vicious circle begin to end in 2012?

As pointed out by Dr Urjit Patel in his presentation at 10^th PetroIndia, an annual conference organized jointly by the Observer Research Foundation and the India Energy Forum there is no real dilemma for the Government as far as the petroleum and electricity sectors are concerned as the only thing it can do is to is to allow energy prices to reflect true costs. The petroleum and electricity sector together account for a loss of over 2 percent of GDP which is over one trillion rupees. No political leader, however shortsighted, can afford to ignore this figure. Within the Government there is an acceptance that something has to be done but there is also acceptance that it is politically infeasible given the constraints of coalition politics. The story of oil price de-control in America may be illuminating in this context.

During the Carter era, leaders of the industrial nations began to voice criticisms of excessive American consumption and under-pricing of oil (just as the IEA and OECD are complaining about India and China now). Using the 1978 Bonn summit as the forum, leaders from major industrialised countries attempted to forge a trans-national bargain linking the growth of Germany and Japan with the decontrol of domestic oil prices in America. The argument was that unrestrained demand for oil in America driven by domestic price controls were driving up global oil prices thus stifling growth of other countries. Though there is some disagreement over the nature of the Bonn pledge, Carter admitted in his biography that US inability to implement this policy was ‘becoming an international embarrassment.’ The Bonn summit was followed by the second oil price crisis triggered by the Iranian shut down and subsequent OPEC decisions that doubled the price of oil. Working against public opinion, some of Carters advisors promoted immediate decontrol of oil prices as a signal to IEA and OPEC on US commitment to gain control over oil imports. Others feared the inflationary effect of sudden decontrol. Carter himself preferred that decontrol was coupled with a tax so as to avoid giving away $ 16 billion to oil companies.

To take on the opposition, the Carter administration’s foreign economic policy officials began an effort to redefine the oil pricing issue by linking oil decontrol to a larger set of international economic problems and to a diplomatic agreement that addressed these problems. Embedding oil pricing in complex matters of foreign policy and international economics was indeed a master stroke of the Carter administration. It facilitated linking the American pledge to decontrol oil prices to German and Japanese agreements to reflate their economies. This strategy redefined what was at stake from an international perspective and effectively shifted the balance of power in favour of the administration in the struggle among domestic groups over oil pricing policy. In transforming the issue of decontrol, the administrative officials strengthened their position within the domestic policy process and within the administration itself. Less than a year later the administration successfully began the process of decontrol. Despite continued attempts by Congressmen to thwart the Bill linking it to the interests of oil companies, the Congress was no longer able to find a majority vote for continued controls. What had changed was not consumer interests in continued controls but the terms of the debate. The change in the environment and the recasting of the issue from an international perspective made it possible for a Democratic administration that came to power promising continued control of oil prices to influence and implement one of the most important policy decisions on oil price in the United States with little or no influence from the oil industry. The decontrol decision of the Carter administration in 1979 was a landmark in American energy policy. It transformed the Governments’ role from that of ‘grand provider’ to ‘market facilitator’. Isn’t it time for India to do the same!

POWER

Will 2012 be a New Beginning for Power…?

Ashish Gupta, Observer Research Foundation

ear 2011 was not good as power sector is concerned but we are hopeful that in this year we will see some new amendments in the policies which will help the ailing power sector. The distribution sector which has performed worst in the power sector suffered a loss of around ` 78, 000 Cr (` 780 bn) in 2011. Many of the discoms are looking for bailout plan from the government as their financial condition is very fragile. Their inability to raise tariffs and cross subsidies are not compensated by the respective state governments. The gap between average cost of supply and revenue realization is widening and will continue to do so unless some stern measures have been taken. There is a need for reviewing of accounts and financial stability of SEB’s and discoms, losses incurred, review of electricity tariff, mechanism for improving measures and their operation, reviewing managerial and organizational structure and planning course of action for achieving financial feasibility. Stern action is required for the utilities and discoms whose accounts have not been audited and imposition of penalty who fail to submit annual revenue requirement and tariff revision proposal to the regulator. Also state government should clear all the outstanding subsidies to the distribution utilities and ensure advance payment of subsidies as per section 65 of the Electricity Act, 2003 in the future. Apart from the above they should also ensure payment of all the outstanding dues from the various government departments and institutions to the distribution utilities or release payments from the State budget directly. The action proposed above, if implemented in 2012 will bring relief to the ailing power distribution utilities and also help in improving the regulatory set-up.

Environmental clearance for “go – no go area” which is a major hurdle for power sector is gradually showing positive thrust through acceptance of the recommendation by Dr. Chaturvedi commission report for granting clearance to projects in sensitive environmental zones on a case to case basis. Industry which is struggling for getting E & F clearances as there is no uniformity in approach. Even after Expert Appraisal Committee (EAC) favours a go-ahead for coal mining project, forest clearance is not obtained within a years time the Environmental Clearance (EC), will stand rejected and the industry have to apply fresh for getting this permission. As per normal practice the time required to get all clearance is one year but in reality it takes almost three years and they end up applying repeatedly for EC. Since many of the thermal plants are under implementation, specially ambitious UMPP’s which are dependent on allotted captive blocks are yet to get forest clearance. This will affect the power sector badly not only in terms of generation but also have an immediate effect on investor sentiment in the power generation sector and on financing for power generation.

Therefore it is necessary to bring transparency and clear time framework for clearing Environment & Forests permission. We are hopeful that MoEF will take positive steps with regard to E&F permission in this year. Another area which needs due consideration is the disposal of excess production of coal by the captive mines. As per The Coal Mines Nationalisation Act of 1973 allows coal from captive block be used exclusively for specified end use project and production of surplus coal should not result in any undue advantage to captive block owner, the policy states. It said the surplus coal should be placed at the disposal of CIL which in turn would dispose it off through e-auction. Clearly, there is no incentive to the captive miners. Though, the Planning Commission and industry had pleaded that the excess production, other than the allocated quota, should be allowed to be used by the captive miners to ease the dry fuel shortage situation in the country. It is suggested that CIL should develop some mechanism for disposing off the excess production in such a manner that would incentivize both the parties.

RENEWABLE ENERGY

2012: Visions Vs Delusions

Sonali Mittra, Observer Research Foundation

ear 2012 sits uncomfortably at crossroads of the four ambitious energy development plans. Overlapping and in some cases impeding the larger objective, Jawaharlal Nehru National Solar Mission, ‘Power to all by 2012’ and Rajeev Gandhi Vidyutikaran Yojana have been struggling to meet their individual targets in their own work spheres. 2011 in perspective, revealed the gaps in our planning, implementation and governance in the renewable energy sector. So, inherently the wish-list of 2012 suggests an extension of the frontiers of these multiple programs by drawing upon the conterminous objectives.

First and foremost, the 11^th Five Year Plan (2007-12) targeted capacity addition of 62,374 MW (according to the mid-term review) revised from the 78,700 MW proposed earlier. With the annual growth in power generation recorded at 5.56%, only 67.9% of the target has been realized yet. Desolately enough, besides the apparent constraints like delay in commissioning of projects, long outages, huge transmission and distribution losses (27%), what are the other factors that are impeding the growth in the power sector? Are there more intrinsic factors underpinning the situation which are being constantly overlooked while reforming policies? Yes, the political structure and administrative debacle is one such factor with others attached to the allocation politics. The failure to recognize them is will lead to more challenges of ‘rising expectations’ from the subsequent plan.

Secondly, under the purview of 11^th Five Year Plan, Government of India set another ambitious plan to provide ‘Power to All by 2012’. It requires the total installed capacity to be at least 2,00,000 MW by 2012 from the present level of 1,85,496 MW (as on 31.11.2011). Falling short of the capacity addition targeted in the past year, the transmission and distribution of the electricity produced hasn’t been very successful either. Despite the ‘integrated system planning’ designed under this plan, India faced a 12.5% deficit on an average throughout the country. So, again what is that we are lacking in our approach? Surely, 2012 need not start with the old failed process and run in itself into the non-productive vicious circle.

Thirdly, the Rajiv Gandhi Grameen Vidyutikaran Yojana, set out to meet the rural electricification objectives by utilizing both conventional and non-conventional energy resources (grid connected and off-grid). The end of 2011 was marked by about 47% of the rural households (including Below Poverty Line) being provided with electricity connection. Launched in April 2005, the programme has been fast approaching its number, but the challenge remains of how the ‘electricification’ of the rural household is being carried out and is reported. A mere transmission pole in the vicinity of a village wouldn’t necessarily meet the purpose of electricification unless there is regular and adequate power supply in each of the household. Lack of availability of data on the progress, monitoring and evaluation report has added to the ambiguity of the situation. With most of the surveys conducted independently pointing towards 44% of India still lacking electricity connection, the reports of RGGVY raises certain doubts in their approach, implementation and progress.

Fourthly, the Jawaharlal Nehru Solar National Mission being one of the most debated and discussed plan in the year 2011 will bring its phase I to end in 2012. As against the higher expectations, JNNSM was seen under-performing last year with anticipatied continuation of the issues related to bankability, financial closures and technical feasibilities of some projects in 2012. A parliamentary panel labelled Ministry of New and Renewable Energy’s approach to be disappointing and lackadaisical. However, on a positive note, the off-grid solar program was seen making some progress in 2011. MNRE has been playing an active role in proposing various incentives, reforms and programs to boost the renewable energy development. If only, they were more strategic and effectively implemented, the entire face of the renewable growth trajectory would shoot up.

In perspective, evaluating each of the above power development programs, it is evident that the foundation fundaments are pointing towards three basic goals: one, electrification of all households (rural and urban) in India; two, improving the quality and supply of electricity; three, boosting the renewable energy input in both grid and off gird electricity generation. Now, the challenges that plague all four schemes seem to be duplicating themselves as well. One, bankability of the projects and hence their delay in commissioning; two, infrastructural deficiency – namely evacuation facilities, technology and transmission and distribution; third, political interference and influence in designing policies and reforms. The first two can be more or less dealt technically and administratively, what remains is the third challenge of bureaucratic pressure and power plays. Does our political and administrative structure perceive future without the sense of sight? Here lies the biggest differentiation between ‘vision and delusion’. 2011 in review, revealed the gaps in our planning, implementation and governance in the renewable energy sector. Hopefully, 2012 would strive to reduce this disparity by identifying key common objectives and supplementing each other in meeting the larger goal of energy security.

Rising Powers and Climate Change: The Case of India (Part II)

Lydia Powell, Observer Research Foundation

Continued from Volume VIII, Issue No. 28…

t also urged Governments to promote technological advances through research and development, increase renewable energy resources and also promote the transfer of technologies that could potentially help reduce greenhouse gas emissions that cause global warming – especially carbon dioxide from the burning of fossil fuels. At COP 11 in 2005, developing countries including India indicated a slight shift in their relative positions and expressed greater willingness to discuss stronger efforts to reduce emissions, subject to the provision of financial resources and technology.[1] However at COP 12 in 2006, large developing countries including India joined the United States in strongly opposing any discussion of taking on binding commitments and thus were accused of contributing to stalling measurable progress toward new agreements on international action beyond 2012 when the Kyoto commitments expire.[2]

A clear shift in India’s position towards offering some form of commitment to reduce emissions became evident at the G8 forum in 2009 at a special climate summit of major industrialized and developing countries convened by President Obama under the aegis of the Major Economies Forum on Energy and Climate. In both meetings, in identical words, India endorsed a statement that the maximum permissible global temperature rise was 2ºC above pre-industrial levels.[3] At these meetings, developed nations agreed, for the first time, that their emissions should be cut by 80 percent by 2050, a precondition to developing countries agreeing to a global reduction of 50 percent by then. Developing country leaders including the Prime Minister of India rejected this global target but India’s endorsement of the 2ºC target was read as a move towards making mitigation commitments in the future.[4] The English media in India which is seen to reflect the views of the small but vocal urban middle class and elite population with relatively more favourable views towards the United States hailed it as ‘a sign of India’s growing diplomatic heft’ and as an ‘indication of the bigger role that India would play in global governance.’[5] As expected India went on to announce more significant moderations in its climate victim stand in Copenhagen in 2009 and then in Cancun in 2010.

A cursory look at the origins of India’s victim stand reveals that it did not emerge out of the corridors of the Indian bureaucracy. In the early 1990s, the Ministry of Environment & Forests (MOEF) of the Government of India which was responsible for formulating India’s position on climate change was almost entirely dependent on inputs from non-state actors such as academic researchers and environmental activists. The per capita argument which was the basis of India’s victim stand presented in 1991 was based on a paper by the Centre for Science & Environment (CSE), an activist think tank based in New Delhi.[6] This paper was prepared in response to a 1990 report from the World Resources Institute that assigned primary blame for emissions on developing countries based on green house gas (GHG) emissions from deforestation and agriculture.[7] Later, The Energy & Resources Institute (TERI) another New Delhi based research agency which is said to have received funding from the Rockefeller and Ford Foundations in the USA as well as the International Development Research Centre (IDRC), Canada to set up a research centre on climate change and global warming also got involved in influencing policy formulation on climate change by the MOEF.[8]

This has been acknowledged by the Minister for Environment & Forests of the Government of India in the period 1990-95 who observed that ‘CSE and TERI were his major arms of inputs in climate negotiations’.[9] TERI is seen to have influenced a small change in India’s position from years of resistance to accepting a pilot phase of Joint Assisted Implementation of a mitigation project in 1996.[10] Despite the strong positions India took in the formative years of climate policy, no one outside the Government believed that India had a firm policy on climate change. It was said that ‘if there was a policy it existed only in the heads of delegation officials’.[11] Climate change was not among the priorities of the Indian government at that time as the Government was focussed on economic reforms that were initiated in the early 1990s.

In this period, the European Union had emerged as the driver of progressive policy making, while the United States was perceived not merely to be lagging behind but was also seen to be indulging in gaming the international regime building process.[12] Within this transatlantic divergence, countries such as India, China, Brazil and South Africa, which were yet to be labelled ‘rising powers’ managed to avoid the climate limelight. The United States’ reliance on scientific uncertainties and economic rationality as justifications for delaying climate action provided a convenient shield for the future ‘rising powers’ to hide behind. Unintentionally, India’s strong victim position also provided a cover for many countries not least the United States which was intent on avoiding mitigation action. If India had made a binding commitment to reduce carbon emissions, the moral pressure on the United States to commit to emission reductions would have been significant as its carbon emissions were roughly twenty times that of India on a per capita basis at that time.

India’s strong opposition to mitigation commitments also served the interests of other ‘rising powers’ such as China and Brazil which sought to maintain a relatively low profile in climate negotiations. China relied on the norms of non-interference, sovereignty and the right to development to avoid committing to emission mitigation targets.[13] Brazil which initially saw pressure on environmental protection as ‘outside interference’ shifted to a more open position after it hosted the Earth Summit (United Nations Conference on Environment Development) in 1992.[14] Eventually, the Brazilian position on climate change also prioritised domestic interests such as using and preserving the Amazonian rain forests. In fact, the Brazilian position on deforestation which was influenced by non-state actors (predominantly based overseas) in the early stages is said to have evolved into its position on climate change.[15]

What is instructive to note is that in the case of India, the portrayal of the climate conflict as one of a struggle of the poor against the rich with itself at the forefront sustained its dominance despite the fact that it originated outside the government.[16] The endurance of this position lies in the fact that it was consistent with India’s traditional bargaining positioning as leader of the developing world in North-South negotiations which reflected a mixture of domestic pressure and a preference for a certain world order that favoured the poor.[17] In other words, India’s ‘internal’ and ‘external’ logics overlapped in this period and hence there was no major conflict in holding this position. India was yet to be labelled a ‘rising power’ and it seemed natural for India to identify itself with poor developing countries.

A shift away from India’s ‘leader of the poor’ stand became apparent in 2004 when the Ministry of External Affairs (MEA) started sending a member to the climate negotiating team. By 2007 India was well on its way to become a ‘rising power’ and the MEA sought to reframe its climate position that suited this new label. The issue of ‘climate change’ was seen to be too important to be left to the Ministry of Environment & Forests and so a Council on Climate Change was set up in the Prime Minister’s Office (PMO).[18] Since then the signals from India on climate policy positions have tended to betray a tilt in favour of India’s foreign policy positions or its ‘external logic’. However India’s ‘external logic’ which was eager to put India on the high table of global powers was in direct conflict with its ‘internal logic’ that forced attention on poverty alleviation and the consequent need for fossil fuel fired economic growth.

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

India: Demand-Supply Scenario

Akhilesh Sati, Observer Research Foundation

Million Tonnes of Oil Equivalent (Mtoe)	2020	2030	2035	% CSP for year 2035
Total Primary Energy Demand	1000	1372	1622	100
Coal	489	680	804	50
Oil	214	312	388	24
Gas	77	118	146	9
Nuclear	17	33	41	3
Hydro	14	20	23	1
Biomass and waste	181	196	205	13
Other renewables	7	13	16	1
Power generation	432	633	767	100
Coal	343	481	578	75
Oil	10	9	8	1
Gas	35	61	78	10
Nuclear	17	33	41	5
Hydro	14	20	23	3
Biomass and waste	5	18	26	3
Other renewables	7	11	14	2
Other energy sector	100	147	175	100
Electricity	38	61	75	43
Total Final Consumption	621	833	977	100
Coal	110	143	160	16
Oil	185	284	358	37
Gas	34	46	56	6
Electricity	115	180	223	23
Heat	-	-	-	-
Biomass and waste	176	178	178	18
Other renewables	1	2	2	0
Industry	222	295	335	100
Coal	93	127	146	43
Oil	30	34	35	10
Gas	11	16	19	6
Electricity	56	85	103	31
Heat	-	-	-	-
Biomass and waste			31	37
Other renewables	-	-	-	-
Transport	81	164	234	100
Oil	74	150	213	91
Electricity	2	2	2	1
Biofuels	2	5	8	3
Other fuels	3	7	10	4
Buildings	233	269	292	100
Coal	17	16	15	5
Oil	31	40	46	16
Gas	1	4	6	2
Electricity	40	67	86	29
Heat	-	-	-	-
Biomass and waste	143	141	138	47
Other renewables	1	1	2	1
Other	85	106	117	100

Source: World Energy Outlook, India: Current Policies

NEWS BRIEF

NATIONAL

OIL & GAS

Upstream

ONGC to invest $2.89 bn in KG gas find

January 2, 2012. Oil and Natural Gas Corp (ONGC) plans to invest $2.894 billion (about ` 15,340 crore) in developing its ultra-deepsea UD-1 gas discovery in the Krishna Godavari basin by 2016-17. ONGC believes that UD-1 gas discovery in the southern part of its Block KG-DWN-98/2 can produce for 14-15 years with peak of about 20 million cubic meters per day (mmcmd) lasting for five years.

The company detailed the production profile and the likely investment in the revised proposal for declaring the UD-1 find as commercial (called Declaration of Commerciality). Block KG-DWN-98/2 sits next to Reliance Industries' KG-D6 block where drop in reservoir pressure and water/sand ingress has seen output dip by over 35 per cent to just over 39 mmcmd. UD-1 is the deepest gas discovery ever made in the country and ONGC estimates it may hold 4.257 Trillion cubic feet of inplace gas reserves. The upstream regulator, the Directorate General of Hydrocarbons (DGH) has accepted the DOC but with lower inplace volumes of 3.938 Tcf. Of the inplace reserves, ONGC estimates 2.55 Tcf can be recovered while DGH puts the figure at 2.315 Tcf. ONGC plans to drill 11 wells to bring the field to production by 2016-17 with an output of 585 million cubic feet per day (16.5 mmcmd). The production would rise to 715 mmcfd (20.24 mmcmd) in the second year and stay there for five years. Output from the seventh year would start dipping and it would be 86 mmcfd (2.4 mmcmd) in year 15. DGH found the discovery commercial after considering cumulative production of 2.315 Tcf with recovery of 58.5 per cent for 15 years. It estimated a net present value (NPV) yield for ONGC at $200 million after considering $2.984 billion of capital investment and another $1.77 billion in operating expenses. ONGC has said Development Plan at this stage of the project remains conceptual and may change based on new data. Further as on date, there is no off-the shelf commercial production technology available with any company in the world to produce gas in such deep waters (2,841 meters). ONGC believes that technological solutions would be available in next three years. The block KG-DWN-98/2 is divided into two - Northern Discovery Area and the Southern Discovery Area. The northern part has nine discoveries - Padmavati, Kanakdurga, N-1, R-1 (Annapurna), E-1, A1, U1, W1 and D-1/KT-1. The southern part holds the UD-1 discovery at a record depth of 2,841 metres.

Cairn Lanka successfully completes the first phase of exploration

December 28, 2011. Cairn Lanka, a wholly owned subsidiary of Cairn India Limited, has successfully completed the first phase of exploration campaign in Sri Lanka Block SL-2007-01-001. The exploration programme involved the acquisition, processing and interpretation of 1,753 sq km of 3D seismic data and a three well deep water drilling programme. The seismic programme exceeded the phase I commitment by 20% and the drilling programme exceeded the drilling depth commitment by 50%.This programme resulted in two successive gas and condensate discoveries: the CLPL-Dorado-91H/1z well and, the CLPL-Barracuda-1G/1 well. The third well, CLPL-Dorado North 1-82K/1 was plugged and abandoned as a dry hole on 14th December, 2011. Cairn Lanka's successful drilling programme - the first in Sri Lanka in 30 years - has established a working petroleum system in the frontier Mannar Basin. Following this success, Cairn Lanka has notified the government of Sri Lanka of its intention to enter the second phase of exploration.

Downstream

Sales of branded fuels like Speed, Xtrapremium & Power plummet to one-sixth of its 2008 peak

December 31, 2011. Premium petrol and diesel, once the favourite fuel of urban car owners, have almost crashed out of gas stations, with sales falling steeply to one-sixth of its peak in 2008 when motorists happily paid the extra buck for Speed, Xtrapremium and Power brands of petrol to get a zippy drive and better mileage. Sales of premium diesel dived 70% last October, continuing the sharp decline in the past three years. Sales of branded diesel in the last fiscal year were barely one-sixth the level in 2007-08, as customers switched from petrol to diesel vehicles and shunned branded fuel to save running costs.

Transportation / Trade

GSPC asks Adani Gas to source natural gas from others

January 1, 2012. State-run integrated energy company Gujarat State Petroleum Corporation (GSPC) has asked Adani Gas, an Adani Group subsidiary, to source natural gas from some other sources. GSPC, is the sole supplier of natural gas to Adani Gas, a city gas distributor (CGD), operating a network of around 57 CNG stations in Ahmedabad and Vadodara, besides having a PNG network for domestic supply. Adani Gas sources on an average 0.85 million metric standard cubic metre of gas per day from GSPC in order to meet the requirement of its industrial and domestic consumers in the state. However, GSPC will continue to provide natural gas to Adani Gas for the time being.

Policy / Performance

RIL's export to Bahamas: Investigators rule out foul play

January 3, 2012. Government investigators looking into a sudden surge in exports from India to Bahamas are all set to conclude the numbers are not dodgy, which could result in Reliance Industries Ltd, whose name had cropped up as the reason for the startling discrepancy in the trade figures of the two countries, getting a clean chit. A preliminary report by the Directorate of Revenue Intelligence (DRI) and the Directorate of Central Excise Intelligence, which had been ordered by the finance ministry to investigate the mismatch in data, has concluded that it is not because of any scam and can be explained by the peculiarities of oil trading. Indian exports to Bahamas, vaulted to $2.2 billion in 2010/11 from $2.2 million in 2008-09. But this steep jump did not stack up against Bahamas' total imports figures of $2.8 billion in 2010, setting off alarm bells about possible money laundering and prompting the finance ministry to order an investigation.

BP CEO writes to oil minister on KG-D6 approval hurdles

January 2, 2012. UK's BP plc CEO Bob Dudley has written to Oil Minister S Jaipal Reddy seeking immediate approvals so as that the block's potential can be fully exploited. BP, which recently bought 30 per cent stake in KG-D6 and 20 other blocks of Reliance Industries for $7.2 billion, is keen to undertake sea-bed surveys this winter season -- the only four months weather window available in Bay of Bengal for such jobs, to acess potential of satellite discoveries in the block and draw blue-print of their development. Dudley said one full year may be lost if approvals do not come in time. RIL's $1.529 billion plan to develop four satellite fields surrounding the currently producing D1&D3 fields in KG-D6 block is awaiting oil ministry nod. The survey is part of the development plan.

Over ` 2 per litre hike in petrol price on cards?

January 2, 2012. Oil companies are likely to hike price of petrol by about ` 2.10-2.13 per litre because of weakening Indian currency. The rate change may, however, need a political clearance as Assembly elections in five crucial states, including Uttar Pradesh and Punjab, have been announced. This warrants an increase of ` 1.78 per litre and after adding local sales tax or VAT, the desired hike in petrol price in Delhi is ` 2.10-2.13 a litre. Petrol at Indian Oil Corp and Bharat Petroleum Corp petrol pumps in Delhi is now priced at ` 65.64 per litre and at ` 65.65 a litre on retail outlets of Hindustan Petroleum Corp. Oil firms had, at the last review on December 15/16, decided not to burden the consumers with about ` 1 per litre hike in petrol price needed at that time, as they felt Reserve Bank's intervention may help arrest fall in rupee's value. The oil firms had in November cut petrol prices twice on drop in international oil rates. The companies reduced petrol prices by ` 2.22 per litre, or 3.2 per cent, from November 16, followed by a ` 0.78 per litre cut from December 1. The domestic rates, which were last revised on November 30, are pegged at ` 51.50 to a US dollar exchange rate. The average exchange rate in first fortnight of December was ` 51.98 to a US dollar, which has further deteriorated. Oil companies, as per practice, revise rates of petrol on 1st and 16th of every month based on the average imported price and exchange rate during the fortnight. Oil companies like Indian Oil Corp (IOC) use fortnightly average of benchmark oil price and exchange rate to revise retail rates on 1st and 16th of every month. However, it remains to be seen if the oil firms will get a political nod to increase the prices in view of Assembly elections. Petrol price was freed from government control in June last year but public sector companies continue to informally consult their parent Oil Ministry before taking a decision. The government continues to control rates of diesel, domestic LPG and kersoene which were sold way below cost to keep inflation under check. The oil firms lose ` 12.71 per litre on diesel, ` 29.93 a litre on kerosene and ` 326 per 14.2-kg LPG cylinder.

CNG prices hiked by ` 1.75 per kg in Delhi

December 31, 2011. Indraprastha Gas Ltd (IGL) has raised prices of compressed natural gas (CNG) by ` 1.75 per kg beginning because of a weakening rupee and a halt in cheaper domestic supplies from Reliance Industries' D6 block. Vehicle owners will have to pay 1.75 per kg more in Delhi and 2 extra in Noida, Greater Noida and Ghaziabad. CNG prices were last raised three months ago. IGL has, however, spared household consumers using piped natural gas (PNG) but a price hike looks imminent if imports of costly R-LNG continue. Imported gas is over four times costlier than the D6 gas, which is sold at $4.20 per unit. IGL had raised PNG rates on September 1 from 18.95 per unit to 22 per unit. With a complete halt in KG-D6 supplies due to decrease in production, IGL is left with no other alternative but to source costly spot R-LNG to meet the ever-increasing demand. The impact on the per-km running cost of vehicles would be minor. CNG will now cost 33.75 per kg in Delhi and 37.90 per kg in Noida, Greater Noida and Ghaziabad.

Arbitrariness shakes investor confidence in oil sector

December 30, 2011. Arbitrary decisions on the $8.48 billion Cairn-Vedanta deal and BP's $7.2 billion stake buy in Reliance Industries' oil and gas properties has shaken investor confidence in the world's third-largest energy consumer in an eventful year. The way the government treated miner Vedanta Resources' proposal to buy majority of UK's Cairn Energy in Cairn India and RIL selling 30 per cent of its stake in 23 properties including the prolific KG-D6 gas block to BP, goes to the heart of the mistrust between India Inc and UPA-2 in 2011. First the government arm-twisted Cairn and Vedanta into accepting to pay royalty and cess on the all-important Rajasthan oilfields for conclusion of the deal. As it appeared that the 15-month long saga is over, Oil Ministry sent the proposal back to the Cabinet for approval citing bunch of red flags that Home Ministry, in its security clearance, had raised on alleged global and domestic "transgressions" by Vedanta and its subsidiaries.

Euro-III fuel to be phased out in 7 cities from March 31

December 29, 2011. Environment-friendly Euro-IV quality petrol and diesel will be sold in seven more cities by March 31. The seven cities where fuel of Euro-III specifications will be phased out are: Puducherry, Mathura, Vapi, Jamnagar, Ankaleshwar, Hissar and Bharatpur. The oil ministry has also directed state-run Indian Oil Corporation, Bharat Petroleum and Hindustan Petroleum to phase-out sale of Euro-III petrol and diesel in their pumps in 50 cities by 2015.

Oil Ministry refers RIL's marketing margin issue to EGoM

December 28, 2011. The Petroleum Ministry has asked a ministerial panel to decide if Reliance Industries can charge a marketing margin over-and-above the government-approved sale price for KG-D6 gas. The issue of the $ 0.135 per million British thermal unit marketing margin charged by RIL "to cover for the risk and cost associated with marketing of gas" has been referred to an Empowered Group of Ministers (EGoM). The Oil Ministry, which had long held that the marketing margin was a bilateral issue between the buyer and seller of gas, referred it to the EGoM after user industries like fertilisers sought a clarification on the legality of the levy.

Petroleum ministry to refund $120 mn to Cairn India & Ravva Oil

December 28, 2011. The Indian government will have to refund $120 million to Cairn India and Ravva Oil, the joint venture partners operating an oil and gas block in the Krishna-Godavri basin, after Malaysia's top court ruled in their favour. This follows a recent Federal Court judgement setting aside a Malaysian High Court order directing Indian companies to deduct the outstanding amount of profit petroleum - the share of crude oil or gas that the government gets from operators - from the payment due to the Ravva consortium. The Ravva block, the second most valuable asset for Cairn after its Rajasthan oil fields, produces 28,000 barrels of oil and over 30 million cubic feet of gas a day. Cairn India holds 22.5% stake and is the operator of the block while ONGC holds 40% stake, Videocon Petroleum 25% and Singapore-based Ravva 12.5%. ONGC had explored and developed the Ravva field before the production-sharing contract was signed in October 1994.

Bio-diesel policy faces anti-trust probe from CCI

December 28, 2011. The antitrust watchdog will launch its own probe into whether the petroleum ministry and state-run oil marketing companies have suppressed the market for bio-diesel, over-riding a report on the contrary by the Director-General of Investigation and Registration. India has no commercial market for bio-diesel, the cleaner diesel fuel made from natural renewable resources that can help cut dependence on costly crude imports and reduce greenhouse gases. The government allows producers to sell it as transport fuel only to oil marketing companies. It also regulates its price and has imposed curbs on its transportation. Disgruntled bio-diesel producers such as Royal Energy Ltd had earlier complained against the curbs. When the matter was transferred to the CCI in 2009, after the Monopolies and Restrictive Trade Practices Act, 1969 was repealed, the regulator referred it to the Director General of Investigation and Registration (DGIR). The DGIR's report said there was no need for a further inquiry. Sections 3, 4 and 26 of the Competition Act allow the regulator to probe further, including government enterprises and ministries. This is the second time the regulator is initiating action on its own. Data from the industry lobby shows that the domestic industry, which has 1.2 mt of unutilised capacity, has registered flat growth since 2009, when commercial sales of the fuel were banned. According to reports, diesel imports may rise by up to 30% in 2011. Experts say easing the regime will help cut dependence on diesel. In India, the price of bio-diesel is regulated by the petroleum ministry, which uses the retail price of diesel for its calculation. It is currently sold at about 30 a litre.

Maharashtra govt takes affirmative action on HPCL'S new refinery project

December 28, 2011. Maharashtra state government has finally taken some affirmative action to approve the Hindustan Petroleum Corporation's (HPCL) new refinery project in Ratnagiri. HPCL is planning to build a new 9-15 MTPA greenfield refinery project in Ratnagiri, Maharashtra. HPCL has been seeking a tax holiday and swift land acquisition for the project. HPCL had also sought more land from the Maharashtra government to set up the refinery as it was also considering another site for the refinery. It had asked for 4000 hectares for the proposed facility at Chausal, in the same district. The government had indicated that land will be available for the refinery, which will cost HPCL around ` 30,000 crore. HPCL is also in the process of reviving its $10 billion refinery-cum-petrochemical project in Visakhapatnam and is currently in talks with various companies like Mittal Energy to enter into a joint venture partnership.

POWER

Generation

Adani Power 'well placed' to mitigate fuel risk

January 2, 2012. Adani Power, which is aiming at 20,000 MW installed capacity by 2020, is "well placed" to mitigate fuel supply risk on account of the parent group's dominance in coal trading, says a report. HSBC Global Research, a part of global banking major HSBC, said Adani Power also has a strong record of timely project completions. According to a research report, parent Adani Enterprises' coal mines and dominance of coal trading would help Adani Power to mitigate fuel risk. Many power projects in the country are grappling with fuel scarcity, a scenario that could adversely impact the country's capacity addition plans. Adani group owns coal mines in Indonesia and Australia and also has a 30-year, take-or-pay contract with PT Bukit Asam for mines in Sumatra. Further, it pointed out that Adani Power has taken adequate measures to address technical and fuel-mix change risks by way of appropriate design of the boiler. At present, Adani Power has an installed capacity of 2,640 MW and the same is expected to reach 20,000 MW by 2020.

NTPC to invest ` 183.46 bn in 2 projects

December 29, 2011. NTPC Ltd will invest ` 18,346 crore to develop two projects in Karnataka and Madhya Pradesh. Company accorded investment approval to the projects totaling 2,900 MW electricity generation capacity. The proposal includes a new project of 2,400 MW capacity at Kudgi in Karnataka at an estimated cost of ` 15,166 crore and a 500 MW expansion project at Vindhyachal, Madhya Pradesh at a cost of ` 3,180 crore. NTPC, with a total generation capacity of 36,000 MW, already has 3,260 MW operational capacity at Vindhyachal. Both projects are subject to environment clearance, the company said. NTPC said it entered into power supply commitment with Madhya Pradesh distribution utility for supply 50 MW from proposed solar plant at Rajgarh in the state. The project is expected to be commissioned by 2013. Power from the Rajgarh solar project will be pooled with power from the company's coal based stations to lower costs, the company said.

Transmission / Distribution / Trade

Gain likely for users as power cos to cap cost

December 28, 2011. Electricity consumers are poised to gain as the government plans to cap costs of power supplied from projects with captive coal blocks and assured fuel supply from Coal India Ltd. The government feels that power companies with free fuel supply from captive mines are profiting at the cost of consumers and distribution companies by charging tariff that is not reflective of costs. The power ministry wants to revise tariffs of projects that do not have long-term power supply commitments or are selling electricity in short-term open markets. The ministry also proposes to consider efficiency of projects to award power supply contracts in future and allow fuel costs to be passed through for the benefit of imported coal-based plants. The ministry has set up a committee under additional secretary Ashok Lavasa to review bidding norms of power projects. Private power companies expressed their displeasure over the issue during the meeting that ended without any consensus. Companies with assured coal supplies unreasonably jacked up their prices after tariff from imported coal-based projects rose further impacting state distribution companies whose annual losses are pegged at 27,000 crore. Tariff from a power plant fuelled by captive coal blocks or assured supply from Coal India Ltd should be about 1.50- 2 per unit while they were charging the consumers anywhere between 4 and 8 per unit. The power ministry proposes to put a ceiling on the fixed cost component of tariff for all projects fuelled by coal blocks or other assured form of fuel supply. Capping fixed cost component of power tariff was not possible "as pricing was a function of time". Fuel cost for projects is proposed to be pass through - a move likely to be resisted by captive coal block owners but comes as relief to companies with projects based on imported coal. Imported coal based projects are hit as the fuel prices rose due to changes in regulatory mechanism in exporting nations. The power ministry also said that companies should not be given further coal linkages or blocks if they charge higher tariff from customers despite owning coal blocks or assured fuel supply. The ministry has already decided that in next five years merchant power projects that sell electricity in open markets will get left-over coal after meeting requirement of projects based on competitive bidding.

Policy / Performance

Reliance Power, Shell plan east-coast LNG unit

January 3, 2012. Reliance Power and energy giant Shell are in talks to jointly set up India's first east-coast LNG terminal to fuel factories and power plants that are eyeing imports as output from the D6 block has fallen sharply. Several companies, including Petronet LNG, the country's biggest gas importer, are considering setting up a terminal on the east coast. Power projects with a total capacity of about 7,000 MW, including Reliance Power's Samalkot project, would be stranded due to gas scarcity, as local gas is scarce and importing LNG from existing facilities on the west coast is not economically viable. The two companies were keen to set up an equal joint venture for an LNG terminal at Kakinada. The development comes two months after Reliance Industries and oil major BP incorporated their equal joint venture, India Gas Solutions, for global sourcing and marketing of natural gas in India.

Reconsider plan to transfer surplus coal to CIL: Private power companies

January 2, 2012. Private power companies have asked the government to reconsider the proposal for transferring surplus coal from the allotted mines to Coal India, fearing the move would discourage investments in the sector. The Association of Power Producers (APP) has also expressed reservations over the government's proposed policy to transfer excess coal produced at a mine to Coal India's nearest subsidiary. The Coal Ministry has sought feedback from all stakeholders regarding the policy of disposal of surplus coal from the mines. As per the Mines and Mineral Development and Regulation (MMDR) Bill, 2011, an annuity of 26 per cent of the profit after tax accrues to the local community to the persons holding occupation of the land or traditional rights of the surface of the land. The royalty would be considerably reduced due to the low cost of coal produced and state revenues would be affected. APP has requested the Ministry of Coal to please review the proposed policy and provide a framework which provide adequate incentive for mining and developing coal and helps augmenting domestic coal supply.

Coal India expects higher revenue to offset wage hikes

January 2, 2012. Coal India, the world's largest coal miner, hopes higher revenues after a change in its pricing method will offset the impact of a likely wage increase. The state-run firm approved a plan to change its benchmark pricing for non-coking coal to gross calorific value from the current useful heat value. It expects higher revenues after the change but cannot currently estimate the exact impact. Coal India is currently in wage negotiations with its workers' unions, and had made a related provision of 7.5 billion rupees ($141 million) in the September quarter.

CIL may form subsidiary for buying coal assets in South Africa

January 2, 2012. Coal India (CIL) is likely to set up a subsidiary for buying coal assets in South Africa, as part of efforts to boost its output. The government of Limpopo, the northernmost province of South Africa, approached CIL a couple of months back, requesting the PSU to form a joint venture (JV) with one of its public sector firms for acquiring coal mines. The joint venture would be between the public firm of Limpopo and a subsidiary of CIL. The Limpopo government has also handed over its draft memorandum of agreement on the proposal to CIL.

Tamil Nadu to set up new thermal power station

January 1, 2012. Tamil Nadu government announced setting up of a new 600 MW thermal power station, to be built at a cost of ` 3600 crore, at nearby Ennore. The new ultra modern 'Alternate Ennore Thermal Power Station' will come up over 900 acres. It will replace the old power producing engines and start functioning by 2015 end. The five units of the existing Ennore Thermal Power Station with a capacity of 450 MW have been functioning since 40 years and some engines have developed snags.

Electricity regulators have no choice but to revise tariffs

December 29, 2011. Electricity regulators have, for long, been at the beck and call of their political masters despite the 'independent' status provided to them by law. But they may need to look for some fresh and innovative excuses to explain their failure to revise power tariffs regularly from now on. A special order by the Electricity Appellate Tribunal in early November has made it mandatory for all electricity regulators at the state and central-level to revise tariffs annually before the beginning of the fiscal year irrespective of whether the power distribution companies, or discoms, ask for it or not. It has ruled that the electricity regulator is empowered to regulate and revise power tariffs under the Electricity Act and the tariff order. The tribunal has also asked state regulators to enable mechanisms to ensure that utilities can reflect the increasing cost of fuel and power purchase every month. And regulators have been directed to put the system in place by May 2012.

Reliance Power starts third unit at Rosa

December 29, 2011. Reliance Power has commissioned another 300 MW unit of its power project at Rosa in Uttar Pradesh, taking the total capacity to 900 MW. Reliance Power said the plant was operating at 85% capacity and Chinese equipment, sourced from the Shanghai Electric Company, was functioning well. The company has already commissioned two units of 300 MW at Rosa and the project is expected to achieve full capacity of 1,200 MW by March 2012. Power generated from the project would be sold to Uttar Pradesh distribution company at a tariff to be determined by the state electricity regulator. Average tariff from power projects based on domestic coal was about 3 per unit. The tariff would depend on blending cost of imported coal. The company was importing coal from Indonesia and blending up to 40% of imported coal with domestic fuel. Due to poor financial health of Uttar Pradesh distribution utility there were concerns about prompt receipts.

Coal ministry rejects Coal India's proposal to cut output target

December 29, 2011. The coal ministry has turned down Coal India's request to cut its production target for the year, possibly fearing that acceding to such a demand could have a bearing on global prices. The state-run miner wanted its production target to be cut to 440mt owing to flooding in its mines during the monsoon. According to its agreement on annual targets signed with the ministry at the beginning of the year, if CIL produces 452mt it will be rated 'outstanding' and 'very good' if it produces 447mt. The 447mt production was cleared by the Planning Commission and that the ministry does not want to reduce it. The company has produced 248mt till November, about 20mt less than the eight-month target of 274mt. However, production has picked up to some extent this month. During 2010-11, the company produced 431mt and supplied 424mt to its clients.

2011: High subsidy hit Punjab power sector

December 28, 2011. The sheen of the power sector, which plays a vital role in vote-bank politics in Punjab, was tarnished by a substantial hike in power tariffs, the ballooning power subsidy and strident farmers protests over land acquisition for a new power project in 2011. Despite being a corporatised entity after unbundling of the erstwhile Punjab State Electricity Board, power generation-cum-distribution company Punjab State Power Corporation Limited (PSPCL) continued to experience high transmission and distribution losses and a "mammoth" gap in the revenue requirement to meet its costs.

INTERNATIONAL

OIL & GAS

Upstream

Total acquires $2.3 bn stake in Utica shale from Chesapeake, EnerVest

January 3, 2012. Total SA, France’s largest oil company, acquired a $2.32 billion holding in Ohio’s Utica shale region from Chesapeake Energy Corp. and EnerVest Ltd. Total will gain a 25 percent stake in 619,000 acres of Utica in eastern Ohio, a shale deposit rich in liquids as well as natural gas. Chesapeake will get $2.03 billion and EnerVest $290 million. Extracting hydrocarbons from underground shale rocks has turned the U.S. into the world’s largest gas producer, attracting investments from international oil companies such as BHP Billiton Ltd. and Royal Dutch Shell Plc. The Utica fields may also provide oil, making them more profitable should crude prices hold above $100 a barrel.

PDVSA to settle Exxon claim with $255 mn cash payment

January 3, 2012. Petroleos de Venezuela SA (PDVSA), the state oil company, said it was given 60 days to pay Exxon Mobil Corp. about $255 million in cash to settle an arbitration claim over assets seized by Hugo Chavez in 2007. The cash payment will settle a $907 million ruling by the New York-based International Chamber of Commerce, adding to $191 million of Exxon debt that the Venezuelan company will cancel and $300 million from frozen funds in a New York account. The ICC deducted $160 million in counterclaims from the ruling provided the payment is made in 60 days, PDVSA said. Exxon, the world’s largest oil company by market value, originally sought to freeze $12 billion of PDVSA assets as compensation for the nationalization of the Cerro Negro heavy- crude project in the Orinoco belt. The freeze was overturned by a U.K. court in March 2009, leading Exxon to reduce its arbitration claim to $7 billion in 2010. The ICC handed Exxon the ruling for a net $746.9 million payment.

Brazil's OGX gains production license for Waimea oil field

January 2, 2012. Brazilian oil and natural gas driller OGX Petroleo e Gas Participacoes SA said it gained an operation and production license that will allow it to start producing oil at the Waimea oil field in Brazil's Campos basin. Brazil's Federal Institute for the Environment and Renewable Natural Resources, or Ibama, granted OGX a license to operate its FPSO OSX-1 production rig, which will allow it to start a long-duration production test at Waimea as planned. The license will also allow the company, controlled by Brazilian billionaire Eike Batista, to further develop oil production at Waimea, located in the BM-C-41 block in Campos basin, off the coast of Rio de Janeiro state. Waimea's oil will mark the start of oil production by OGX. The company holds 35 oil and gas production concessions, sited mainly in shallow waters offshore Brazil, and potential resources of 10.8 billion barrels of oil equivalent.

Russian crude production rose to post-Soviet high in 2011 on new projects

January 2, 2012. Russian oil production rose 1.25 percent in 2011 to a record level for the post-Soviet era, as companies in the world’s largest crude-producing nation took advantage of higher prices and boosted output at new projects. Production grew to an average of 10.27 million barrels a day. Output in December slipped to 10.32 million barrels a day from 10.35 million in November. Prime Minister Vladimir Putin, who will seek re-election as president in March, has called for Russia to pump more than 10 million barrels a day for at least the next decade. Taxes on oil and exports are the biggest contributor to the national budget.

Downstream

Petroplus French refinery halt may mean death of Normandy site, union says

January 2, 2012. Petroplus Holdings AG’s refining halt at units in Normandy may mark the plant’s end, a union said, shrinking the crude-processing industry in France that may have posted losses of 800 million euros ($1.04 billion) in 2011. Europe’s largest independent refiner by capacity, unable to buy adequate oil because of a credit freeze, will halt refining at three of its five plants, including at Petit Couronne in northern France, Antwerp and Cressier in Belgium and in Switzerland. The sites have a combined processing capacity of 337,300 barrels of crude a day.

CNOOC Huizhou Refinery's 12 million-tonne project comes online

December 30, 2011. CNOOC Huizhou Refinery said its 12 million-tonne oil refining project has recently gone into official operation. Public statistics showed that it takes two and a half years for the project from trial operation to official operation. The Huizhou Refinery Project is the first large-scale downstream project solely invested in by CNOOC. Around RMB21.6 billion (approx. US$3.42 billion) was invested in Phase I to build a refinery with an annual capacity of 12 million tonnes. The project was designed to process high acid heavy offshore crude, and is the largest single train refinery in China and the first refinery specially designed to process high acid heavy offshore crude in the world.

Marubeni wins Kazakh oil plant contract with Sinopec

December 29, 2011. Marubeni Corp. and a subsidiary of a Chinese state-run firm have received a $1.7 billion contract to build a facility at a large oil refinery in Kazakhstan. The contract involves setting up a plant that extracts gasoline and other petroleum products by reprocessing residual oil left after the refining process. The new plant at the Atyrau refinery is slated to begin production in late 2015. The west Kazakhstan refinery is operated by state-run oil company NC KazMunayGas JSC.

Indeni to raise $40 mn for plant upgrade

December 29, 2011. Indeni Petroleum Refinery has initiated a resource mobilisation plan to raise US$40 million required for plant upgrade. The company had advertised for tenders from project consultants as a first step. The firm would secure the amount required for installing the two major components, Isomeriser and Desulphuriser. The company had already received replies to tenders from consultants to do a detailed engineering study. Indeni was in a hurry to upgrade the plant before 2015 which had been set by the African Refinery Association as a benchmark or roadmap for all oil refineries in the region to comply with the new international standards.

Transportation / Trade

China, Russia mull doubling oil pipeline output

January 2, 2012. The first cross-country oil pipeline to carry oil from Russia to energy-hungry China transported roughly 15 million tonnes of crude in its first year of operation, with the two countries aiming to double the output in future. China and Russia marked the first anniversary of their 1,000-km-long oil pipeline that completed a year of operation without "accident". The pipeline, which originates in the Russian town of Skovorodino in the far-eastern Amur region, enters China via Mohe and ends in China's northeastern city of Daqing.

Nebraska releases pipeline no-go map

January 2, 2012. TransCanada Corp. says Nebraska's newly issued map of environmentally sensitive areas is "extremely helpful" and will help the Canadian energy giant determine some alternative routes through the state for its controversial Keystone XL oil pipeline. The U.S. State Department surprised the pipeline's supporters in November by ordering Calgary-based TransCanada to reroute the $7-billion pipeline, which is intended to connect Canada's oilsands to the Gulf of Mexico region.

Slowing China means ore-ship rates at lowest in decade

December 30, 2011. The weakest growth in demand in at least a decade for shipments of iron ore, the second-biggest commodity cargo after crude oil, means rates for the largest vessels will plunge to the lowest level since 2002. Capesizes, each hauling about 160,000 metric tons of ore, will earn an average of $15,000 a day, about 4 percent less than in 2011. While that implies losses for ship owners and investors in their companies, speculators can profit because forward freight agreements, handled by brokers and used to bet on transport costs, are anticipating an average of $16,367.

Enterprise, Enbridge to conduct open seasons for Seaway pipeline expansion

December 29, 2011. Enterprise and Enbridge recently announced plans to reverse the flow direction of the 500-mile, 30-inch diameter Seaway crude oil pipeline, enabling it to transport crude oil from the oversupplied hub in Cushing, Oklahoma to the U.S. Gulf Coast. The initial 150,000 barrels per day of capacity on the reversed system could be available by the second quarter 2012. Following pump station additions and modifications, which are expected to be completed by the first quarter 2013, capacity would increase to 400,000 barrels per day assuming a mix of light and heavy grades of crude oil. The new 85-mile pipeline that will be built from Enterprise's ECHO crude oil terminal southeast of Houston to Port Arthur, Texas will give shippers access to the region's heavy oil refining capabilities. Service is scheduled to begin in early 2014.

InterOil extends certain LNG project agreements

December 28, 2011. InterOil Corporation has extended the dates by which certain conditions are to be met and Final Investment Decisions made in LNG project agreements with Mitsui and Energy World Corp, until March 31, 2012. The terms of the Project Funding and Construction Agreement and Shareholder Agreement entered into in February 2011 with Energy World Corporation Ltd. governing the parameters in respect of the development, construction, financing and operation of a planned three million tonne per annum (mtpa) land-based LNG plant in the Gulf Province of Papua New Guinea (PNG) have been amended so that the date by which conditions are to be met and FID reached has been extended until March 31, 2012.

Policy / Performance

Nigeria braces for nationwide protests after fuel costs more than double

January 3, 2012. Nigeria, Africa’s biggest oil producer and most populous nation, braced itself for nationwide protests after the government scrapped subsidies on fuel, doubling gasoline costs. The Nigeria Labor Congress and the Trade Union Congress of Nigeria will meet to set a date for a strike involving “tens of millions” of people. Protests erupted in the market area of Yaba in the commercial capital, Lagos. Nigeria, which imports most of its fuel because of a lack of refining capacity, abolished 1.2 trillion naira ($7.5 billion) of subsidies on Jan. 1. That’s likely to more than double the price of unleaded gasoline to 140 naira a liter (0.26 gallon).

Oil could average $92-$96 a barrel in 2012

January 3, 2012. Crude oil futures in New York will average $92 to $96 a barrel in 2012 as slowing economic growth curbs fuel demand. Prices may slip from 2011’s record average of $95.11 as the euro declines against the dollar amid the European debt crisis and uncertainty about the economic recovery. The strengthening of the dollar against the euro curbs commodities’ appeal as an alternative investment to U.S. currency.

Biggest hedge fund in ships sees frozen gas beating oil

January 3, 2012. Tankers hauling liquefied natural gas at sea will earn record rates in 2012 as demand reaches an all- time high, beating returns from vessels carrying oil and coal, according to the world’s biggest shipping hedge fund. The tankers, each holding enough gas to meet about 25 percent of peak daily winter demand in the U.K., will earn as much as $200,000 a day, from $140,000 at the end of 2011.

BP seeks recovery of damages from Halliburton

January 3, 2012. BP Plc seeks to have Halliburton Co., its cement contractor for the Macondo well project whose blowout set off the 2010 Gulf of Mexico oil spill, pay all of the oil company’s related costs and damages. BP had paid more than $21 billion in cleanup costs and economic damages to individuals, businesses and governments harmed by the spill as of Dec. 1, the company said. BP reserved more than $40 billion to cover costs related to the sinking of the Deepwater Horizon drilling rig.

Bangladesh invites firms to bid on LNG project

January 2, 2012. The government has invited bids from four global firms to build the country's first liquefied natural gas (LNG) import terminal on Moheshkhali Island in Cox's Bazar in the Bay of Bengal. The firms include Singapore's Golar LNG Energy Ltd and a consortium of Astra Oil & Excelerate Energy, South Korea's Samsung C&T Corporation and India's Hiranandani Electricity Pvt Ltd. The planned LNG floating terminal will have the capacity to handle 5 million tonnes of LNG a year, re-gasification capacity of at least 500 million cubic feet per day (mmcfd) of gas, and berthing and mooring facilities for LNG ships with a capacity of 138,000-260,000 cubic metres.

Exxon awarded for nationalized Venezuelan assets

January 1, 2012. Petroleos de Venezuela SA must pay about $750 million to Exxon Mobil Corp., a tenth of what the U.S. company is seeking, for assets nationalized by Venezuelan President Hugo Chavez in 2007. The International Chamber of Commerce in New York, an international arbitration court, gave a “favorable” ruling to Venezuela’s state oil company. The World Bank’s International Centre for Settlement of Investment Disputes is also due to rule on the claim in a suit filed against the Venezuelan government.

Iran plans to ink $15 bn in oil deals by March 2013

December 31, 2011. The Iranian Offshore Oil Company (IOOC) has said that $15 billion in oil deals will be signed by domestic and foreign companies by the end of next calendar year (March 20, 2013). Another deal, valued at $3 billion will be inked for developing the Forouz B gas field by the end of the current (calendar) year. Negotiations are also underway to conclude separate contracts for developing the Farzad A, Forouzan, Soroush and Esfandyar fields.

Cheniere’s Sabine LNG proposal won’t affect environment, U.S. says

December 29, 2011. Cheniere Energy Inc.’s proposal to build a liquefaction facility to export natural gas from its Sabine Pass terminal won’t significantly affect the environment. Cheniere built Sabine Pass as a gas-import terminal. It received approval from the U.S. Energy Department to export liquefied natural gas and is awaiting a final decision from the commission for a project that would initially cost as much as $5 billion. Improved drilling techniques has made the U.S. the world’s largest gas producer, creating the prospect of ship- bound exports. The export plant would cool gas to a liquid form so it can be loaded onto tankers for shipment to markets inaccessible by pipelines. The Louisiana project would be capable of exporting about 16 million metric tons of LNG a year. Cheniere has announced several 20-year gas-supply contracts, including a pair of agreements for the project with BG Group Plc and Gas Natural SDG SA of Spain.

Large natural gas find 'an historic day for Cyprus'

December 28, 2011. President Demetris Christofias said was an historic day for Cyprus after announcing that Block 12 contained an estimated 5 to 8 trillion cubic feet (tcf) of natural gas. Based on the exploratory drill by U.S. based Noble Energy the prospect, which lies south of the island, contains a gross mean of 7 tcf of gas, Christofias said. Noble Energy operates the well with a 70 percent working interest. Delek Drilling and Avner Oil Exploration will each have 15 percent, subject to final approval by the government of Cyprus.

Afghanistan, China sign first oil contract

December 28, 2011. Afghanistan's government has signed a deal with China's state-owned National Petroleum Corporation to exploit oil and natural gas in a northwestern region. It's the first of several such blocks to be put on the market in coming months. Afghan Minister of Mines Wahidullah Shahrani says the initial value of the project is $700 million. But the total value could be ten times that if more reserves are found and developed, and if international oil prices remain at levels. It allows the Chinese firm to work oil blocks in the northeastern provinces of Sari Pul and Faryab. The area, known as the Amu Darya River Basin, was first explored by Soviet engineers in the 1960s.

EIB’s carbon disclosure may learn from oil

December 28, 2011. The European Investment Bank, which may have started selling 2013 carbon allowances in a 1.8 billion-euro ($2.4-billion) program, may strive for more timely market disclosure. The EIB received the permits from the European Commission, the regulator of the world’s largest emissions market at the beginning of December and has to sell them within 10 months. Prices fell to a record 12 days later amid uncertainty about whether the sales had started.

POWER

Generation

China plans Asia largest coal fired power plant

January 3, 2012. China Shenhua Group will build the largest coal fired power station in Asia over the next five years, as the country struggles to meet its energy needs. China biggest coal company and officials in the Guangxi Zhuang Autonomous Region signed a deal for the 8-gigawatt thermal plant. The plant would be built in the southern port city of Beihai to help ease power shortages caused by drought which has strained power supplies.

Transmission / Distribution / Trade

Alstom signs eur240 mn contract for electricity grid in Sweden

January 2, 2012. French power engineering and train company Alstom SA said it signed a contract to supply EUR240 million worth of equipment for an electricity transmission grid in Sweden. The grid will link Barkeryd in central Sweden to Hurva in the south of the country and is due to be completed at the end of 2014, the company said. Alstom will register the contract as part of the third quarter of its fiscal year 2011-2012.

Iranians to invest $571 mn in Armenian power industry

January 2, 2012. An Iranian private sector consortium will invest $571 million in two projects in Armenia to commission power transmission line between the two countries. The investment will raise the Aras River hydro electric power plant's capacity to 1.7 GW per year. Iran will lay a pipeline to transfer gas to Armenia and, in return, will import electricity from the neighboring country. The two sides agreed to draw up a list of goods which would be exchanged between the two countries at the lowest tariff.

China completes cross-border power transmission project with Russia

January 1, 2012. State Grid Corporation of China (SGCC), the country's largest power supplier, said it has put to trial operation a cross-border electricity transmission project in northeastern Heilongjiang province to supply Chinese with Russia's electric power exports. The electric power SGCC purchased from Russia began reaching Chinese customers after the completion of the direct-current back-to-back networking substation, or called "the trans-Amur project" by Russians. The trial operation will last 168 hours. With a transmission capacity of 750 mega-watts, the electricity transmission project is China's biggest cross-border power line, according to SGCC. The project is also part of the Sino-Russian energy and trade cooperation. The transmission project would increase Russia's power supply to five or six billion kilowatt hours of electricity to China and Russia intended to increase its electricity supply to China in the coming years. Russian companies plan export 60 billion kwh of electricity to China by 2020. Power plants will be built along its border with China to reduce power transmission losses and reduce transportation costs.

Tampakan firms to sell excess power

January 1, 2012. Proponents of the $5.9-billion Tampakan copper gold project in South Cotabato plan to sell excess power of about 50-100 megawatts (MW) from their planned coal power plant to the power grid, a move seen to help secure adequate power supply in Mindanao. The proposed power station, which is targeted to be operational by 2014, is expected to generate an initial 250 MW. Capacity may be ramped up to as much as 400 MW once the mining project starts full commercial operation.

Nordic utilities leave 51,000 without power days after storm

December 29, 2011. Nordic power companies have failed to restore power to about 51,000 customers in the region three days after a storm swept through the region and damaged power grids. In Finland, 43,000 homes remain blacked out, including 31,000 households serviced by Fortum Oyj and 6,600 by Sweden’s Vattenfall AB. The rest of the power failures are at local utilities. In Sweden, 7,000 people were without electricity, up from 4,700. Norway’s grid operator Statnett SF said that about 1,500 clients were without power, down from 2,500.

New transmission lines to be built at Grand Coulee

December 28, 2011. Construction will begin in February on six new 500-kilovolt transmission lines at carry electricity from Grand Coulee Dam to the Bonneville Power Administration (BPA)'s grid. Grand Coulee is the largest hydroelectric facility in the U.S. BPA will fund the multi-million dollar project which will bring dozens of construction jobs to the area for most of 2012. The six new 500-kilovolt overhead transmission lines will replace six aging underground lines. The new lines will transfer power across the Columbia River and over the visitor center area, and then uphill to connect to existing lines.

Policy / Performance

Spain ageing nuclear plant may stay open

January 2, 2012. Spain's incoming centre-right government may allow an ageing nuclear plant to stay open beyond a 2013 deadline for closing set by its Socialist predecessors. Environmentalist groups have protested that Spain is out of step with countries like Germany, which closed seven older nuclear plants after Japan's Fukushima disaster and plans to shut the rest within a decade. In 2009, then-premier Jose Luis Rodriguez Zapatero ordered the Garona plant to close in 2013, by which point it will have been in operation two years more than a benchmark 40-year lifespan. Zapatero's decision came after the Nuclear Safety Council ruled the plant could run safely until 2019.

RusHydro to invest $7.1 bn in 2012-2014

December 30, 2011. OAO RusHydro plans to invest 227 billion rubles ($7.1 billion) in 2012 through 2014, Interfax reported. The plan for 2012 was cut by 14 percent to 88.9 billion rubles and for 2013 by 18 percent to 78.1 billion rubles, Interfax said.

RENEWABLE ENERGY / CLIMATE CHANGE TRENDS

National

NZ Co to help IOC, JSPL set up bio jet fuel plant

January 2, 2012. The New Zealand-based renewable energy company LanzaTech is in talks with its partners - IndianOil and Jindal Steel & Power - to help them set up plant to produce commercial bio jet fuel from ethanol. As a first step, LanzaTech will open an office in the country in the first half of 2012 as part of its plan to expand its operations. IndianOil and Jindal Steel & Power are already in discussions for collaborating to accelerate deployment of LanzaTech's technology to produce fuel ethanol from industrial off-gases.

India to build 400 MW of solar, two-thirds less than plan

December 30, 2011. India will complete 400 megawatts of solar power connected to the grid this fiscal year, two-thirds less than previously forecast by state and central governments. India has so far built 180 megawatts during the year ending March 31, the Ministry of New and Renewable Energy said. Gujarat had planned to build more than 900 megawatts during the fiscal year as part of a regional solar program, according to documents obtained from the state government. In addition, the central government’s Solar Mission had a forecast of 302 megawatts, according to a list of plans from the ministry. The mission involved 150 megawatts of operations awarded by auction, 98 megawatts of rooftop developments and 54 megawatts of capacity under a program to consolidate state-level projects. India’s renewable energy capacity has grown 20 percent in 2011 to 22,447 megawatts. Wind farms made up most of the increase, adding a total of 2,827 megawatts.

All PSEs to be asked to set up renewable energy projects: Govt

December 29, 2011. The government said all public sector enterprises would be asked to set up renewable energy projects to promote use of such sources. The Ministry of New and Renewable Energy has decided to ask all Central PSEs to set up renewable energy projects or voluntarily procure renewable energy certificates as a part of their Energy Management Programme for sustainable development. The scope of the Energy Management Programme has been expanded by including renewable energy as a specific activity to be pursued by the Central PSEs. The central PSEs can implement carbon management plan by participating in any of the Missions under the National Action Plan under Climate Change. They may purchase Renewable Energy Certificates to offset their carbon footprints.

Renewable energy schemes should in sync with outlay: Panel

December 29, 2011. A Parliamentary Committee has asked the New and Renewable Energy Ministry to put its schemes in sync with the proposed outlay and prepare for achievable targets with less scope for reduction in the programmes. The Parliamentary Standing Committee on Energy in its recent report has raised apprehensions as to how the Ministry would be able to meet its targets in the 11th Plan Period.

ONGC to set up nuclear-plant, fertilizer unit, solar projects

December 29, 2011. ONGC is to set up a slew of projects in the nuclear, fertiliser, solar, wind power and lighting sectors. A gas-fired fertiliser plant would be set up in Tripura, the solar projects in Rajasthan and Gujarat and the wind power project in Rajasthan, while the sites for the nuclear plant and a light-emitting diode manufacturing unit have yet to be finalised. ONGC has internally assessed that the ` 5,000 crore urea unit in Tripura can be found with the natural gas the company has abundantly found in the state.

NTPC plans 50 MW solar power project in Madhya Pradesh

December 29, 2011. NTPC Ltd., India’s biggest power producer, plans to build a 50-megawatt solar photovoltaic plant in Madhya Pradesh state. The plant in Rajgarh is expected to start operating in 2013. NTPC has signed a contract to sell power from the facility to MP Power Trading Co. or MP Tradeco.

Welspun approached to sell security backed by solar revenue

December 29, 2011. Welspun Energy Ltd., India’s biggest solar photovoltaic developer, was approached by a bank proposing to use revenue from its first plant to create a security of the kind often used to raise funds for projects such as toll roads. The energy unit of Welspun Group, which is backed by Apollo Global Management LLC co-founder Leon Black, gained interest to securitize revenue from its 15-megawatt unit in Gujurat after three months of operation. Investors would be paid income from the solar revenue.

Global

LDK Solar’s Sunways bid offers China access to German market, technology

January 3, 2012. LDK Solar Co. (LDK)’s plan to buy Germany’s Sunways AG provides China’s second-largest solar-panel maker with access to new technology and a distribution network in the world’s biggest photovoltaic market. Sunways shares rose the most in six months in Frankfurt after LDK offered to purchase the Constance-based solar-cell and module maker for about 24.2 million euros ($31.3 million), excluding contributions in kind. The acquisition would be the first by a Chinese solar-energy company in Germany, where a record 7,400 megawatts of solar capacity was installed in 2010.

Ecuador court upholds $18 bn ruling against Chevron

January 3, 2012. An Ecuadorean appeals court upheld a ruling that Chevron Corp should pay $18 billion in damages to plaintiffs who accused the U.S. oil giant of polluting the Amazon jungle and damaging their health. A local judge ordered Chevron to pay $8.6 billion in environmental damages last February, but the amount was more than doubled to about $18 billion because Chevron failed to make a public apology as required by the original ruling.

Delta adds $3 surcharge on fares between U.S. and Europe

January 3, 2012. Delta Air Lines said it has added a $3 surcharge each way on fares purchased in the United States for flights between the United States and Europe, a move that would help offset the cost of the EU's new Emissions Trading Scheme. Delta is the first major U.S. airline to raise the price of U.S.-to-Europe flights since the European Union's carbon law kicked in. Europe's highest court backed the controversial EU law to charge airlines for carbon emissions on flights to and from Europe.

Avoiding fracking earthquakes: expensive venture

January 3 2012. With mounting evidence linking hundreds of small earthquakes from Oklahoma to Ohio to the energy industry's growing use of fracking technology, scientists say there is one way to minimize risks of even minor temblors. Only, it costs about $10 million a pop. A thorough seismic survey to assess tracts of rock below where oil and gas drilling fluid is disposed of could help detect quake prone areas. But that would be far more costly than the traditional method of drilling a bore hole, which takes a limited sample of a rock formation but gives no hint of faults lines or plates. The more expensive method will be a hard sell as long as irrefutable proof of the link between fracking and earthquakes remains elusive.

Lufthansa to raise fuel fees as 2012 carbon trading to cost $168 mn

January 2, 2012. Deutsche Lufthansa AG, Europe’s second-biggest airline, said European Union emissions-trading expenses will add 130 million euros ($168 million) to costs in 2012, prompting the carrier to raise ticket prices. Spending that results from the EU’s carbon-emissions cap- and-trade program, which start for airlines, will be taken into account when Lufthansa calculates fuel surcharges.

S.A.G. Solarstrom signs contract to sell power plant in Italy

January 2, 2012. S.A.G. Solarstrom AG, a German solar- project developer, signed a contract to sell a power plant in Italy to an unidentified institutional investor. The company will dispose of the 48-megawatt Serenissima photovoltaic plant for a “three-digit-million-euro” figure. The developer signed the contract Dec. 31 and will be paid in the current quarter.

Nigeria, Global biofuels sign $2.55 bn accord

January 2, 2012. Nigeria, Africa’s top oil producer, signed a memorandum of understanding with Global Biofuels Ltd. to build 15 integrated biofuel plants for about 414 billion naira ($2.55 billion). Global Biofuels will start “the implementation of an agro- based industrial activity for the production of ethanol, biomass electric power and food, all from a single industrial complex, using sweet sorghum as raw materials”. Work on a pilot plant in the southwestern Ekiti State will start in the first quarter and is expected to be completed within 12 months, while 14 additional plants will be established in 14 other states after the pilot project is finished. About 70 percent of the project will be funded by the Chinese government, while the remaining 30 percent will come from financial institutions including NEXIM Bank, ECOWAS Bank for Investment and Development, Africa Finance Corp., Fond Gari of Togo, and First Bank of Nigeria Plc.

Beijing municipality to monitor smaller pollutant particles

January 2, 2012. Beijing will start monitoring smaller pollutant particles this year to ensure better air-quality information. China’s Environment Ministry approved new air- quality standards to include pollutants smaller than 2.5 micrometers in diameter, known as PM2.5. The government currently uses an indicator known as PM10 that measures particulates as big as 10 micrometers in diameter for its public pollution data. Air quality in all of the 32 Chinese cities that track pollution fall short of World Health Organization guidelines. The air in Beijing is the fifth-worst in China, based on the PM10 measure. The U.S. embassy in Beijing monitors PM2.5, and releases the information via Twitter.

EPA cross-state emissions rule put on hold by appeals court

December 31, 2011. The U.S. Environmental Protection Agency must delay implementing rules on interstate air pollution on Jan. 1, a federal court ruled, siding with electric power producers seeking to defeat the new regulations. A three-judge panel of the U.S. Appeals Court in Washington granted a request by electric power producers and other challengers to delay the deadline for plants in 27 states to begin reducing emissions of sulfur dioxide and nitrogen oxide while the court considers the rule’s legality. More than three dozen lawsuits in the Washington court seek to derail the EPA’s Cross-State Air Pollution Rule, which was issued in July and revised in October. The court hasn’t scheduled a date for argument, though order suggested the judges would hear the case by April.

California low-carbon fuel standard is blocked by U.S. judge

December 30, 2011. California’s low-carbon fuel standard was blocked by a federal judge who found that it discriminates against out-of-state corn ethanol and crude oil and violates the Commerce Clause of the U.S. Constitution. The judge agreed with the farmers that California’s method of assigning a higher so-called carbon intensity score to ethanol produced in the Midwest, which is otherwise chemically and physically identical to that produced in California, because of factors such as electricity used to produce it and transportation, discriminates against interstate commerce. Similarly, the judge found that California discriminates against Alaska and foreign crude oil by assigning these a higher carbon intensity value. The judge issued a preliminary injunction that stops California from enforcing the standard until the lawsuit has been resolved completely.

Wind-tower makers from China, Vietnam draw rivals’ U.S. petition

December 30, 2011. Wind-tower producers from China and Vietnam are selling their renewable-energy equipment below cost in the U.S., according to an attorney for American producers that petitioned the U.S. to impose anti-dumping duties. The law firm also represents the U.S. unit of SolarWorld AG in a pending complaint on imports of Chinese solar panels. The new petition, on metal towers that hold turbines aloft at wind farms, expands an international dispute over pricing and government subsidies for alternative energy.

U.K. had second-warmest year on record in 2011

December 30, 2011. This year is poised to be the second warmest on record for the U.K. The average temperature nationwide through Dec. 28 has been 9.62 degrees Celsius (49.3 degrees Fahrenheit), second only to 9.73 degrees in 2006. Last year at 7.97 degrees was the 12th coldest in a series that began in 1910. Before 2011, the second warmest year in the nationwide temperature series was 2007, with an average of 9.59 degrees. Countrywide data started in 1910, while temperature data for central England dates to 1659. U.K. records set in 2011 include the warmest logged April and spring, and the hottest recorded October temperature at 29.9 degrees in Gravesend, southeast England on Oct. 1. Gravesend also had the country’s highest recorded temperature of the year at 33.1 degrees on June 27. Scotland posted its wettest year in the data series, with 1,859.5 millimeters (73.2 inches) beating the previous record from 1990.

Record surge in CO₂ credit volume may hamper 2012 price rebound

December 30, 2011. More than twice as many new carbon credits were supplied to the world’s second-biggest emissions market this year, damping prospects for a recovery from record- low prices in 2012. The UN Clean Development Mechanism will generate a record of about 320 million Certified Emission Reduction credits in 2011, up from 132 million last year. While a 62 percent drop in UN prices may discourage new supply, Bloomberg New Energy Finance cut its 2012 price forecast this month as it estimated the glut of so-called CERs will be bigger than previously estimated. A surge in CERs from projects that destroy industrial gases known as hydrofluorocarbon-23 and nitrous oxide has led to a supply glut this year. The European Union will stop recognizing most of this category in May 2013, prompting investors to issue credits to beat that deadline just as Europe’s debt crisis and a UN climate summit that failed to boost demand before 2015 exacerbate the bearish outlook for global carbon markets.

U.S. proposes wind, solar leasing rule on federally owned land

December 30, 2011. The U.S. Interior Department is seeking comment on how it should issue right-of-way leases for competing solar and wind projects on government land. The department wants to establish a competitive bidding process that would bring “fair market value for the use of public land”. The government is considering bidding procedures within zones designated for wind and solar projects, including how companies would qualify and what financial arrangements would apply. A 60-day comment period ends Feb. 27. The Department’s Bureau of Land Management oversees 245 million acres across the U.S, according to the report. It plans to have 10,000 megawatts of wind, solar and geothermal projects approved by 2015.

Dong Energy’s 97-turbine German North Sea wind park approved

December 30, 2011. Dong Energy A/S, the world’s largest developer of offshore wind parks, got approval for a project in Germany’s North Sea with 97 turbines, more than usually allowed. Construction of Borkum Riffgrund 2, about 37 kilometers (23 miles) northwest of Borkum island, must begin at the latest by 2015. It will be allowed to exceed the normal 80-turbine limit to help use the area more efficiently. Germany, Europe’s largest electricity market, is pushing plans for growth of renewable power after deciding to abandon nuclear energy following the disaster in Japan’s Fukushima this year. The regulator is evaluating applications for 84 parks in the German North and Baltic Seas and said its approval process must reflect environmental protection and energy concerns.

JA Solar wins 19 MW order from Solarhybrid in Germany

December 29, 2011. JA Solar Holdings Co. said it won a contract to supply Solarhybrid AG 19 megawatts of solar modules for the Allstedt I solar project on a former German military airfield in Halle. With this order, JA Solar expects total shipments to Solarhybrid to reach 40 megawatts in 2011.

U.K. renewable-energy investment totals $3.8 bn

December 29, 2011. U.K. renewable-energy investment has totaled almost 2.5 billion pounds ($3.8 billion) so far this financial year as companies from Toyota Motor Corp. to Vestas Wind Systems A/S committed funds, the government said. Renewable-power plants, equipment factories and services to the alternative-energy industry announced since the April 1 start of the tax year will create 11,619 jobs, the Department for Energy and Climate Change said. Britain is working toward a European Union goal of getting 15 percent of energy from clean sources by 2020. The department said renewable-energy consumption rose 27 percent from 2008 through 2010. That means biofuels, wind, solar and other alternatives to fossil fuels and nuclear account for 3.3 percent of energy for heat, transport and power.

German power, carbon declines after Italy misses debt-sale goal

December 29, 2011. German power for next year dropped to its lowest level in more than a week and European Union carbon permits declined after Italy auctioned 18 percent less debt than its target. Baseload power for delivery in Europe’s largest electricity market in 2012 fell 0.8 percent to close at 51.85 euros ($67.09) a megawatt-hour, broker data shows. That’s the lowest since Dec. 19. Bloomberg tracks power prices from brokers including GFI Group Inc., ICAP Plc, Spectron Group Ltd., Tradition Financial Services and Tullett Prebon Plc. EU carbon permits for December 2012 decreased 6.6 percent to 7.26 euros a metric ton on the ICE Futures Europe exchange in London. United Nations emission credits for December next year lost 7.1 percent to 4.07 euros a ton.

E.ON plans Swedish 700 MW offshore wind farm

December 29, 2011. E.ON AG, Germany’s largest utility, is planning a 700 megawatt offshore wind-power park in the south-eastern part of the Baltic Sea, about 100 kilometers from the Swedish mainland, Dagens industri reported. The project, located in an area called the Southern Middle Bank bordering the Polish economic zone, would be one of the world’s largest of its kind, and the investment would be over 20 billion kronor ($2.9 billion), DI said.

Europe’s biggest solar park is completed in Ukraine by Activ

December 29, 2011. Europe’s biggest solar park was completed after its Vienna-based developer, Activ Solar GmbH, obtained financing from two Russian banks. The company finished building the 100-megawatt photovoltaic plant in Perovo in the Crimea with funding from Moscow-based VTB Bank OJSC and Sberbank of Russia. A project of this size typically costs about 300 million euros ($387 million). The company, which owns a polysilicon manufacturing plant in Ukraine, also developed the country’s first utility-scale solar facility in early 2011 and completed Eastern Europe’s largest plant in Ohotnikovo in four phases each with 20-megawatts. It announced the completion the last 20 megawatt phase at Perovo. Ukraine is seeking to increase its wind and solar capacity to reduce its dependence on coal and nuclear power, which provide 90 percent of its electricity. The country established a feed-in tariff until 2030, or fixed premium for power from clean sources, for large solar projects of 0.46 euros per kilowatt hour in late 2009.

Sempra’s Mesquite Solar plant begins producing power in Arizona

December 28, 2011. Sempra Energy, California’s third- largest utility, began producing power at a 150-megawatt solar project in Arizona that received a $337 million U.S. Energy Department loan guarantee three months ago. Workers at the Mesquite Solar 1 project connected 42 megawatts of Suntech Power Holdings Co. (STP) panels to the power grid. The plant, located about 40 miles west of Phoenix, is expected to be complete in 2013 and will produce enough power for 50,000 homes. The company is selling the power to California’s largest utility, PG&E Corp., under a 20-year contract.

[1] Details of COP 11 meeting available at http://unfccc.int/meetings/cop_11/items/3394.php

[2] Details of COP 12 meeting available at http://unfccc.int/meetings/cop_12/items/3754.php

[3] Declaration on ‘Responsible Leadership for a Sustainable Future’ made at the G 8 summit available at http://www.g8italia2009.it/static/G8_Allegato/G8_Declaration_08_07_09_final%2c0.pdf

[4] Declaration on ‘Responsible Leadership for a Sustainable Future’ made at the G 8 summit available at http://www.g8italia2009.it/static/G8_Allegato/G8_Declaration_08_07_09_final%2c0.pdf

[5] ‘Good G 8 Spurs India’s Hope for Global Role’, The Financial Express of 14 July 2009 quoting Reuters

[6] Agarwal, A & Narain, N. 1991. ‘Global Warming in an Unequal World,’ Centre for Science and Environment, New Delhi. This was the paper which used the per capita argument to raise alarm over issues of equity and fairness being ignored in framing of the climate problem.

[7] Jha, P S. 2010. ‘The Politics of Climate Change in India,’ in Green M.J., Freeman III, C.W. & Searight, A.E. (eds) ‘The Politics of Climate Change in Asia” A Report of the CSIS Asian Regionalism Institute, CSIS

[8] Jacobson, S. 2000. ‘Transnational Environmental Groups, Media, Science & Public Sentiment in Domestic Policy Making on Climate Change,’ in Higgot, R A, Underhill, G R D & Bieler, A (eds.), ‘Non State Actors & Authority in the global System,’ Routledge, London

[9] Jacobson, S. 2000. ‘Transnational Environmental Groups, Media, Science & Public Sentiment in Domestic Policy Making on Climate Change,’ in Higgot, R A, Underhill, G R D & Bieler, A (eds.), ‘Non State Actors & Authority in the global System,’ Routledge, London

[10] Jacobson, S. 2000. ‘Transnational Environmental Groups, Media, Science & Public Sentiment in Domestic Policy Making on Climate Change,’ in Higgot, R A, Underhill, G R D & Bieler, A (eds.), ‘Non State Actors & Authority in the global System,’ Routledge, London

[11] Jacobson, S. 2000. ‘Transnational Environmental Groups, Media, Science & Public Sentiment in Domestic Policy Making on Climate Change,’ in Higgot, R A, Underhill, G R D & Bieler, A (eds.), ‘Non State Actors & Authority in the global System,’ Routledge, London

[12] Carlarne, C, ‘The Glue that binds or the Straw that Broke the Camel’s Back? Exploring the Implications of US Reengagement in Global Climate Negotiations’

[13] Heggelund, G. 2007. ‘China’s Climate Change Policy: Domestic & International Developments,’ Asian Perspective Volume 31, No 2, 2007 pp 155-191

[14] Jacobson, S. 2000. ‘Transnational Environmental Groups, Media, Science & Public Sentiment in Domestic Policy Making on Climate Change,’ in Higgot, R A, Underhill, G R D & Bieler, A (eds.), ‘Non State Actors & Authority in the global System,’ Routledge, London

[15] Bramble, B J & Porter, G. 1982,‘Non-Governmental Organizations & the making of US International Environmental Policy,’ in Hurrell, A, Kingsby, B (eds), ‘The International Politics of the Environment: Action, Interests & Institutions,’ Oxford: Clarendon Press 313-53

[16] Narlinker, A. 2006. ‘Peculiar Chauvinism or Strategic Calculation? Explaining the Negotiating Strategy of a rising India,’ International Affairs, 82, 56-76

[17] Mohan, C R. 2003. ‘Crossing the Rubicon: The Shaping of India’s New Foreign Policy,’ New York/Basingstoke: Palgrave Macmillan

[18] Bidwai, P. 2010. ‘An India that Can Say Yes: A Climate-Responsible Development Agenda for Copenhagen and Beyond,’ Heinrich Boll Foundation, New Delhi

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