Closure of the Hormuz: A Low Probability but High Impact Event!
Lydia Powell, Observer Research Foundation
lobally over 55 mbpd or 64 percent of the world’s total oil flows through narrow straits commonly labelled ‘chock points’. The top three ‘chock points’ account for 46 percent of the total supply. The most important among these is the Strait of Hormuz which is also critical when it comes to oil supplies to India as roughly 70 percent of its oil imports have to flow through the Strait of Hormuz. Oil tankers carry between 16.5 and 17 million barrels of crude through the narrow channel daily. 90 percent of oil exported from Middle East Gulf producers, equal to about 40 percent of all seaborne oil or 20 percent of total oil traded worldwide flows through the Hormuz. The bulk of this oil travels to Asia, the United States and Western Europe. About three-quarters of Japan's oil imports and about 50 percent of China's pass through this strait. An additional 2 million barrels of oil products, including fuel oil, are exported through the passage daily, as well as liquefied natural gas (LNG). The world's largest LNG exporter, Qatar, ships a total of 31 million metric tones annually through the strait to Asia and Europe; India is among Qatar’s LNG customers. Iran itself exports around 2.4 million barrels daily, most of it via the Strait of Hormuz. An extended closure of the Hormuz would in theory remove almost 25 percent of world oil supply from the market which is more than twice what was experienced during the 1970s oil crises.
Currently, the impending threat to the Hormuz Straits is shaping the oil market in ways that are favourable to Iran. A tight global oil market with little or no excess capacity is sensitive to developments at the margin particularly those originating in the Persian Gulf. The price of oil has risen sharply even before the crisis and the oil market is not making a distinction between oil from sources that are far away from the Hormuz Strait and those that are coming from the Hormuz. What is critical to note here is that even if all of India’s oil is sourced from ‘secure’ regions of the world, India would be in no better position than a country which has all imports subject to disruption at the Hormuz with respect to access or price. As far as the oil market is concerned a disruption somewhere is a disruption everywhere and will immediately affect the price. The price of oil is the opportunity cost of oil in the global market and oil produced domestically is as valuable as oil produced in conflict zones. The message is India cannot insurance itself against this economic risk by diversifying its oil sources or even by investing in its maritime power. In a globally integrated oil market, India can free-ride on the global ‘public good’ of security that the overwhelming power of the American maritime forces in the Persian Gulf region is provides. The real risk for India is a price risk for which it is inadequately prepared. If oil prices increase to unforeseen levels and stays at those levels for an extended period, the Indian economy will be stretched beyond its means. This will only increase as the share of imported energy increases in its energy basket. India needs to see ‘energy security’ through an economic lens rather than a traditional security lens. India’s energy security will increase if the ‘loss of economic welfare that arises from movements in energy prices’ can be minimized. Towards this end, India must look inward towards improving energy efficiency through radical reform of its investment and energy pricing policies that distort domestic energy and industrial sectors. An efficient, energy optimizing economy that is resilient to volatility in energy prices is the only insurance policy that India needs for energy security.
Coal Pricing: Is GCV Method Good for India?
Ashish Gupta, Observer Research Foundation
he average cost of coal production in India is steadily increasing, despite increase in productivity. The coal pricing mechanism is not consistent with the international practice. Prior to nationalization in 1973, coal prices were set administratively low in comparison to the production cost leading to losses for many coal mining companies. To allay some of these losses government set up the Bureau of Industrial Cost & Prices in 1970 to recommend the appropriate price of coal, based on the average of production cost of all mines which led to problem for the coal companies with high production cost. In 2000 a new Colliery order was passed for deregulating the prices of all the grades of coal and Ministry of Coal will no longer involved in setting the price of coal. According to the order each coal company is allowed to set its own sale price based on the prevailing market prices.
The recent move of Coal India to resort to fix sale price of coal on Gross Calorific Value (GCV) rather than on useful heat value of the fuel will have a direct impact on the sale price. This clearly indicates that Colliery order which is still in place, but only on the paper as the prices are still being guided by the Government. Though the GCV practice is very much consistent with the International practice, we need to address one main question as far as India is concerned: Do we have the proper infrastructure in the place which can accommodate this practice? As per CIL, the move will have negligible effect where as NTPC claimed that their coal bill will be rise by 40% from ` 20, 000 Cr to ` 28, 000 Cr. Also there is no clarity on the method which is to be adopt by CIL for classification, sampling and analysis to finalize the grade of coal or GCV band of mine. Another important question which raises concern that why Coal India has gone for GCV analysis on its own where as the Office of The Coal Controller is the authorized body for declaring the grades and ascertaining the coal availability. NTPC the largest consumer of coal has requested the Power Ministry to take up the issue with Coal Ministry. But, all goes in vain as Coal India moved to the new system from January 1, 2012.
Many of the public utilities have complained that this new system had resulted for wrong classification of coal because the quality of the same coal which they were getting before 31st December, 2011 as 4200 GCV now they are procuring as 5300 GCV. This points the accusing finger on the classification procedure and implementation of GCV by CIL. Companies have to pay much higher prices for the same quality coal than what is required. It is good to keep pace with international practices but to implement it blindly without proper planning is surely not a justifiable move by CIL.
Is Natural Gas threatening Renewables?
Sonali Mittra, Observer Research Foundation
lready held back by the rising trade disputes and economic downturn of the major markets, renewable energy growth might just get stunted further with the increasing popularity of natural gas. It would be wrong to directly compare renewables and natural gas but the global fuel economics suggests otherwise. With their own set of challenges and impacts, both have been competing in the global markets to gain attention, although for very different underlying reasons. The key factor seen to be playing a major role is the climate change policy, which unfortunately is in a very ambiguous state.
Verifying the comparison or moreover, relationship between natural gas and renewables, was the latest study conducted by Massachusetts Institute of Technology which suggested that expansion of shale gas has the potential to damage development of renewable energy. Not entirely unique to the USA fuel market, this might be the case globally.
Looking at the performance chart, the 2010 Total world energy production revealed that wind contributed only 1.2% while solar was at 0.2%. Despite the drop in the prices of the solar PV, renewables haven’t been able to reach the mark as thought earlier and is already showing a slowdown due to both the internal and external externalities (like falling subsidies, high capital cost, infrastructure, policy and regulatory requirements).
Natural gas on the other hand has seen an increasing demand in the global market. The nations conferring to the ‘no-nuclear’ energy mission were thought to give boost to the renewable energy market but instead they are considering natural gas to be the more convenient option. To add more to it, natural gas supports the triple bottom line: people, planet and profit criteria that renewable energy fails to satisfy at this moment. So, an inherent affinity towards natural gas is imperative but what happens to other alternative fuels that are threatened, needs to be looked into more strategically.
The only fulcrum of the situation lies in the way climate change policy shapes itself. Natural gas, no doubt is a cleaner, more abundant and affordable fossil fuel but in the presence of a strong climate change mitigation policy, it might be difficult to ignore the environmental impacts it causes in comparison to renewable energy resources. Any which way, natural gas is the only attractive fuel source seen to be making any headway in the short-term. However, it should be treated more like a bridge towards the ultimate end of sustaining energy demand and supply through renewable resources. In the meanwhile, more investments in research, infrastructure and development should be done to ensure that we have something at the end of the bridge to take us to a more sustainable future.
Rising Powers and Climate Change: The Case of India (Part IV)
Lydia Powell, Observer Research Foundation
Continued from Volume VIII, Issue No. 30…
Constraints to Consensus on Climate Mitigation
reen House Gas (GHG) mitigation is a global public good and so each country has a built-in incentive to free-ride on the efforts of other countries. GHG mitigation is also non-rivalrous in the sense that one country’s mitigation action can benefit the whole world and no one country can be excluded from appropriating the benefits. Game theoretic models see the current ‘cap’ and ‘trade’ framework in climate negotiations as a ‘public-goods’ game in which incentives for cooperation are lower than that of other well known games such as the prisoners’ dilemma. In a world with identical countries (say in terms of size and wealth), the ‘cap’ and ‘trade’ mechanism provides little or no incentive for free-riding but problems arise when countries differ.
Polarisation between countries begins with differences such as size and wealth (geographic conditions, habits, resource endowments, governance structures etc could be other differences not accounted for in game theoretical models). As per game theoretical models, if size is the only difference between countries then large countries will place a higher value on mitigation while smaller countries will place a proportionally lower value. If wealth is the major difference, then poor countries will place a much lower value on mitigation compared to rich countries and will tend to free ride. The current global climate negotiating framework assumes that all countries will assign the same value on mitigation efforts and that the differences between countries, if any, can be addressed through an appeal to scientific projections and moral sentiments. This has clearly not happened. Tomes of reports that project climate calamities for developing countries based on mathematical models and strong appeals to ‘save’ the planet from coal burning power plants have not convinced India to significantly change its plans for power generation.
India which is curious combination of large size (population numbers) and relative poverty (low per capita incomes) stands testimony to some of the predictions of game theoretical models. As a poor country India evidently has low incentives for mitigation action but as a large country it has relatively larger incentives for mitigation action (more victims of climate change and consequently more gain from mitigation action). However the incentives to ‘free-ride’ as a poor country far outweigh the incentive to seek greater mitigation as a large country because of its domestic logic is consistent with the former rather than the latter position. More immediate concerns such as poverty alleviation and consequently the need for economic growth are seen to be more important than the distant possibility of benefitting from climate mitigation action. This explains why India’s attempt to portray itself as a climate apostle rather than a climate victim prior to the Copenhagen summit had to be unceremoniously abandoned.
For the first time in nearly two centuries, major ‘emerging powers’ such as India are actually very poor. The so-called ‘economic power’ of India is driven by quantitative factors (size measured in terms of population numbers) rather than qualitative factors such as economic efficiency and productivity. India’s per capita income of $1340 at market exchange rates ($3560 at PPP) is comparable to that of Sudan at $ 1270 which when qualified by a population of over 1.2 billion grows into an aggregate GDP of roughly $ 3 trillion (at market exchange rates) and puts India somewhere between France and Germany in terms of GDP and secures G 20 membership.
The inconsistency between what may be called ‘quantitative’ attributes (reflected in national aggregate figures) of the Indian economy and its ‘qualitative’ attributes (reflected in individual or per capita figures) is key to understanding the Indian (or any large developing country) dilemma in multilateral bargaining environments. Internal politics which is almost entirely focussed on qualitative attributes of the economy comes into conflict with India’s external statecraft which tends to project its quantitative attributes.
Quantitative factors or the ‘size’ of a country defined by territorial borders is a critical parameter in the prevailing climate narrative. Global and national boundaries are used interchangeably to define and solve the climate problem. Borderlessness (globality) is invoked to frame the problem of climate change as one of global collective guilt while ‘borders’ are invoked to assign blame and responsibility. Borderlessness facilitates the democratisation of climate guilt as it spreads it around 7 billion people and reduces ‘per capita’ guilt.
On the other hand ‘borders’ assist in the convenient allocation of cost of combating climate change that favours smaller (in terms of population numbers) nations. Under this premise, if India (or China) breaks itself into four or five countries with roughly 200 million people it can no longer be labelled a large polluter and hence will have little or no climate liability. This is an absurd outcome as all countries can break themselves up to avoid climate liability. However the whole burden sharing framing of what justice entails is structured in terms of the rights and responsibilities of ‘nations’ and so ‘nations’ rather then individuals are seen to be endangered by climate change and affected by climate policy.
As a nation, ‘not growing’ is not an option for India because a ‘poor’ India with millions of unmet aspirations is a greater threat to national and global security than climate change in the medium term. Since economic liberalisation in the 1990s, the quality of the Indian economy is seen as being directly dependent on double-digit economic growth rates. High economic growth rates are seen to be necessary to reduce levels of absolute poverty in India and provide electricity to over 400 million people who have not been linked to the electric grid and modern cooking fuels to over 800 million people who use traditional biomass as fuel for cooking. Borrowing the words of Jennifer Beard, ‘development is the place that everyone (in India) is trying to get to, to complete themselves.’ While high economic growth rates need not necessarily translate into ‘development’ or ‘better quality of life’ for individuals at the bottom of the economic order in India, it is a ‘hope’ that holds the country together. Calls for GHG mitigation action by rich countries are seen as a means to ‘freeze’ development and thus preserve existing inequalities to trap million in abject poverty. Ironically, the poor in India are already ‘green’ as they consume little or no fossil fuels directly or in the form of electricity. This is a status that they are neither aware of nor proud of and would only be too happy to get out of, if given a choice.
There have been comments that India’s ‘national interest’ concerns are a mere proxy for ‘elite interest’ and that the benefits of economic growth will be largely appropriated by the middle class and the elite. There may be some merit in this argument given the perverse inequalities that persist in India despite sustained economic growth, but as long as ‘nations’ remain the primary target for policy action, India’s focus on ‘national interest’ cannot be contested. Climate change policy is fundamentally constructed through the twin lenses of national security and national economic strategy, the ‘nation’ is the master discourse which legitimises other discourses. In this light, the current climate change negotiating framework which seeks to facilitate the production of global public goods such as GHG mitigation without accommodating national interest is unlikely to result in cooperative outcomes.
Concluded
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
Global Oil Trade Movements 2010
Akhilesh Sati, Observer Research Foundation
Thousand barrels daily
|
To
From
|
US
|
Canada
|
Mexico
|
S & C America
|
Europe
|
Africa
|
Austral-asia
|
China
|
India
|
Japan
|
Singa
-pore
|
Rest of World including Other Asia
Pacific
|
Total
(mb/d)
|
|
US
|
-
|
124
|
477
|
769
|
358
|
71
|
4
|
53
|
8
|
95
|
138
|
58
|
2.2
|
|
Canada
|
2532
|
-
|
7
|
2
|
27
|
-
|
-
|
19
|
-
|
10
|
‡
|
>1
|
2.6
|
|
Mexico
|
1280
|
32
|
-
|
30
|
136
|
-
|
-
|
24
|
28
|
-
|
10
|
‡
|
1.5
|
|
S. & Cent. America
|
2211
|
91
|
26
|
-
|
327
|
9
|
1
|
488
|
193
|
9
|
185
|
29
|
3.6
|
|
Europe
|
702
|
217
|
90
|
102
|
-
|
304
|
1
|
26
|
9
|
10
|
176
|
251
|
1.9
|
|
Former Soviet Union
|
756
|
34
|
9
|
14
|
5982
|
26
|
20
|
676
|
17
|
293
|
192
|
527
|
8.5
|
|
Middle East
|
1729
|
86
|
12
|
111
|
2355
|
308
|
142
|
2383
|
2612
|
3629
|
921
|
4594
|
1.9
|
|
North Africa
|
589
|
117
|
2
|
91
|
1677
|
-
|
15
|
203
|
80
|
17
|
4
|
76
|
2.9
|
|
West Africa
|
1686
|
137
|
-
|
256
|
920
|
59
|
29
|
878
|
428
|
8
|
-
|
199
|
4.6
|
|
East & Southern Africa
|
-
|
-
|
‡
|
‡
|
2
|
-
|
-
|
254
|
21
|
44
|
4
|
8
|
3.4
|
|
Austral
-asia
|
10
|
-
|
-
|
2
|
‡
|
-
|
-
|
147
|
28
|
56
|
40
|
201
|
4.9
|
|
China
|
8
|
‡
|
-
|
100
|
14
|
19
|
2
|
-
|
13
|
23
|
114
|
362
|
6.6
|
|
India
|
49
|
1
|
-
|
54
|
172
|
11
|
2
|
12
|
-
|
60
|
210
|
624
|
1.2
|
|
Japan
|
10
|
2
|
2
|
4
|
19
|
2
|
33
|
57
|
3
|
-
|
114
|
56
|
0.3
|
|
Singa
-pore
|
8
|
2
|
‡
|
8
|
36
|
65
|
225
|
147
|
73
|
13
|
-
|
841
|
1.4
|
|
Other Asia Pacific
|
119
|
4
|
11
|
63
|
69
|
22
|
403
|
596
|
84
|
300
|
782
|
17
|
2.5
|
|
Total imports
(mb/d)
|
11.7
|
0.8
|
0.6
|
1.6
|
12.1
|
0.9
|
0.9
|
6.0
|
3.6
|
4.6
|
2.9
|
7.9
|
53.5
|
Source: BP Statistical Review, June 2011
Global Oil Strategic Chokepoints
|
Oil Transit Chokepoints
|
mb/d
(appx.)
|
Export Destination
|
|
Strait of Hormuz
|
17
|
Europe, U.S., Asia
|
|
Strait of Malacca
|
14
|
Asia
|
|
Suez Canal
|
2
|
Europe, U.S.
|
|
Strait of Bab el-Mandab
|
3.2
|
Europe, U.S., Asia
|
|
Bosporus and Dardanelles (Turkish Straits)
|
2.9
|
Western and Southern Europe
|
|
Panama Canal
|
0.8
|
South, Central & North America
|
|
Danish Strait
|
3.3
|
Europe
|
|
Total
|
43.2
|
|
Source: Energy Information Administration
Note: † Less than 0.05
‡ Less than 0.5
mb/d: million barrels per day
NEWS BRIEF
OIL & GAS
Oil India in talks with Conoco for shale gas assets
January 17, 2012. India's state-run explorer Oil India is in talks with US-based companies, including ConocoPhillips, to buy stake in shale gas assets in the US. The company is looking for a minority stake of between 20-30 percent in US shale acreage with an investment of about $200 million. Oil India is looking for acreage near Eagle Ford (Texas). Oil India was looking at buying shale gas assets in Latin America, the United States and Australia. The United States is the world's top producer of shale gas, a natural gas locked in rock formations considered a top source of future energy. Indian companies, including Reliance Industries Ltd. and GAIL (India) Ltd., have bought shale gas assets in the US as local gas supplies lag demand. India aims to launch its shale gas exploration policy this year, Oil Minister Jaipal Reddy said.
OVL-GAIL eyes UK co in $1 bn deal
January 14, 2012. OVL, the overseas arm of ONGC, has teamed up with GAIL India to place a joint bid to acquire UK-based energy firm Cove Energy Plc, a deal valued over $1.2 billion or ` 6,000 crore. Cove and its subsidiaries are engaged in exploration, development, and production of oil and gas reserves in Mozambique, Tanzania, and Kenya. Cove Energy has an 8.5% stake in Rovuma gas filed in Mozambique with an estimated 30 trillion cubic feet (tcf) of gas reserves, or three times bigger than Reliance Industries Ltd's gas discovery in Krishna Godavari basin. Cove Energy, with a market value in excess of $950 million, has mandated Standard Chartered Bank and Cenkos Securities Plc for a sale process and opened its data room last month to interested bidders. Both OVL and GAIL have concluded technical due diligence and are expected to place the financial bid soon. Oil India had looked at the UK based firm before backing out. Oil India may place a bid for Cove Energy. Indian firms BPCL and Videocon has 10% stake each and right of first refusal in Rovuma gas filed, operated by US based Anadarko Petroleum . But these firms are not exercising their rights to buy Cove Energy's 8.5% stake in the Mozambique gas block.
Indian, global companies vie for BG's 65 pc pie in Gujarat Gas
January 13, 2012. The race to acquire BG India's 65% stake in the Gujarat Gas Company Ltd (GGCL) has all the makings of an epic corporate battle as foreign energy firms and international private equity players have thrown their hat in the ring to compete with state firms - Adani group and Torrent. European companies are keen to grab the chance to enter the Indian energy market, particularly at a time when Europe's saturated market has a gloomy outlook. Gujarat-based Torrent Power had also submitted a "strong initial bid" for GCCL, which has emerged as India's largest private sector natural gas transmission and distribution company in terms of sales volumes.
OIL said to study possible purchase of COV
January 12, 2012. Oil India Ltd., India’s second- biggest state-owned energy explorer, is considering a possible purchase of Cove Energy Plc (COV), which has assets in east Africa. Oil India is studying documents related to the U.K. company that put itself up for sale. Bids for London-based Cove may exceed $1.2 billion. Cove has a market value of 609 million pounds ($933 million). Indian companies are looking across the world for oil and gas deposits to secure supplies as demand grows at home. Cove, in which BlackRock Inc. has a stake, is part-owner of a field in Mozambique that may hold enough gas to be converted into liquid form and shipped to countries including India, Asia’s second- fastest growing major economy.
Steep fall in natural gas production at KG-D6
January 12, 2012. A steep fall in natural gas production at Reliance Industries' D6 block in KG basin and scarcity of retail outlets are hampering growth of compressed natural gas as a fuel of choice in private vehicle segment. Despite an increasing price differential between CNG ( 31- 32) - the cheapest and cleanest fuel in the country - and petrol ( 68- 73) and diesel ( 41- 45), demand for CNG-operated vehicles has failed to pick up significantly due to inadequate infrastructure and lack of policy push by state governments. This small number is the combined result of many factors, such as low demand, gas availability issues and exorbitant price of prime locations in most metro cities.
Downstream
Essar Oil starts hydrogen manufacturing unit
January 16, 2012. Essar Energy subsidiary Essar Oil Ltd announced the commissioning of the hydrogen manufacturing unit, a third new unit to be commissioned as part of the phase I expansion at its Vadinar Refinery in Gujarat. Essar Oil is planning to commission six additional units by March 2012, thus completing a ` 8,310-crore expansion project that will increase the Vadinar Refinery's capacity and enhance its complexity almost twofold. While capacity will increase to 18 MMTPA (equivalent to 375,000 barrels per day) from 14 MMTPA currently (300,000 bpd). Also, the refinery complexity will reach 11.8-up from 6.1 at present. An optimisation project is also under execution at the refinery to further increase the capacity to 20 MMTPA (405,000 bpd) by September 2012. The capacity expansion, complexity enhancement and subsequent optimisation will give the Vadinar refinery the capability to process over 80% heavy and ultra-heavy crudes, which are lower cost than light crudes.
IOC plans to shut diesel unit for 15 days
January 13, 2012. Indian Oil Corp, the country's biggest oil refiner, plans to shut a diesel hydro treater at its 300,000 barrels per day Panipat refinery for 15 days, for maintenance in June-July.
Indian refiners diversifying crude oil basket
January 12, 2012. Domestic refiners are making alternate arrangements for any disruption in crude oil supply from Iran because of the US sanctions and said that the government has not directed them to reduce Iranian imports. Alternative supply arrangements are part of refiners' strategies to avoid dependence on any particular source. Indian refiners have started looking for alternate sources since December 2010 after the Reserve Bank of India barred payment for Iranian crude through a regional clearinghouse under the US pressure.
HPCL offers rare gasoil cargo for export
January 12, 2012. Hindustan Petroleum Corp has offered a rare high sulphur gasoil cargo for export following an outage at its 166,000 barrels per day (bpd) Vizag refinery earlier this month. HPCL is usually a net importer of diesel and rarely exports the product unless there is an issue with its refinery. A diesel hydro-desulphurisation unit at state-run HPCL's 166,000 barrels per day (bpd) Vizag refinery in southern India was shut for unplanned maintenance about one to two weeks ago.
GAIL in talks to buy LNG from US plant
January 16, 2012. State-run GAIL (India) Ltd is in talks to buy liquefied natural gas (LNG) from suppliers, including Macquarie Energy, which has a share in the U.S.-based Freeport LNG project. Freeport LNG and Macquarie Energy, the North American energy marketing and trading arm of Macquarie Group, are developing an export plant in Texas costing about $2 billion. The plant would be able to export 1.4 billion cubic feet per day of gas by 2015. GAIL has not yet decided on the volumes to be purchased from Macquarie. Buying gas from the United States is about $2 per million British thermal units cheaper than that from India's other long term LNG purchase contracts.
LPG shortage hits Kashmir
January 16, 2012. As moderate to heavy snowfall continued in the Kashmir Valley for the second consecutive day, locals and tourists are now complaining about the scarcity of essential commodities. Before the fresh snowfall, the authorities had claimed that enough stocks of LPG cylinders were available in the valley to ward off any crisis caused by the closure of the Jammu-Srinagar national highway. Surprisingly, the state government started rationing of LPG cylinders by issuing instructions to gas companies that they should supply LPG cylinders filled with just five kg of gas (instead of the normal 14 kg) till the LPG supplies are restored after the Jammu-Srinagar highway is reopened.
Cairn introduces technology for pipeline security
January 12, 2012. Cairn India is strengthening security at its world's longest 670 km long heated insulated pipeline for crude transportation. Cairn India contributes 20% of India's crude needs and produces 1,25,000 barrels from Mangala Processing Terminal in Barmer, Rajasthan. It is produced through this pipeline to Jamnagar in Gujarat via Banaskantha district. Traditionally, E&P companies banks on private security agencies and local police for the safety of the pipeline carrying crude. The present arrangement does not send live signals of breakage in the pipeline. However, equipped with new technology, Cairn India hopes to have better vigilance in place for its pipeline.
Adani Group offers to buy gas from KG-D6
January 17, 2012. The Adani Group has offered to buy gas from Reliance's coal-bed methane blocks for its city gas distribution projects at a price significantly higher than the price of existing domestic gas but the deal can be clinched only after the oil ministry approves the price. Adani Group and other potential buyers have approached Reliance to source gas for its markets in Ahmedabad, Vadodara and Faridabad. The group's gas distribution arm has backed Reliance's gas pricing formula that will enable it to charge about $13 per mmbtu, which is three times the price of gas from Reliance's D6 block and close to the price of imported LNG. Adani Gas supplies 1.35 mmscmd of gas to over 800 industrial units, 1,000 commercial units and 1,35,000 households in three cities besides operating 65 CNG stations. It expects gas requirement to grow to 1.60 mmscmd by March 2012 and 2.50 mmscmd by March 2014, prompting it to seek Reliance's CBM gas although it is not known which pipeline may be used to transport the gas.
ONGC, OIL face $54/barrel cap on sales
January 17, 2012. The government plans to cap the price of crude oil sold by ONGC and Oil India to state refiners at $54/barrel this financial year despite an average market price of $110/barrel to help them sell diesel, kerosene and cooking gas below market rates. The move, which is under inter-ministerial consultation, will severely hurt finances of ONGC but ease government's subsidy burden and help it in containing fiscal deficit, government said. The finance ministry has expressed deep concern over widening fiscal deficit and has proposed a new subsidy-sharing formula where larger contributions are sought from upstream firms such as ONGC, government said.
Singapore govt builds 1 pc stake in RIL
January 17, 2012. The government of Singapore held a stake of just over 1 per cent in Reliance Industries. Reliance is India's most valuable company, and the Singapore government's stake would be worth about $498 million based on the company's closing price. Shareholding data on the National Stock Exchange website as of the end of September does not identify the Singapore government as a holder of more than 1 per cent of the company. Singapore operates two of Asia's biggest sovereign wealth funds, the Government of Singapore Investment Corp, known as GIC, and Temasek Holdings.
Crude prices to rise due to Iran tension
January 17, 2012. Tensions over Iran have started escalating of late, which prop up global crude oil prices in an otherwise weak economic scenario, globally. As sanctions over OPEC's second-largest oil exporter Iran tighten, how the Islamic Republic reacts will have a great impact on oil prices in 2012. Annoyed over Iran's continuing defiance in pursuit of its nuclear ambitions, the US had imposed growing number of economic sanctions on Iran. And more countries are following suit.
RIL, ONGC may lower their naphtha exports
January 17, 2012. Reliance Industries and ONGC may lower their February naphtha exports due to maintenance of a mooring facility at the Hazira port which would affect loadings/unloadings of cargoes. Two maintenance are scheduled to be carried out at the single point mooring (SPM), lasting about 10 days each. One will take place between late January and early February, and the other between the end of February and early March. ONGC had skipped naphtha exports from the Hazira port for two months in February and March 2011 after maintenance at the mooring facility, owned by Reliance Industries.
Essar Energy to cut crude oil buys from Iran
January 17, 2012. London-listed Essar Energy, a major importer of Iranian crude, will reduce its dependence on Tehran for oil, joining a growing list of Indian refiners that are turning elsewhere to diversify supplies and spread risks. Large refiners such as Reliance Industries have stopped buying Iranian crude while state companies like Indian Oil have cut purchases. India's total imports from Iran are likely to fall to 13 million tonnes in the current fiscal from 18.5 million tonnes in 2010-11, and 21.2 million tonnes in the year before that.
'RIL can't be stopped from recovering D-6 costs'
January 16, 2012. The oil ministry's technical arm, Directorate General of Hydrocarbons (DGH), has told the government it cannot stop Reliance Industries from recovering costs incurred in the D6 block because it does not have the power to initiate the enabling resolution in the management committee (MC) for the block. The MC, chaired by the DGH, can take a decision only if it is backed by parties representing at least 70% stake in the block, along with the support of one government nominee in the committee. In D6, neither the government, nor any state-run firm has any stake. The views of the DGH, the government's only advisor on technical issues in oil and gas fields, add a new dimension to the company's conflict with the oil ministry. RIL has initiated arbitration fearing that the oil ministry will not allow it to recover all development costs on the grounds that output did not match initial expectations. The DGH is still inclined to penalise Reliance for the fall in gas output, which the technical advisor feels is because the company did not drill enough wells, while RIL has argued that it is a victim of geological uncertainty. But the DGH says the administrative mechanism would come in the way of penalising the company. Oil and gas exploration blocks awarded to private firms under the new exploration licensing policy are governed by production sharing contracts (PSCs) between the government and companies. According to the contract, blocks are managed by respective MCs, with two government representatives.
Govt banks on ONGC stake sale to meet divestment target
January 14, 2012. Government is still betting on ONGC share sale to gather cash to bridge the shortfall in ` 40,000 crore disinvestment target for current fiscal. Volatile market conditions have dashed government's hopes of meeting the disvestment target for 2011-12. It had to postpone the ONGC and SAIL stake sales due to the upheaval in the stock market.
Oil regulator to fix marketing margins for gas
January 13, 2012. The government has formally asked the petroleum regulator to determine marketing margins for natural gas on the basis of costs, rebuffing Reliance Industries, which had argued that the levy was purely a matter between buyers and sellers. The oil ministry has written to Reliance saying the Petroleum & Natural Gas Regulatory Board would determine the margin that gas suppliers can charge. Reliance Industries had earlier sent a letter to the ministry questioning the legality of the government's move to regulate marketing margins for KG-D6 gas and told the oil ministry that such a step would be discriminatory as state-run firms also used a similar levy to cover costs and risks. Oil ministry said that the rule would be applicable to "all marketers" of natural gas in the country including state-run Gail India. The decision was taken to protect consumers in the short-supplied market, government said.
‘Iran oil imports to fall 30 pc in 2011-12’
January 13, 2012. The government has not asked any refiner to cut imports of Iranian crude oil despite US sanctions but after the RBI barred payments through a regional clearinghouse a year ago, refiners themselves are gradually reducing such purchases, which are projected to fall 30% in 2011-12. Total imports are estimated to fall to 13 million tonnes in the current fiscal from 18.5 million tonnes in 2010-11 and 21.2 million tonnes in the previous year.
MC to consider viability of ONGC’s gas find
January 12, 2012. The management committee (MC) is expected to meet to consider commercial viability of Oil & Natural Gas Corp's ultra-deepwater gas discovery in the Krishna-Godavari basin, which is adjacent to Reliance-operated D6 block. The meeting has been re-scheduled due to unavailability of some of the MC members. After a preliminary scrutiny the members have found the proposal acceptable. ONGC had made UD-1 gas find in the southern part of KG-DWN-98/2 block along with five other discoveries within two years of acquiring 90% stake in the block from Cairn India in 2005. Cairn still holds a 10% stake in the block. ONGC's proposal, which has passed preliminary scrutiny of the Directorate General of Hydrocarbons (DGH) and the oil ministry, proposes an investment of $2.9 billion to achieve a peak output of about 20 million standard cubic meters per day (mmscmd) from the UD-1 discovery.
‘Dependence on gas import to double in 2 yrs’
January 12, 2012. India's dependence on import of natural gas is expected to almost double in nearly two years and ten fold by 2030, rapidly shooting up the prices of electricity also. This was stated by former CEO and MD of Petronet LNG, Prosad Dasgupta, during a Workshop on 'Dash for Gas: Opportunities and Challenges' organized by Observer Research Foundation. Dasgupta said that India's import dependence for natural gas would increase to 60 percent by 2014/15 from the current 33 percent. The overall import dependence for coal and natural gas would increase ten fold by 2030, he said. This will make it necessary that electricity prices increase 3 fold in the future, Dasgupta said. Criticising the pricing policy, experts like Mr. Nitin Zamre (MD, ICF International) noted that while we pay $ 12-14/mmbtu for imported gas, the domestic suppliers were paid nearly $ 4/mmbtu. They pointed out that this is affecting the investment on the sector and the resultant reduction in production domestically. Experts said this is leading to a situation where while domestic gas, priced at $ 4/mmbtu, is dwindling in terms of availability, re-gasified LNG, even if it is priced at $ 14/mmbtu, is abundantly available and will cost roughly half that of subsidized diesel for use in vehicles and also will be competitive with domestic piped gas at current prices of compared on a heating value basis. P.K. Bishnoi, Member, Commercial of the Petroleum and Natural Gas Regulatory Board (PNGRB) said that India must use 'Gas to Gallop' towards economic development. Dr. Sudha Mahalingham, Member, Distribution of the PNGRB said that said that India is grappling with the dilemma over whether the energy and transportation infrastructure is a commodity whose price can be decided by the market or a strategic resource over which the Government can exercise control. The conference was attended by Dr. B. Mohanty, Advisor to the Ministry of Petroleum and Natural Gas, Members of the PNGRB, experts, officials of private players and others.
OMCs under-recoveries to double at ` 1.4 trillion
January 12, 2012. The under-recoveries of oil marketing companies are set to nearly double and touch an all-time high of ` 1.4 trillion this fiscal up from ` 78,000 crore last fiscal due to high crude oil prices and falling rupee. This will push at least some of these OMCs into the red for the first time in their history, warns the report.
Under-recoveries, which are the losses incurred by public sector oil marketing companies from sale of fuels at a discount to the cost price, are affecting the profits and liquidity of these companies. Timely compensation from the government will be critical for them to manage their liquidity.
Govt to be ‘meddler’ rather than ‘market facilitator’
January 11, 2012. The oil ministry said that on the basis of a representation from the department of fertilisers, the issue of marketing margin for KG-D6 gas was being referred to an empowered group of ministers (EGoM), which Reliance feels contradicts the ministry's earlier assertion, also in Parliament, that the production sharing contract does not provide for government intervention in this matter. The company has struggled for various approvals and initiated arbitration proceedings fearing the oil ministry many not allow it to recover the entire cost of developing the giant gas field in the KG-D6 block, has formally protested in a letter to oil minister Jaipal Reddy. While the government has approved fresh investments in the D6 block but several disputes, including the pricing of coal bed methane gas, are unresolved. Reliance told the oil ministry that state firms such as Gail India, Indian Oil Corp, Bharat Petroleum and ONGC have been charging a margin for gas marketed by them. The company argued that the marketing margin is charged to cover the seller's costs and risks including customer credit risks, penalties under the Gas Sales and Purchase Agreement, disputes and litigation risks.
POWER
Hydro project will ruin Himachal river catchment
January 15, 2012. The Hul hydropower project will ruin five km or one-fourth of the catchment of the Hul stream, a tributary of the Saal river, environmentalists say. It will also affect the livelihood of over 6,000 locals. Seven mini and micro hydro projects have been proposed on the Saal river alone. Since 2003, the people of eight panchayats in the Saal Valley of Chamba, under the banner of the Saal Ghaati Bachao Sangharsh Morcha, have been demonstrating against the Hul Hydro Power Private Ltd (HHPPL), the company executing the 4.5 MW project. According to Himachal Pradesh's micro-hydel policy, the consent of the affected gram sabhas (local bodies) is necessary before constructing any project.
Bhilwara Energy to receive ` 6.6 bn
January 13, 2012. Bhilwara Energy Limited (BEL), a part of the LNJ Bhilwara Group engaged in power sector business, has announced that a consortium of Indian and Nepali Banks would lend ` 663 crore for its 120 megawatt hydroelectric project in Nepal. The SPV Company has already acquired over 90% of the required project land and started preconstruction activities. The total capital out lay for the project is ` 1020 crore. While IDBI Bank is the lead lender, others members of the Consortium include Oriental Bank of Commerce, Punjab & Sind Bank, Exim Bank, PTC Financial Services and Everest Bank of Nepal. Currently, the group has an installed capacity of about 300 MW. While work on another 800 MW hydro power project in Tawang in Arunachal Pradesh is already underway, it is also venturing into Wind power generation with a 50 MW wind farm in Satara Dist of Maharastra State, which is likely to be commissioned by March 2012
CLP India's Jhajjar project ready for commercial production
January 13, 2012. CLP India said its 660-MW power plant at Jhajjar in Haryana was ready for commercial production. The first unit of the 1,300-MW project was synchronised with grid. Ninety percent of the plant's output was reserved for Haryana. CLP India won the contract to set up Jhajjar project through international competitive bidding in July 2008. CLP India said to minimise environmental impact of operations, the company installed flue gas desulphurisation at Jhajjar despite a significant additional financial implication. The second unit of the project was nearing completion and likely to be synchronised in three months.
NMDC incorporates SPV company for power plant at Chhattisgarh
January 12, 2012. The country's top iron ore miner National Mineral Development Corporation (NMDC) said it has incorporated a special purpose vehicle company for setting up a power plant in Chhattisgarh for captive supply to its under-construction steel plant in the state. The company is a wholly-owned subsidiary of NMDC at present and by virtue of the Companies Act, 1956, it is also a government company. The miner's first steel venture, the plant at Chhattisgarh is being constructed at a cost of about ` 15,500 crore and is is expected to be operational by 2014. NMDC announced it has signed a pact with a consortium led by Shriram EPC Ltd for a ` 509 crore by-product complex at its steel plant at Nagarnar, in Chattisgarh.
NTPC & TNEB JV to ease TN's power woes
January 11, 2012. The first 500mw unit of the Vallur super thermal power project, a joint venture between NTPC and the Tamil Nadu Electricity Board, is at an advanced stage and will shortly contribute to the Tamil Nadu grid. NTPC presently meets about 18% of Tamil Nadu's power requirement. The chief minister sought an additional allocation of 100 MW from NTPC in view of the power shortage in the state. NTPC has an installed capacity of over 36,000 MW, accounting for 28% of the electricity generated in the country.
Transmission / Distribution / Trade
‘Rupee fall to hit coal importers the most’
January 17, 2012. The recent rupee depreciation has added to the woes of power generation companies. While some of them have hedged against an unfavourable currency movement, most companies will have to take a hit on their margins. Power companies have an exposure to foreign currency as they are dependent on imported coal due to a domestic coal supply deficit. Besides, they also have a foreign loan exposure; though most of this will be mark-to-market loss as the repayment of these loans will start only from 2013, once the projects are operational.
Reliance Infra infuses ` 5.2 bn equity in BSES
January 16, 2012. Reliance Infrastructure Ltd has infused ` 520 crore equity into BSES Delhi distribution companies as part of ` 5,100 crore financial package being worked by IDBI. The package required the promoters to bring in 20% equity or ` 1,020 crore. Delhi government will infuse another ` 500 crore into the distribution companies. Discussions with IDBI are at an advanced stage and are expected to conclude soon. Completion of this process will help arrange long-term debt to finance the cash-flow mis-match and enable BSES Delhi to facilitate its payments to generation and transmission companies. Reliance Infrastructure said efforts were being made to ensure quick payments to generation and transmission companies.
DVC to import 3 mt coal in 2012-13
January 15, 2012. Damodar Valley Corporation (DVC) will import three million tonne (mt) of coal in 2012-13 to meet a part of its coal requirement to feed its thermal power plants and was waiting for government's final nod on guarantee to raise ` 4,400 crore. The total coal requirement for the existing projects is 11 million tonne. The corporation would require 14 million tonne for their upcoming capacities. DVC agreed that due to coal problem from Coal India Limited a few of its units could not be brought on generation to full capacity.
Essar Power plans foray into distribution
January 15, 2012. Aiming to become an integrated power company, Essar Power plans to enter the electricity distribution business and has applied for licences in Maharashtra and Bihar. Essar Power had applied to the Maharashtra Electricity Regulatory Commission for a licence to supply power in Mumbai. The company is also looking at distribution licence in other cities. Meanwhile, Essar Power, which acquired 76 per cent stake in Orissa's Navbharat Power Pvt Ltd, would execute projects of over 2,000 MW capacity as part of the joint venture agreement. Essar Power has total installed generation capacity of 1,600 MW and is focused on reaching a capacity of 9,670 MW by 2014.
NALCO to finalise coal supply for Indonesian project in Feb
January 15, 2012. State-run NALCO is set to finalise a deal with a miner by next month for supply of coal to its $ 3.8 billion aluminium-cum-power project in Indonesia. The aluminium major has plans to set up a 5-MTPA aluminium smelter and a 1,250-MW power plant in Indonesia entailing $ 3.8 billion (about ` 18,000 crore) investment. The coal mines shortlisted has reserves of about 200 million tonnes (MT). The company has zeroed in on Muara Enim mine in the East Kalimantan district of Indonesia.
Power backup companies look at growth in India mkt
January 14, 2012. The poor power supply situation across the country is proving an opportunity for equipment manufacturers. So, while Su-Kam Power Systems, the ` 600 crore Delhi-based power back up company is looking at forming international partnerships for higher rated UPS' and entering new businesses like rental power, Kohler Power Systems, part of Kohler India Corp, a wholly owned subsidiary of the US headquartered $7 billion company better known for its bathroom fittings, plans to set up a greenfield plant to make gensets.
Power bills now can be paid on Sundays
January 11, 2012. Power consumers in central and east Delhi can now pay their bills on Sundays too, thanks to increasing number of nuclear families in the capital. A decision to this effect was taken by discom BSES Yamuna Power Ltd (BYPL) after finding out that "nuclear families" were facing trouble in making timely payment. This will help over 12 lakh electricity consumers in Chandni Chowk, Daryaganj, Krishna Nagar, Yamuna Vihar, Nand Nagri, Laxmi Nagar, Patel Nagar, Mayur Vihar-I, II and III, Jhilmil, Shankar Road, Paharganj, GT Road, and Karawal Nagar among other localities. The operations have begun during the first week of January. The bill payment centres of division offices will work on Sundays. Though, the payments counters will be open from 8 AM to 8 PM, cash payment will be accepted at the counters from 9 AM to 3 PM. Among the over 12 lakh BYPL customers, over 80 per cent customers choose to make payments at the bill payment counters.
Policy / Performance
‘Govt to modernise power usage calculations’
January 16, 2012. The Indian government is planning to set up a "Smart Meter Task Force" that will look into modernising the "primitive ways" of calculating power usage, tech czar Sam Pitroda said. Pitroda, who also heads the Indian Smart Grid Task Force, was speaking at the inaugural session of GridWeek Asia 2012 organised by Indian Electrical and Electronics Manufacturers' Association. According to Pitroda, the government reckons that India needs 100 million meters and towards this end, the Smart Meter Task Force will be entrusted the task of introducing low cost meters, costing between ` 1,000 to ` 1,500. He said that the United Progressive Alliance government has also set up $1 billion venture fund to foster innovation across sectors states.
PM to meet with power company chiefs
January 15, 2012. Amid a host of issues, including shortage of gas, coal and finances plaguing the sector, Prime Minister Manmohan Singh is likely to meet the heads of private power companies on January 18 to hear them to resolve hurdles. CEOs of leading private firms including Tata Power, Reliance Power, Adani Power, Jindal Power among others, are expected to attend the meeting. Shortage of gas and coal and other issues are likely to figure in the meeting. The impact of rising coal prices in the global markets on domestic power tariff is another major issue that is likely to come up for discussion. In September last year, the Indonesian government had linked the price of coal exported with a benchmark based on international prices of coal. This move is likely to raise the cost of power generated from the coastal ultra mega power projects (UMPP) like Mundra in Gujarat and Krishnapatnam in Andhra Pradesh. Tata Power and Reliance Power, developers of Mundra and Krishnapatnam UMPPs respectively, had written to the Power Ministry seeking its approval to increase the power tariffs of those projects. The Ministry asked them to sort the matter with the respective buyers. The companies are hopeful that government intervention may provide them some relief. Besides, the prower developers are also facing problems in raising funds as the banks are resisting disbursing finances without having coal linkages in place. Some of the infrastructure projects including power sector are languishing due to this and may lead to miss the power generation target in the 12th plan also. The power companies are also likely to meet other Cabinet ministers - finance and coal - to place their problems infront of them and seek their solution.
India loans $100 mn to Mali for power project
January 13, 2012. India has extended a $100-million loan to Mali for a power project, while Bamako promised to support the Asian giant's bid for a permanent UN Security Council seat. The joint statement, was issued after a visit to India by Malian President Amadou Toumani Toure on January 11-12. The Indian government $100-million (77.8-million euro) credit line is meant to finance a power transmission project connecting the Malian capital Bamako to the southern city of Sikasso.
CIL says wage increase within expectation
January 13, 2012. Coal India, the world's largest coal miner, will sign a five-year agreement with its workers' unions to increase wages by 25 percent, which will add about ` 40 billion ($775 million) to its annual wage bill. The state-run company has been in negotiations with its five recognised unions, representing most of its 360,000 workers, for several months. The new accord will be signed by the last week of January. The agreement, effective from July 1, 2011, provides for a minimum three percent increase in wages annually, while increase in other allowances will push this up further.
India invites investment from Bangladesh
January 11, 2012. India invited Bangladesh to participate in setting up power projects, particularly in its north eastern states saying such joint ventures would help both the countries. India has a liberal policy permitting 100 per cent foreign direct investment in respect of projects relating to electricity generation, transmission and distribution. The details of such cooperation can be discussed at the forthcoming meeting of the Steering Committee on Power held at the level of Secretaries between the two countries. During Prime Minister Manmohan Singh's September, 2011, visit to Bangladesh the two countries had agreed to promote trans-border cooperation in the management of shared water resources, hydropower potential and eco-systems and in the area of connectivity.
OIL & GAS
Norway 2011 total O&G production falls 5 pc on year
January 16, 2012. Norway's total oil and gas production fell by 5% in 2011, to 218.7 million cubic meters of oil equivalent, the Norwegian Petroleum Directorate said. The fall was largely driven by lower gas production, the directorate said. Norway exports most of its petroleum production. Total Norwegian production of oil and gas has been falling since 2004, mainly because of lower output of crude oil. The role of the Norwegian Petroleum Directorate is to get as much petroleum out of the shelf as possible. The directorate expects production to rise in 2012, to 222 million cubic meters of oil equivalent, holding steady at this level until 2016. Norwegian 2011 crude oil production fell to 97.3 million cubic meters, or 1.7 million barrels a day, from 104.4 million standard meters in 2010.
Cnooc starts drilling its first shale-gas project in eastern China
January 12, 2012. Cnooc Ltd., China’s biggest offshore energy producer, started drilling at its first shale-gas project in the country, joining rivals including China Petroleum & Chemical Corp. in the search for unconventional natural gas. Exploration started in the eastern Anhui province, China National Offshore Oil Corp., Cnooc’s parent, said. The shale-gas project is also the Hong Kong-listed unit’s first onshore venture. China, estimated to hold more natural gas trapped in shale than the U.S., has yet to produce the fuel commercially. Chinese energy explorers have been seeking shale technology and expertise by buying stakes in overseas fields, including acquisitions of Chesapeake Energy Corp. assets by Cnooc.
North Dakota surpasses OPEC member Ecuador in oil production
January 11, 2012. North Dakota oil production surged 42 percent to 510,000 barrels a day in November, exceeding the output of OPEC member Ecuador, as energy explorers accelerated drilling in the Bakken Shale formation. The state’s daily crude output topped a half-million barrels for the first time during the month. North Dakota’s 6,300 wells produced enough oil to displace imports from foreign suppliers such as Iraq or Colombia.
Shell says the potential for shale gas in Europe is limited
January 11, 2012. Royal Dutch Shell Plc said the potential for shale gas development in Europe is limited by the region’s regulations and its dense population. Shell expects expansion in shale and tight gas -- which is locked in rock that’s difficult and expensive to break -- in North America, China and Australia, and has signed a deal in Ukraine. Shell, based in The Hague, applied for permits to drill for oil in Arctic regions this year and next. The company said it agreed to invest as much as $800 million to explore for oil, natural gas and shale gas in Ukraine.
Super fracking goes deeper to pump up natural gas production
January 11, 2012. As regulators and environmentalists study whether hydraulic fracturing can damage the environment, industry scientists are studying ways to create longer, deeper cracks in the earth to release more oil and natural gas. Energy companies are focused on boosting production and lowering costs associated with so-called fracking, a technique that uses high-pressure injections of water, sand and chemicals to break apart petroleum-saturated rock. The more thoroughly the rock is cracked, the more oil and gas will flow from each well. The world’s largest oilfield service providers are leading the search for new technologies, with some companies focused on splintering the rock into a web of tiny fissures, and others seeking to create larger crevices in the richest zones.
Saudi Aramco to invest $200 bn in refining
January 17, 2012. Saudi Arabian Oil Co. plans to build refineries in China and Indonesia as part of a $200 billion spending program to double refining capacity and explore for oil and natural gas during the next decade. Saudi Aramco, as the state-run company is known, is preparing for talks about “final terms” for a Chinese refinery and is still waiting for “good terms to be put on the table” for a processing plant in Indonesia. Aramco will probably decide soon whether to invest in expanding a plant it operates with Japan’s Sumitomo Chemical Co. Aramco, the world’s largest crude exporter, is expanding refining and petrochemical production to meet domestic demand and export refined products that can fetch higher prices than oil. The company plans to boost its global refining capacity to 8 million barrels a day in 10 years, including projects yet to be announced.
Tankers poised for worst year in decade as U.S. refineries close
January 17, 2012. Suezmaxes, hauling about 1 million barrels of oil, are poised for their worst year in more than a decade as the biggest contraction in U.S. East Coast refining in at least 20 years means less cargo on their largest trade route. The ships, about 50 percent of the size of supertankers, will earn $15,188 a day this year, 12 percent less than in 2011 and the lowest since at least 1997. Investors may profit from that prediction by selling forward freight agreements, traded by brokers and used to bet on future transport costs, which are anticipating an average of $17,088.
Oil-tanker glut shrinks on Chinese demand
January 17, 2012. A glut of supertankers competing to load cargoes of Persian Gulf oil shrank to a 14-month low on Chinese crude purchases and persistent tensions over a possible closing of the Strait of Hormuz. There are 5 percent more ships available for hire over the next 30 days than there are likely cargoes, the smallest excess since Nov. 2, 2010. Contracts used to bet on the cost of shipping oil in February were little changed after advancing the most since pricing began on Sept. 1. Demand for crude before China’s weeklong Lunar New Year holidays starting Jan. 23 may be helping to lift charter rates. Iran’s threat to block the strait may spur traders to stockpile crude.
UAE to test pipeline bypassing the gulf
January 16, 2012. A pipeline designed to carry the UAE's oil to an offshore terminal in Fujairah will begin testing in May. If the tests are successful, the pipeline will begin operation the following month. The pipeline is being constructed to bypass the Strait of Hormuz, thereby cutting the shipping time by two days and reducing the impact of a possible blockade by Iran. The pipeline will carry oil from Habshan, Abu Dhabi's onshore oil collection point, to an offshore oil terminal in Fujairah, some 370 km away. When completed, it will carry 1.4 million bpd, but could increase capacity in the future to 1.8 bpd or over 70 percent of Abu Dhabi's output. Abu Dhabi contains 90 percent of the UAE's crude oil reserves. The $3.29 billion construction project is being run by the International Petroleum Investment Company, the overseas oil investment arm of the government of Abu Dhabi.
EU naval forces exchange gunfire with Somali pirates in attack on tanker
January 14, 2012. European Union naval forces exchanged gunfire with Somali pirates in thwarting an attack on a Spanish navy oil tanker near Mogadishu. Five of six suspected pirates detained on the ESPS Patino were injured and two required medical treatment, EU Navfor Somalia said. EU counter-piracy forces, which began their mission in December 2008, last exchanged fire with pirates in September, naval force said from Northwood, England.
China snubs Geithner on Iran oil, Japan plans cut
January 12, 2012. U.S. Treasury Secretary Timothy F. Geithner’s efforts to tighten economic sanctions on Iran over its nuclear program won backing from Japan a day after China rejected limiting oil imports from the country. Geithner’s meetings were part of a two-stop trip to Asia’s largest economies aimed at building support for tighter economic sanctions on Iran after international monitors detected an acceleration in the nation’s nuclear development program. China, which counts Iran as one of its top petroleum suppliers, snubbed the U.S., with a vice foreign minister saying his nation “opposes imposing pressure and sanctions.” JX Nippon Oil & Energy Corp., Japan’s biggest refiner, is in talks with Saudi Arabia and other producers to replace crude shipments in the event of an embargo on Iranian supplies. JX buys about 90,000 barrels of Iranian oil a day. Japan, the world’s second biggest importer of Iran’s crude after China, bought 1.09 million kiloliters, or about 6.85 million barrels, in November, or 6.4 percent of the country’s total purchases for the month. European Union foreign ministers are scheduled to decide at a meeting in Brussels when to impose and how to phase in an embargo on Iranian oil, which is designed to force Iran back to the negotiating table over its nuclear program.
France said to seek faster execution of EU’s ban on Iranian oil imports
January 17, 2012. France is pushing for faster enforcement of the European Union’s proposed ban on oil imports from Iran. France wants the embargo to be delayed by no more than three months to allow nations including Greece, Italy and Spain to find alternative supplies. While France is seeking a shorter exemption for existing crude purchase contracts, a six-month delay favored by more EU nations remains the more likely compromise. EU foreign ministers are scheduled to decide on the ban, which will probably also include an exemption for Eni SpA (ENI). The embargo requires unanimity among the bloc’s 27 states. Iran has threatened to block the Strait of Hormuz, through which almost 20 percent of the world’s oil flows, if exports are curbed. A gradual implementation of the embargo would satisfy the concern of nations most dependent on Iranian crude, including Italy, Greece and Spain. The three countries accounted for about 68 percent of EU imports from Iran in 2010. Nations including Germany and the U.K. also favored the shortest delay, while nations most exposed to imports from Iran pressed for an exemption of as long as 12 months. The EU will probably adopt a six-month phase-in. The U.S, and EU say Iran’s nuclear-development plans are aimed at building atomic weapons. The Islamic republic, the second-largest oil producer in the Organization of Petroleum Exporting Countries after Saudi Arabia, says its program is for civilian purposes only. EU sanctions on Iran already include an embargo on equipment for and investment in the oil and natural gas industries. The bloc has also imposed restrictions on transfers of funds to and from Iran. A group of U.S. senators called on the EU to impose sanctions on Iran’s central bank in addition to the planned oil ban.
Saudis said to be targeting $100 crude
January 17, 2012. Oil rose to a three-day high after France pushed for faster enforcement of a ban on Iranian imports and Saudi Arabia’s oil minister said the world’s biggest exporter wants to keep prices at $100 a barrel.
Gas bears up bets on ’catastrophic’ surplus
January 16, 2012. Hedge funds turned bearish on U.S. natural gas for the first time in eight weeks as a surplus and warmer-than-normal weather pushed the price of the heating fuel to the lowest level in more than two years. The funds and other large speculators switched from bets that futures will rise to a bearish, or “short,” position of a net 10,344 futures equivalents in the week ended Jan. 10. Natural gas plunged 13 percent last week on the New York Mercantile Exchange, the biggest decline since August 2009, after forecasts showed above-average temperatures through January. Stockpiles in the week ended Jan. 6 stood at 3.377 trillion cubic feet, 17 percent above the five-year average.
Nigerian unions suspend strike after Jonathan agrees to cut gasoline price
January 16, 2012. Nigerian labor unions suspended strikes and protests in Africa’s top crude producer after President Goodluck Jonathan limited gasoline-price increases. They also urged the government to release protesters detained during demonstrations. Jonathan, earlier announced a limit on the increase in gasoline prices to 97 naira ($0.60) a liter. The strike began Jan. 9 after the government ended subsidies, which it said cost 1.2 trillion naira last year, and vowed to spend the savings on power plants and roads. Gasoline prices more than doubled from 65 naira a liter since the subsidies were abolished. Oil Minister Diezani Alison-Madueke said she has set up bodies to eradicate corruption and examine management in state oil companies including the Nigerian National Petroleum Corp. She will meet with the Senate to try and speed up the passage of a proposed Petroleum Industry Bill needed to reform the industry. Nigeria pumped about 2.2 million barrels of oil a day.
OPEC keeps oil demand forecast steady
January 16, 2012. The Organization of Petroleum Exporting Countries (OPEC) kept its forecast for 2012 oil demand unchanged, while warning that Europe’s debt crisis could harm global consumption. Oil use will increase by 1.1 million barrels a day, or 1.2 percent, to 88.9 million a day this year, OPEC said in its monthly report. The 69-page document made no reference to Iranian threats to block shipping traffic through the Persian Gulf. OPEC’s production rose to its highest level since October 2008, the report from its Vienna-based secretariat showed.
Iran’s OPEC Governor warns Arab oil suppliers against backing an EU embargo
January 15, 2012. Iran’s OPEC Governor Mohammad-Ali Khatibi called on Arab oil suppliers to refrain from supporting a possible European embargo on Iranian crude sales, calling such help “a dangerous political game”. European Union foreign ministers will meet on Jan. 23 to consider barring purchases of oil from Iran, the second-biggest producer in the Organization of Petroleum Exporting Countries after Saudi Arabia. Should the bloc approve an embargo, its 27 members states would be prohibited from concluding new oil contracts with Iran or renewing any that are due to expire.
China’s Wen to juggle Iran oil need with Saudi ties on Persian Gulf trip
January 13, 2012. China’s Wen Jiabao must balance his country’s need for Iranian crude with its budding energy partnership with Saudi Arabia on his first visit to the Gulf kingdom. The Chinese premier’s trip starting comes amid signs that tighter economic sanctions may stop Iran, OPEC’s second-largest producer after Saudi Arabia, from selling its oil. Wen will also visit Qatar and the United Arab Emirates, fellow members of the Organization of Petroleum Exporting Countries. Wen will become the most senior Chinese leader to travel to Saudi Arabia since President Hu Jintao in 2009. His visit will begin as Saudi Arabian Oil Co. and China Petroleum & Chemical Corp. sign an agreement for a proposed refinery on the Red Sea coast. Sinopec’s planned 37.5 percent stake in the Yanbu plant would make it China’s first investment in a Saudi oil facility.
China gets cheaper Iran oil as U.S. pays tab for Hormuz patrols
January 12, 2012. China stands to be the biggest beneficiary of U.S. and European plans for sanctions on Iran’s oil sales in an effort to pressure the regime to abandon its nuclear program. As European Union members negotiate an Iranian oil embargo and the U.S. begins work on imposing sanctions to complicate global payments for Iranian oil, Chinese refiners already may be taking advantage of the mounting pressure. China is demanding discounts and better terms on Iranian crude, oil analysts and sanctions advocates said.
Iran Sanctions to affect South Korea economy
January 12, 2012. South Korea’s economy will probably be affected by increasing sanctions on Iranian oil exports and the country needs to diversify its oil suppliers. U.S. Treasury Secretary Timothy F. Geithner is pressing Asian nations to cut Iranian oil imports with visits to China and Japan. Iran is South Korea’s fifth-largest supplier of crude and accounted for 9.4 percent of its total imports in 2011, the government said. South Korea is working with counterparts abroad and “it’s too early to say” what the specific approach will be on Iran imports, he said.
POWER
Generation
Turkey's ENKA to build electric power plant
January 17, 2012. Turkey's ENKA company signed an agreement in Baghdad for the construction of a new electric power plant that would turn natural gas into electric power in Basra province of Iraq. ENKA group signed the agreement with the Iraqi Ministry of Electricity in Baghdad. The electric power plant would cost 236 million USD to build. ENKA returned to Iraq after 21 years with agreement.
Dewa increases installed power capacity
January 16, 2012. The Dubai Electricity and Water Authority (Dewa) achieved an 18.4 per cent increase in installed power generation capacity and a 21.2 per cent increase in water desalination capacity in 2011. Dewa increased its power generation capacity to 8,718 megawatts (MW), compared with 7,361 MW in 2010, while desalinated water production capacity increased to 400 million gallons per day compared with 330 million in 2010. The increase in power and water production aims to meet the needs of customers and development projects in all economic and social sectors. Dewa currently has 10 power and water desalination plants and around 300 substations of various capacities.
China AP1000 nuclear plant on track
January 15, 2012. China's first third-generation nuclear power plant will come online as scheduled in 2013, a nuclear power executive said, despite delays caused by redesigning after a devastating tsumani in Japan in March. China's third-generation pressurized water reactors are the first in the world to use AP1000 technology developed by Westinghouse. Building has been underway since 2009. The tsunami badly damaged reactors in Japan and led to questions over the safety of China's ambitious nuclear plans. China plans to start building new capacity almost equal to Japan's entire nuclear power sector by 2015, to reduce its dependence on coal. The two companies are still mulling over further efforts to ensure nuclear safety. An optimized construction schedule would allow the No.1 unit of the Sanmen nuclear power plant, in east China's Zhejiang province to begin operation in 2013.
Transmission / Distribution / Trade
ISA to bid for transmission projects in Chile
January 16, 2012. Interconexion Electrica SA, Latin America’s biggest power-line operator, plans to bid for energy- transmission projects in Chile this year. ISA, as the Medellin-based company is known, also plans to bid for projects in Peru and Brazil.
Ethiopia and Sudan power grids soon to be linked
January 14, 2012. The Ethiopia-Sudan power transmission line will be completed earlier this year connecting Ethiopia to Sudan’s power grids, according to the Ethiopia Electric and Power Corporation. The energy link is expected to be completed by first quarter of this year and will allow power trading between the two east African neighbours. Ethiopia plans to sell an initial 100MW of electricity to Sudan as an example of Ethiopia’s capacity to export power. The Horn of Africa country has recently begun exporting 35 MW of electricity a month to Djibouti earning up to $1.5 million every four weeks. The Ethiopia-Sudan transmission project will enable Khartoum to replace its thermal power generating units with Ethiopia’s renewable and clean hydro-power generated energy. The World Bank funded $41 million 230KV transmission line will be 296km long. The transmission line stretches between the Ethiopian towns of Bahir-Dar and Metema and connects with a transmission line in the Sudanese border town of Gedaref.
Policy / Performance
France's Hollande softens nuclear closure stance
January 17, 2012. French Socialist presidential hopeful Francois Hollande will only shut France's oldest nuclear power plant in eastern France during his 5-year term, if elected in May. Hollande said at the end of November he would only pick what he views as priority issues in a pre-electoral pact by the Socialists and the Green party, which included shutting 24 nuclear reactors by 2025.
Hamaoka plant to get anti-tsunami seawall
January 17, 2012. In an attempt to protect its assets from a Fukushima-style meltdown, Chubu Electric Power Co. is constructing an 18-meter (60 foot) anti-tsunami seawall around its Hamaoka nuclear plant. The plant is reportedly near a fault line that may be vulnerable to future earthquakes and tsunamis. The decision to build the wall came following the Japanese government’s forced shutdown of the plant in order to implement disaster mitigation measures.
Brazilian nuclear plants set new records
January 16, 2012. The electricity produced by Brazil’s two nuclear power plants, Angra 1 and Angra 2, set new records in 2011. The total amount of electricity generated was 15.644 million megawatts (MWh). The two plants also set individual records in 2011: Angra 1 generated 4.654 million MWh and Angra 2, 10.989 million MWh. Angra 1 is 30 years old and Angra 2 has been operational for a decade. Both plants are operating at 100% of capacity at the moment, generating 3.17% of all electricity in Brazil (91% of Brazil’s electricity is produced by hydroelectric power plants). The nuclear power plants are an important part of the state of Rio de Janeiro electricity grid, generating 30% of the electricity the state uses (the nuclear power plants are located in the state at Angra dos Reis). Sometime at the end of 2015 or the beginning of 2016. a third nuclear power plant, Angra 3, is scheduled to go online. At that time, nuclear power will generate 60% of the electricity used in Rio de Janeiro.
Obama ready to use military force to stop nuclear Iran, Ex-adviser says
January 11, 2012. No one should doubt that President Barack Obama is prepared to use military force to prevent Iran from acquiring a nuclear weapon if sanctions and diplomacy fail, the president’s former special assistant on Iran said. The administration considers the risks of permitting a nuclear-armed Iran to be greater than the risks of military action.
RENEWABLE ENERGY / CLIMATE CHANGE TRENDS
‘India to face challenges on energy front’
January 16, 2012. India would face serious challenges in energy security if business continued in the inefficient manner as it is being conducted at present, TERI chief R K Pachauri said. He said that India would run into problem, not in physical supply of energy but costs which would be extremely unbearable, Pachauri said at an event on the rating system of buildings in West Bengal in association with Credai. Pachauri said that TERI, a research body, had intimated the government about the challenges in energy security. Stressing upon the need to set up green buildings for conservation of energy, he said that TERI had introduced the Green Rating System for Buildings for developers. He said that if the demand for power from buildings went down, then demand for capital for generating additional capacity would also go down. Pachauri also stressed the importance of efficient management of energy resources and more use of renewable sources of energy.
BlackRock’s Mytrah says able to produce wind power cheap as coal
January 16, 2012. Mytrah Energy Ltd., an Indian wind- farm builder held by BlackRock Inc., says it’s able to produce power as cheap as developers of coal-fired plants because rising demand for the fossil fuel has increased import prices. A forecast 8 percent gain in the price of coal in Asia this year may boost competitiveness of clean energy producers such as Mytrah, which is also backed by Henderson Global Investors Ltd., Capital Research Global Investors and Eton Park International LLP. About half the thermal power stations in India, the third- largest coal user, have stocks of fewer than seven days against normal levels of 15 to 30 days, the regulator said. Developers’ bids in auctions for coal-fired power stations have ranged from $49 to $78 a megawatt-hour, against tariffs for wind farms of $66 to $105 a megawatt-hour.
Suzlon to invest ` 180 bn in Andhra Pradesh
January 16, 2012. Wind turbine maker Suzlon said it has signed a pact with the Andhra Pradesh government for investing ` 18,000 crore to develop wind power projects in the state by 2016. Suzlon signed a Memorandum of Understanding (MoU) with the Government of Andhra Pradesh for the development of wind capacity in the state totaling 3,000 MW between 2012 and 2016, creating potential investments of up to ` 18,000 crore, the company said. Under the MoU, the Andhra Pradesh government will facilitate Suzlon in obtaining necessary permissions, registrations, approvals and clearances for the development of the wind farms. Suzlon, in turn, will play the role of a developer and facilitate the channelisation of investments into the state through its customers investing in wind energy. The agreement covers the development of new capacity in wind farms across the state, with development planned in the districts of Tallimadugula, Alankarayanipeta, Gandikota, Vajrakarur, Tirumalayapalli and other parts of Andhra Pradesh. The wind power potential of Andhra Pradesh is around 9,000 MW of which only about 200 MW has been harnessed so far.
Bhanshali plans to invest in solar power foray
January 16, 2012. Vallabh Bhanshali, an investment banker who introduced Infosys to the capital markets, has made a unobtrusive but ambitious entry into solar power with plans to invest ` 1,700 crore in setting up generation capacity of 100 megawatt. In 2010, Bhanshali sold the investment banking and brokerage arms of Enam, a domestic financial services firm, to Axis Bank for ` 2,700 crore and the foray into solar power is the first significant diversification since then, after scrapping plans to raise a ` 3,500 crore infrastructure fund. India's aim to scale up its solar power generation capacity to 20,000 MW by 2020 from around 250 MW now has encouraged power utilities like Tata Power Company, Reliance Power, GMR Energy and Adani Power to expand into renewable energy. The sector has also attracted foreign companies. Talma Chemical Industries, promoted by the Bhanshali family, has launched an SPV called Visual Percept Solar Projects, to develop projects based on photovoltaic technology. The solar business is being spearheaded by Vallabh Bhanshali's nephew, Akash Bhanshali.
Suzlon arm wins order from UK based RWEnpower Renewables
January 13, 2012. Wind turbine maker Suzlon Energy said its German subsidiary REpower has signed a contract to supply 10 wind turbines to England-based RWEnpower Renewables for the Bradwell wind farm. The turbines at Bradwell, with an output of 2.05 MW each, will generate enough electricity to power the equivalent of nearly 12,000 homes annually. Value size of the contract was not mentioned. REpower has delivered 36 onshore wind farms in Scotland, England and Wales and one offshore wind farm, Project Beatrice, in the North Sea.
Gamesa sets up a manufacturing unit
January 13, 2012. Gamesa, a company in the wind energy segment, has set up a factory in Vadodara, Gujarat with an investment of ` 175 crore to manufacture wind turbines for the burgeoning wind power market. The company plans to manufacture 390 units by 2013. The newly operating plant is a part of the announcement made by the company in March 2011 to invest over ` 400 crore in India to strengthen the company's manufacturing base in India in order to tap rising demand in the country's wind energy market. The blade factory will primarily supply India's northern states, including Gujarat, Rajasthan, Madhya Pradesh and Maharashtra, which offer promising wind energy potential.
GMR plans to step up solar power play
January 13, 2012. GMR Energy, a subsidiary of GMR Infrastructure plans to increase its presence in the renewable energy segment. It plans to grow the installed capacity to 100 MW from 25 now. GMR has also commissioned its first 25 Mw solar power project Gujarat with a total investment of ` 360 crore. The project was awarded in October 2010 under the Gujarat SolarPolicy. Power from this plant will be supplied to Gujarat Urja Vikas Nigam Ltd on a 25 year Power Purchase Agreement under the Gujarat State Solar Policy. GMR Energy is currently operating 808 MW of power projects and is in the process of executing another 7500 MW.
Solar power lights up Swedish Embassy
January 13, 2012. In an effort to reduce carbon footprint, the Swedish Embassy has started using solar panels for power generation. The embassy will meet 10% of its total energy demand through solar power. The embassy building has solar panels spread over an area of 600 sqm that produce about 75 kw of power. This, say officials, will result in annual savings of ` 7-8 lakh in power bills.
SunEdison commissions 5 MW plant in Rajasthan
January 12, 2012. SunEdison, a global solar energy services provider, has commissioned a 5 megawatt plant in Jodhpur district of Rajasthan. The plant, set up under the Jawaharlal Nehru National Solar Mission (JNNSM), is spread over 44 acres and uses thin-film solar technology. The project was completed in 2.5 months and was inaugurated by Farooq Abdullah, Honourable Minister for New and Renewable Energy (MNRE) and Shri Ashok Gehlot, Chief Minister of the state of Rajasthan. It is expected to generate 8 million kilowatt-hour of electricity in its first full year of operation and offset carbon emissions of up to 3,000 metric tonnes every year. The power would be supplied to NTPC Vidyut Vyapar Nigam (NVVN), the nodal agency for augmenting purchase and sale of power generated from solar energy under the JNNSM mission. In 2010 SunEdison deployed more than 160 megawatts of solar throughout the world.
EU, UN carbon prices could fall ‘close to zero,’ SocGen says
January 17, 2012. Societe Generale SA said European carbon permits may fall close to zero should regulators fail to set tight enough limits in the market after 2020. The bank cut its forecasts for European Union permit prices in 2012 by 28 percent to 8.90 euros ($11.32) a metric ton, on lower emissions because of worsening economic conditions and faster-than-expected deployment of renewable energy. The market’s third phase runs for the eight years through 2020. Under one proposal being considered by the parliament, regulators could temporarily set aside allowances to curb an oversupply through this year and beyond. Such a scenario would potentially bring forward a 15 euro-a-ton price to 2015 instead of in 2020 under the more-probable scenario with no set aside. Returning the 1.4 billion tons of set-aside supply during the three years through 2020 would drive EU prices back down to 10 euros by the end of the decade under that scenario. The set aside would also compensate for energy efficiency measures, according to the report. The bank last made a 2020 forecast in October 2010, proposing scenarios in which EU permit prices would rise to between 40 to 60 euros by 2020, depending on offset restrictions and tighter carbon limits. Under most likely scenario, the emissions market’s net overall balance will be 879 million tons oversupplied in the 13 years through 2020, the report said. This surplus is based upon a shortfall of 870 million tons of EU permits, which is balanced by a maximum use of UN offsets totaling 1.75 billion tons. Total emissions during phase three of the trading system should be about 18.4 billion tons, meaning emissions will be 5 percent below 2012 levels by the end of the period. The bank forecast EU permits will trade at 12.60 euros on average during that time.
EU tells Clinton it won’t abandon carbon emissions limits for airlines
January 17, 2012. The European Union won’t abandon its curbs on carbon dioxide discharges by international airlines and sees the program as an incentive toward a global solution. The 27-nation EU is ready to discuss the exemption of incoming flights from the U.S. from its emissions trading system should the world’s largest economy introduce “equivalent measures” to cut pollution by the aviation industry. The European law will also be reviewed and amended when countries worldwide reach an agreement to limit greenhouse gas discharges from airlines.
German clean energy must face free market
January 17, 2012. Germany needs to overhaul its subsidy system for renewable energy created in the 1990s to ensure the clean-power industry remains competitive. Power producers will need to face competitors without earning above-market prices over the long-term if the country wants to reach its clean-energy targets and not overpay. German consumers paid about 13 billion euros ($16.6 billion) in subsidies, mostly for power from wind and solar plants.
Most UK smart meter users improve home insulation
January 17, 2012. Around 64 percent of consumers using a system to monitor their energy demand at home, so-called smart meters, have made improvements to energy efficiency, a survey by Centrica's British Gas showed. The UK energy supplier, which has installed 400,000 smart meters in customer homes and businesses, also found that 80 percent of the more than 700 smart meter users surveyed said the devices had made them rethink their energy consumption. The UK government has made plans for every household and business to be fitted with a smart meter by 2019, a target that requires the replacement of around 53 million gas and electricity meters.
EU nations to sell 124 mn carbon permits in 15 months
January 16, 2012. European Union nations will sell 124 million metric tons of surplus carbon allowances originally set aside for new entrants during the next 15 months. Of a total surplus of 220 million tons in the five years through 2012, 124 million will be sold, 20 million will go to new entrants and the remaining 76 million tons will be canceled. Germany and the U.K. may be forced to cancel at least some of their new-entrant allowances because of rules that limit sales to 10 percent of a nation’s cap in the five years.
Denmark’s green Europe meets Chinese wall on Vestas cuts
January 13, 2012. Denmark’s push for a green Europe suffered a reality check as domestic wind turbine producer Vestas Wind Systems A/S cuts back one tenth of its workforce to survive Chinese competition and a slump in demand. Denmark, which took over the European Union’s rotating presidency Jan. 1, called for an increased focus on green technologies to cut emissions and secure energy safety in the 27-nation bloc, in part to highlight the country’s prowess in wind technology. Europe’s ambition of leading the world in clean energy and reducing greenhouse gas emissions by 20 percent through 2020 is suffering setbacks as leaders struggle to generate economic growth against a backdrop of over-indebtedness and tough competition from markets such as China.
Global Solar capacity rose 54 pc to 28 GW
January 13, 2012. New solar capacity around the world increased 54 percent to about 28 gigawatts last year driven by record installations in Germany and Italy. Photovoltaic installations rose to between 26.5 and 29.4 gigawatts last year, compared with 18.2 gigawatts during 2010. European governments from the Germany to Italy and the U.K. are curbing subsidies as prices for PV panels decline, aiming to choke off a boom in installations that started after they offered feed-in tariffs giving above-market rates for electricity from low-carbon sources. Solar installations grew around the world, driven by crashing panel prices. Shares of solar companies led by First Solar Inc. and Suntech Power Holdings Co. declined because of oversupply and declining margins. New spending on solar energy jumped 36 percent to $136.6 billion in 2011, outpacing the $74.9 billion put into wind power, and represented almost half of all renewable energy investment worldwide last year. Those figures also include solar thermal facilities, which use mirrors to heat fluid that turns turbines.
China to build 300 MW wind farm off Hebei coast
January 13, 2012. China will build a 300 megawatt wind farm off the coast of Leting county in the northern province of Hebei. The 5.76 billion yuan ($913 million) project will receive all required government approvals by year-end and will be connected to the power grid by the end of 2015. The farm, an array of 100 units of 3 MW offshore turbines, will generate 752 million kilowatt hours of power and 730 million yuan in sales annually.
OCI plans 400 MW of solar power plants in Texas
January 12, 2012. OCI Solar Power, majority-owned by a unit of South Korean polysilicon maker OCI Co., plans to build 400 megawatts of solar power projects for CPS Energy, San Antonio’s municipal utility. The proposal may be finalized within the next three months and would include a 25-year power purchase agreement for electricity generated by multiple projects. Construction is expected to begin next year, with the first projects coming online in the second half of 2013 and the remainder through 2016. OCI Solar plans to relocate its headquarters from Atlanta to San Antonio. Nexolon Co., a South Korean manufacturer of solar-panel components, also will establish its North American headquarters in San Antonio and build new facilities to supply the projects.
Clean-energy investment rises to $260 bn
January 12, 2012. Renewable energy investment rose 5 percent to a record $260 billion driven by a surge in solar developments and increased spending in the U.S. New spending on solar energy jumped 36 percent to $136.6 billion in 2011, outpacing the $74.9 billion put into wind power. Spending in the U.S. rose by a third to $55.9 billion, surpassing the 1 percent gain in China to $47.4 billion.
Solar sector grows on German installs, China growth plans
January 12, 2012. Solar companies climbed on optimism that stronger-than-expected demand at the end of 2011 will continue this year. Energy Conversion Devices Inc.’s 39 percent increase and Hanwha SolarOne Co., which surged 37 percent, led the index, which has climbed 16 percent this year after falling 59 percent in 2011. Surging installation in Germany and the U.K. and China’s plans to double total capacity this year are driving demand for solar panels, said Aaron Chew, a Maxim Group LLC analyst in New York.
Solarhybrid buys 201 MW of solar-project rights in Israel
January 12, 2012. Solarhybrid AG, a German renewable- energy developer, bought rights to solar-energy projects in Israel with a combined capacity of about 201 megawatts. Solarhybrid agreed to a one-time payment of 9 million shekels ($2.3 million) and a so-called earn-out payment of 240 shekels per realized kilowatt. The solar developer bought the rights from the estate of insolvent Sunday Energy Ltd. Other companies, including Israeli construction contractor Ormat Systems Ltd., own on average 22 percent of the projects, Solarhybrid said.
Southern tops ranking of U.S. carbon emitters as new rules loom
January 12, 2012. The federal government’s first-ever public accounting of the sources of greenhouse gases puts the spotlight on Southern Co. and other power companies that will soon face regulation of those emissions. The Environmental Protection Agency released details of carbon dioxide and other pollutants tied to climate change from 6,700 factories, power plants and refineries. Of the 100 top polluters, power generators occupied 96 spots, with three Southern coal-fired units at the top. The list quantifies which companies at the top of the list would be the hardest-hit by rules now being weighed by the EPA to curb carbon emissions from already-operating facilities.
Ban at U.S. Grand Canyon pits tourism against uranium mining
January 12, 2012. An Obama administration ban on new uranium mining near the Grand Canyon, the second most-visited U.S. national park, has touched off a debate over jobs from mining and tourism in a state that relies on both industries. U.S. Interior Secretary Ken Salazar, who signed the 20-year ban at Washington, said it was part of an effort to safeguard the $3.5 billion spent by visitors to the national park each year. The ban will prevent new uranium and other hard-rock mining on about 1 million acres near the Grand Canyon National Park, which was visited by 4.5 million people in 2010, second to the Great Smoky Mountains. Previously approved mining and new projects on claims and sites with existing rights will be allowed, potentially leading to development of as many as 11 uranium mines.
Areva says banks trim loans for offshore wind farms
January 11, 2012. Areva SA, which is bidding with other companies to build five offshore wind farms in France needing 10 billion euros ($12.8 billion) of investment, said banks are lending less because of the financial crisis. Areva’s wind unit is part of a group led by Spanish utility Iberdrola SA and France’s Eole-Res SA that is bidding for two sites in Brittany, and is part of a group led by GDF Suez SA bidding for three farms off the Normandy coast. Areva is the world’s biggest supplier of nuclear fuel and services. France, which has no offshore wind power yet, proposes to install 6,000 megawatts, or about 1,200 wind turbines, by 2020 to boost clean energy. Bids are due for the first round of five zones with a combined capacity of 3,000 megawatts, which will require about 10 billion euros of investment, according to the government. Winning bids will be preselected in April this year with a final decision in 2013 after the companies have confirmed funding. The wind farms are scheduled to come into service from 2015 to 2020.
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